Altium
Annual Report 2022

Plain-text annual report

Building products for a sustainable future The Alumasc Group plc Report and Accounts 2022 T h e A l u m a s c G r o u p p l c R e p o r t a n d A c c o u n t s 2 0 2 2   Strategic report Building products for a sustainable future by delivering on our purpose to provide high-quality, low carbon, sustainable products and solutions We are a UK-based supplier of sustainable building products, systems and solutions, the majority of which manage the scarce resources of water and energy within the built environment, and improve the quality of life for the owner/occupier using recyclable materials. Strategic report Governance Financial Statements & Company Information Board of Directors 52 Corporate Governance Statement 54 59 Nomination Committee Report 60 Audit Committee Report 64 Directors’ Remuneration Report Directors’ Report 73 Statement of Directors’ Responsibilities 76 Highlights Chair’s Statement & Investment Case Our Strategy Our Business Model Operating Segments Chief Executive’s Review Financial Review ESG Report TCFD Section 172 Statement Principal Risks and Uncertainties Risk Management Process Non-financial Information Statement 1 6 8 10 12 18 22 25 40 42 46 50 51 Independent Auditor’s Report 77 Consolidated Statement of Comprehensive Income 81 82 Consolidated Statement of Financial Position 83 Consolidated Statement of Cash Flows 84 Consolidated Statement Of Changes In Equity 85 Notes to the Financial Statements 112 Company Statement of Financial Position 113 Company Statement of Cash Flows 114 Company Statement of Changes in Equity 115 Notes to the Company Financial Statements 129 Financial Summary 130 Additional Shareholder Information 132 List of Subsidiaries 133 Business and Operating Locations 134 Company Information and Advisers 135 Notice of Annual General Meeting The Alumasc Group plc Report and Accounts 2022 Highlights Strategic report Governance Financial statements Financial Highlights Operational Highlights • Strong revenue and profit growth in core businesses • Operating margin increased despite input cost increases • Investment in sales and product management resource to improve capability • Strategic decision to sell Levolux to focus on core businesses • Actively looking for synergistic acquisitions • Focused on investments in new products, manufacturing capability and automation • Close alignment to the sustainability agenda – awarded London Stock Exchange Green Economy Mark • Pensions deficit reduced further, resulting in agreement to reduce annual contributions to £1.2m from £2.3m Revenue* £89.4m 2020/2021: £77.8m Underlying* PBT £12.7m 2020/2021: £10.0m Reported PBT £(5.0)m 2020/2021: £9.8m Underlying* EPS 28.6p 2020/2021: 22.5p Dividends per share 10.0p 2020/2021: 9.5p Net bank debt £4.7m 2020/2021: £0.9m * From continuing operations. A reconciliation of underlying to statutory profit before tax is provided in note 5 to the Group financial statements. The Alumasc Group plc Report and Accounts 2022 1 Strategic report Highlights continued Making a difference Creating long-term stakeholder value by understanding and managing our impact on the planet. Our values: • Trustworthy • Responsible • Passionate about sustainability Social Creating a safe, healthy and empowering working environment Our focus • Health & Safety • Diversity/equal opportunities • Employee engagement • Community engagement Our goals • Zero harm • Diverse and empowering place to work • Support local communities Read more Sustainability: Social – p36 Environment Governance Minimising the impact of our operations while making and selling products which have a positive impact on the environment Our focus • Environmental solutions • Sustainable materials • Energy management • Packaging/waste reduction Our goals • Provide environmental solutions for the built environment • Promote circular economy • Minimise GHG emissions • Reduce and recycle waste Read more Our environmental solutions – p27 and 28 Sustainability: Environmental – p26 Our values: Conducting ourselves in an open, ethical and responsible manner Our focus • Board oversight • Meaningful governance • Code of Conduct • Anti-modern slavery/human trafficking • Anti-bribery and corruption • Responsible Tax policy • Supplier treatment policies • Risk management Our goals • Developing long-term relationships with stakeholders • Meet or exceed all applicable regulations • Ethical supply chain • Understand and manage our risks Read more Sustainability: Governance – p38 2 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Alignment with United Nations Sustainable Development Goals (UN SDGs). Indicators • Increased proportion of domestic and industrial wastewater flows safely treated Improved water use efficiency Increased level of integrated water resources management • • Indicators • Develop quality, reliable, sustainable • and resilient infrastructure Upgrade infrastructure and industry to make it sustainable, resource-efficient and environmentally sound • Enhance industrial technological capability Indicators • Enhance inclusive and sustainable urbanisation Increase weather resilience • • Provide access to safe, inclusive and accessible, green and public spaces Impacts • Roofing and Water Management products support Sustainable Urban Drainage Systems (SUDS) Impacts • GHG emission management • Renewable energy sourcing • Sustainable products Impacts • Roofing division provides urban green and amenity space, aiding biodiversity Insulation and ventilation products improve energy performance contributing towards zero carbon buildings • • Drainage products and green and blue roofs assist stormwater management Indicators • Promote sustainable management and efficient use of natural resources • Reduce waste generation through prevention, reduction, recycling and reuse Impacts • Durable products designs to last for life of building • Maximise recycled content • Products repairable and recyclable at end of life • Use of recycled packaging • Waste reduction Other UN SDGs supported • Shareholder engagement • Customer engagement • Banker engagement • Employee diversity • Community and environmental engagement • Employee health and safety • Employee engagement • Health & Safety • Supplier engagement The Alumasc Group plc Report and Accounts 2022 3 Strategic report Highlights continued Sustainability at heart Water Management Building Envelope See page 12 for more on our Water Management division See page 14 for more on our Building Envelope division 4 The Alumasc Group plc Report and Accounts 2022 Housebuilding Products See page 16 for more on our Housebuilding Products division Strategic report Governance Financial statements At Alumasc sustainability is at the heart of what we do.” Chief Executive“ Paul Hooper The Alumasc Group plc Report and Accounts 2022 5 Strategic report Chair’s Statement Strong performance “ Alumasc’s business has demonstrated strong momentum and resilience, delivering underlying profits from continuing operations substantially ahead of a successful prior year.” I am pleased to present my first report as Chair, following the retirement of John McCall on 31 December 2021. On behalf of Alumasc’s stakeholders, I would like to once again record my sincere thanks to John for his leadership, contribution and unwavering support to Alumasc over many years. In another year of unprecedented challenges, including continued Covid disruption, the war in Ukraine, cost inflation not seen for a generation and labour shortages, Alumasc’s business has demonstrated strong momentum and resilience, delivering underlying profits from continuing operations substantially ahead of a successful prior year. Performance Revenues grew by 15% from £77.8 million to £89.4 million* and underlying pre tax profits from £10.0 million to £12.7 million*. Alumasc’s Net Debt increased to £4.7 million, compared to £0.9 million to last year. This reflects higher inventory levels to protect against material shortages as well as Capex of £2.6 million, repaying pandemic related government support of £0.7 million, dividend payments of £3.4 million and pension contributions of ££2.6 million. Our bank credit facilities have recently been increased to £29.0 million, to allow Alumasc to invest both for organic and inorganic growth. Strategy – organic growth Alumasc’s divisions have been encouraged to reset their plans to deliver faster and more ambitious growth. As a result, the divisions have invested in additional high-quality people to accelerate product development and sales and we expect to reap the benefits in the coming years. In addition, following the successful cost reductions achieved from streamlining our operations in 2020, Alumasc is examining the potential to drive further efficiencies across the Group. Strategy – corporate transactions Following a strategic review, the Alumasc Board agreed that Levolux, with its focus on installation, was non-core and it would be better positioned under new ownership. Levolux was sold on 26 August 2022 to Talrus Limited, a company associated with leading private investors, Rcapital. They are well placed to support the Levolux business and management team, and we wish the Levolux team and Talrus well. Alumasc is also actively looking for synergistic acquisitions to supplement its organic growth. ESG Our contribution to environmental sustainability through the energy and water efficient products that we develop and sell was recognised by the London Stock Exchange awarding Alumasc its Green Economy Mark in the year. This is awarded to companies that derive the majority of their revenues from environmentally friendly solutions and is appropriate recognition of the many Alumasc colleagues who strive daily to produce solutions to combat climate change for our customers and planet. In the rest of this report are examples of some of our climate friendly products, as well as the social/community contributions made by Alumasc’s people and the Board’s commitment to high standards of corporate governance. Pension scheme As shown in Note 22, the defined benefit pension scheme deficit has further reduced in the year from £4.6 million to £2.1 million. I would like to thank both our Management Team and the Pension Scheme Trustees for the collaborative approach they have adopted to make further inroads to the deficit for the benefit of Scheme Members, through a combination of Company pension contributions, sensible asset investment decisions and the impact of gilt yields on liability calculations. Agreement has also been reached with the Trustees to reduce the Company’s pension contributions to £1.2 million pa (previously £2.3 million) until the next triennial valuation in 2025, in recognition of the reduced scheme deficit. Dividends I am pleased to confirm that the Board continues to pursue a progressive dividend policy. An interim dividend of 3.35p per share was paid in April 2022 and our proposed final dividend, if approved by shareholders, is 6.65p, making a total distribution for the year of 10.0p per share (2020/21: 9.5p per share). Board As mentioned elsewhere, John McCall and Jon Pither, having given a combined nearly 70 years of loyal service to Alumasc, retired during the year. On behalf of all our stakeholders, I thank them for their immense contribution and wish them long and happy retirements. * From continuing operations. See Note 5 to the Group Financial Statements for reconciliation to statutory profits. 6 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Stephen Beechey took on the role of Remuneration Committee Chair following Jon’s retirement. The Board was very pleased to welcome Karen McInerney to the Board as a Non-executive Director and Chair of the Audit Committee in the year. Karen brings a wealth of financial, treasury and risk management experience from having worked in a small listed company which is now a FTSE 250 group and we are already benefitting from her insights. Looking ahead and Alumasc’s people Whilst economic and geopolitical conditions continue to be unpredictable and will doubtless lead to some volatility, Alumasc has a clear long-term strategy of organic and inorganic growth focused on sustainable building products. Our people have demonstrated remarkable resilience and adaptability in the past two and a half years, and I am sure they will continue to do so in the times ahead to deliver a strong performance for our various stakeholders. The Board and I thank our staff colleagues for their continued hard work and commitment. Vijay Thakrar Chair 6 September 2022 Case for investing in Alumasc Re-shaped portfolio provides a platform for strategic acceleration • All divisions capable of delivering sustained and profitable organic growth • Focussed group of niche businesses supplying high quality construction products • Scope to accelerate growth through people and product investment and value accretive acquisitions Business set to benefit from long term structural growth drivers • 80% of Alumasc products specified to deliver environmental benefits • Commitment to sustainability in construction recognised by the LSE Green Economy mark • Sustainability focus underpins potential for growth ahead of underlying markets Premium products and brands, with strong market positions • High margin, premium products typically specified by customers and regulations • Trusted brands across commercial, new build residential and RMI markets • Leading niche market positions with a growing digital presence • Increasing recognition in overseas export markets Entrepreneurial, de-centralised model to optimise efficiency and agility • Divisional structure with underlying brands given freedom to exploit market opportunities • Customer-centric culture focussed on delivering excellent service • Well invested and efficient manufacturing facilities alongside robust supply chains Strengthened financial position provides capacity to invest for growth • Very low levels of indebtedness, with leverage below 0.5x EBITDA • Pension position further strengthened with reduced deficit of c.£2m and annual contributions reducing by c.50% • Ability to invest for growth, whilst driving improved returns on capital Potential to deliver significant shareholder value • Targeting further improvement in Group margins and cash generation • Acquisition activity expected to accelerate, with a strong pipeline of opportunities • Delivering a progressive dividend policy The Alumasc Group plc Report and Accounts 2022 7 Strategic report Our Strategy Our strategy – sustainability at its heart Our strategic objectives FY22* progress Revenue growth • Attractive positions in niche markets, supported by long term growth drivers • Differentiation through premium brands service/support, sustainable products, materials • New channels, new geographies, adjacent markets and cross-selling • M&A used to accelerate progress Margin improvement • Brand strength, supported by quality know-how and customer service • Develop higher value – continue adding green products and solutions • Manufacturing efficiency • New Product Development Revenue £89.4m 2020/2021: £77.8m Return on sales 14.9% 2020/2021: 13.5% Efficiency • Efficient centre, day-to-day responsibility devolved to agile and customer-focused operating companies Investment in people, capacity and capability • • Working capital managed to maximise efficiency while ensuring adequate inventory levels Cash conversion as a % of operating profit 85% 2020/2021: 121% Return on Invested Capital 25.8% 2020/21: 18.4% Responsible business with focus on sustainability • Capability investment to increase use of recycled material • Collaboration with raw material suppliers to improve recycled content • Electricity from renewable sources • Continued investment in energy-efficient plant and machinery • Transition to electric vehicles • Number of days lost annually due to accidents at our sites Use of recycled materials 75% 2020/2021: 75% Intensity ratio (scopes 1&2) per £m of revenue 23.36% Intensity ratio reduction since baseline year 2016/2017: 52.46% Cash generative growth which supports • Capital and people investment to support organic growth • Working capital • Bolt-on M&A • Progressive dividend Capital expenditure Dividend £2.6m 2020/2021: £2.0m 10.0p 2020/2021: 9.5p * From continuing operations 8 The Alumasc Group plc Report and Accounts 2022 To be discussed Strategic report Governance Financial statements Building products for a sustainable future by delivering on our purpose to provide high-quality, low carbon, sustainable products and solutions. Our measures Ambition • Growth in revenue from continuing operations • Increase in market share • Growth of export markets • Customer satisfaction • Underlying operating profit as a percentage of revenue • Investment in efficiencies, including new technology • Growth in margin • New products Increased market share Future goals • • Market known Brands • Develop new markets Increase in sales and profits Future goals • • Sustainable solutions • Develop new markets • Manufacturing efficiency • Underlying operating profit as a percentage of shareholders’ funds, including historic goodwill and excluding cash/debt, pension deficit (net of tax) and lease liabilities Future goals • Optimal inventory levels to maximise working capital efficiency Increase return of profit per head Increased digitalisation to reduce costs • • • Proportion of our raw material consumption satisfied by recycled materials • Scope 1 & 2 market-based emissions as a percentage of turnover • Number of days lost annually due to accidents at our sites Future goals • Continual increase in proportion of recycled/ recyclable products • Staff wellbeing • 0% of waste to landfill • Transition of fleet to electric vehicles • Organic and inorganic growth • Training • Progressive dividend Future goals • Targeted investment in capacity, capability and efficiency • M&A in value-accretive areas The Alumasc Group plc Report and Accounts 2022 9 Strategic report Our Business Model Living our Purpose of Building Products for a Sustainable Future We provide high-quality, low carbon, sustainable products, systems, and solutions. We behave with integrity, building strong relationships and trust with our customers and colleagues, and deliver on our promises. What we rely on What we do and how we do it Business Segments Drivers Water Management See page 12 for more on our Water Management Water Management Building Envelope See page 14 for more on our Building Envelope Energy Management Specified roofing solutions Housebuilding Products See page 16 for more on our Housebuilding Products Ease of construction Underpinned by Sustainability and supporting the SDGs Low carbon products | Durable and recyclable products | Sustainable Solutions for the Built environment 10 The Alumasc Group plc Report and Accounts 2022 Resources Management style and peopleWe have an inclusive management style that helps empower our employeesWe value our staff and have de-centralised operating unitsOur people bring technical knowledge about our products and systems and passion for customer serviceEfficient central supportTechnical know-howWe are experts in what we doCreating new products to support sustainability in the building environmentIP/BrandsWe have registered patents and patents for our innovative products to protect our IP and have premium brandsCapital Investment in new technologyUse of new technology to support operationsProviding cleaner and energy efficient manufacturingTo be discussed Strategic report Governance Financial statements Sustainable building products backed by strong brands Customers/channels to market The value we create 80% Specified Products 80% of Group revenues are linked to specification and regulation 80%+ Structural Growth Over 80% of Group revenues derive from environmental products, systems and solutions Customers Housebuilders Contractors Merchants and distributors International market development Export revenues, currently 15% of Group sales, are being targeted in selected markets Online digital platforms Low carbon products | Durable and recyclable products | Sustainable Solutions for the Built environment The Alumasc Group plc Report and Accounts 2022 11 Repeat customersWe establish excellent relationships with our customersMotivated employeesOur staff are motivated, are trained and incentivised to provide exceptional customer serviceSustainable growthLong-term customers, excellent products and processesAim to grow the business with firm foundations and good brand reputationMargin improvement/ Superior returnsBy using new technology and having efficient operations, we can maintain and improve marginCombating climate changeBy providing sustainable and long-lasting productsZero carbon manufacturing by the Housebuilding Products divisionCommunitiesSupporting our communities Providing apprenticeships and local jobsStrategic report Operating Segments Water Management Alumasc Water Management Solutions (‘AWMS’) deliver ‘Rain to Drain’ solutions that set the standard for urban water management. Alumasc has been promoting the efficient use, retention, recycling and disposal of water for almost 90 years. Under the AWMS banner, customers benefit from rainwater and drainage products that capture, retain and control the flow of rainwater in the most effective way inside and outside buildings from origination source to water course, sewer or ground. Growth drivers • Legislation aimed at conservation, attenuation and control of water • Structural engineering specifications • Building regulations • Sustainable drainage Operations and supply chain • UK in-house manufacture • Worldwide supply chain including suppliers in Europe and North America Routes to market • Merchants and distributors (some via preferred installers) • Direct to customer via online digital platforms Opportunities and potential • Outperformance of the UK construction market through continued market share gain and introduction of new products and systems • Development of further synergies in our ‘Rain to Drain’ strategy • 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 • Selective bolt-on acquisitions that provide synergies, new products and access to new channels Financial Highlights 2021/2022 Revenue £47.6m 2020/2021: £38.4m Underlying operating margin* 18.4% 2020/2021: 15.9% Underlying operating profit* Operating profit £8.8m 2020/2021: £6.1m £8.7m 2020/2021: £6.0m * Prior to brand amortisation charges of £0.1 million in both years. 12 The Alumasc Group plc Report and Accounts 2022 Alumasc in action: Fulham Football Club case study A bespoke Gatic CastSlot system was installed as part of the redevelopment of the riverside stand for Craven Cottage, home to Fulham FC. The project incorporates Gatic CastSlot Treadsafe, which was chosen to drain away any excess surface water from the seating/standing areas along the deck of the stand. The unobtrusive profile of CastSlot sits neatly within concrete, asphalt, and block surface finishes and features an electro painted ductile iron throat section. This is securely fixed to the galvanised steel channel body to provide an exceptionally robust yet discreet drainage system. The treadsafe option was chosen for this project. Treadsafe is available for areas where there is regular foot traffic and is available with a 10mm or 30mm opening – ideal for stadium standing and seating areas. Bespoke access boxes were also created for the new stand, and channel throat depths were also extended for level changes, allowing a constant invert within the channel. The major challenge for the project was to extend the throat of the slot, which is something that other similar products manufactured by our competitors are unable to do. With Gatic’s method of manufacture, this was not a problem. Specifiers and designers often incorporate Gatic systems in their designs due to the previous successes, the performance of the product, the service and continual technical support. Established since 1928, the Gatic range is renowned for innovation, quality and performance across many prestigious projects in the construction, transport and utility markets. Strategic report Governance Financial statements “ Our core focus is on meeting customer and market requirements. Our high-quality, durable products have seen an increase in demand from customers requiring sustainable drainage solutions.” Paul Hooper Chief Executive and Water Management Divisional Managing Director The Alumasc Group plc Report and Accounts 2022 13 Strategic report Operating Segments continued Building Envelope We work with our customers to help create a sustainable future with efficient buildings that connect people and communities. Our comprehensive range of building envelope solutions includes roof waterproofing systems, green and landscaped garden roofing. Our team collaborates with our clients to create tailored building envelope solutions that address a multitude of challenges that we all face in protecting our environment for future generations, including: • Efficient use and reuse of materials • Energy consumption reduction • Comfort in use through control of heat, light, air and water • Creation of additional amenity space • Carbon capture 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 Routes to market • Direct to main building contractors in the UK • Through general contractors Opportunities and potential • Business development opportunities arising from the Alumasc Building Envelope specification sales approach • Market share gains through product leadership and outstanding customer service Financial Highlights 2021/2022 Revenue £29.4m 2020/2021: £28.4m Underlying operating margin* 12.2% 2020/2021: 13.2% Underlying operating profit* Operating profit £3.6m 2020/2021: £3.8m £3.1m 2020/2021: £3.8m * From continuing operations. Underlying figures presented prior to restructuring costs of £0.5 million in 2021/22. 14 The Alumasc Group plc Report and Accounts 2022 “ The Building Envelope Division continued its pursuit to face the everyday challenges of climate change and the drive from clients and building users to provide systems and solutions that reduce carbon from the atmosphere, are safe to install and are comprised of the highest levels of recycled raw materials attainable.” Gilbert Jackson Executive Director and Building Envelope Divisional Managing Director Strategic report Governance Financial statements One Chamberlain Square Paradise Project Creating Paradise: Alumasc Delivers for the Complete Building Envelope for One Chamberlain Square Paradise Project One Chamberlain Square is the lead project in a wider vision to create Paradise in Birmingham — the most important development the city has seen in a generation. With the help of Alumasc offering solutions for the entire building envelope, One Chamberlain Square is set to be a vibrant mixed-use development that will also be the new home of professional services firm PwC, but will endeavour to maintain a balance between busy urban hub and the natural world. In order to do this, Alumasc provided a range of products and services encompassing the entire building envelope, specified by Weedon Architects. This included a Blackdown Extensive Brown Roof, applied over Hydrotech Hot Melt Waterproofing, alongside Harmer Roof Outlets and bespoke solutions from Roof-Pro, for building D: an eight-story commercial building over a podium car park. On the roof of Paradise Blackdown’s Extensive Brown Roof is a green roof in the making. A Brown Roof was applied over approximately 4000m2 of roof space for this project, One Chamberlain’s ‘brown’ roof is installed without plant life and will naturally seed from plant material that either blows in from the local environment or that is introduced by birds. In this way, it literally replaces the green space that has been taken up by the construction of the building it lies on, encouraging biodiversity by providing and strengthening habitats for wildlife local to the area, with truly local plant life. “ This is an extremely high-profile development, which demanded trusted, standard setting products. All systems decided on were chosen on quality, durability and enhanced design life compared to competition.” Owen Doherty Director at Weedon Architects and Project Architect The Alumasc Group plc Report and Accounts 2022 15 Strategic report Operating Segments continued Housebuilding Products 16 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Our brands Financial Highlights 2021/2022 Revenue £12.4m 2020/2021: £11.1m Underlying operating margin* 19.7% 2020/2021: 23.0% Underlying operating profit* Operating profit £2.4m 2020/2021: £2.6m £2.4m 2020/2021: £2.5m * Prior to restructuring costs of £0.1 million in 2020/21. Growth drivers • Growth in UK housebuilding 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 excellent customer service • Margin improvement through operational efficiency and additional operational flexibility, utilising the new factory commissioned in early 2018 and ongoing investment in new machines and automation “ Wider industry cost pressures, including rising energy costs and increasing wages, resulted in higher costs for many materials. Our focused commercial controls and strong customer relationships have enabled us to effectively manage these input-cost pressures and largely mitigate the impact.“ Michael Leaf Executive Director and Housebuilding Products Divisional Managing Director The Alumasc Group plc Report and Accounts 2022 17 Timloc Building Products’ ability to deliver products next day with low carriage paid order values is what sets them apart from competitors and has enabled them to become market leaders within their sector. Timloc is 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. Currently 75% of Timloc products are manufactured from recycled materials. Timloc Building Products is the first building products manufacturer in the UK to achieve a carbon neutral status after implementing various ‘green’ initiatives to reduce and offset their carbon emissions to zero. In addition, Timloc became the first building products manufacturer in the UK to use electricity generated from 100% renewable sources. Timloc’s continued innovation and product development has seen the introduction of further new products and product ranges to market over the last 12 months. This includes the Fire Rated cavity stop sock range and expansion of its roofline offering. Strategic report Chief Executive’s Review Group performance from continuing operations: 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) 2021/22 2020/21 % change 89.4 12.7 12.0 28.6 26.8 10.0 77.8 10.0 9.5 22.5 20.6 9.5 +15% +27% +27% +27% +30% +5% * A reconciliation of underlying to statutory profit before tax is provided in note 5 to the Group financial statements. Covid-19 The response of our employees to the challenges faced this year has been exceptional. Covid-19 has brought many difficult challenges. Our number one priority is always the health, safety and wellbeing of our people and visitors to sites. We have complied with, as a minimum, government regulations. Unannounced HSE visits have confirmed this with very positive feedback being received. Our new norm allowed us to adapt our working practices to have more people working from home while maintaining a good premium customer service. I am very proud of our incredible people and all that they have achieved. Overview of performance Despite the prior year delivering a record result assisted by circa £2.5 million of pent up revenue demand from the Covid affected lockdown year of 19/20, I am pleased to report a further record year driven by record revenue (since the focus on only premium Building Products began in 2016) which increased by 15% over the prior year. The year was particularly affected by significant raw material and freight cost increases, in many cases well ahead of inflation. These were successfully recovered through sales price increases. The star performer of the year was undoubtedly the Water Management Division. Following its prior year record 27% profit growth to £6.1 million it grew a further 43% to £8.8 million, increasing its operating margin to 18.4% from 15.9%. This was an outstanding performance and was driven by a 24% revenue increase to £47.6 million. The remaining two divisions had credible performances against a difficult background of increasing global supply chain challenges, almost achieving the same results as the previous financial year. Both the divisions grew their sales albeit with margins down slightly against the prior year. New products again played a major role, particularly at the Housebuilding Products Division which in the past 18 months launched a record number of products. This was again supported by its industry leading next day service, both of which have significantly contributed to its performance. 18 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Executing our priorities in FY21/22 Management accelerated the pace of strategic development during its 2022 financial year: 1. Levolux divestment Following a strategic review it became clear that Levolux was no longer core to the development of the Group. Its business model is different to the rest of the Group’s. Its focus is on design and installation, despite management’s best efforts to be a supply only company which is not what the customers want. Levolux was sold on 26 August 2022 to Talrus Limited who are well placed to support the Levolux business and management team to return the business to sustainable profit. 2. Implementation of a more cost-efficient operating structure The Group’s relentless focus on cost efficiency has supported the improvement in underlying operating margin from 8.4% in the 2018 financial year to 14.9% in 2022. Further efficiencies across the facilities will continue to be sought. 3. Prioritising and focusing investment to drive profitable growth Capital expenditure was £2.6 million, very slightly ahead of depreciation. Once again investment has been focused on our businesses with the greatest manufacturing activity: our Water Management business and our Housebuilding Products business. We continue to invest 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 our Housebuilding Products Division, including to support new product launches. The benefit of the investments is evident in the relatively strong performances of these businesses. There has also been a further reduction in our carbon emissions brought about by the additional investment in more efficient machinery at Timloc along with the Group’s recent introduction of electric vehicles to the company fleet. 4. Proactive management of our portfolio of businesses The Group continues to seek to grow through bolt-on acquisitions. With the Group’s platform simplified and focused following the disposal of Levolux, we are well placed to leverage our strong financial position and capitalise on the opportunities presented by our growing pipeline of acquisition targets. 5. 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 who target these criteria. An example of this is its innovative Roofing solutions, such as Olivine, which can actually 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 significantly contributed to the energy conservation and air tightness within new build housing with its ventilation products, cavity closers, cavity stop socks and radiator seal. It is constantly innovating and launching new products that meet or exceed the latest legislation including the latest uplift in Building Regulations (Part F and Part L). A recent example of this is the new InVentive Roof Tile Vent Range, a significant product launch for 2022/23 which opens a new channel with Roofing Merchants. The division is well placed to assist housebuilders with the introduction of housing to the Future Homes Standard in 2025 and further changes in legislation. All divisions are totally committed to, and insist on, the use of recycled and recyclable material where appropriate. Alumasc is very proud to be able to state that 75% of the Group’s products are made from readily recyclable material and 26% of the Group’s raw materials are sourced from recycled material. The Housebuilding Products Division is already operating at a carbon neutral level and there are plans in place for the rest of the Group to follow suit over time. The relentless pursuit of both innovative energy and water management solutions combined with the increasing use of recycled material will continue. Alumasc is already 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. The Alumasc Group plc Report and Accounts 2022 19 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 UK revenue growth from continuing operations was 9% which we believe was at a faster growth rate than the UK construction market. For instance, there is no doubt that market share was taken both in the UK Roofing market and the UK market in which Gatic Slotdrain operates. 2. Augment UK revenue growth through the development of selected export markets Compared to the prior year in which export revenues from continuing operations were 10% of Group revenues, this year export revenues from continuing operations reached 15% and grew by just over £6.0 million (80%) assisted by Gatic Cover work on the Chek Lap Kok Airport third runway in Hong Kong. 3. Grow profit at a faster rate than revenue by improving operating margins The Group’s operating profit from continuing operations grew by £2.8 million (27%) to £13.3 million. Strategic report Chief Executive’s Review continued Overview of performance Continuing operations Revenue analysis Revenue from continuing operations grew by £11.6 million (15%) compared to the prior year. This was the resultant benefit of investing in high-quality Roofing salespeople, launching new products, winning market share, growing Gatic SlotDrain sales and winning the Gatic Covers project at Chek Lap Kok Airport in Hong Kong. Gross margin Alumasc’s Gross Margin fell by 0.5 percentage points, to 37.3%, following a successful pass through of raw material price increases. Net fixed and operating expenses Net fixed and operating expenses increased by £1.5 million during the year mainly due to increased sales resource, marketing, product managers and inflationary pay increases. Underlying operating profit Underlying operating profit was £13.3 million compared with £10.5 million in the prior year. Underlying profit before tax Underlying profit before tax was £12.7 million (2020/21: £10.0 million). Non-underlying, non-recurring items Non-underlying and non-recurring items amounted to a £0.7 million net cost in the period compared with a £0.5 million net cost in the prior year. Further details are given in the Financial Review. Discontinued operations The Levolux trading loss, and the £14.9 million non-cash write down of the associated assets held for sale resulted in a loss after tax from discontinued operations of £16.7 million (2020/21: £0.2 million profit). Levolux – discontinued/divested/ held for sale Following its substantial turnaround in the prior year Levolux fell back with a loss which was very disappointing. This was principally linked to the reduction in commercial activity in the UK and USA, in some cases the result of main contractors delaying the placing of orders to try to obtain lower prices during the above mentioned period of significant cost increases. This was all against a background in which Covid-19 affected activity and, in particular, during further lockdowns in North America. A strategic review has determined that Levolux should be divested. Therefore, following a sales process Levolux was sold on 26 August 2022 for a nominal initial consideration of £1 together with £1 million of deferred consideration which is repayable from proceeds in excess of £1 million arising from any subsequent disposal. Profit after tax for the year The Group’s resulting overall statutory loss after tax for the year was £7.0 million (2020/21: £7.6 million profit). Divisional review Water Management Revenue £47.6 million (2020/21: £38.4 million) Underlying operating profit* £8.8 million (2020/21: £6.1 million) Underlying operating margin* 18.4% (2020/21: 15.9%) Operating profit £8.7 million (2020/21: £6.0 million) * Prior to brand amortisation charges of £0.1 million in both years. Water Management produced a record profit of £8.8 million which was £2.7 million (43%) higher than the previous year. This followed the prior year record growth of £1.3 million (27%) versus the 19/20 year. Significant material cost increases were passed on in the year. The performance in this division was assisted by the winning of the contract to supply the third runway with Gatic Covers at Chek Lap Kok Airport in Hong Kong. The drivers of the improvement were revenue related (which increased by £9.2 million (24%)) and product portfolio management, including new product launches, general efficiency improvement and tight cost control. Water Management’s operating profit return on sales increased to 18.4% from a prior year of 15.9%. This was a very encouraging performance. Divisional review Building Envelope Revenue £29.4 million (2020/21: £28.4 million) Underlying operating profit* £3.6 million (2020/21: £3.8 million) Underlying operating margin* 12.2% (2020/21: 13.2%) Operating profit £3.1 million (2020.21: £3.8 million) * From continuing operations. Underlying figures presented prior to restructuring costs of £0.5 million in 2021/22. The Building Envelope Division sells principally into the high end UK commercial and residential new build construction market. Alumasc Roofing’s performance was strong and in particular within the Refurbishment sector. The five new salespeople recruited in the prior year significantly strengthened some of the more weak areas of sales in the UK whilst technical services staffing was increased across the country. It went from strength to strength and increased its revenue stream whilst also securing additional market share. This business now has a very strong and capable sales force. Significant cost increases were passed on in the year. 20 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Divisional review Housebuilding Products Revenue £12.4 million (2020/21: £11.1 million) Underlying operating profit* £2.4 million (2020/21: £2.6 million) Underlying operating margin* 19.7% (2020/21: 23.0%) Operating profit £2.4 million (2020/21: £2.5 million) * Prior to restructuring costs of £0.1 million in 2020/21. Timloc, our Housebuilding Products Division, had another strong year. In addition, during a challenging year, Timloc continued to launch new products, improve efficiencies and maintain 100% OTIF to customers. Timloc continues to receive very positive feedback from its customers on its excellent service and promotes this through its #TrustTimloc to deliver strapline. New product development is an important factor in Timloc’s success and during the year it saw continued growth of recently launched new products and launched further new products including FrStop cavity stop socks, Non-combustible products and a number of Roofline Products. A very exciting full launch of its new Tile Vent Range will take place in Q1 of the new financial year, with early indications of success encouraging. With its constant focus on improving efficiencies, new product development and customer service Timloc is well positioned to maximise opportunities presented by the housebuilding sector. Outlook Alumasc’s cost savings programme, liquidity management, strong balance sheet and improved commercial positioning underpin a robust platform that is well positioned to benefit from the long term growth drivers in its markets. Alumasc’s primary aim is to manage the long-term sustainability of the business and to focus on its key strategic objectives, growing revenues faster than the UK construction market and being a supplier of sustainable building products. The Board believes that Alumasc’s strong strategic and market positions underpin its established track record over many years of outperforming the UK construction market, together with: • • the outstanding Water Management Division’s performance which is really benefiting from both its UK and export re-focused strategy, as well as its extensive online offering; the strong Roofing performance where it enters the new year with a very healthy order book; • • • the strong performance of the Housebuilding Products Division against a structural market shortage of housing in the UK; focused investments in new products, manufacturing capability and automation; investments in sales resources and product managers to grow the business both in the UK and internationally; • actions taken to deliver operational efficiencies across the Group; and • close alignment to the sustainability agenda. Demand remains strong entering the new financial year, which has started in line with management’s expectations. Notwithstanding uncertainty over the current macro-economic outlook, a strong platform is now in place which provides the Board with confidence for another strong year. Paul Hooper Chief Executive 6 September 2022 The Alumasc Group plc Report and Accounts 2022 21 Strategic report Financial Review Reconciliation of underlying to statutory profit before tax from continuing operations The underlying profit before tax from continuing operations for the 2021/22 financial year of £12.7 million reconciles to the statutory profit before tax from continuing operations of £12.0 million as follows: 2021/22 £m 2020/21 £m 12.7 (0.1) (0.1) (0.5) – 12.0 10.0 (0.1) (0.2) (0.1) (0.1) 9.5 Dividends The Board have recommended to shareholders a final dividend of 6.65 pence per share (2020/21: 6.25 pence), which will absorb an estimated £2.4 million of shareholders’ funds. This has not been accrued in these accounts as it was proposed after the end of the financial year. Subject to shareholder approval at the Annual General Meeting, it will be paid on 4 November 2022 to members on the share register on 30 September 2022. Together with the interim dividend of 3.35p (2020/21: 3.25p) paid to shareholders on 6 April 2022, this will bring the total distribution for the year to 10.0 pence per share (2020/21: 9.5 pence), which is covered 2.9 times (2020/21: 2.4 times) by underlying earnings per share from continuing operations. The Board continues to follow a progressive distribution policy, where dividends rise broadly in line with earnings, while maintaining a prudent level of cover. Underlying profit before tax Brand amortisation Net IAS 19 defined benefit pension scheme costs Restructuring costs IAS 19 past service cost in respect of GMP equalisation Statutory profit before tax The reconciling items were: • Amortisation of acquired brands of £0.1 million (2020/21: £0.1 million). This is a non-cash charge arising from the application of accounting standards, to write off the estimated value of brands associated with acquired businesses over their anticipated useful life. • Net IAS 19 defined benefit pension scheme costs of £0.1 million (2020/21: £0.2 million) are also non-cash charges. These relate to the Group’s legacy defined benefit pension scheme, which was closed to future accrual in 2009. The value of the charge is determined by actuarial assessment and represents the notional financing cost of the Group’s pension deficit. • One-off restructuring costs of £0.5 million (2020/21: £0.1 million), reflecting the cost of exiting the Group’s remaining roofing installation business and following changes in the estimated cost of several reorganisation projects, which were announced during the 2019/20 financial year. • A one-off IAS 19 past service cost in the prior year of £0.1 million, representing an increase in the estimated cost of guaranteed minimum pension equalisation between men and women, following a High Court ruling in November 2020. Taxation The Group’s underlying effective tax rate on continuing operations was 19.4% (2020/21: 19.5%), slightly above the UK statutory corporation tax rate of 19% due to certain costs that are disallowable for tax purposes. We expect the Group’s underlying tax rate to be approximately 21% in the 2022/23 financial year, due to the planned increase in the main UK corporation tax rate from 19% to 25% from 1 April 2023. The Group’s effective tax rate on statutory profit before tax was 20.6% (2020/21: 22.6%). Reconciliations from the actual to statutory rates of tax are provided in note 10. The reconciling items mainly relate to the tax treatment of the one-off items in the Group’s income statement and the deferred tax impact of the planned increase in the corporation tax rate to 25% from 1 April 2023. Earnings per share Underlying earnings per share from continuing operations for the year was 28.6 pence (2020/21: 22.5 pence). This increase is consistent with the increased underlying profit before tax for the year. Basic earnings per share from continuing operations of 26.8 pence (2020/21: 20.6 pence) reflected the increase in underlying profit before tax for the year. 22 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 2021/22 £m 2020/21 £m 13.3 2.7 16.0 (4.0) (0.7) 11.3 (2.3) 9.0 (2.6) (0.4) (1.6) (2.6) (0.9) (0.5) (3.4) (3.0) (0.8) (3.8) 4.7 10.5 2.7 13.2 0.6 (1.1) 12.7 (1.0) 11.7 (2.0) (0.2) (0.2) (2.6) (0.9) – (1.9) 3.9 (0.5) 3.4 0.9 Summarised Cash Flow Statement Underlying operating profit from continuing operations Underlying depreciation/amortisation Underlying EBITDA Change in working capital Deferred VAT repaid Operating cash flow from continuing operations Discontinued operation Operating cash flow from continuing and discontinued operations Capital expenditure Interest Tax Pension deficit funding Lease payments Purchase of own shares Dividend payments Sub total Non-underlying payments Movement in net bank debt Net bank debt at the year end Cashflows and net debt The Group’s cash management activities during the year were focused on repayment of the final tranches of Covid-related VAT and pension deferrals, and the management of working capital during a period of strong demand coupled with significant price inflation and continued supply chain disruption. The Group’s operating cashflow from continuing operations was £11.3 million (2020/21: £12.7 million), after a cash outflow into working capital of £4.7 million, which includes payment of £0.7 million of VAT deferred from 2019/20 (2020/21: £0.5 million outflow, including £1.1 million of deferred VAT payments). Operating cashflow from continuing operations as a percentage of underlying operating profit was 85% (2020/21: 121%), reflecting selective investment in inventory to maintain customer service and manage cost price increases, coupled with the cost price inflation and strong revenue growth in the period. As a consequence, average trade working capital as a percentage of revenue was 18.1% over 2021/2022 (2020/21: 13.9%). After a £2.3 million cash outflow from discontinuing operations (2020/21: £1.0 million outflow), the total operating cash inflow from continuing and discontinued operations was £9.0 million (2020/21: £11.7 million). Capital expenditure was £2.6 million (2020/21: £2.0 million), representing 104% of depreciation (2020/21: 86%). The main investments were on capacity and efficiency improvements at our Housebuilding Products facility in Howden, East Yorkshire, and at Water Management. The Board see further opportunities for targeted investments to deliver organic growth, and expect capital expenditure to remain above depreciation for the medium term. Tax payments of £1.6 million were made in the year (2020/21: £0.2 million). The prior year included a £0.4 million receipt of tax overpayments from 2018/19. The Group recorded a net cash outflow for the year of £3.8 million (2020/21: £3.4 million inflow), increasing net debt at 30 June 2022 to £4.7 million (30 June 2021: £0.9 million). Statement of financial position and return on investment Group net assets decreased by £10.4 million in the year to £25.7 million at 30 June 2022, a consequence of the write down of assets held for sale in relation to the Levolux business, partially offset by a reduction in the pension deficit. The Group defines its capital invested as the sum of shareholders’ funds, including historic goodwill but excluding net bank debt, pension deficit (net of tax) and lease liabilities. Post tax return on investment (underlying operating profit from continuing operations divided by capital invested) was 25.8% (2020/21: 18.4%), reflecting the improved operating performance. Pensions The Group accounts for its defined benefit retirement obligations in accordance with IAS 19 Employee Benefits, based on the market value of scheme assets and a valuation of scheme liabilities using a discount rate based on AA corporate bond yields at year end. Mortality and inflation assumptions have been aligned to updated actuarial information. The IAS 19 defined benefit pension scheme deficit at 30 June 2022, before deferred taxes, was £2.1 million (30 June 2021: £4.6 million). Scheme assets decreased in the year by £25.4 million to £87.2 million. Scheme liabilities decreased by £27.9 million to £89.3 million, due to an increase in the discount rate. The Alumasc Group plc Report and Accounts 2022 23 Strategic report Financial Review continued Going concern In assessing the Group’s ability to continue as a going concern, the Board has considered medium-term forecasts based on the Group’s approved budget and three-year plan including stress test scenarios modelled on both a resumption of Government lockdowns and a 20% reduction in revenue. Under the stress test scenarios, there remained adequate headroom in banking facilities and no breach of banking covenants over the 13-month period to September 2023. The Board also took note of the Group’s further ability to reduce its cost base and/or conserve cash resources at short notice if necessary. A reverse stress test scenario, that would lead to a breach of the Group’s banking covenants, was also modelled. The Board considered the risk of such a scenario arising to be remote. Having taken into account the scenario models above, 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 for the full Going Concern assessment. Simon Dray Group Finance Director Payments into the scheme in the year were £2.6 million (2020/21 £2.6 million), including £0.2 million (2020/21 £0.4 million) of payments deferred from 2019/20 under a Covid-19 cash conservation scheme agreed with the trustees. Future contributions are agreed with the scheme’s trustees, based on actuarial valuations rather than the IAS 19 deficit. Following the triennial review in March 2022, the Group has agreed reduced annual payments of £1.2 million from 1 October 2022. These payments are designed to enable the scheme to reach a fully funded position, using prudent assumptions about the future, over a reasonable timescale. Banking facilities and covenants The Group maintains facilities with its banking partners to ensure the availability of sufficient liquidity to meet the Group’s operational and strategic needs, at optimal cost. The Group projects facility utilisation and compliance with the associated covenants during its short-term forecasting, annual budgeting and strategic planning exercises to ensure adequate headroom is maintained. During the year, the Group entered into a £25.0 million committed revolving credit facility which expires in August 2025 and two further single-year extension periods to August 2026 and August 2027. A further £20.0 million is available through an uncommitted accordion facility. Alumasc’s current banking facilities comprise: • An unsecured committed three-year revolving credit facility of £25.0 million, with an expiry date of August 2025 and a further two one-year extension periods; and • Overdraft facilities, repayable on demand, of £4.0 million. The covenants associated with these facilities are set out below, together with the reported figures at 30 June 2022 and 2021: Net debt: EBITDA Interest cover Covenant 30 June 2022 30 June 2021 <2.5 >3.5 0.4 31.7 0.1 42.1 24 The Alumasc Group plc Report and Accounts 2022 ESG Report Strategic report Governance Financial statements Environmental Sustainability is at the heart of our business model. The majority of our products are sustainable and are designed to combat climate change in the built environment. We have a sustainability framework and roadmap that covers our supply chain, businesses, energy, and our conduct. Our sustainability approach allows us to map the areas of our business and the activities we undertake. We have also developed key metrics to help us monitor our ESG journey. Environmental Highlights Scope 1 and 2 reductions this year Intensity ratio (scopes 1 and 2) per £m of revenue this year Renewable energy 23.36% 28.96% Reduction since the baseline year 2016/2017: 55.90% Reduction since the baseline year in 2016/2017: 52.46% 100% electricity from renewable sources Environmental Our products help to build a better future, and help our customers have solutions to adapt their environment to help reduce the impact of climate change. Alumasc has made a commitment to reduce the impact of our own activities and operations. In 2020, we targeted a 10% reduction in our GHG emission intensity by 2022. The actual reduction over this period was 32%. We are targeting a further reduction in our GHG emissions intensity of 10% by 2025. By 2030 Our GHG target reduction to be >10.00 for the intensity ratio tCO2e per £1m of revenue. Our Greenhouse Gas (GHG) emission management Last year all our electricity sources were switched from renewable-only sources. We continue to work with Carbon Footprint Limited to monitor and report on our GHG emissions and to review opportunities to reduce our emissions. This year we have worked with them to produce a plan for our carbon reduction journey. Each of our businesses have been encouraged to reduce their emissions and to come up with innovative ways to protect our environment. Our stories of achievements made in the year can be found on page 29. Our subsidiaries are encouraged to improve their energy efficiency and progress is monitored at monthly Board meetings. Significant emissions come from our own vehicle fleet and from our manufacturing operations (Scopes 1 and 2). We are working to reduce our vehicle emissions, through our travel policy and the adoption of videoconferencing. We encourage the increased use of electric vehicles and aim to have 100% electric forklift trucks as part of our programme. Electric vehicle charging points have been installed at our St Helen’s site. Operational and manufacturing efficiency is promoted by capital expenditure investments in new technology, this in turn reduces energy consumption and emissions. We are looking to introduce the recommendations received from our Energy Saving Opportunity Scheme. During the year Carbon Footprint Ltd completed audits at a number of sites and their recommendations are being followed up and implemented to improve energy efficiency. All sites except one site have adopted ISO14001:2015 and have been audited as part of the process to confirm that they have accredited Environmental Management Systems and the final site is expected to be accredited before the end of 2023. External ISO consultants provide assurance on our environmental systems, and these are maintained and reviewed by our colleagues. All observations following an ISO audit are communicated with the management teams. Carbon Footprint was appointed to independently assess our Greenhouse Gas emissions in accordance with the UK Government’s ‘Environmental reporting guidelines: Including streamlined Energy and Carbon Reporting Requirements.’ The assessment has used the 2022 emission conversion factors published by Department for Environment, Food and Rural Affairs (Defra) and the Department for Business, Energy & Industrial Strategy (BEIS). The assessment follows the GHG Protocol methodology by reporting both the location-based and market-based emissions from electricity usage and electricity transmission and distribution. The table on page 29 summarises the GHG emissions for the reporting year: 1 July 2021 to 30 June 2022. Alumasc has been assessing emissions since 2017 using Carbon Footprints’s Sustrax II. The emissions assessed reflect the move to 100% renewable energy tariff. The Alumasc Group plc Report and Accounts 2022 25 Strategic report ESG Report continued Environmental continued ESG targets – Roadmap to 2050 Roadmap measure 2021 data 2022 data 2030 target 2050 target Turnover derived from environmental solutions 77% 77% >80% >80% Sustainable products Product recycled content 27% 27% >40% >50% Product recyclability 74% >75% >80% >90% GHG emissions GHG emission intensity ration tCO2e per £1m of revenue 23.21 17.78 >10.00 Net zero Waste reduction Waste to landfill Plastic packaging Reduction of preventable plastic packaging Health & Safety Lost days due to accidents Diversity & Inclusion Gender diversity2 – – 83 3:13 99% 100% 100% 50% 100% 100% 891 3:13 0 2:1 0 1:1 1 51 days lost related to one accident. 2 Male: Female. 3 Rounded figures. 26 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Our sustainable products Colour Coated Galvanised Steel Rain Collector Galvanised Steel Guttering As a society we have become ever more eco-conscious, we are making decisions based on the long-term rather than the short-term. Galvanised steel guttering can be infinitely recycled and is always likely to be recycled. Not only is it a simple process to recycle, but as scrap metal, steel will always have a value, because of this, in the UK, 87% of constructional steel is recycled, 10% is reused and only 3% goes to landfill. When it’s wet our metal guttering helps ensure efficient rainwater drainage and now, we want to help people conserve as much of that water as possible rather than allow it to disappear down the drains. To help collect and save this water, we’ve chosen to stock efficient, stylish and sustainable rainwater diverter products. These products are a great way of harnessing rainfall when it’s plentiful and using it when it’s not. When water is scarce, it’s ideal to be able to access free, collected rainwater to use to keep our gardens thriving and wash our cars for example.” Collecting rainwater made easy With climate change appearing to be a reality that we are all having to face and although any change here in the UK is not as dramatic as being witnessed in many countries across the globe, we do seem to be experiencing warmer temperatures and more erratic weather patterns. Because of this, increasingly, the collecting and conserving of rainwater is becoming a priority for many property owners. So, Rainclear Systems chose to stock a rain-collector made from galvanised steel. Anthony Hitchman, Managing Director of Rainclear Systems explained: “There are many respected studies on climate change that indicate that here in the UK we’re most probably due for warmer wetter winters, an increase in heavy summer downpours along with intermittent periods of the prolonged drought and water shortage. At Rainclear, we have always stocked products that help people cope with our unpredictable weather. Accessed 2021 – www.futurelearn.com/courses/sustainable-construction-development The Alumasc Group plc Report and Accounts 2022 27 Strategic report ESG Report continued Environmental continued Re-use of packaging: Rainclear Rainclear, part of Water Management Solutions, uses packaging made from 100% recycled paper for shipping. This reuse saves: • approximately 15 trees per year • 60% reduction of water and energy consumption • 50% reduction of C02 when compared to using virgin fibre paper. Galvanised steel guttering Our sustainable products include Galvanised steel guttering that does not crack or warp as is the case with plastic guttering. The galvanising process (the application of a protective zinc coating) means that galvanised steel guttering is rust-resistant for up to 15 years, and longer if maintained. Galvanised steel guttering provides a durable and elegant finishing touch to a home renovation or self-build project, with its sustainable design and a low carbon footprint that respects the environment. Galvanised steel guttering can be infinitely recycled. Not only is it a simple process to recycle, but as scrap metal, steel will always have a value. Accessed 2022 – Steel recycling – Galvanizers Association – https://www.industrytransition.org/insights/g7-green-steel-production/. Green Economy Mark • Alumasc has been recognised by the London Stock Exchange as a contributor to the global green economy • The Mark is awarded to companies and funds that derive more than 50% of revenues from environmental solutions • The Alumasc Group plc provided high-quality, low carbon, sustainable building products, systems and solutions which help manage the scarce resources of energy and water in the built environment and improve the quality of life for the owner/occupier The classification, first introduced in 2019, was created to highlight companies and investment funds listed on all segments of the London Stock Exchange’s main market and AIM that are driving the global green economy. 28 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Greenhouse Gas Report (GHG) emission management Alumasc appointed Carbon Footprint Ltd, a leading carbon and energy management company, to independently assess its Greenhouse Gas (GHG) emissions in accordance with the UK Government’s ‘Environmental reporting guidelines: including Streamlined Energy and Carbon Reporting requirements’. The assessment has used the 2022 emission conversion factors published by Department for Environment, Food and Rural Affairs (Defra) and the Department for Business, Energy & Industrial Strategy (BEIS). The assessment follows the GHG Protocol methodology by reporting both the location-based and market-based emissions from electricity usage and electricity transmission and distribution. The table below summarises the GHG emissions for reporting year: 1 July 2021 to 30 June 2022. As a business we have been assessing our carbon emissions using the Carbon Footprint Sustrax II since 2017. This year we have assessed both our location-based and market-based emissions to account for the change to a 100% renewable energy tariff used across the Group. Activity Baseline Year 2016/17 Previous Year 2020/21 Current year 2021/22 Total energy consumed (kWh)1 n/a 11,231,556 8,276,380 Definitions Location-based approach – reflects the emissions from electricity coming from the national grid energy supply. Market-based approach – reflects the emissions from the electricity sources or products (energy tariffs), that the consumer has specifically chosen. Energy efficiency actions Alumasc agreed an audit schedule for 2021/2022 with Carbon Footprint and they have visited a number of sites. This supports Alumasc’s drive to reduce emissions. Energy and carbon saving measures have been implemented during the 2021/22 assessment period, including: • Adoption of new energy efficient technology Location based Scope 1 Location based Scope 2 Location based Scope 3 Scope 1 & 2 Location-based Gross Emissions (tCO2e) Total Location-based Gross Emissions (tCO2e) Total Market-based Gross Emissions (tCO2e) Carbon offsets (tCO2e) Total Net Location-based Emissions (tCO2e) Intensity ratio: tCO2e (gross Scope 1 & 2) per employee2 Intensity ratio: tCO2e (gross Scope 1 & 2) per £M revenue2 1,900.99 1,749.33 465.07 1,426.64 673.99 237.05 1,363.62 246.31 168.03 • Start of migration of the vehicle fleet to electric vehicles • Continued reduction in travel by use of videoconferencing 3,650.32 2,100.63 1,609.93 4,115.39 2,337.68 1,777.96 – 0.00 1,804.06 0.00 1,518.93 24.00 4,115.00 2,337.68 1,777.96 7.14 34.84 4.68 23.21 3.51 16.56 1 kWh figure includes Alumasc’s energy usage from building energy and fuels (Scope 1 & 2, excluding refrigerants) & grey fleet (Scope 3) only, as per the SECR guidelines. 2 Location-based GHG emissions. The Alumasc Group plc Report and Accounts 2022 29 Strategic report ESG Report continued Environmental continued ESG achievements at Building Envelope During the year Building Envelope achieved the following targets: • 100% of marketing promotional materials for Roofing are now paper-free. Business cards are also now digital, to accompany all e-brochures. North Tees and Hartlepool NHS Foundation Trust Undergoes Sustainable Refurbishment We overhauled the existing roof delivering 3,500m2 of flat roofing refurbishments for the hospital. The product used was Alumasc Self-Adhesive Olivine and Caltech Alpha systems. The roof has CO2 neutralising benefits along with the sensitively managed flame-free installation using low odour liquid. Performance The Olivine felt system is comprised of a CO2 neutralising, reinforced SBS polymer modified bituminous waterproofing membrane, underlays, insulation boards, and air and vapour control layers. Our Self-Adhesive Olivine system not only requires a flame-free installation but is surfaced with a natural olivine granule, a magnesium iron silicate. The olivine granules initiate a chemical reaction with CO2 from rainwater which converts to silicon dioxide (sand) and magnesium carbonate, two elements harmless to the environment. 1m2 of olivine has the capacity to capture approximately 1.75kg of CO2. How this aligns with our Sustainable Development Goals 30 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements CO2nstruct Zero Business Champion On 4 April 2022 Housebuilding Products (Timloc Building Products) signed up to become a CO2nstruct Zero Business Champion. CO2nstruct Zero was launched last year to unify industry efforts to cut carbon. See 17 for more How this aligns with our Sustainable Development Goals Renewable Electricity We have procured 100% renewable electricity across the Group in 2022, consequently reducing our carbon emissions by 246 tonnes. See 29 for more How this aligns with our Sustainable Development Goals Reduction of waste to landfill Most of our sites have already achieved 100% of waste going to landfill. See 26 for more How this aligns with our Sustainable Development Goals The Alumasc Group plc Report and Accounts 2022 31 Strategic report ESG Report continued Environmental continued Electric Vehicle (EV) charging points Our St Helens site has installed EV charging points to encourage greater use of electric motor vehicles either selected from our fleet provider or personally purchased by staff. See 26 to 31 for more on environmental highlights Cycle to work scheme We operate the cycle to work scheme at all our sites. Two have new cycle shelters, Burton Latimer and Halstead. This is a great programme that helps with fitness and removes vehicle emissions. How this aligns with our Sustainable Development Goals How this aligns with our Sustainable Development Goals “ I like to cycle to work as the business provides the benefit of the Cycle 2 Work Scheme. I live locally and benefit from this.” Shaun Burton Latimer 32 The Alumasc Group plc Report and Accounts 2022 Diversity & Inclusion (D&I) Our current gender balance is representative of the wider industry demographics and will take some time to address. However the Board recognises the benefits that a diverse and inclusive workplace brings and our businesses are taking steps to improve it. See 38 for more How this aligns with our Sustainable Development Goals Strategic report Governance Financial statements Staff health, safety & wellbeing The protection of staff health, safety, & wellbeing are at the core of everything we do. We have set targets for a reduction in lost days due to injury. (see page 39). We have an app that has the provision of services to help with mental wellbeing, it offers up to ten counselling sessions for any member of staff or their family and an online GP 24/7 for all staff. See 38 to 39 for more How this aligns with our Sustainable Development Goals Talent, training and development Alumasc’s Board reviewed its Group-wide talent pipeline and the programme of courses available to develop our people. This forms part of Alumasc’s career development and succession planning for key roles. We are hiring apprentices to help with long-term career development in the business. See 39, 42 to 43 for more How this aligns with our Sustainable Development Goals The Alumasc Group plc Report and Accounts 2022 33 Strategic report ESG Report continued Social Fundraising Ball of Funk Alumasc Roofing, and Frank Besant along with friends, organised a Charity Ball – ‘Ball of Funk’ evening featuring DJs, live music, bubbles, and glamour. All of the £1,625 of profits have been donated to Sam’s Diamonds Cancer Support. “ I wanted to donate the clear profits to a cause like Sam’s Diamonds that really means something to so many people. With the way the world has been for the last nearly two years it was great to let loose, smile and party together again.” Frank Besant Importance of social / culture The Board sets the culture and the tone from the top. The right culture is embedded into our business and adopted by our employees. It is also reflected in our processes and operations and in all our dealings with our stakeholders. Our purpose is to be the leading provider of sustainable building products and systems. This green ethos is both motivational and necessary to combat climate change. It is important for us to engage with our local communities, and we do this with our charitable activities that deliver a range of benefits, enabling us to support local groups that provide benefits to the community, and to build local relationships. Further information can be found on pages 35 to 36. Halstead in bloom As part of supporting our local communities our Wade business sponsored Halstead in Bloom. We are supporting our local community by enhancing the environment with shrubs and flowers. Half-Marathon Hero We are inspired by our Area Technical Manager Donna Lynne Owen from Alumasc Roofing, who recently ran the Swansea half marathon. Everyone has a cause close to their heart and Donna supported Cancer Research UK and Maggie’s Centres who provide vital support for anyone affected by cancer. 34 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Kirsty, Heather and Chris from #Team Timloc took part in the Hull4Heroes skydive on Sunday 29 May 2022. The Team jumped 15,000 ft to raise £1,000 bringing it to a donation of £2,500 overall. Colchester Pride story This June we celebrated Pride Month and to help our surrounding communities, we chose to hold a number of events for charities local to our AWMS offices who specifically support the LGBTQ+ community. We are proud to have fundraised for Youth Works Northamptonshire and Colchester Pride. At AWMS Halstead funds were raised for Colchester Pride (https://www.colchesterpride.org/). The two sites raised more than £250 for these good causes. Charity Skydive In May 2022, three members of team Timloc completed a 15,000ft charity skydive in aid of Timloc’s charity partner Hull4Heroes. The trio collectively raised an amazing £1,000 for the charity organisation that provides veterans and their families with support, including, mental wellbeing, mentoring, employment, and housing, to help make the transition back into civilian life as smooth as possible. The Alumasc Group plc Report and Accounts 2022 35 Strategic report ESG Report continued Social continued Other Stories Hull 4 Ukraine Hull 4 Heroes recently set up the Hull 4 Ukraine appeal to coordinate relief aid for refugees currently fleeing the conflict in Ukraine. The Timloc team contributed donations including blankets, clothing, toiletries and food for the cause along with a pallet of over 200 boxes for packaging the donations. Loft Doors Timloc donated loft doors to be used in rehabilitation bungalows as part of the Matt Hampson Foundation, a charity founded by its namesake to provide treatment and support to young people seriously injured through sport. Archi Velo Craig Begg was raising money for charity throughout August by entering the Archi Velo 170km. Instead of cycling the 170km he has upped the ante to 1000km! Craig said, “I’m supporting this charity as I have met some great clients and friends during most of my working life and enjoyed being involved in design elements of some of the UK’s most prominent construction projects.” All net proceeds have gone to the Architects Benevolent Society. 36 The Alumasc Group plc Report and Accounts 2022 Sparkling Twenties Ball Alumasc Roofing sponsored Sam’s Diamonds Sparkling Twenties Charity Ball in November 2021. The award which we sponsored was the ‘Partner Award’ and the ball raised just over £3,500. Prickles and Paws The Hedgehog Highway by Timloc plays a big part for charities. From every sale of the Hedgehog Highway a donation is made to hedgehog organisations to help continue their extensive work in rescuing, rehabilitating and rehoming sick or injured hedgehogs. Timloc Building Products has donated over £1,750 to various hedgehog charities across the UK so far. Strategic report Governance Financial statements Women in Construction Alumasc supported Women in Construction week (#WomenConstruction Week and #BreaktheBias) on social media, posting on LinkedIn and Twitter. The programme is to encourage a stronger more diverse workforce in the sector. Housebuilding Products encouraged people to be tagged offering a hamper as a prize. We used quotes, profiles, and insights to encourage support for the campaign. Karen McInerney our Non- executive Director also posted in support of female talent at Alumasc. Some of the following profiles are from this campaign. “ Working within the construction industry is great fun." Gemma Lewis Area Technical Manager “I first started at Keyline doing an admin role. From there with the support of the branch manager my development in building and construction grew. I enjoy the variety of people I meet and support every day. I love driving by a project – be it a school, a heritage site or even just a house – knowing I have had a hand in it coming to life and completion. I have had the opportunity to work on some great buildings. I am the only female in the Northern Alumasc Team but my colleagues are brilliant and we are an Alumasc family – all there for each other.” Nicola McGowan Area Sales Manager, Scotland “I have worked at Alumasc for two years, initially starting as an agency working with a busy paint shop department. I started packing and progressed through product knowledge. Within the team I have recently progressed further to run the powder centre and also assist in the wet spray line. I have been a Fire Marshal for the business for a year and have recently put my name forward to complete the First Aid and Spill Kit training. I am very happy and enjoy my current role and look forward to future opportunities within the business.” Marta Barczak Production Operative – Paint Shop, Burton Latimer The Alumasc Group plc Report and Accounts 2022 37 Strategic report ESG Report continued Governance Our Governance framework is built by our internal policies and regulations, and our key policies include: diversity and equal opportunities; IT Security; Health & Safety; Anti-bribery, Gifts & Hospitality; and Tax. Our governance framework reflects our listed status (see pages 55 to 58), and we follow the QCA Code (see page 54). We ensure our training programmes are delivered either face- to-face by professionals and internal staff or online, and are regularly updated to ensure staff are aware of our policies and requirements. Code of conduct Our Governance is built on the expected ethical standards and behaviours of our employees as outlined in our Code of Conduct. We expect employees to have a high degree of integrity and to be honest, responsible, and trustworthy in what they say and do. Upon joining all employees are provided with the Employee Handbook that incorporates our Code of Conduct. We remind staff of this requirement through training and briefings. Site visit at Wade. The June Board Meeting was held at Wade in Halstead, and there was an opportunity for the Board members to have a site tour and to meet staff. 38 The Alumasc Group plc Report and Accounts 2022 Diversity and Inclusion Alumasc is an equal opportunities employer. Recruitment, training and development are based on the aptitude and abilities of employees regardless of religion, ethnicity, gender and sexual orientation. Employees with disabilities are given equality of opportunity with respect to entering and continuing employment with Alumasc. We have examples in the year where adaptions of the workplace or working environment have facilitated opportunities for disabled staff. 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 their employment continues, and appropriate training is given. A formal Equality and Diversity Policy has been approved by the Board and applies to all our businesses. We are committed to promoting diversity, inclusion, and equal opportunities from recruitment, employment and career progression to learning and development. We are proud to support staff having training and undertaking studies for qualifications to progress their careers. Alumasc recognises the benefit of having the widest range of experience, knowledge, and skills. Management undertakes reviews of staff performance and recognise their achievements. Career progression is extremely important to us for succession planning. Promotions are usually announced at the end of the financial year. Anti-modern Slavery and Human Trafficking Alumasc has an Anti-modern Slavery and Human Trafficking Policy (see – www.alumasc.co.uk/wp-content/uploads/2021/05/Anti- Modern-Slavery-and-Human-Trafficking-Policy.pdf) and an annual statement for the Group on Anti-modern Slavery is published on the UK government site and on our website www.alumasc.co.uk in line with Home Office guidance, along with our previous disclosures. Our Statement for this year will be published in compliance with government requirements before the deadline. Last year the Anti- modern Slavery and Human Trafficking Policy was enhanced by the addition of the International Labour Organization’s signs of forced labour and our training also reflects this. Employees can report anything observed to their line manager if it does not look right or to contact on the Speak Up hotline. Alumasc expects its suppliers and those in the supply chain, where possible, to confirm that they have the same or very similar policies in place for Anti-modern slavery. Strategic report Governance Financial statements Anti-Bribery and Corruption Alumasc has a zero-tolerance approach towards bribery and corruption. Our Groups Anti-Bribery Policy gives straightforward and clear advice on the ethical standards and the compliance required. We have long-term relationships with our suppliers that are built on trust and reliability. During the year Alumasc refreshed its Gifts & Hospitality Policy and this was reviewed and approved by the Board. A report this year was made on our Anti-bribery programme to the Audit Committee, please see page 63 for further information. Confidential Helpline We have a Speak Up helpline that is available to all staff, where matters can be reported in confidence in accordance with our policy. Even if the report after investigation does not reveal any matter, our culture is that there will be no negativity as a result. We have also set up a confidential email: speakup@alumasc.co.uk, that can be used by staff and suppliers. Training is provided to staff to employees via face-to-face training or via online modules. We have advertised the helpline to our staff, and we will investigate any matter raised. Tax and other laws and regulations Alumasc’s aim is to create long-term sustainable value, and this means complying with our Code of Conduct and all applicable laws. In line with our Group’s Tax Policy, we pay tax in full and in a timely manner when it is due. Our dealings with the tax authorities are open and transparent, we undertake commercial transaction in a tax efficient manner, and we take advantage of allowances and reliefs when they are available. We have a zero-tolerance policy towards tax evasion and its facilitation. The Group Finance Director is responsible for the policy’s implementation, and this is supported by advice and training from our external tax advisers. Headcount by gender Non-executive Directors Executive Directors Senior managers Employees Total Male Female Total 2 4 37 292 335 1 0 9 114 124 3 4 46 406 459 We are committed to protect the Health & Safety of our people, to improve the quality of the working environment and make a positive contribution to our local communities. Health & Safety Alumasc has a clear primary focus to ensure the Health & Safety of our employees, and this is always the first item at our plc Board and subsidiary meetings. Our CEO is responsible for Health & Safety. All significant incidents are discussed weekly and are reviewed. This ensures that Health & Safety policy implementation and near miss reporting is discussed. We have a target of zero harm and as part of our targets we report on lost days and the learning from any incident. We recognise the importance of understanding and continually strive to improve our Health & safety culture. Health & Safety training programmes are delivered to our staff to build on our compliance with Industry best practice and to ensure that focus is on continuous improvement. The culture is to ensure that all employees understand the importance and take shared ownership to enhance our Health & Safety performance. Engaged and informed employees help us improve our Health & Safety and environmental performance. We use targeted role related training, e-learning to promote employee awareness of their responsibilities, hazards associated with operations and safe ways of working. We operate a formal method of reporting of recording near misses, hazards, and lost days. Near miss reporting is encouraged across the business at all levels. Near miss reporting has remained at a high level. Reporting assists with continual improvements and provides information to management on how to improve processes and to ensure safe ways of working. The number of incidents where there were days lost during the year was 89, in 2021 this was 83 days. The cumulative PRI score was 5.03 compared to 4.94 in 2021/22. Our main Health & Safety KPI, the performance rate index (a relative measure capturing the total amount of lost time and other safety incidents, relating the result to the overall number of hours worked). This is used to measure improvements in our Health & Safety performance. Our sites and operations have Health & Safety Committees. We are audited by specialist external Health & Safety consultants and the results of these audits are provided to the plc Board. Any resulting action plans are also discussed at management meetings. There has been an overall trend of Health & Safety improvements, due to the focus on our zero-harm target and to continuous improvement by employees and management. The risks encountered arise due to working with machinery, materials handling, operating forklift trucks, and car and lorry use. The business carries out robust Health & Safety risk assessments and oversight ensures that recommendations are implemented. The Alumasc Group plc Report and Accounts 2022 39 Strategic report ESG Report continued Task Force on Climate-related Financial Disclosures (TCFD) We recognise that as a responsible business we need to understand the environmental, social and governance (ESG) issues that are relevant to our business. Each of these requirements are balanced and managed effectively to allow us to create long-term value for our stakeholders. Acute physical risks • Flooding/draining and water attenuation Chronic physical risks • Rainfall patterns Transitional risks • Policy & Legal • Heat stress/temperature extremes • Technology • Extreme storms/rainwater systems • Infrastructure failures • New products • Cost of raw materials • Create new innovative low carbon products to add to our products portfolio TCFD Our overall approach to sustainability is driven by our purpose to become the leading supplier of sustainable building products, systems, and solutions in our chosen markets. We are building on our sustainability strategy by our implementation of the recommendations of TCFD and through our core business strategy and purpose. We have a clear role to provide sustainable products to further assist the reduction of carbon in the built environment. We anticipate that our disclosures will develop over time and our journey has already achieved carbon reduction. The following table provides an overview of our TCFD steps taken during the year and our next steps: Strategy Risk Management/opportunities Our business strategy is designed to provide sustainable and environmentally friendly solutions for our customers. We use innovation to identify market opportunities to identify new solutions that help companies comply with regulations. Internally, we aim to manufacture and supply goods in an efficient manner through the use of new technologies and machinery, reducing the energy used to make products. Our strategy covering short, medium, and longer-term objectives is outlined on pages 2 to 36 of this report. As part of our strategy each division was asked to consider how new product development could address market opportunities resulting from Climate Change. This year we have added climate change as a risk on the Group risk register and climate change risks were also considered and reported using a questionnaire. All divisions were asked to consider the impact of Climate Change on their divisions and to incorporate this into our risk management process. A full description of the risk process is on page 50. There are also key market opportunities for our business through innovative Climate Change combating products, such as Olivine roofing (see page 30), air sealant housebuilding products, fully recyclable and durable metal systems, and through sustainable rainwater products (see page 27). Governance of sustainability Metrics and targets The Governance is as follows: Board of Directors: The Board can challenge the Executive Directors and leadership on the approach and performance considering sustainability/Climate Change risks. The Board is involved in approving metrics and targets and sustainability is discussed at every Board meeting. Key Board activities during the year are disclosed on pages 55 to 58. The Board has set the culture for sustainability and cross divisional teams are managing the implementation. The Board has sustainability knowledge from Industry and access to ESG advisers and had a presentation during the year. Our Executive directors and senior management are critical to our development of new and innovative products for our customers that will help have a low or zero carbon in the built environment. Internally we seek to ensure they have efficient manufacturing processes. Executive Committee: The Group’s Managing Directors have been critical to the process as they share the responsibility on our sustainable business approach. Remuneration Committee: During the year, the Remuneration Committee considered ESG targets, and how these could be linked to climate change related targets (see pages 64 and 65). 40 The Alumasc Group plc Report and Accounts 2022 We report on our business unit targets on a monthly basis and internally on a six monthly basis. Data is provided from our business units to our external partners, Valpak assists us with our collection of data and reporting for packaging and waste and Carbon Footprint, assist with the collation of our emissions under Scope 1, 2 and 3 (disclosed on page 29). Our intention is to report upon our key metrics in 2023. Key metrics used are: • Zero waste to landfill • Energy efficiency • Our electricity supply is procured from renewable sources (see page 25) • We keep our property portfolio under review and seek to have energy saving and Climate Change resilience in place through our business continuity planning. Audits of our buildings for energy saving opportunities have been carried out in 2021/22 (see page 29) • Some divisions have developed KPIs for using recycled and recyclable materials for packaging Strategic report Governance Financial statements As part of our TCFD programme this year we considered the risks below and asked two business units to provide a response on their approach. As part of our risk programme, we will include more risk scenarios for each division to consider in 2022/23. The risks identified are being managed by each business division with central oversight by the subsidiary Boards, who report consolidated risk registers to the main Board of Directors. Please see our Principal Risks and Uncertainties section for more information on how we manage risks (pages 46 to 50). Supply chain We have engaged with suppliers and in particular the supply chain, for example at packaging to have more environmentally friendly packaging, where possible. Inbound cardboard can be re-used as outbound void packaging. For plastic products manufactured by Housebuilding Products 75% of our products are made from recycled plastics and Rainclear seeks to sell products (where available) that use recycled metals to reduce the embodied carbon significantly. When products are not manufactured by us, Rainclear asks the supplier for data to confirm the recycled material content. Our operations We are already acting on climate related risks and have achieved the following by: further saving of 35% of electricity usages by moving to use one building rather than three and by using new laser technology. • Improving the use of recycled materials across our businesses • 100% renewal energy • Zero waste to landfill • Looking to re-use packaging where possible at Rainclear • Energy saving audits of our buildings • Net Zero planned by 2050 We are looking to reduce our carbon emissions through using new technology and through manufacturing and we have a science-based target to cut our carbon- based emissions by a further 10% by 2025 and by 2050 we aim to be a net zero carbon emission business – see our journey to Net Zero on page 26. Decarbonise our buildings: We have had an energy saving audit of our buildings in 2021/22 and at our Wade site in Halstead, we generate c.35% of energy via our PV cells on the factory roof. Further at Wade by using new technology and moving the slot drain manufacturing there was a Starting a low-carbon fleet: We are committed to transitioning our fleet over time to electric vehicles. EV options are now available for cars and there has been strong support from employees. Supply chain: We have looked at sourcing in the UK and EU for parts and are making on-shoring or near shoring decisions where environmental and cost benefits coexist for example, at our Wade business we are considering some near shoring options. Helping customers to cut carbon: We have used teams and zoom to interact with customers reducing carbon and we have low or zero carbon products for the built environment. Other environmental aspects: Recycling and use of recycled materials has been a strong driver for our businesses. We keep under review our plastics use and are in the process of making our packaging recyclable, where possible. See page 17 for information about Housebuilding Products a CO2nstruct Zero Business Champion. The Alumasc Group plc Report and Accounts 2022 41 Strategic report Section 172 Statement Our section 172 statement for the year ended 30 June 2022, gives insight into how our stakeholders have influenced decisions during the financial year. A key focus for the Board is to understand the impact its decisions or actions could have on stakeholders under s 172 of the Companies Act 2006. The Board looks to promote the success of the Company for the benefit of its members as a whole, and the Board confirms that during the financial year it has given consideration to the following (in addition to other matters): • • • • the likely consequence 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; 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 members of the Company. Stakeholders Engagement/activity Matters considered/actions Value created Actions taken Alumasc is keen to know its investors’ views. We hold Analysts’ presentations and investor briefings at year end and half-year for existing and potential investors. Our Annual General Meeting also has a dial in number as well as an opportunity to meet the Board in person. We also offer one-to-one meetings in person or via Zoom/ Teams as required. Our Investor section of our website is updated with news, and we also provide information via LinkedIn, Facebook, Twitter, and Instagram. We are registered for the green economy mark at the LSE that has recognised our sustainability programme (see page 28). Contact can be made with us via our contact email – alumasc@camarco.co.uk We also engage with shareholders in respect of remuneration via our Remuneration Committee Chair or the Chair (see page 64). We engage with our employees and provide communications about results and Board changes. Local divisions hold meetings with staff to ensure they are aware of any activities and to receive feedback. We work to protect our employees Health & Safety, and wellbeing. As well as this we provide courses and training to aid understanding and development, with health & safety being the first item on parent and subsidiary company Board meetings. We regularly review remuneration at all levels in the Group and some of our colleagues participate in incentive arrangements to share rewards and align shareholder and staff interests. • Investment opportunities • Progressive dividend policy, • Following the pandemic payment of • New innovations and products • Sustainability and ESG • Support for M&A activity • Short-term need for higher stocking, due to supply chain concerns, and the need to have stock to hand to meet customer orders, in turn leading to high net debt reinstated with dividends of 10.0p for 2022 (9.5p for 2021) • Increased the number of Fund manager investors on our register • Provided more information on our ESG metrics and targets a dividend has been a sensitive issue. Following the high performance and selected discussions with shareholders and pension trustees, the Board agreed to the payment of the final dividend in 2021 and interim dividend in 2022. Total 2022 (and 2021 comparative) • On 26 August 2022 Levolux Ltd, as it was non-core, was sold to Talrus Ltd, a company associated with leading private investors Rcapital • Extra investment into Health & Safety • Health & Wellbeing improvements • Board agreed to recruit more new training, supervisor courses, and helping to reduced sickness and apprenticeships and to hire graduates qualifications absences, and dissatisfaction • Communicated our vision for the • Motivated workforce strategy of Alumasc with colleagues • Foster expertise and knowledge to • Regular training and development enlarge the talent pool for the future for staff • Positive culture of honesty and trust • Providing appraisals, career planning, and teamwork (where possible) to fill vacancies. Steps to improve the diversity of the workforce were also considered • Statistics on gender ratios are now presented to each subsidiary Board and opportunities for career progression • Enhancing working conditions • Improving processes and initiatives • Supporting staff with our wellbeing app • Retain colleagues due to increased engagement and satisfaction and we have awarded a 4.5% pay rise across the business • Promoting further diversity and inclusion and a list of steps either being taken or commenced was advised to the Board The Trustees of the Alumasc Group Pension Scheme have a collaborative relationship with the Company. Alumasc makes sure that the Trustees are advised and consulted on in respect of any significant changes in the Company. We work with the Trustees and have Company representatives on the Investment Sub-Committee. • Following the triennial valuation Alumasc • Liability reduction helping the • The Group has had a collaborative has had an early dialogue with the Pension Trustees in connection with members of the pension scheme (both current and deferred) and contributions and other matters. We all other stakeholders have achieved an early resolution of the Contributions Schedule following good engagement with the Trustees • Lock-in profits and de-risk investments for the longer-term and lower the risk for investment returns relationship with the pension Trustees and been involved in the investment strategy. The deficit has fallen and the contributions have been reduced to £1.2m starting on 1 October 2022 and will run to 31 March 2028 in line with the Company’s proposal to achieve funding on a low dependancy basis Shareholders Drivers • Return on investment • ESG programme, sustainability at the core • Clear strategy • Transparent risk management Employees Drivers • Safe working environment • Good working culture and appropriate reward/incentivisation • Training and development, an opportunity to progress • Retention • Communications • Sponsoring diversity and inclusion Pension Trustees Drivers • Reducing the deficit through outperforming investments • Need to de-risk and lock-in investment gains • Regular dialogue/ communications with the Trustees • Protecting the pensioner members and deferred members 42 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Stakeholders Engagement/activity Matters considered/actions Value created Actions taken Alumasc is keen to know its investors’ views. We hold Analysts’ presentations and investor briefings at year end and half-year for existing and potential investors. Our Annual General Meeting also has a dial in number as well as an opportunity to meet the Board in person. We also offer one-to-one meetings in person or via Zoom/ Teams as required. Our Investor section of our website is updated with news, and we also provide information via LinkedIn, Facebook, Twitter, and Instagram. We are registered for the green economy mark at the LSE that has recognised our sustainability programme (see page 28). Contact can be made with us via our contact email – alumasc@camarco.co.uk We also engage with shareholders in respect of remuneration via our Remuneration Committee Chair or the Chair (see page 64). We engage with our employees and provide communications about results and Board changes. Local divisions hold meetings with staff to ensure they are aware of any activities and to receive feedback. We work to protect our employees Health & Safety, and wellbeing. As well as this we provide courses and training to aid understanding and development, with health & safety being the first item on parent and subsidiary company Board meetings. We regularly review remuneration at all levels in the Group and some of our colleagues participate in incentive arrangements to share rewards and align shareholder and staff interests. • Investment opportunities • New innovations and products • Sustainability and ESG • Support for M&A activity • Short-term need for higher stocking, due to supply chain concerns, and the need to have stock to hand to meet customer orders, in turn leading to high net debt • Progressive dividend policy, reinstated with dividends of 10.0p for 2022 (9.5p for 2021) • Increased the number of Fund manager investors on our register • Provided more information on our ESG metrics and targets • Following the pandemic payment of a dividend has been a sensitive issue. Following the high performance and selected discussions with shareholders and pension trustees, the Board agreed to the payment of the final dividend in 2021 and interim dividend in 2022. Total 2022 (and 2021 comparative) • On 26 August 2022 Levolux Ltd, as it was non-core, was sold to Talrus Ltd, a company associated with leading private investors Rcapital • Extra investment into Health & Safety training, supervisor courses, and qualifications • Health & Wellbeing improvements helping to reduced sickness and absences, and dissatisfaction • Communicated our vision for the • Motivated workforce strategy of Alumasc with colleagues • Foster expertise and knowledge to • Regular training and development enlarge the talent pool for the future for staff • Positive culture of honesty and trust • Providing appraisals, career planning, and teamwork • Board agreed to recruit more new apprenticeships and to hire graduates (where possible) to fill vacancies. Steps to improve the diversity of the workforce were also considered • Statistics on gender ratios are now presented to each subsidiary Board and opportunities for career progression • Enhancing working conditions • Improving processes and initiatives • Supporting staff with our wellbeing app • Retain colleagues due to increased engagement and satisfaction and we have awarded a 4.5% pay rise across the business • Promoting further diversity and inclusion and a list of steps either being taken or commenced was advised to the Board The Trustees of the Alumasc Group Pension Scheme have a collaborative relationship with the Company. Alumasc makes sure that the Trustees are advised and consulted on in respect of any significant changes in the Company. We work with the Trustees and have Company representatives on the Investment Sub-Committee. • Following the triennial valuation Alumasc • Liability reduction helping the • The Group has had a collaborative has had an early dialogue with the Pension Trustees in connection with contributions and other matters. We have achieved an early resolution of the Contributions Schedule following good engagement with the Trustees members of the pension scheme (both current and deferred) and all other stakeholders • Lock-in profits and de-risk investments for the longer-term and lower the risk for investment returns relationship with the pension Trustees and been involved in the investment strategy. The deficit has fallen and the contributions have been reduced to £1.2m starting on 1 October 2022 and will run to 31 March 2028 in line with the Company’s proposal to achieve funding on a low dependancy basis Shareholders Drivers • Return on investment • ESG programme, sustainability at the core • Clear strategy • Transparent risk management Employees Drivers • Safe working environment • Good working culture and appropriate reward/incentivisation • Training and development, an opportunity to progress • Retention • Communications • Sponsoring diversity and inclusion Pension Trustees Drivers • Reducing the deficit through outperforming investments • Need to de-risk and lock-in investment gains • Regular dialogue/ communications with the Trustees • Protecting the pensioner members and deferred members The Alumasc Group plc Report and Accounts 2022 43 Strategic report Section 172 Statement continued “ The Board considers as part of its decision- making process its impact on stakeholders.” Vijay Thakrar Chair Stakeholders Engagement/activity Matters considered/actions Value created Actions taken Customers Drivers • Seek to address climate change in the built environment – new solutions • Durable and long- lasting products providing quality and a fair price • First class customer service Suppliers Drivers • Supply chain resilience and excellent logistics for supply chain management • Quality products/raw materials • Sustainability • Environmental and ethical sourcing • We have good relationships with our customers and have dedicated account managers in place. We collaborate with customers and provide training and events for customers, and develop products/services tailored to their wishes • We are present at trade events and can provide information and expertise to assist customers • We are interested in customers’ requirements for building products to manage waste water, drainage, housebuilding and roofing requirements • Customers provide feedback on • Increased revenue and profit growth • Listened to feedback and created new • Greater understanding our clients’ products such as tile vents following requests. needs with regard to sustainability • Designing new sustainable products to meet requests and demand • Helping to improve the built environment • Our relationships and excellent service give us a competitive advantage products, their use and we in turn consult with customers when we develop new products. New products are often launched after customer requests and feedback • We seek to collaborate with customers on significant projects • We continue to prioritise customer service and look to make continuous improvements, with targets to increase order fulfilment on time and in full • We form long-term supplier relationships, often seeking • Reliable sourcing of products • Key supplier data, particularly • We engage with suppliers in solutions and partnering for new ideas • We ask our key suppliers to confirm compliance with our code of ethics, including providing environmental data • Reduction in waste and landfill from packaging changes and other sustainability assists with disclosures connection with their carbon to end customers and investors footprint and sustainable materials initiatives to protect the environment • Strong supply chain logistics, • Stable and reliable production and quality and timely delivery services supply of goods from vendors • Innovation and new products • Quality assurance and confirmation that • Ethical and sustainable supply chain on a risk basis suppliers comply with our ethical and environmental requirements Local communities and the environment Drivers • Engagement with football and cricket teams, and • Make donations to local charities • Creating awareness of Alumasc • We have supported local community • Sustainable business operation, with low environmental impact • Charitable giving • Sports sponsorship • Future employment opportunities nearby businesses. We look to reduce our environmental impact year-on-year. We also seek to help with biodiversity where possible • Sponsorship of local matters that improve the environment (e.g. Halstead in Bloom – see pages 34 to 36) and not for profit organisations in local communities and creating organisations and further information (see pages 34 to 36) job opportunities about this can be found on pages 33 to 36 • Long-standing supporter of local • Brand awareness sports clubs and charitable events • Creating jobs for low-socio- • Fundraising takes place for staff economic families nominated local charities and not for profit organisations • Increasing awareness for recycling and the need for staff in UK manufacturing • Creating apprenticeships to employ local people • Improving the environment • Supporting the creation of apprenticeships 44 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Customers Drivers • Seek to address climate change in the built environment – new solutions • Durable and long- lasting products providing quality and a fair price • First class customer service Suppliers Drivers for supply chain management • Quality products/raw materials • Sustainability • Environmental and ethical sourcing • Sustainable business operation, with low environmental impact • Charitable giving • Sports sponsorship • Future employment opportunities Stakeholders Engagement/activity Matters considered/actions Value created Actions taken • We have good relationships with our customers and have dedicated account managers in place. We collaborate with customers and provide training and events for customers, and develop products/services tailored to their wishes • We are present at trade events and can provide information and expertise to assist customers • We are interested in customers’ requirements for building products to manage waste water, drainage, housebuilding and roofing requirements • Customers provide feedback on • Increased revenue and profit growth • Listened to feedback and created new products, their use and we in turn consult with customers when we develop new products. New products are often launched after customer requests and feedback • We seek to collaborate with customers on significant projects • We continue to prioritise customer service and look to make continuous improvements, with targets to increase order fulfilment on time and in full • Greater understanding our clients’ needs with regard to sustainability • Helping to improve the built environment • Our relationships and excellent service give us a competitive advantage products such as tile vents following requests. • Designing new sustainable products to meet requests and demand • We form long-term supplier relationships, often seeking • Reliable sourcing of products • Key supplier data, particularly • Supply chain resilience solutions and partnering for new ideas and excellent logistics • We ask our key suppliers to confirm compliance with our code of ethics, including providing environmental data • Reduction in waste and landfill from packaging changes and other initiatives to protect the environment • Stable and reliable production and sustainability assists with disclosures to end customers and investors • Strong supply chain logistics, quality and timely delivery services supply of goods from vendors • Innovation and new products • Quality assurance and confirmation that on a risk basis suppliers comply with our ethical and environmental requirements • Ethical and sustainable supply chain • We engage with suppliers in connection with their carbon footprint and sustainable materials Local communities and the environment Drivers • Engagement with football and cricket teams, and nearby businesses. We look to reduce our environmental impact year-on-year. We also seek to help with biodiversity where possible • Sponsorship of local matters that improve the environment (e.g. Halstead in Bloom – see pages 34 to 36) • Make donations to local charities and not for profit organisations (see pages 34 to 36) • Long-standing supporter of local sports clubs and charitable events • Creating awareness of Alumasc • We have supported local community in local communities and creating job opportunities organisations and further information about this can be found on pages 33 to 36 • Brand awareness • Creating jobs for low-socio- • Fundraising takes place for staff economic families nominated local charities and not for profit organisations • Increasing awareness for recycling and the need for staff in UK manufacturing • Creating apprenticeships to employ local people • Improving the environment • Supporting the creation of apprenticeships The Alumasc Group plc Report and Accounts 2022 45 Strategic report Principal Risks and Uncertainties Key for change since last year No change Increase  Decrease  Risks and Uncertainties Mitigating actions taken Climate Change Risk/Impact Potential to impact our supply chain and increase volatility in the prices of raw materials, and other supplies. Sudden climate changes events, such as increased severe weather conditions and storms could impact our supply chains and shipments. Regulations increasing costs could be imposed on manufacturing, certain processes, fuels/goods used, impacting prices for products that customers require. Geo-political uncertainty/Inflation Risk/Impact Macroeconomic uncertainty on a global basis due to the pandemic in countries following a zero covid policy in China and other countries, and following the Russian invasion of Ukraine and subsequent war in Ukraine. Markets are not settled post Brexit and ongoing logistics delays continue. Inflation and interest rates resulting in increased prices for raw material, energy supplies and services, also impacting pay and other costs. Supply chain/Inflation Risk/Impact International supply chain risks have increased through local lockdowns due to the Covid-19 pandemic, skilled staff shortages, increased tariffs/ duties, Brexit risks in Europe and together political/global volatility, and shortages of skilled logistics staff. Change No change • Improving partnerships and relationships in our supply chain to combat disruption and potential price increases • Greater resilience by using suppliers from different geographical locations • Ensuring suppliers and logistics partners understand the risks of climate change • Strategic buying of core products and careful stocking • Development of targets for our Scope 1, 2 and 3 emissions • Investment in new technology to manufacture new products to address the needs of climate change, with improved energy efficiency • Strategy includes helping customers address climate change, by selling and creating innovative new products with sustainable qualities and eco-friendly credentials • Strategic positioning in export markets/sectors anticipated to grow faster than the UK construction market • Revenues are derived from a variety of end-use construction markets – Increase this provides resilience • Development of added value systems and solutions that are 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 limited exposure to currency risk, mainly the Euro and US Dollar. These exposures are for the most part hedged, with hedging percentages increased 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 is in place for key residual risk areas, including increased inventory of materials/ products imported from the EU • Robust management has ensured cost increases are passed on to customers • Annual strategic reviews, including supplier, quality, reliability, and sustainability • Regular key supplier visits, good relationships maintained including quality control reviews and training Increase • Logistics delays due to driver shortages have been managed and delivery times agreed/managed with customers. Shortages of ships for cargo transportation also impact delivery times. Delays in logistics are due to shortage of transportation/staff and a steep rise in demand post Covid • Regular supplier quality, value for money and risk reviews • Avoidance of strategic dependence on single sources of supply • Contingency plans in place to manage Brexit and Asian sourcing risks • Supplier questionnaires and export checks are completed to ensure compliance with Group policies including anti-bribery and anti-modern slavery • Training provided on customs duties, particularly on managing new arrangements post Brexit • Brand and product strength generally enable increases in raw material prices to be passed on through selling prices 46 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Key for change since last year No change Increase  Decrease  Risks and Uncertainties Mitigating actions taken Cyber security and Business Interruption Risk/Impact Cyber security risks and Business Interruption risks are increasing globally and have increased during the Covid-19 pandemic and following the Russian invasion of Ukraine. • IT disaster recovery plans are in place for all businesses and tested regularly – reviews are being held with each business to ensure that the Recovery Time Objective (RTO) is adequate for the business • Business continuity plans are in place, or being evolved where we are relocating operations, at each business • Awareness training and management briefings held on cyber security risks and actions taken as preventative measures • New security protocols and software are installed and continually reviewed to help mitigate cyber threats • Regular reviews of cyber security, including external penetration testing and reviews with external IT professionals • Critical plant and equipment are identified, with associated breakdown/recovery plans in place • Business interruption insurance to cover residual risks • Further systems are being implemented to underpin the business strategic growth plans and drive efficiency. Implementation risks are mitigated via the use of third-parties, qualified project managers, and increased user-testing Change Increase Credit risk Risk/Impact The risk is that credit is extended and customers are unable to settle invoices. The Group manages credit risks and the contribution from the UK Government Export Credit Scheme for overseas opportunities has supported export 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, where possible • Due to Covid-19 and related uncertainties credit risks have increased, which has also been an area impacted by local lockdowns due to the pandemic • 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 No change Covid-19 pandemic Risk/Impact The pandemic is still impacting our customers’ and suppliers’ businesses and the supply chain. Impact in countries overseas impacting customer and suppliers – with lockdowns. There is an established approach for our divisions and processes incorporated into business as usual. Adverse impact on the welfare of staff. • The primary focus has been on the health and wellbeing of staff and additional communication channels were established. In addition, a new wellbeing app has been made available to all staff to help to mitigate stress at home and in the workplace Decrease • Staff have moved to a hybrid working model where appropriate. All manufacturing sites have been operational with additional Covid-19 protocols in place • Exports and internet sales have been buoyant and helped us to connect with new customers/market share • Some business opportunities and mitigations used during the pandemic (including use of video conferencing) continue to provide ways to trade efficiently and improve margin/revenue due to cost reduction/efficiencies. Best practices and new ways of working that proved to be effective will be adopted going forward • With new ways of working the business is very agile and can quickly implement any new Government guidelines to protect employees and customers from Covid-19. There is now greater use of IT and other flexible ways of working have been adopted The Alumasc Group plc Report and Accounts 2022 47 Strategic report Principal Risks and Uncertainties continued Key for change since last year No change Increase  Decrease  Risks and Uncertainties Mitigating actions taken Health & safety risks Risk/Impact Health & safety incident could occur despite a strong culture and previous management performance. Staff recruitment and retention risks Risk/Impact Potential lack of skilled employees being available for recruitment and risk of loss due to inflation in the jobs market. Risk of not being able to take- on/retain key skilled staff. Product/service differentiation relative to competition not developed or maintained legislative and media risks Risk/Impact Failure to innovate and have an agile and entrepreneurial but compliant business behaviour. Increasing regulation and media focus in products/service have impacted the risk profile. • Health & safety and the wellbeing of staff is the main 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, with appropriate remedial action taken • Group health & safety best practice days are held twice a year, chaired by the Chief Executive • Annual audits of health & safety are conducted in all Group businesses by independent consultants and other specialist advisers • Health & Safety training is provided, and implementation is monitored • Specific focus on improving safety of higher risk operations, with external consultancy support as needed • Very serious near misses are reported to the Board • Remuneration packages are appropriate to the position: staff are encouraged and supported to grow their careers through training and development • Board and Executive Committee focus on staff retention and reward, supported by HR and external advice • Employee numbers and changes monitored in monthly subsidiary Board meetings • Retention plans for key, high performing, and high-potential employees • The Remuneration Committee considers retention and motivation when considering the remuneration framework • Succession planning • 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 is planned at Group level and carried out more regularly in each business. New product ideas are discussed as part of the businesses’ strategy • 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 • Customer feedback considered in the design and/or supply of additional products and services • Devolved structure allows an agile approach to business and an ability to meet increasing demand for products • Employed new product managers to help identify gaps in the market and to ensure we have a leading edge portfolio of products and services Change No change Increase No change 48 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Key for change since last year No change Increase  Decrease  Risks and Uncertainties Mitigating actions taken Loss of key customers Risk/Impact The risk is the loss of markets or customers. The Group operates credit insurance (see credit risk) to cover the potential impact of loss of revenue. Service and client relationship need to be maintained to retain and grow the business. • Cross selling of products encouraged to grow revenues, and to introduce customers to all our product ranges • Develop and maintain strong customer relationships through service excellence and dedicated account management • 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 understand and adapt to changing and emerging customer needs Change No change Legacy defined benefit pension obligations Risk/Impact The long-term funding of the pension scheme removes funds that need to be re-invested into new technology to grow the business. The pension scheme’s obligations need to reduce by investments and by the maturity of the Scheme to prevent it holding back the business. Product warranty/ recall risks Risk/Impact Risk is one of product recall with subsequent cost and reputational risks, however the Group does not have a history of significant warranty claims or product recalls. • Continue to grow the business so that the relative affordability of pension deficit contributions is improved over time. Active management of scheme liabilities and assets to reduce deficit, with particular success during the year Decrease • Continue to maintain constructive relationship with Pension Trustees • Affordable pension funding commitments agreed and met • Regular review at Group Board level • Use of specialist advisers • Investment performance and risk/return balance overseen by an Investment Committee that receives specialist investment advice • The Trustees are pursuing a lower risk investment strategy to match liability risks and reduce future volatility • Robust internal quality systems, compliance with relevant legislation, building regulations and industry standards (e.g., ISO, BBA etc.), and product testing, as appropriate No change • Group insurance programme to cover larger potential risks • Back-to-back warranties obtained from suppliers where possible The Alumasc Group plc Report and Accounts 2022 49 Strategic report Risk Management Process Alumasc’s Risk Management Process The Group’s risk management process is designed to ensure that material risks to the business are identified, considered, analysed, and managed as part of our strategy and business decisions. The Board has overall responsibility for Alumasc’s risk management. Day-to-day risk management is delegated to the appropriate personnel throughout the organisation and they are responsible for monitoring risk and mitigation strategies. Risk Appetite Some risk is inherent in doing business. Alumasc’s risk appetite reflects the amount of risk that the Board is prepared to accept to achieve our strategic goals. The business recognises, discusses, and agrees the amount of strategic risk that it is prepared to take to achieve its strategic goals. Risk mitigation and avoidance strategies are put in place to minimise any impacts from those risks should they arise. Where possible and cost effective, insurance is maintained to pass risk on to third parties. The recognition of risk and its impact is part of the decision- making process. Identification of risks Risk identification is part of day-to-day operations and business activity. Business leaders and line managers are empowered to manage risk on a day-to-day basis, and it forms part of business team meetings. Identified risks are assigned business owners who are responsible for ensuring that the risk mitigation strategies are in place. Significant projects, including property moves, installation of new manufacturing equipment, or new product launches specific registers relating to these matters are established. The Board formally reviews the risk register and considers any material changes and the related changes to mitigations or controls. In addition, any accidents, or significant commercial, financial or regulatory matters are reported to the Board as they arise. As part of the process the operational risks are determined by the trading business units in consultation with their local teams. The Strategic Risks are managed by the Leadership Teams and the Executive Directors, and those risks are discussed at the plc Board. Emerging Risks These are considered by the Executive Directors and the subsidiary boards, and local management teams, and with professionals on the leadership teams who can consider emerging risks that could potentially adversely impact the business or its stakeholders; steps are taken to mitigate these emerging risks as appropriate. As part of the process the leadership and management have contact with customers and suppliers. Climate Change As part of our approach to manage Climate Change risk Alumasc is using the framework in order to shape its environmental response internally and to consider market impacts that has implication for new product development. Alumasc has as part of its approach already used its disclosures and data collection to help shape its policy as part of TCFD. We use the following information and report further on pages 25 to 32. Our risk process is as follows: • For Greenhouse gas emissions on Scope 1, 2 and 3, the data reported has been verified by Carbon Footprint, this information has to date informed our policy of using 100% renewable energy and helped us to consider future policies for our motor fleet • Senior leadership including Executive Directors have considered climate change and governance is in place via our subsidiaries and divisional management and The Alumasc Group plc Board • Scenarios will be are being developed using workshops in 2022/23, to cover buildings, weather and other implications resulting from climate change As a result of our work on risk assessment Climate Change has been added as a principal risk as part of the businesses internal and product development activity to reduce the impact of GHG emissions. See risk on page 46 for more detail on our approach. This Strategic Report was approved by the Board on 6 September 2022. 1. Identification (by the local management teams) • Each risk from the prior year is reviewed to see if it is still valid or requires updating • Emerging risks analysed • Major regulatory changes – new plans and initiatives • Complex processes considered • The external environment 2. Discussion at Subsidiary and Group Boards • Registers reviewed with Management and Leadership teams 3. Prioritisation • Rank and priorities risks-based Impact/Likelihood • Likelihood: the chance of the risk occurring • The impact of a risk (should it arise) on the division’s financial targets 4. Mitigation process • Creation of an action plan for high and medium level risks – Noting what actions are needed – Risk ownership noted – What new activity needs to be implemented 5. Mitigation actions • Subsidiary companies/divisions develop what activity needs to be carried out • Determination of ownership of the mitigation process • Recording of what needs to happen and the frequency 50 The Alumasc Group plc Report and Accounts 2022 Non-financial Information Statement Strategic report Governance Financial statements The table below provides the non-financial information required by Section 414CB of the Companies Act 2006 and highlights where the references can be found: Non-financial information Reporting requirement Business Model Description of management of principal risks and impact of business activity Environmental matters • Climate change principal risk • Providing sustainable solutions for the built environment Employees • Health & Safety • Engaged, motivated, and diverse workforce • Training and development • Apprenticeships Social and Community • Developing sustainable long-term actions • Brand awareness Respect for Human Rights Development and actions Incorporating how sustainability is part of our model and focus for our products to tackle these challenges in the built environment. Full description of key risks and our risk assessment processes. Clear focus on providing solutions to help solve environmental challenges of our customers resulting from climate change. Seeking to reduce emission with targets for year-on-year reductions. Reductions in material to landfill and demonstrating that already Housebuilding Products is a net zero manufacturer. This year a new principal risk – Climate Change has been included. Focused on the Health & Safety and Wellbeing of staff, motivation, and retention in difficult economic times. Making employees feel engaged and promoting a transparent and open culture. Recruiting and retaining a diverse workforce is critical for the Group. Page no.s 9 and 10 46 to 49 26 to 30, 39 to 41, 46 42 to 43, 38 to 39 We are committed to be a responsible business, promoting sustainable operations and ensuring our operations respect the environment. We encourage employees to raise funds for local groups and charities. 34 to 36 The Group does not have a Human Rights policy; however, we do have an Anti-slavery and Human Trafficking Policy and this can be found on our website. The Group has a zero-tolerance policy to modern slavery and human trafficking. 38 Anti-bribery and anti-corruption The Group has a zero-tolerance policy for any form of bribery or corruption. The Gifts and Hospitality policy was updated this year. 39 and 63 The Alumasc Group plc Report and Accounts 2022 51 Governance Board of Directors Committed and experienced leadership Vijay Thakrar BSc, FCA Chair A N R Paul Hooper BSc, MBA, DipM Chief Executive Appointed: 2019 Vijay Thakrar 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 Alpha FX Group plc, RSM Group and Treatt plc, where he is Chair Designate. He is also a member of the Audit & Risk Committee of the John Lewis Partnership, a role which he will step down from by the end of January 2023. Appointed: 2001 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. Paul is also a non-executive director on the Board of Titon Holdings plc. A N R N Audit Committee Nomination Committee Remuneration Committee Chair of Committee Simon Dray BSc, FCA Group Finance Director Appointed: 2021 Simon Dray has a 30-year career in a range of senior finance functions with multi-national companies. After qualifying as a chartered accountant with Deloitte, Simon moved to work in industry. From 2002 to 2008 he worked at Halma plc as Group Financial Controller, before joining Low & Bonar plc in 2008, working in a variety of senior finance roles including interim CFO before becoming Director of Strategy and M&A. Simon brings experience of heading up finance departments for publicly listed companies and significant M&A experience. 52 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Stephen Beechey BSc, MA, MRICS, MCIOB, MAPM Non-executive Director A N R Appointed: 2019 Stephen Beechey has worked in the construction industry for over 30 years and he has a broad understanding of all aspects of the business. He is also an executive director of the Wates Group, one of the largest privately-owned construction, development and property services companies in the UK, where he sits on the Group Executive Committee and the Construction Group Board, he is a director of the Construction Skills Certification Scheme Ltd. Stephen chairs the Alumasc Remuneration Committee and is a member of the Audit and Nomination Committees. Karen McInerney BA Hons, FCA Non-executive Director A N R Appointed: 2022 Karen McInerney is a qualified chartered accountant with 27 years’ experience at Computacenter plc, where she currently leads financial operations as Group Financial Controller. Karen has a wealth of experience in accounting, financial reporting, acquisitions, as a pension trustee, tax and treasury management, Audit Committee/governance matters, and is also a member of the Risk Committee at Computacenter plc. Karen holds the position of Chair of The Alumasc Audit Committee and is a member of the Remuneration and Nomination Committees. Board Tenure >15 Years: 1 <5 Years: 6 Gilbert Jackson Executive Director Michael Leaf Executive Director Appointed: 2019 Gilbert Jackson, currently responsible for the Building Envelope division of Roofing and Levolux, has extensive experience in building products and the construction industry. He championed the idea of specification led cross-selling of a warranted system approach. Gilbert joined Alumasc in 2011, having previously worked at Polypipe Civils Ltd, Marley Waterproofing and IKO. Appointed: 2019 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 Alumasc Group plc Report and Accounts 2022 53 Governance Corporate Governance Statement “ The Board views good corporate governance as the key to providing a clear framework for long-term sustainable growth.” Vijay Thakrar Chair Our governance framework Our Corporate governance framework is designed to promote decision-making to support our strategy to be a leading sustainable building products business for the benefit of our stakeholders. The composition of the Board and its Committees as at 6 September 2022, is as follows: The Alumasc Group Plc Board Of Directors (Biographical details can be found on pages 52 and 53) Audit Committee Remuneration Committee Nomination Committee Membership as at 6 September 2022 Membership as at 6 September 2022 Membership as at 6 September 2022 Karen McInerney (Chair) Stephen Beechey Vijay Thakrar Stephen Beechey (Chair) Karen McInerney Vijay Thakrar Vijay Thakrar (Chair) Stephen Beechey Karen McInerney see pages 60-63 see pages 64-72 see page 59 Director induction On appointment to the Board, Mrs Karen McInerney was provided with: • Meetings with the Group Company Secretary, all Board Members and Key Management Team members • A tailored induction appropriate to her position • A briefing from the Nomad The Board adopted the QCA Corporate Governance Code 2018 (the QCA Code) on 25 June 2019 pursuant to Rule 26 of the AIM rules and a summary of our approach is set out on pages 56 to 58. The following section outlines how the Group fully complies with the QCA Code and how the Board and Committees operate. Executive Committee Further information on our Corporate Governance can also be found on our website (www.alumasc.co.uk) 54 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Deliver growth Principle 1: Establish a strategy and business model which promotes long-term value for shareholders. 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; trustees of its pensions schemes; customers; suppliers; and bankers. The Board reviews management’s recommendations, challenges them and approves the strategic approach. In the year we reviewed our strategic alignment with environmental sustainability products and considered how Alumasc could accelerate organic and non-organic growth. The Executive Committee and the management teams of the Group’s divisions are focused on delivering the agreed plans. Further details of the Company’s business model and strategy are set out on pages 9 to 10. 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 investors with a forum to understand the business and our risks/opportunities. During the financial year we had an increased level of contact with investors and analysts via Zoom and Teams calls as a result of the pandemic. We plan to hold a Capital Markets Day for Investors in October 2022 to build further engagement with investors, to coincide with our Annual General Meeting. Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success. We recognise the importance of balancing the interest of our key stakeholders: employees; customers; investors; suppliers; and the communities in which we operate. Engagement with our stakeholders makes us a stronger business. Corporate and social responsibilities are taken seriously and Alumasc is aware of its role and the need to build strong relationships across a range of stakeholder groups. Protecting employees’ Health & Safety is a number one priority and is always the first agenda item for all subsidiary and plc board meetings. Our s.172 Statement on pages 42 to 45 provides more information on how we take into account our responsibilities to our various stakeholders. Principle 4: Embed effective risk management considering both opportunities and threats throughout the organisation. The Board recognises that it is responsible for deciding on the nature and extent of key risks the Group decides to take in achieving its strategic objectives and the Board maintains a robust risk register and internal controls system to support this. The Board reviews and considers its risk appetite on an annual basis. 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 monitoring of principal risks as critical for business. Our principal risks and risk management approach is outlined on pages 46 to 50. The Board maintains overall responsibility for the Group’s approach to risk management, however it has also 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 Board. Please see page 39 on compliance with Group policies. The Alumasc Group plc Report and Accounts 2022 55 Governance Corporate Governance Statement continued Deliver growth Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair. The Board consists of three Independent Non-executive Directors (one of whom is Chair), Chief Executive, Group Finance Director and two Executive Directors (each of whom is the Managing Director of a Division). This combination provides the Board as a whole with appropriate understanding of the Company’s business balanced by independent challenge/perspectives from Non-executives. Clear separation of roles between the Chair and the Chief Executive Officer is in place. The Chair takes responsibility for the running of the Board; no individual or group dominates the Board’s decision-making, and the Chair ensures that all Board members are properly briefed on all key matters. The Chair has overall responsibility for corporate governance matters. Board agendas are approved by the Chair. Directors are provided with regular, timely information on the performance of the divisions within the Group. The Chair facilitates the meetings and ensures there is time for each Director to contribute. Directors contribute their independent judgement and experience to challenge and explore key matters. The Board is provided with Health & Safety reports, finance and management reports and other information on a regular basis. The Chief Executive Officer, with the other Executive Directors, has responsibility for implementing the strategy of the Board and for managing 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 of interest. Any change in commitments is notified as soon as possible by the Directors to the Chair and Company Secretary. Non-executive Directors are expected to devote such time as is necessary for the proper performance of their duties, including preparation for and attendance at Board, Committee or shareholder meetings. 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. Their reports are on pages 59 and 64 to 72, and their terms of reference can be found at www.alumasc.co.uk. The Board checks annually and can confirm that it believes that the members of the Committees have the appropriate skills and knowledge to carry out their roles. 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, the Directors are expected to seek re-appointment after serving three years in office as a Director and to retire by rotation each year and seek re-election at the AGM. The Non-executive Director who was appointed during the year, Mrs Karen McInerney, is required to offer herself 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. Standing for re-election are Vijay Thakrar, Paul Hooper and Stephen Beechey. 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. 56 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Deliver growth Principle 5: Continued Principle 6: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities. Scheduled Board meeting attendance Directors V Thakrar S Beechey Position Chair Non-executive Director K McInerney Non-executive Director P Hooper S Dray G Jackson M Leaf J S McCall J P Pither Chief Executive Group Finance Director Executive Director Executive Director Former Chair and Non-executive Director Former Non-executive Director (Attended/eligible to attend) 7/7 6/71 4/42 7/7 7/7 7/7 7/7 3/33 1/14 1 Mr Stephen Beechey was unable to attend one Board meeting due to a conflict of meetings. 2 Mrs Karen McInerney was appointed on 1 January 2022. 3 Mr John McCall retired on 31 December 2021. 4 Mr Jon Pither retired on 21 October 2021. Profiles of the Board members appear on pages 52 and 53 of this report and on our website (https://www.alumasc.co.uk/investors/board-directors). These profiles detail the high level and range of business experience which enables the Group to be managed effectively. During the year, the Board undertook a formal review of the Directors’ skills and experience, covering a range of areas considered necessary for the Directors, as a group, to be able to provide appropriate leadership to the Company. It was felt that, while there are areas where collectively the Board has areas of strength (such as strategic and management/leadership experience), there are also areas in which the Board needs to develop its capabilities. Two particular such areas identified are: Digitalisation – using this both to drive growth/efficiency and managing its risks. Following the review, the Board has asked the Group’s Head of IT to provide regular updates to the Board on emerging IT issues, and how the risks for Alumasc, including cyber security and Group-wide IT processes, are being managed and what further enhancements/training are needed. On digital growth opportunities, some business units have high levels of expertise and success. The Board has scheduled time to engage with the leaders of those units to increase the Board’s understanding of the digital growth and efficiency opportunities and how they could be rolled out across the Group. Areas of potential efficiency include greater digitalisation of our processes. Marketing and social media – how social media can be used more extensively in our marketing. There are examples of some really successful social media activities in various business units. The Group is considering how it can best coordinate these activities (including with our Group Financial PR advisors) and share best practice across the Group, with periodic updates being provided to the Board. We have also recently further strengthened our in-house knowledge and recruited Product Managers with expertise in this area. The Alumasc Group plc Report and Accounts 2022 57 Governance Corporate Governance Statement continued Deliver growth Principle 7: Evaluate Board performance based on clear and relevant objectives seeking continuous improvement. The Board also undertook a formal evaluation of its effectiveness during the year. While many areas of how the Board operates are felt to be strong (such as review/oversight of strategy and understanding of the Board’s responsibilities to a wide range of stakeholders), there are some areas where the Board felt it could improve: Staff engagement – divisional management engage extensively with staff colleagues and it was felt that Board visibility could be improved, especially following the easing of restrictions that arose during the Covid pandemic. The Board has therefore scheduled its future meetings such that each of our divisions is visited at least annually. There will be sufficient time allocated at each visit to view and understand the operations and engage with staff colleagues. In addition, all colleagues across the Group now receive a bi-annual Group update from the Chair and CEO, covering financial performance as well as ESG matters, which has been positively welcomed. This augments the divisional communications that are already in place. Internal governance and reporting – it was felt that we should review opportunities to maximise the value derived from our existing internal governance processes. The Board will consider this more closely in coming months. One enhancement made recently is the introduction of an electronic Board portal for sharing papers both for Group/plc and Divisional Board and Committee meetings. This is already leading to greater streamlining and efficiency in our internal governance and reporting, as well as reduction in use of paper. Principle 8: Promote corporate culture that is based on ethical values and behaviours. Our Chair and Chief Executive Officer lead on corporate culture and encourage the values embodied in the Code of Conduct. All employees are expected to maintain an appropriate standard of conduct in all business dealings and the Directors set the tone at the top. Alumasc Group personnel are asked to maintain appropriate standards and to comply with Health & Safety regulations and deal ethically with customers and suppliers. The Group has a robust Compliance framework with policies that govern its activities in respect of zero tolerance towards Modern Slavery, Anti-bribery, Whistleblowing and Data Protection, Non-facilitation of Tax evasion and Supplier standards. 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. Any matters of concern can also be raised to the Chair or to the Chair of our Audit Committee, as appropriate. Principle 9: Maintain Governance structures and processes that are fit for purpose and support good decision-making by the Board. There are seven scheduled Board meetings each year. Before each Board meeting an agenda is prepared and circulated to the Directors, together with papers in good time before each meeting. The Board is responsible for the overall governance of the Company. Its responsibilities include setting the strategic direction of the Company, ensuring there is appropriate leadership to put the strategy into action and to supervise the management of the business. There is a formal Schedule of Matters Reserved for the Board and this includes discussions about the overall Group long-term strategy. The Board also considers annual budgets, annual and interim results, dividend policies, material contract approvals, large capital expenditure requests, trading announcements, acquisitions/disposals and senior appointments. Governance for Alumasc goes beyond basic compliance, and it has effective governance and transparent decision-making, at divisional and Group level, that link to Group strategy. 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. On our website (www.alumasc.co.uk) the ‘Investors’ section is regularly updated. We communicate with our shareholders and analysts 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 our investor section of the website (www.alumasc.co.uk). 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 are held to enable, where needed, closer alignment between the way in which the Group is led and shareholder views. Information on engaging with wider stakeholders is provided in the s.172 Statement on pages 42 to 43. 58 The Alumasc Group plc Report and Accounts 2022 Nomination Committee Report Strategic report Governance Financial statements Dear shareholder I am pleased to present the Committee’s report on its work for the year ended 30 June 2022, as well additional information about its ongoing objectives and responsibilities. As reported in the Chair’s Statement, two long standing Board members retired during the year, Jon Pither on 21 October 2021 and John McCall on 31 December 2021. Between them, they served Alumasc loyally for nearly 70 years and, on behalf of all our stakeholders, I thank John McCall and Jon Pither for their leadership, contribution and unwavering support of the business over many years. Their wise counsel will be sorely missed and I wish them both a happy and long retirement. I was appointed Chair in succession to John McCall and would like to thank the Board for their support and confidence. I stepped down as Audit Committee Chair and the Committee undertook a thorough process to recruit my successor. The Committee was delighted to appoint Karen McInerney as a Non-executive Director and Chair of the Audit Committee as well as a member of the Remuneration and Nomination Committees. Karen has significant financial, treasury and risk management experience and has already demonstrated the benefit of her diverse thinking in Board discussions. Also, following Jon Pither’s retirement, Stephen Beechey became Chair of the Remuneration Committee. Stephen has significant experience of remuneration matters in the Construction and Building Industry and is already bringing that to bear. Our Chief Executive, Paul Hooper, was invited to become a Non- executive director of Titon Holdings plc in the year. The Committee reviewed this and was pleased to support the appointment, as it helps broaden Paul’s skills and experience from which Alumasc will also benefit. During the Spring, the Committee and Board conducted a review of the Board’s skills and experience together with a formal evaluation. The results and focus areas from this are summarised in our Corporate Governance Report on pages 55 to 58. The Committee also reviewed and updated its Terms of Reference. The Committee’s focus in the period ahead will be on: • Ensuring that the Board has an appropriate and diverse mix of skills and experience to drive Alumasc forward • Succession and resilience planning across our senior leadership teams in the business • Supporting the development across the business of our next generation of leaders During the year there were three formal scheduled Committee meetings. In addition, several unscheduled meetings were held, attendance at the scheduled meetings is shown in the table. The Group Company secretary attends all formal meetings of the Committee, and the Committee may also ask other executives to attend, as necessary. Board re-appointments Having been appointed in the year Mrs Karen McInerney will offer herself for election at the forthcoming AGM. Those who have come to the end of their three-year term and will seek re-election are referenced on page 56 of our Governance report and in the Notice of AGM on page 135. Vijay Thakrar Chair of the Nomination Committee 6 September 2022 The Alumasc Group plc Report and Accounts 2022 59 Meeting attendance Details of the Committee members who served during the year can be found below. Meeting attendance Mr Vijay Thakrar (Chair)1 Mr John McCall2 Mr Jon Pither3 Mr Stephen Beechey Mrs Karen McInerney4 Attended/ eligible to attend 3/3 2/2 0/0 3/3 1/1 Notes: 1. Vijay Thakrar was appointed as Committee Chair on 1 January 2022 2. John McCall retired as Chair on 31 December 2021 3. Jon Pither retired as a Non-executive Director on 21 October 2021 4. Karen McInerney was appointed as a Non-executive Director and Committee member on 1 January 2022 “ I thank John McCall and Jon Pither for their leadership, contribution and unwavering support of the business over many years.” Vijay Thakrar Chair of the Nomination Committee Governance Audit Committee Report Meeting attendance Details of the Committee members who served during the year can be found below. Members Karen McInerney (Chair)1 Vijay Thakrar Stephen Beechey John Pither2 Attended/ eligible to attend 3/3 4/4 4/4 1/1 1 Karen McInerney was appointed as a Non-executive Director and Chair on 1 January 2022 2 Jon Pither retired on 21 October 2021 The members of the Committee are as follows: • Karen McInerney (Chair) • Vijay Thakrar • Stephen Beechey The Group Chief Executive, Group Finance Director, Group Financial Controller and the external auditors usually attend the meetings of the Committee by invitation. The Committee met four times in the year, all of which were attended by the external auditors, and a record of the meeting attendance by Committee members is set out above. Following each Audit Committee meeting that the external auditors attend, the Committee meets with the auditors without members of the management team being present. “ 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.” Karen McInerney Chair of the Audit Committee 60 The Alumasc Group plc Report and Accounts 2022 Statement from the Chair of the Audit Committee Dear Shareholders I am pleased to present the Audit Committee’s report for the year ended 30 June 2022. This is my first report since succeeding Vijay Thakrar as Chair of the Committee on 1 January 2022. I would like, on behalf of the Committee, to express our gratitude for Vijay’s contribution to the leadership of this Committee over the last three years, and to Jon Pither, who retired from the Committee and the Board on 21 October 2021. The Committee’s main duties are as follows: • monitoring and reviewing the integrity of the financial reporting process and reviewing the full year financial statements, interim statements and any trading updates provided to the market, including the appropriateness of judgements and estimates taken in preparing the financial statements and preparations for the introduction of new accounting standards; • monitoring and reviewing the effectiveness of the Group’s internal financial controls including approval of the resourcing, 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; • • reviewing 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 reporting any matters to the Board 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 2021/22 Financial Year The main activities of the Committee during the year were: • overseeing the tender process for the Group’s external audit, making recommendations to the Board with regard to the choice of the Group’s external auditors, as described further below, and overseeing the induction of the new external auditor; • reviewing and challenging management’s forecasts and scenarios, its liquidity position and the appropriateness of adopting a going concern basis in these financial statements; • monitoring the integrity of the interim and full year results announcements and financial statements, trading statements and any other announcements containing financial information, and considering the application of key accounting policies and accounting standards and the key estimates and judgements taken by management in the preparation of those statements and the external auditor’s comments in those areas; Strategic report Governance Financial statements • • reviewing the Annual Report to ensure it is fair, balanced and understandable, and recommending its approval to the Board; 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 judgement, and the basis on which the auditor assesses materiality, and assessing their independence; • evaluating the effectiveness of the external audit; • • reviewing the treatment of the disposal of the Levolux business as a discontinued operation in the 2021/22 financial statements; reviewing and approving the plan and scope of internal audit work, considering internal audit reports issued during the year and discussing key matters and improvement points arising from those audits with management; and • assisting with the induction of the new Group Finance Director. Activities of the Committee in the 2022/23 Financial Year The additional objectives of the Committee during the coming year are: • • reviewing the scope of the internal audit work programme and its resourcing; and reviewing the continued upgrading of the Group’s Enterprise Resource Planning (ERP) systems, to ensure adequate financial controls remain in place. Significant areas of judgement considered in relation to the financial statements The Committee considered, in conjunction with management and the external auditor, the significant areas of estimation, judgement and possible error in preparing the financial statements and disclosures, discussed how these were addressed and approved the conclusions of this work. The principal areas of focus in this regard were: (i) Revenue recognition Revenue recognition 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 judgement in the recognition of revenue and profit over time, including estimation of the percentage of contract completion and estimates of costs to complete the work, as described in the accounting policy note on page 90. Having reviewed these judgements taken at the year end with management and the external auditors, the Committee was satisfied with management’s judgements for the level of revenue and profit recognised on construction projects for the financial year. (ii) Defined benefit pension scheme valuation As described in the risk review on page 49, 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. (iii) Accuracy and valuation of inventory The Group’s businesses carry significant levels of inventory, both manufactured in-house and bought-in. The accuracy of the records of physical inventory on hand and the valuation of that inventory, including judgements as to the value of manufacturing cost to be absorbed into the inventory valuation and the net realisable value particularly of old and slow-moving inventory, can affect both the Group’s Consolidated Statement of Financial Position and its Consolidated Statement of Comprehensive Income. Inventory records, including an analysis of trends and the evolution of management judgements on valuation are reviewed by the Executive Directors in monthly meetings with operating company management and in associated Board reports. Internal audit has particular focus on checking the accuracy of the inventory records through attendance at stock counts and reviewing the application of judgements taken by local management surrounding valuation. Physical stock counts are held at the financial year end and half year end, and more regularly when needed. The Committee reviews regular reports from executive management, internal audit and the results of the external audit to satisfy itself that inventory values across the Group are materially accurate. (iv) Going concern The Committee has reviewed and challenged management base case trading and cashflow scenarios covering the period to September 2023, including stress tested and reverse stress tested scenarios as set out on page 85. 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 85, the Committee considers that the disclosure of the Board’s assessment of Going concern is complete and understandable. The Alumasc Group plc Report and Accounts 2022 61 Governance Audit Committee Report continued Appointment of Crowe UK LLP (Crowe) as the Group’s external auditors At the request of the Board, in February 2022 the Committee led a tender process for the future appointment of the Group’s external auditors. BDO and five other firms were invited to participate in this process. The principal criteria by which the tendering firms were assessed were: • • • • • the quality and robustness of the proposed audit process and approach, as evidenced by presentations to the Committee and information gathered as part of the tender process, together with independent information in the public domain on the track record of the tendering firms with regard to audit quality; the degree of alignment between the tendering audit firms and Alumasc with regard to understanding of the business, past experience of auditing building products, construction and manufacturing companies, the identification of key audit risks and the proposed approach to auditing those risks; the quality of leadership of the audit team and key audit team members and the degree of challenge to management that the audit team would bring; the perceived ability for the auditors to add value to Alumasc as part of the audit through their observations of the business and making recommendations for improvement; and the efficiency and value for money of the audit relative to the scope of work required. The conclusion of the audit tender process was a recommendation from the Committee to the Board to appoint Crowe as the Group’s auditors for the 2021/22 financial year onwards, which the Board accepted. The Committee would like to thank BDO for their service as the Group’s auditors and the professionalism with which they approached the tender process and handover to Crowe. Assessment of the effectiveness of external audit The Committee assessed the performance of Crowe both through formal Committee meetings, Crowe’s reports to the Committee and more informal interaction since their appointment. The Committee also received structured feedback following the year end audit from senior Group level and operational management on such matters as to Crowe’s objectivity, proficiency, resourcing and audit strategy and planning. Having considered this information, the Committee concluded that Crowe’s first external audit of Alumasc was robust and effective. Assessment of the independence of the external auditor The Group’s policy on the independence of auditors is consistent with ethical standards published by the Financial Reporting Council. As described above, the Group changed its external auditors during the year from BDO to Crowe. The Committee assessed Crowe’s effectiveness and independence on their appointment and will re-assess them annually in future. Any non-audit services proposed to be carried out by the external auditor are discussed and approved in advance by the Committee. During the financial year under review and following their appointment as auditors Crowe did not carry out any non-audit work. Crowe have confirmed to the Committee that they consider themselves to be independent within the meaning of regulatory and professional requirements. In view of all the above, the Committee is satisfied with the independence of the external auditor. Appointment and re-appointment of the external auditor As described above, the audit for Alumasc’s financial year ended 30 June 2022 was Crowe’s first following their appointment in April 2022. As this appointment was made by the Board after the Group’s AGM in October 2021, resolutions are being put to the AGM to be held in October 2022 both to confirm Crowe’s initial appointment and to recommend their appointment for the 2022/23 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 46 to 49. Each operating company has implemented procedures for controlling the risks relevant to 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. 62 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements (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 material 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 Health & 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. Capital expenditure plans are discussed during the annual budget process and any project costing over £250,000 requires Board approval. (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 46 to 49. 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, bearing in mind the size of the Group at that time, the complexity of its systems and processes, and whether the experience of the staff carrying out internal audit visits is appropriate for the areas under review. 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. 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. 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. Speakup posters are being designed for distribution around the Group. Anti-bribery and corruption policy The Group has in place a policy with regards to compliance with the Bribery Act 2010 and this has been refreshed in the year along with the training materials together with the Gifts and Hospitality Policy. The Group’s Anti-bribery and Corruption Policy reflects the Board’s 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, are raised and discussed at monthly operating company board meetings. An annual update on the Anti-Bribery programme is provided to the Committee. Tax policy The Group has in place a tax policy, which sets out the Group’s desire to conduct its operations in a tax-efficient manner in compliance with all relevant legislation, to engage with tax authorities in an honest and transparent way. In accordance with this policy and its Code of Conduct, the Group operates a zero-tolerance policy towards tax evasion and the activities which facilitate it. The Group is committed to ensuring its businesses meet the compliance obligations of the UK corporate criminal offences legislation regarding the failure to prevent the facilitation of tax evasion. Copies of the Group’s Code of Conduct and associated policies can be found on the Group’s website www.alumasc.co.uk Karen McInerney Chair of the Audit Committee 6 September 2022 The Alumasc Group plc Report and Accounts 2022 63 Governance Directors’ Remuneration Report Meeting attendance Details of the Committee members who served during the year can be found below. Members Stephen Beechey (Chair)1 Jon Pither2 Karen McInerney3 Vijay Thakrar Attended/ eligible to attend 3/3 1/1 2/2 3/3 1 Stephen Beechey was appointed Committee Chair on 25 November 2021 2 Jon Pither retired on 21 October 2021 3 Karen McInerney was appointed as a Non-executive Director on 1 January 2022 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 Additional attendees by request include the Chief Executive, the Group Finance Director and Company Secretary; they take no part in discussions relating to their own remuneration. “ Our incentives are aligned to our business growth strategy and protecting the interests of our stakeholders. The incentive outcomes for the year reflect the performance of the business during this challenging period.” Stephen Beechey Remuneration Committee Chair 64 The Alumasc Group plc Report and Accounts 2022 Statement from the Chair of the Remuneration Committee Dear Shareholders Having been appointed as Committee Chair on 25 November 2021 I am pleased to present my first Report of the Remuneration Committee (the Committee) for the financial year ended 30 June 2022. 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. 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 re-listed on AIM. This Remuneration Report sets out the remuneration paid to the Directors during the period. The performance of The Alumasc Group plc has seen growth and improvement during the year and has managed to keep up momentum after the step-change in performance in 2021. The focus of health, safety and wellbeing of our workforce, our customers and our communities was a key driver in the year. Market share increased in the year and sales growth was strong in the UK and exports accounted for 15% of sales. The business performed well and improved UPBT (Underlying Profit Before Tax) to £12.7m from continuing operations. Pandemic Remuneration continued to be considered against the backdrop of Covid-19. The health safety and wellbeing of staff needed to be maintained whilst offering a competitive service and developing product ranges. Where practical, staff worked from home, and those involved in production worked in a Covid-19 secure environment with clear processes and procedures in place to protect the workforce. Performance and remuneration outcomes for the year ended 30 June 2022 The financial and operating performance for the Group in 2022 is set out on pages 81 to 129. 2022 was a challenging year with the second half particularly impacted following the approach to zero-Covid-19 in China and the geo-political crisis following the invasion of Ukraine by Russia. In addition, markets were volatile with continued supply chain challenges, together with increasing raw material prices. We discussed rewards in view of the impact of Covid-19, the geo-political situation and inflation. The rewards for the workforce were also considered. Strategic report Governance Financial statements Some of the senior executives had to carry out more than one role and remuneration was discussed in this context. New challenges of working during the pandemic led us to consider how we could incentivise Directors and management to deliver during this difficult time. The Group achieved the following results for the year: • Group revenues from continuing operations were £89.4m, growth of 15% • Underlying profit before tax from continuing operations of £12.7m, up 27% • Underlying earnings per share from continuing operations of 28.6p, also up 27% • Significant work on the disposal of Levolux Ltd, which completed on 26 August 2022 The 2021/22 annual bonus was based on Group Underlying PBT targets. The business delivered total UPBT of £10.8m in 2022 and this resulted in bonuses from all operations, a reconciliation of statutory profit before tax is provided in Note 5 to the Group financial statements. In October 2019, awards were granted under the LTIP to senior executives based on EPS and TSR performance for the three-year period ending October 2022. The total UPBT was £10.8m and this resulted in 99.4% of the award vesting and the TSR measure will be known when assessed in October 2022. If on target, 99.4% of the 2019 LTIP will vest. Full details of the performance targets and outcome is reported on page 71 and 72. The Remuneration Committee believes the incentive outcomes reflect the performance of the business during this challenging period. The Remuneration Committee has not applied its discretion during the year to any part of the Directors’ remuneration. 2022/23 Policy implementation Salaries of the general workforce have been increased by 4.5% with effect from 1 July 2022 and Directors’ base salaries have also been increased by 4.5%. The metrics selected for the 2022/23 annual bonus are 90% in relation to underlying profit before tax (UPBT) and 10% for ESG metrics specifically relating to reducing greenhouse gas emissions and for reducing/eliminating lost days due to accidents. This is consistent with Alumasc’s commitment to the health of our plant and our people. It has also been decided to base 25% of the bonuses of our two Divisional Executive Directors on the delivery of Group-wide UPBT targets as opposed to using solely divisional targets, as previously. This is considered to achieve a better balance between their responsibilities as Group Directors and as Divisional Managing Directors. An LTIP award will be granted in 2022 and this award will vest after three years subject to UPBT and TSR performance metrics. Details of the measures and targets are provided on page 71. The Committee considers that the overall remuneration is fair, balanced, and reasonable and takes into account the interests of all stakeholders. It is also focused on our long-term growth strategy. 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; • variable pay, in particular long-term incentive plan (LTIP) targets for the current year; • Gender Pay gap; • consideration of a Group-wide salary increase; • • the review of performance criteria for the current LTIP; the Committee’s Terms of Reference were reviewed and updated; • ESG metrics for bonus targets were considered and agreed; • pension arrangements for the Chief Executive were discussed and a way forward was agreed; and • the 2022/2023 bonus scheme and future operation of this to encourage growth and to implement the stretch targets. 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. I would be pleased if you would support this report for its advisory vote at the forthcoming AGM. Stephen Beechey Remuneration Committee Chair 6 September 2022 The Alumasc Group plc Report and Accounts 2022 65 Governance Directors’ Remuneration Report continued Annual Report on Remuneration The following sections show how the Remuneration Policy approved in 2020 was applied in the year ending 30 June 2022. Single total figure of remuneration The remuneration of the Non-executive Directors for the years 2021/22 is as follows: Director Vijay Thakrar1 John McCall2 Jon Pither3 Stephen Beechey Karen McInerney Total Base salaries/fees Benefits in kind of total Remuneration 2021/22 £’000 2020/21 £’000 2021/22 £’000 2020/21 £’000 2021/22 £’000 2020/21 £’000 Single figure 73 50 38 43 23 227 40 100 40 35 – 215 2 3 – – – 5 – 6 – – – 6 75 53 38 43 23 232 40 106 40 35 – 221 1 Upon appointment as Chair on 1 January 2022, Mr Vijay Thakrar was awarded salary/fees of £100,000 p.a., plus medical and car insurance cover. 2 John McCall retired on 31 December 2021. 3 Jon Pither retired on 21 October 2021. Mrs Karen McInerney was appointed as a Non-executive Director and Chair of the Audit Committee on a fee of £45,000 p.a. Mr Jon Pither retired from the Company as a Non-executive Director on 21 October 2021, and was paid for consultancy work until April 2022. A pay increase of 4.5% was awarded to Executive and Non-executive Directors with effect from 1 July 2022, consistent with all staff across the Group. Information on Directors’ service contracts can be found on our website at www.alumasc.co.uk. The remuneration of the Executive Directors for the years 2021/22 and 2020/21 was as follows: Base salaries/fees1 Bonuses Benefits in kind2 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 Jackson Michael Leaf Simon Dray Total 2021/22 £’000 2020/21 £’000 2021/22 £’000 2020/21 £’000 2021/22 £’000 2020/21 £’000 2021/22 £’000 2020/21 £’000 2021/22 £’000 2020/21 £’000 2021/22 £’000 2020/21 £’000 282 204 192 173 851 274 187 172 55 96 - 96 60 688 252 218 123 113 24 478 19 8 11 12 50 19 12 10 4 45 56 18 20 15 109 54 19 17 5 95 251 97 87 – 435 – – – – – 704 327 406 260 565 341 312 88 1,697 1,306 1 Salaries are recorded on an accounting basis of the amounts paid during the year. Payments for new Directors reflect the payments made since their appointment date. A salary increase of 4.5% was awarded to Executive Directors with effect from 1 July 2022 and, as disclosed in last year’s report, the salaries of Mr Gilbert Jackson and Mr Michael Leaf were increased by £15,000p.a. each from 1 September 2021 to reflect their increased responsibilities in joining the Group Board together with a 2021 general pay increase in line with the workforce. 2 Benefits in kind includes car allowance, health benefits, life cover and a disability insurance policy. Mr Paul Hooper is a director of Titon Holdings plc and he was appointed on 1 April 2022. Subject to Nomination Committee approval, Executive Directors are permitted to accept external board or committee appointments provided they do not interfere with their obligations to the Company. 66 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Benefits The Group operates a policy whereby Executive Directors are provided with health insurance, disability insurance and life cover, and are given a car or a cash alternative to a company car and associated expenses. Annual bonus outcome for 2021/22 For the year to 30 June 2022 the level at which any annual bonus to Executive Directors would become payable is outlined in the table below. The Executive Directors had a maximum bonus opportunity of 50% of their salaries. Targets 2021/20221 £9m UPBT £10.5m UPBT £11.8m UPBT £10.8m UPBT2 68% of maximum Threshold On Target Maximum Actual Resulting bonus 1 Divisional targets for bonus payments were in place for Mr Gilbert Jackson and Mr Michael Leaf. The Building Envelope division did not meet its threshold target. Housebuilding Products met its target required to have a bonus payout. 2 From all operations, a reconciliation of underlying statutory profit before tax is provided in Note 5 to the Group financial statements. The performance of the Group has resulted in the following payouts: • Paul Hooper – 34% of salary • Gilbert Jackson – 0% of salary • Michael Leaf – 50% of salary • Simon Dray – 34% of salary 2019 LTIP outturn Awards were made to Paul Hooper under the LTIP on 17 October 2019. These were subject to EPS and TSR performance criteria. The minimum EPS target required growth of above RPI +2.5% per annum using a base UPBT figure. This target was met (subject to TSR confirmation), and awards are expected to vest at 99.4% of the award as per the table on page 71. In lieu of an LTIP Gilbert Jackson and Michael Leaf were awarded a cash-equivalent divisional based award in 2019. The divisional target was not met for Gilbert Jackson and there would be no payment. Michael Leaf met his divisional target and will be awarded £42,000 as a result. The Committee exercised no discretion in determining the vesting and considered that the formulaic outcome reflected the underlying performance of the Group. During the year, 2018 LTIPs were exercised and the information is included in the table on page 70. Pensions The Group makes provision to pay into a defined contribution pension scheme of each Executive’s choosing or a cash alternative (after deduction for employer’s national insurance contributions). Pension contributions are as follows: Director Paul Hooper1 Gilbert Jackson Michael Leaf Simon Dray Pension contribution (% of base salary) 20%1 10% 10% 10% 1 It has been agreed with Paul Hooper that his pension contribution will be adjusted to align with the workforce rate of 10% for pensions with effect from 1 January 2023. The Alumasc Group plc Report and Accounts 2022 67 Governance Directors’ Remuneration Report continued Payments in compensation to past Directors for loss of office As set out in last year’s report, Mr Andrew Magson resigned as a Director and left the business on 30 September 2020. As a good leaver, he continued to have an interest in unvested LTIP awards, and approximately 22,175 LTIPs are due to vest subject to TSR confirmation on 18 October 2022, and the award will depend on the TSR outturn. Scheme interests awarded during the year LTIP awards were granted on 19 October 2021 as detailed in the table below. Scheme Basis of award granted Paul Hooper 2021 LTIP Simon Dray 2021 LTIP Gilbert Jackson 2021 LTIP Michael Leaf 2021 LTIP 75% of base salary at a price of 240p 40% of base salary at a price of 240p 40% of base salary at a price of 240p 40% of base salary at a price of 240p 1 Based on share price of 240p on the day of grant. No. of shares awarded 90,823 Face value of award1 £217,975 37,538 £90,091 44,503 £106,807 41,156 £98,774 % vesting for threshold performance Vesting and performance period 25% 25% 25% 25% 3 years 3 years 3 years 3 years These awards will vest on 15 October 2024 and are subject to two measures and an underpin. The underpin requires UPBT of at least £9.0 million to be delivered (in the year ending 30 June 2024) below which no award would vest. However, if this is achieved, 65% out of the 75% of salary award granted to the Chief Executive and for the Group Finance Director 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. For the Executive Directors, they were given the same underpin with divisional targets. Statement of Directors’ shareholdings and share interests Directors’ shareholdings At the date of this report At 30 June 2021 Vijay Thakrar John McCall1 Jon Pither2 Paul Hooper Simon Dray Gilbert Jackson Michael Leaf3 Stephen Beechey Karen McInerney 1 John McCall retired on 31 December 2021. 2 Jon Pither retired on 21 October 2021. 3 Michael Leaf holds shares in part via his PCA. 50,000 N/a N/a 891,286 20,000 22,950 50,621 27,418 Nil 36,496 4,359,668 432,586 769,956 Nil Nil 16,375 27,418 Nil The Directors’ shareholdings are beneficial with the exception of 434,000 shares in which Mr McCall had 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 327,493 ordinary shares. The market value of the shares held in trust as at 30 June 2022 was £519,076. 68 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Performance graph The graph shows the total shareholder return (TSR) on an equivalent holding in the Company compared with the FTSE All Share Index. 450p 400p 350p 300p 250p 200p 150p 100p 50p 0p i ) s d n e d v D s s o r G i ( x e d n I n r u t e R l a t o T Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 Alumasc FTSE All Share Long Term Incentive Plans The table below reconciles movements in LTIP awards during the year. of which Market price at award date* Earliest exercise date Date of award Paul Hooper Oct 2018 130.5p Oct 2021 Oct 2019 Oct 2020 83.5p Oct 2022 79.0p Oct 2023 Interest as at 1 July 2021 149,081 149,081 156,529 Oct 2021 240.0p Oct 2024 – vested in year exercised in year 111,810 (111,810) – – – – – – Total 454,691 111,810 (111,810) Gilbert Jackson Oct 2018 130.5p Oct 2021 Oct 2020 79.0p Oct 2023 Oct 2021 240.0p Oct 2024 Total Michael Leaf Oct 2018 130.5p Oct 2021 Oct 20201 79.0p Oct 2023 Oct 2021 240.0p Oct 2024 Total Simon Dray Oct 2021 240.0p Oct 2024 Total 43,303 56,923 – 43,303 (43,303) – – – – 100,226 43,303 (43,303) 38,798 52,308 – 38,798 (38,798) – – – – 91,106 38,798 (38,798) nil nil – – – – were granted in year – – - 90,823 90,823 – – 44,503 44,503 – – 41,156 41,156 37,538 37,538 Interest as at 30 June 2022 – 149,081 156,529 90,823 lapsed in year (37,271) – – – (37,271) 396,433 – – – – – – – – – – 56,923 44,503 101,426 – 52,308 41,156 93,464 37,538 37,538 * 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 This award was based on a notional share price of 130p. The Alumasc Group plc Report and Accounts 2022 69 Governance Directors’ Remuneration Report continued 2019 Long Term Incentive Plans vesting after the year end Director Paul Hooper Date of vesting1 18 October 2022 Percentage of award vesting Number of shares expected to vest in October 20222 99.4% 148,186 1 The outturn of the 2019 LTIP has been provided in the table above. The vesting outturn for the CEO is subject to confirmation of TSR. It reflects the percentage vesting. 2 Based on a 99.4% vest. 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 Chair 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. 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. Chief Executive single figure of total remuneration Annual bonus pay-out against maximum opportunity Long-term incentive vesting against maximum opportunity Year 2021/22 2020/21 2019/20 2018/19 2017/18 2016/17 2015/16 2014/15 2013/14 2012/13 £000 704 565 352 343 332 510 493 633 323 355 % 68% 100% 3.7%1 3.8% 0% 22% 20% 71% 13% 63% % 99.4%2 75% 0% 0% 0% 72%3 50% 50% 0% 0% 1 This represents a bonus relating to 2019 in respect of the sales of the Facades business. 2 This is based on an assumption TSR will be achieved in October 2022. 3 Adjusted to reflect actual figures following the vesting of the 2015 LTIP award in March 2018. Percentage change in Chief Executive’s remuneration The table below shows the percentage change in remuneration (excluding LTIPs) between the years ended 30 June 2021 and 30 June 2022 for the Chief Executive and all Group employees. All employees in general received 4.5% on 1 July 2022. Salary Benefits Bonus Total 1 This reflects the fact that there were 391 employees at 30 June 2021 and 404 at 30 June 2022. Relative importance of spend on pay 2020/21 2021/22 Percentage increase 70 The Alumasc Group plc Report and Accounts 2022 CEO 3% 0% (56%) (22%) Total employee pay £’000 17,405 18,429 5.9% Employees1 2.5% 2.7% (9.9)% 0.5% Dividends £’000 1,878 3,434 82.9% Strategic report Governance Financial statements Relative importance of spend on pay 20,000 15,000 0 0 0 £ ’ 10,000 5,000 0 17,405 18,429 Total employee pay Dividends 1,878 3,424 2020/21 2021/22 Implementation of the Directors’ Remuneration Policy for the Financial Year 2022/23 The information below sets out how the Company intends to implement the Directors’ Remuneration Policy for the year in 2022/23. Base salary The salaries of the Executive Directors have been reviewed and increased in line with the workforce from 1 July 2022 at the rate of 4.5%. 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. Fees for Non-executive Directors were increased by 4.5% with effect from 1 July 2022, in line with the Executive Directors and the workforce. 2022/23 Bonus Targets for the annual 2022/23 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 and ESG targets related to GHG emissions and Health & Safety/accident improvements. We have introduced stretch targets to drive ambitious organic growth. Currently, the maximum bonus potential for Executive Directors is set at 50% of their salaries. The proposal is to award 30% of salaries for delivery of budgeted underlying profit before tax (UPBT) rising to 50% for delivery of UPBT targets above budget and up to 100% maximum for achieving stretch UPBT targets. Similar increases in ambitious stretch targets and potential bonus rewards will also be implemented for the wider senior management team, which will help to align the interest of shareholders, the Executive Directors and the wider senior management team who are responsible for the day-to-day operations of Alumasc. The targets themselves are commercially sensitive and will be disclosed in next year’s annual report when reporting on the actual bonus outcomes. Long-term Incentive Plan It is intended that the awards under the 2022 LTIP will be made to the Executive Directors in October 2022. For any of the 2022 LTIP awards to vest, a UPBT underpin will need to be met. That UPBT underpin will be a base of £10.5m plus RPI + 2.5% p.a. in the 3 years to 30 June 2025. Subject to achieving the UPBT growth underpin, the awards will vest depending on growth in UPBT and TSR. The Alumasc Group plc Report and Accounts 2022 71 Governance Directors’ Remuneration Report continued Underlying PBT 65% out of the 75% of salary award for the Chief Executive and 30% out of the 40% of salary awards for the other Executive Directors will be dependent on UPBT growth. Awards will vest depending on growth achieved using a notional base UPBT figure of £10.5 million. Performance is based on the third year of the performance period, being the financial year ending 30 June 2025. Awards will vest according to the following targets: UPBT growth (from a base of £10.5 million) Proportion of the award that vests Less than RPI + 2.5% p.a. 0.0% Between RPI + 2.5% p.a. and RPI + 10% p.a. 25% to 100% on a straight-line basis RPI + 10% p.a. or higher 100% Total shareholder return 10% out of the 75% of salary award for the Chief Executive and 10% out of the 40% for the other Executive Directors 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. Statement of voting – 2021 AGM At the 2021 AGM the Directors’ Remuneration Report received the following vote from shareholders: For Against Total votes cast (for and against) Voted withheld* Total votes cast (including withheld votes) Total number of votes cast % of votes cast 16,383,262 20,011 16,403,273 4,245 16,407,527 99.85% 0.12% 99.97% 0.03% 100% * 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. This Report was approved by the Board of Directors on 6 September 2022 and signed on its behalf by the Remuneration Committee Chair. Stephen Beechey Chair of the Remuneration Committee 6 September 2022 72 The Alumasc Group plc Report and Accounts 2022 Directors’ Report Strategic report Governance Financial statements The Directors present their Annual Report and the consolidated financial statements for The Alumasc Group plc for the financial year ended 30 June 2022. The report also includes the Corporate Governance Report on pages 54 to 58 for the purposes of s 463 of the Companies Act 2006 (CA2006). 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 2022 and of the position of the Group at the end of the financial period, together with a description of the principal risks and uncertainties facing the business. The Company has taken advantage of section 414C (11) of the CA 2006 to include disclosures in the Strategic report on these items and the further items listed in the ‘Other information’ section on pages 130 to 131. The Strategic report can be found on pages 2 to 50. Our principal risks and uncertainties are set out on pages 46 to 50 and include each risk and details on how we manage or mitigate these risks. The Directors carried out an assessment of how we manage these risks, including those that could threaten our business model, future performance, or liquidity. 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 55 to 58 and is incorporated into the Directors’ Report by reference. Management report For the purposes of compliance with Accounts regulations Schedule 7 paragraph 1A, the required content of the management report can be found in the Strategic report and this Directors’ Report, including the sections of the Annual Report incorporated by reference. Directors The Directors who served during the financial year and up to the date of approval of these financial statements, unless otherwise stated, were: John McCall (retired 31 December 2021) Jon Pither (retired 21 October 2021) Vijay Thakrar (appointed Chair 1 January 2022) Paul Hooper Stephen Beechey Karen McInerney (appointed 1 January 2022) Simon Dray Gilbert Jackson Michael Leaf The biographies of the Directors can be found on pages 52 to 53. 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 68. In accordance with the Articles of Association, standing for election at the AGM will be Karen McInerney as she was appointed during the year and Mr Vijay Thakrar, Mr Paul Hooper, and Mr Stephen Beechey will be standing for re-election in accordance with the Articles of Association that requires Directors to be reappointed on their third AGM at which they were appointed or re‐appointed. Directors’ & Officers’ Insurance The Company maintains a Directors’ & Officers’ Insurance Policy for the Directors, the Company Secretary, officers, and those in a position of management supervision of Alumasc and its subsidiaries. This insurance is to protect against legal actions brought against Directors & Officers in a personal capacity. Dividend The Directors are recommending a final dividend of 6.65 pence per ordinary share (2020/21: 6.25 pence) which will, if approved at the AGM, will be paid on 4 November 2022 to shareholders on the register at the close of business on 30 September 2022, being a total of 10 pence for the year. The interim dividend of 3.35 pence was paid on 6 April 2022. 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 Trustees 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 68. The Alumasc Group plc Report and Accounts 2022 73 Governance Directors’ Report continued 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 2006 are discussed in the Strategic report (on pages 42 to 45). Covid-19 Alumasc has closely monitored Covid-19 and the impact on our operations, although this has declined in 2022. Our main focus has been on the safety and wellbeing of our employees, customers, suppliers and other stakeholders. All our factories are fully operational and where presence at site is not required staff have been hybrid working or working from home. 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, sexual orientation, and educational and/or professional backgrounds. An analysis of our employees by gender at 30 June 2022 can be found on page 39. Information about Employees can be found on pages 34 to 39. In the Corporate Governance Report and Strategic report section, 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 42, 55 and 58). Global Greenhouse Gas emissions Information about the Group’s Greenhouse Gas emissions is given in our ESG (Environmental, Social and Governance) Report on pages 25 to 39. Political donations No political donations were made during the year by the Company and its subsidiaries (2020/2021: nil). Research and development The Group continues to devote effort and resources to the research and development of new products and solutions. Research and development expenditure during the year totalled £0.2 million (2020/2021: £0.2 million). Disclosure of information to the auditor As far as the Directors are aware, there is no relevant audit information of which the Company’s auditor is unaware; 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 Page/s Location in Annual Report 130 68 Additional information for shareholders Directors’ Remuneration Report 69-72 Directors’ Remuneration Report Note 12 and the significant accounting policies sections, Financial Statements Future developments 2, 7, 9, 21 Strategic report1 Health & Safety and employee related policies 10, 38 & 39 Strategic report: Environmental Social & Governance Report1 Major shareholdings Movements in share capital Purchase of own shares 131 Additional information for shareholders 110 & 111 Notes 16 and 17, Financial statements 130 Additional information for shareholders Share capital – structure, voting, restrictions and other rights 130, 131 Additional information for shareholders and in Note 15 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. 74 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Fair, Balanced and Understandable The Board has concluded that the 2022 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 A resolution to appoint Crowe UK 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 27 October 2022 at 10.00am at Timloc Building Products, Timloc House, Ozone Park, Howden, East Riding of Yorkshire DN14 7SD is included within this document on pages 135 to 140 together with an explanation of the business to be conducted at the meeting. The Notice of the AGM contains the information about the arrangements for 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. The Directors’ Report was approved by the Board on 6 September 2022. On behalf of the Board Helen Ashton Group Company Secretary 6 September 2022 The Alumasc Group plc Report and Accounts 2022 75 Governance Statement of Directors’ Responsibility 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 financial statements in accordance with UK adopted international accounting standards and the Company financial statements in accordance with UK Adopted International Accounting Standards and applicable law. 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 the company and of the profit or loss of the Group for that year. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on A.I.M. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with UK Adopted International Accounting Standards, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safe-guarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that: • so far as each of the Directors is aware, there is no relevant audit information of which the Company’s auditors are unaware; and • the Directors have taken all steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. 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 Company’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 company’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 6 September 2022 76 The Alumasc Group plc Report and Accounts 2022 Independent Auditor’s Report to the Members of The Alumasc Group plc Strategic report Governance Financial statements 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 2022, which comprise: • • • • • the consolidated statement of comprehensive income for the year ended 30 June 2022; the Group and Parent Company statements of financial position as at 30 June 2022; the Group and Parent Company statements of cash flows for the year then ended; the Group and Parent Company statements of changes in equity for the year then ended; and the notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK-adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent company financial statements is to UK adopted international accounting standards. 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 2022 and of the Group’s profit for the year then ended; the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards; and • the financial statements have been properly prepared in accordance with 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 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 In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Groups and Parent Company’s ability to continue to adopt the going concern basis of accounting included: • obtaining managements forecasts covering the period 1 July 2022 to 30 September 2023. We have assessed how these forecasts have been prepared, including the appropriateness of management’s forecasts and sensitivities to the underlying assumptions, as well as verifying the numerical inputs and accuracy of calculations; • Challenge the key assumptions used in the forecasts, including the increase in sales material prices and the access to funding for the period under review; • Challenged management on the stress test scenarios to understand the impact on revenue, funding requirements and profitability; and • Reviewing the disclosures made in the financial statements relating to going concern and agreeing it is consistent with management’s assessment. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group or Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. The Alumasc Group plc Report and Accounts 2022 77 Financial statements Independent Auditor’s Report continued to the Members of The Alumasc Group plc Overview of our audit approach Materiality In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified. Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £500,000, based at planning on approximately 5% of profit before tax including the trading results of the discontinued operation. The Parent Company materiality was determined as £350,000 based on a percentage of net assets, subject to a cap to restrict the amount to no more than Group performance materiality. We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control environment and is approximately £350,000. The Parent Company performance materiality is approximately £250,000. Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and directors’ remuneration. We agreed with the Audit Committee to report to it all identified errors in excess of £25,000. Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds. Overview of the scope of our audit The Group and its subsidiaries are accounted for at one location, being the Parent Company’s registered office. We performed full scope audits of the complete financial information of The Alumasc Group plc and the five components, Alumasc Building Products Limited, Levolux Limited, Benjamin Priest Limited, Alumasc Precision Limited and Alumasc Limited. The work was performed directly by the Group audit team. The operations that were subject to full-scope audit made up 100% of the consolidated revenues, total profit before tax on continuing operations and total assets and liabilities. The Groups other subsidiary, Elkington China Limited, was subject to a desktop review as it is not individually financially significant enough to require a full scope audit for Group purposes. Key Audit Matters Key audit matters are those matters that, in our professional judgement, 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) that we identified. These matters included 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. This is not a complete list of all risks identified by our audit. Key audit matter How the scope of our audit addressed the key audit matter Valuation of defined benefit pension scheme net liabilities (Note 22) The Group operates a defined benefit pension scheme that provides benefits to a number of current and former employees. At 30 June 2022, the defined benefit pension schemes’ net liabilities were £2.1 million. The gross value of pension scheme assets amounted to £87.2 million, with gross liabilities £89.3 million. The valuation of the defined benefit pension scheme net liabilities in accordance with IAS 19 ‘Employee Benefits’ involves significant judgement and is subject to complex actuarial assumptions. Small variations in those actuarial assumptions can lead to a materially different defined benefit pension scheme asset or liability being recognised within the Group financial statements. Therefore, we identified the valuation of the defined benefit pension scheme as a significant risk, which was one of the most significant assessed risks of material misstatement. Our audit procedures included: • Documenting our understanding of management’s processes for evaluating the defined benefit scheme and assessing the design effectiveness of related key controls; • Evaluating the independence and competence of management’s actuary; • Benchmarking the key assumptions used by management in the Group’s valuation using an independent auditor expert actuary, comparing the data used to external market data; • Corroborating the valuation and existence of pension scheme assets to third party statements; • Assessing disclosures made in the financial statements to determine compliance with IAS 19; 78 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Key audit matter How the scope of our audit addressed the key audit matter Recognition of revenue and attributable profit (or losses) on contracts (Note 2 and 3) Revenue is recognised on the stage of completion of individual contracts. 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 partially completed contract represents an area of significant judgement 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. Our audit procedures included: • Documenting our understanding and evaluated management’s processes for evaluating the costs incurred on a contract to date and stage of completion of contract; • Obtained a breakdown of contracts consisting of the revenue and costs in the year; • Selected a sample of both contracts completed and contracts open at the year-end date based on criteria including contract value and loss making contracts; • Obtained copies of contracts to corroborate the total transaction price and the terms of the contract; • Tested a sample of invoices raised during the year through to cash collected; • Challenged management over the recognition of income and whether performance obligations had been met in line with requirements of IFRS 15; • Tested a sample of costs to third party documentation and ensured the costs had been allocated to the correct contract; • Meetings with contract managers on the performance of each contract sampled and discussions on final account negotiations, margin and costs to complete; • We assessed management’s ability to accurately forecast by reviewing a sample of open contracts from the prior period and agreeing to final completed costs and performance of contract. Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to enable us to express an opinion on these matters individually and we express no such opinion. Other information The directors are responsible for the other information contained within the annual report. The other information comprises the information included in the annual report, 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. 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 this gives rise to a material misstatement in the financial statements themselves. 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. Opinion on other matter prescribed by the Companies Act 2006 In our opinion based on the work undertaken in the course of our 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 light of the knowledge and understanding of the Group and the Parent Company and their 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 where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. The Alumasc Group plc Report and Accounts 2022 79 Financial statements Independent Auditor’s Report continued to the Members of The Alumasc Group plc Responsibilities of the directors for the financial statements As explained more fully in the directors’ responsibilities statement set out on page 76, 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 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: We obtained an understanding of the legal and regulatory frameworks within which the Group operates, focusing on those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The laws and regulations we considered in this context were relevant company law and taxation legislation in the UK being the principal jurisdiction in which the Group operates. We identified the greatest risk of material impact on the financial statements from irregularities, including fraud, to be the override of controls by management. Our audit procedures to respond to these risks included enquiries of management about their own identification and assessment of the risks of irregularities, sample testing on the posting of journals and reviewing accounting estimates for biases in particular where significant judgements are involved (see Key Audit Matters above). Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). The potential effects of inherent limitations are particularly significant in the case of misstatement resulting from fraud because fraud may involve sophisticated and carefully organised schemes designed to conceal it, including deliberate failure to record transactions, collusion or intentional misrepresentations being made to us. A further description of our responsibilities is available 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 company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Mark Evans (Senior Statutory Auditor) for and on behalf of Crowe U.K. LLP Statutory Auditor Black Country House Rounds Green Road Oldbury B69 2DG 6 September 2022 80 The Alumasc Group plc Report and Accounts 2022 – – – – (150) (128) (278) (278) (268) (546) (165) (711) 77,805 (48,364) 29,441 (18,935) (150) (128) (19,213) 10,228 (757) 9,471 (2,118) 7,353 Consolidated Statement of Comprehensive Income For the year ended 30 June 2022 Strategic report Governance Financial statements Year ended 30 June 2022 Year ended 30 June 2021 (restated)* 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 3, 4 89,381 (56,015) 33,366 Net operating expenses before non-underlying items (20,033) IAS 19 past service pension cost Other non-underlying items 5 5 – – 89,381 77,805 (56,015) (48,364) 33,366 29,441 (20,033) (18,935) – – – – – – (634) (634) – – Net operating expenses (20,033) (634) (20,667) (18,935) Operating profit Net finance costs Profit before taxation Tax expense 4, 5 13,333 (634) 12,699 10,506 9 5 (608) (60) (668) (489) 12,725 (694) 12,031 10,017 10, 12 (2,469) 48 (2,421) (1,953) 8,064 Profit for the year from continuing operations 10,256 (646) 9,610 Discontinued operations: (Loss)/profit after taxation for the period from discontinued operations Profit/(loss) for the year Other comprehensive income: Items that will not be reclassified to profit or loss: 6 (1,577) (15,080) (16,657) 401 8,679 (15,726) (7,047) 8,465 (168) (879) 233 7,586 Actuarial (loss)/gain on defined benefit pensions, net of tax (25) 10,393 Items that are or may be reclassified subsequently to profit or loss: Effective portion of changes in fair value of cash flow hedges, net of tax Exchange differences on retranslation of foreign operations Other comprehensive gain for the year, net of tax Total comprehensive (loss)/profit for the year, net of tax Earnings per share Basic earnings per share – Continuing operations – Discontinued operations Diluted earnings per share – Continuing operations – Discontinued operations 12 12 480 161 641 616 (6,431) Pence 26.8 (46.5) (19.7) 26.4 (46.5) (20.1) (385) (46) (431) 9,962 17,548 Pence 20.6 0.6 21.2 20.2 0.6 20.8 * The results for the year to 30 June 2021 have been re-presented to show the Levolux business as a discontinued operation. See note 6 for details. Reconciliations of underlying to statutory profit and earnings per share are provided in notes 5 and 12 respectively. The Alumasc Group plc Report and Accounts 2022 81 Financial statements Consolidated Statement of Financial Position At 30 June 2022 Notes 2022 £’000 2022 £’000 2021 £’000 2021 £’000 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 Derivative financial assets Cash at bank Total assets Liabilities Non-current liabilities 13 13 14 15 10 16 17 21 27 12,573 4,926 8,526 2,126 529 13,394 18,786 325 8,284 Interest bearing loans and borrowings 19, 27 (13,000) Lease liability Employee benefits payable Provisions Deferred tax liabilities Current liabilities Trade and other payables Lease liability Provisions Corporation tax payable Derivative financial liabilities Total liabilities Net assets Equity Share capital Share premium Capital reserve – own shares Hedging reserve Foreign currency reserve Profit and loss account reserve Total equity 20 22 23 10 18 20 23 21 24 25 25 25 25 (4,251) (2,114) (1,061) (1,730) (19,031) (881) (1,360) (309) – 4,517 445 (601) 263 216 20,892 11,734 5,469 18,705 3,321 1,145 28,680 40,374 40,789 69,469 37,259 77,633 10,871 21,389 – 4,999 (5,936) (4,811) (4,581) (1,267) (966) (22,156) (17,561) (21,581) (43,737) 25,732 (23,927) (41,488) 36,145 (21,011) (795) (834) (1,019) (268) 4,517 445 (406) (217) 55 31,751 25,732 36,145 The financial statements were approved by the Board of Directors and authorised for issue on 6 September 2022. Paul Hooper Director 6 September 2022 Company number 1767387 Simon Dray Director 82 The Alumasc Group plc Report and Accounts 2022 Consolidated Statement of Cash Flows For the year ended 30 June 2022 Strategic report Governance Financial statements Operating activities Operating profit from continuing operations Adjustments for: Depreciation Amortisation Gain on disposal of property, plant and equipment IAS 19 past service pension cost Increase in inventories Increase in receivables 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 operations Depreciation/amortisation Movement in working capital from discontinued operations Cash utilised by operating activities of discontinued operations Tax paid Net cash inflow from operating activities Investing activities Purchase of property, plant and equipment Payments to acquire intangible fixed assets Proceeds from sales of property, plant and equipment Net cash outflow 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 Purchase of own shares Refinancing costs 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 Year ended 30 June 2022 £’000 Year ended 30 June 2021 £’000 Notes 12,699 10,228 2,459 2,098 257 (18) – (2,573) (2,536) 279 (298) (2,561) 118 7,826 (2,125) 224 (438) (2,339) (1,615) 3,872 (2,449) (123) 22 (2,550) (356) (3,434) 7,000 (713) (169) (526) – 1,802 3,124 4,999 3,124 161 8,284 193 (16) 150 (2,546) (4,570) 6,557 (310) (2,614) 397 9,567 330 216 (1,513) (967) (161) 8,439 (1,666) (330) 46 (1,950) (207) (1,878) (14,000) (692) (178) – (65) (17,020) (10,531) 15,576 (10,531) (46) 4,999 7, 13 7, 15 5 22 26 6 11 27 27 27 The Alumasc Group plc Report and Accounts 2022 83 Financial statements Consolidated Statement Of Changes In Equity For the year ended 30 June 2022 Share capital £’000 Share premium £’000 Notes Capital reserve – own shares £’000 Hedging reserve £’000 Foreign currency reserve £’000 4,517 445 (416) 168 – – – – – – – – – – – – – – – – – – – – – – – – – – 10 – – – – – (475) 90 – – – – – – 4,517 445 (406) (217) – – – – – – – – – – – – – – – – – – – – – – – – – – – – (597) 402 – – – – – 593 (113) – – – – – – – 11 11 101 – (46) – – – – – – – – 55 – 161 – – – – – – – – – Profit and loss account reserve £’000 15,026 7,586 – – – Total equity £’000 19,841 7,586 (46) (475) 90 10,393 10,393 237 – 397 237 10 397 (1,878) (1,878) (10) (10) 31,751 36,145 (7,047) (7,047) – – – (25) (140) – – 118 161 593 (113) (25) (140) (597) 402 118 (3,434) (3,434) (331) (331) At 1 July 2020 Profit for the period Exchange differences on retranslation of foreign operations Net loss on cash flow hedges Tax on derivative financial liability Actuarial gain on defined benefit pensions, net of tax Tax on share options Own shares used to satisfy exercise of share awards Share based payments Dividends Exercise of share based incentives At 1 July 2021 Loss for the period Exchange differences on retranslation of foreign operations Net gain on cash flow hedges Tax on derivative financial asset Actuarial loss on defined benefit pensions, net of tax Tax on share options Acquisition of own shares Own shares used to satisfy exercise of share awards Share based payments Dividends Exercise of share based incentives At 30 June 2022 4,517 445 (601) 263 216 20,892 25,732 84 The Alumasc Group plc Report and Accounts 2022 Notes to the Financial Statements For the year ended 30 June 2022 Strategic report Governance Financial statements 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 UK adopted international accounting standards. Going concern Management continued to take actions to allow the business to trade effectively and manage the risks associated with the Covid-19 pandemic. At 30 June 2022 the Group had cash and cash equivalents of £8.3 million and had utilised £13.0 million of its committed £20.0 million revolving credit facility. This provided total headroom of some £15.3 million against committed facilities and, together with £4.0 million overdraft facilities, there is headroom of some £19.3 million against total facilities at 30 June 2022. On 25 August 2022 the Group entered into a £25.0 million committed revolving credit facility which expires in August 2025 with two further single year extension periods to August 2026 and August 2027. In assessing going concern to take account of the continued 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 a stress test scenario which assumes a 20% reduction in revenue, with no cost reduction or cash conservation measures, and a Covid-19 model, which assumes a five month disruption of trade consistent with that experienced during the first wave of the pandemic. Under the lowest point in these stress tested scenarios, the Group retains adequate headroom against its total banking facilities for the next 13 months to the end of September 2023, with no breach of banking covenants across this period. The Group has modelled an additional scenario (a reverse stress test) that would lead to a breach of its banking covenants. It is considered that the risk of such a scenario arising is remote. Management have also identified a number of mitigating actions that the Group would take to stay within its banking facilities and comply with the associated covenants throughout the period. 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. 2 Summary of significant accounting policies The accounting policies adopted are consistent with those of the previous financial year. The following new standards, amendments and interpretations are effective for the period beginning on or after 1 July 2021 and have been adopted for the Group financial statements where appropriate with no material impact on the disclosures and results made by the Group: • Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); and • Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41). 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. Judgements 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 2022 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. Valuation of defined benefit pension obligations requires estimation of future changes in inflation, mortality rates and the selection of an appropriate 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. The Alumasc Group plc Report and Accounts 2022 85 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 2 Summary of significant accounting policies continued Judgements and estimates continued Revenue and associated margin recognised over time on contracts with customers is recognised using the input method under IFRS 15 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. Judgement is therefore required in the application of the Group’s policy regarding revenue and profit recognition relating to estimates of costs to complete contracts, the final profit margin on those contracts and the inclusion of potential contract variations prior to these being fully agreed. Goodwill Goodwill arises on the acquisition of subsidiaries. As part of its transition to IFRS, the Group elected to re-state only those business combinations that occurred on or after 1 July 2004. In respect of acquisitions prior to 1 July 2004, goodwill represents the amount recognised under the Group’s previous accounting framework, UK GAAP. For acquisitions on or after 1 July 2004, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in the income statement. After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value may be impaired. The carrying amount of goodwill allocated to a cash-generating unit is taken into account when determining the gain or loss on disposal of the unit, or of an operation within it. 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 fair value. 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 – 2 to 5 years Brands – 3 to 25 years The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. In addition, the carrying value of capitalised development expenditure is reviewed for impairment before being brought into use and annually thereafter. 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: – over the period of the lease – 25 to 50 years Right-of-use assets Freehold buildings Long leasehold improvements – over the period of the lease Short leasehold improvements – over the period of the lease Plant and equipment Motor vehicles – 3 to 15 years – 4 to 5 years Where parts of an item of property, plant and equipment have different useful lives, each part is accounted for as a separate item. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively. 86 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 2 Summary of significant accounting policies continued Impairment of fixed assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell, and its value in use. It is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. For the purpose of impairment testing, goodwill is allocated to the related cash-generating units monitored by management, usually at business segment level or business level as the case may be. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset. Leases (i) Identification of a lease 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 amended, on or after 1 July 2019, as the Group has opted to apply the practical expedient to “grandfather” the assessment of which contracts are, or contain, leases. (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. 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 readily be 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 or less. The Group 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 2022 87 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 2 Summary of significant accounting policies continued Impairment of fixed assets continued (iii) As a lessor 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). Financial assets When financial assets are recognised initially under IFRS 9, 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 a consignment basis, which are accounted for when consumed. This inventory remains the property of the supplier until used. Pension costs The Group operates both defined benefit and defined contribution pension schemes as follows: (i) Defined benefit pensions The Group 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 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 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 from 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. 88 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 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 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. 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 re-measured at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the statement of comprehensive income. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how effectiveness will be measured throughout its duration. Such items are expected at inception to be highly effective. For the purpose of hedge accounting, the hedges used by the Group are classified as cash flow hedges, as they hedge exposure to variability in cash flows that are attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction. The portion of the gain or loss on a cash flow hedge that is determined to be an effective hedge is initially recognised directly in other comprehensive income, while the ineffective portion is recognised in the statement of comprehensive income. The Alumasc Group plc Report and Accounts 2022 89 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 2 Summary of significant accounting policies continued Derivative financial instruments and hedging continued Amounts taken to other comprehensive income 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 reporting date. 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 cash flows comprise cash at bank and in hand and 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 cancellation of liabilities are recognised respectively in finance revenue and finance costs. Borrowing costs are recognised as an expense over the period to 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. 90 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 2 Summary of significant accounting policies continued 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 deducted from the cost of 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 July 2022: • Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); • Classification of Liabilities as Current or Non-current (Amendments to IAS 1); • Definition of Accounting Estimates (Amendments to IAS 8); and • Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). Management is currently assessing the impact of these new accounting standards and amendments but does not believe that the amendments will have a significant impact. 3 Revenue Revenue, as disclosed in the statement of comprehensive income and total income is analysed as follows: Revenue arising from: Goods transferred to customers, recognised at a point in time Contracts recognised over time Revenue (per statement of comprehensive income) Rental income Total income 2021/22 £’000 2020/21 £’000 88,558 823 89,381 75,623 2,182 77,805 40 40 89,421 77,845 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. Accordingly, at each reporting date there are likely to be several of these types of contract which have commenced but for which the performance obligations are 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 believe this information is the most relevant when evaluating the impact of strategic decisions because of similarities between the nature of products and services, routes to market and supply chains in each segment. Inter-segment transactions are entered into applying normal commercial terms that would be available to third parties. Segment results, assets and liabilities include those items directly attributable to a segment. Unallocated assets comprise cash and cash equivalents, deferred tax assets, income tax recoverable and corporate assets that cannot be allocated on a reasonable basis to a reportable segment. Unallocated liabilities comprise borrowings, employee benefit obligations, deferred tax liabilities, income tax payable and corporate liabilities that cannot be allocated on a reasonable basis to a reportable segment. The Alumasc Group plc Report and Accounts 2022 91 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 4 Segmental analysis continued Year to 30 June 2022 Water Management Building Envelope Housebuilding Products Trading Unallocated costs Total from continuing operations Segmental operating result Brand amortisation (see note 5) Restructuring costs (see note 5) Total operating profit from continuing operations Segmental operating result £’000 Revenue £’000 47,564 29,389 12,428 89,381 89,381 8,753 3,580 2,447 14,780 (1,447) 13,333 £’000 13,333 (70) (564) 12,699 Segment assets £’000 Segment liabilities £’000 35,084 9,990 15,851 60,925 8,544 69,469 (11,236) (8,625) (7,346) (27,207) (16,530) (43,737) Capital expenditure Property, plant & equipment £’000 Other intangible assets £’000 Depreciation £’000 Amortisation £’000 1,427 141 1,310 2,878 5 2,883 70 12 41 123 – 123 1,207 360 866 2,433 82 2,515 190 187 48 425 – 425 Water Management Building Envelope Housebuilding Products Trading Unallocated Total Year to 30 June 2021 Water Management Building Envelope Housebuilding Products Trading Unallocated costs Total from continuing operations Segmental operating result Brand amortisation (see note 5) Past service cost in respect of GMP equalisation (see note 5) Restructuring costs (see note 5) Total operating profit from continuing operations 92 The Alumasc Group plc Report and Accounts 2022 Segmental operating result £’000 Revenue £’000 38,370 28,362 11,073 77,805 77,805 6,115 3,757 2,552 12,424 (1,918) 10,506 £’000 10,506 (70) (150) (58) 10,228 Strategic report Governance Financial statements 4 Segmental analysis continued Segment assets £’000 Segment liabilities £’000 Capital expenditure Property, plant & equipment £’000 Other intangible assets £’000 Depreciation £’000 Amortisation £’000 Water management Building Envelope Housebuilding Products Trading Unallocated Total Analysis by geographical segment 2021/22 Sales to external customers Segment non-current assets United Kingdom £’000 75,714 28,150 Analysis by geographical segment 2020/21 Sales to external customers Segment non-current assets United Kingdom £’000 70,205 39,225 29,866 25,500 14,747 70,113 7,520 77,633 Europe £’000 2,983 – Europe £’000 3,004 – (9,635) (10,208) (7,114) (26,957) (14,531) (41,488) North America £’000 21 – North America £’000 57 – 1,455 215 769 2,439 – 2,439 Middle East £’000 2,006 – Middle East £’000 1,286 – 271 36 23 330 – 330 Far East £’000 8,071 1 Far East £’000 2,663 4 1,081 175 798 2,054 92 2,146 Rest of World £’000 586 – Rest of World £’000 590 – 137 180 44 361 – 361 Total £’000 89,381 28,151 Total £’000 77,805 39,229 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. 5 Underlying to statutory profit before tax reconciliation Underlying operating profit/profit before tax from continuing operations Brand amortisation IAS 19 net pension scheme finance costs (note 9) IAS 19 past service cost in respect of GMP equalisation Restructuring costs Profit before tax from continuing operations Underlying operating (loss)/profit of Levolux (note 6) Brand amortisation Levolux (note 6) Write down of assets held for sale (note 6) Statutory operating profit/(loss)/profit before tax 2021/22 2020/21 Operating profit £’000 Profit before tax £’000 Operating profit £’000 Profit before tax £’000 13,333 12,725 10,506 10,017 (70) – – (564) 12,699 (1,957) (168) – 10,574 (70) (60) – (564) 12,031 (1,957) (168) (14,912) (5,006) (70) – (150) (58) 10,228 498 (168) – 10,558 (70) (268) (150) (58) 9,471 498 (168) – 9,801 In the presentation of underlying profits, management disclose 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 would typically be excluded in assessing the value of the business. The Alumasc Group plc Report and Accounts 2022 93 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 5 Underlying to statutory profit before tax reconciliation continued In addition, management has presented the following specific items that arose in 2021/22 and 2020/21 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 of separate businesses within the Group in both 2021/22 and 2020/21; • the one off IAS 19 past service pension cost relating to Guaranteed Minimum Pension (“GMP”) equalisation between men and women, in the prior financial year; and • the one-off deferred tax rate change adjustment charge of £319k relating to the increase in main rate of UK corporation tax from 19% to 25% in the prior financial year. 6 Discontinued operations Discontinued operations relate to the Levolux business which was divested by the Group on 26 August 2022 and therefore disclosed as held for sale at 30 June 2022. At the year end the discontinued operation had liabilities of £3,859,000. The assets held for resale were written down to a value equivalent to the liabilities to reflect the sales proceeds of £1 received on 26 August 2022. The results of Levolux included in the consolidated statement of comprehensive income are as follows: Revenue Underlying operating (loss)/profit Brand amortisation Write down of goodwill Write down of brand Write down of Assets held for sale (Loss)/profit before taxation Tax credit/(charge) (see note 10) (Loss)/profit after taxation Year to 30 June 2022 £’000 Year to 30 June 2021 £’000 7,820 12,660 (1,957) (168) (10,179) (874) (3,859) (17,037) 380 (16,657) 498 (168) – – – 330 (97) 233 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 Amortisation of intangible assets Brand amortisation Gain on disposal of property, plant and equipment Unsettled foreign exchange (gains)/losses Employee benefit expense Restructuring & relocation costs IAS 19 Past service cost in respect of GMP equalisation Short term and low value lease payments Research and development Auditor’s remuneration: Audit of these financial statements Audit of financial statements of subsidiaries pursuant to legislation Non-audit services Other operating charges 94 The Alumasc Group plc Report and Accounts 2022 2021/22 £’000 48,291 2,515 187 70 (18) (3) 2020/21 £’000 37,814 2,146 123 70 (16) 66 20,144 18,978 564 – 544 242 73 47 – 58 150 533 114 67 43 35 4,026 76,682 7,396 67,577 Strategic report Governance Financial statements 8 Employee costs and numbers Employee benefit expense from continuing operations: Wages and salaries Social security Defined contribution pension costs (note 22) IAS 19 net defined benefit pension scheme finance 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 2021/22 £’000 2020/21 £’000 17,463 1,715 966 20,144 60 20,204 16,816 1,573 589 18,978 268 19,246 2021/22 Number 2020/21 Number 210 194 404 196 195 391 2021/22 £’000 2020/21 £’000 48 391 169 608 60 668 24 287 178 489 268 757 The Alumasc Group plc Report and Accounts 2022 95 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 10 Tax expense (a) Tax on profit Tax charged in the statement of comprehensive income Current tax: UK corporation tax – continuing operations – discontinued operations Overseas tax Amounts (over)/under provided in previous years Total current tax Deferred tax: Origination and reversal of temporary differences Amounts under/(over) provided in previous years Rate change adjustment Total deferred tax Total tax expense Tax charge on continuing operations Tax (credit)/charge on discontinued operations Total tax expense Tax recognised in other comprehensive income Deferred tax: Actuarial (losses)/gains on pension schemes Cash flow hedge Tax charged to other comprehensive income Total tax charge in the statement of comprehensive income 2021/22 £’000 2020/21 £’000 1,094 (380) 207 (16) 905 833 78 225 1,136 2,041 2,421 (380) 2,041 1,346 97 46 23 1,512 405 (21) 319 703 2,215 2,118 97 2,215 (9) 113 104 2,099 (90) 2,009 2,145 4,224 (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 20.6% is higher than (2020/21: 22.6% was higher than) the standard rate of corporation tax in the UK of 19.0% (2020/21: 19.0%). The differences are reconciled below: Profit before tax from continuing operations (Loss)/profit before tax from discontinued operations Accounting profit before tax Current tax at the UK standard rate of 19.0% (2020/21: 19.0%) Expenses not deductible for tax purposes Income not taxable Rate change adjustment Tax (over)/under provided in previous years – current tax Tax under/(over) provided in previous years – deferred tax 96 The Alumasc Group plc Report and Accounts 2022 2021/22 £’000 2020/21 £’000 12,031 (2,125) 9,906 1,882 42 (170) 225 (16) 78 9,471 330 9,801 1,862 32 – 319 23 (21) 2,041 2,215 Strategic report Governance Financial statements 10 Tax expense continued (c) Unrecognised tax losses The Group has agreed tax capital losses in the UK amounting to £16.3 million (2021: £16.3 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 £1.0 million (2021: £1.0 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 (2021: £15.3 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 2020 Accelerated capital allowances £’000 550 Charged/(credited) to the statement of comprehensive income – current year Credited to the statement of comprehensive income – prior year (Credited)/charged to equity At 30 June 2021 Charged/(credited) to the statement of comprehensive income – current year Charged/(credited) to the statement of comprehensive income – prior year (Credited)/charged to equity 359 (5) – 904 463 79 – Short term temporary differences £’000 Brands £’000 Hedging £’000 Total deferred tax liability £’000 Pension deferred tax asset £’000 Share options £’000 – 1,007 (3,661) (83) 307 417 – 2,099 (1,145) (21) (327) 966 433 625 78 253 1,730 – (9) (529) (75) (65) (16) – (156) 493 96 – – 589 22 (60) (1) – – – 39 – – (90) (51) – – 113 62 – (237) (320) 8 – 140 (172) At 30 June 2022 1,446 (135) 529 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 £3.8 million (2021: £3.8 million) in respect of net capital losses of £15.3 million (2021: £15.3 million) have not been recognised, see note 10 (c). (e) Factors affecting the tax charge in future periods In the Budget on 3 March 2021, the Government announced its intention to increase the main rate of UK corporation tax from 19% to 25% with effect from 1 April 2023. Existing temporary differences on which deferred tax has been provided may therefore unwind in future periods at this increased rate. Since the 25% tax rate change was substantively enacted at the 30 June 2022 balance sheet date, deferred tax assets and liabilities have been calculated to reflect the expected timing of reversal of the related temporary difference. 11 Dividends Interim dividend for 2022 of 3.35p paid on 6 April 2022 Final dividend for 2021 of 6.25p paid on 29 October 2021 Interim dividend for 2021 of 3.25p paid on 6 April 2021 Final dividend for 2020 of 2.0p paid on 30 October 2020 2021/22 £’000 2020/21 £’000 1,201 2,233 – – 3,434 – – 1,163 715 1,878 A final dividend of 6.65 pence per equity share, at a cash cost of £2,381,000, has been proposed for the year ended 30 June 2022, payable on 4 November 2022. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements. The Alumasc Group plc Report and Accounts 2022 97 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 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: 2021/22 £’000 9,610 (16,657) (7,047) 000s 35,825 586 36,411 2020/21 £’000 7,353 233 7,586 000s 35,766 637 36,403 Pence Pence 26.8 (46.5) (19.7) 20.6 0.6 21.2 2021/22 Pence 2020/21 Pence 26.4 (46.5) (20.1) 20.2 0.6 20.8 2021/22 £’000 12,031 2020/21 £’000 9,471 70 60 – 564 12,725 (2,469) 10,256 35,825 28.6p 70 268 150 58 10,017 (1,953) 8,064 35,766 22.5p 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 Restructuring & relocation costs Underlying profit before taxation from continuing operations Tax at underlying Group tax rate of 19.4% (2020/21: 19.5%) Underlying earnings from continuing operations Weighted average number of shares Underlying earnings per share from continuing operations 98 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 13 Property, plant and equipment Right-of-use assets £’000 Freehold land and buildings £’000 Long leasehold improvements £’000 Short leasehold improvements £’000 Plant & equipment £’000 Cost At 1 July 2020 Additions Disposals At 1 July 2021 Additions Disposals At 30 June 2022 6,270 374 – 6,644 420 (155) 6,909 5,899 1,232 – – – – 5,899 1,232 – – – – 5,899 1,232 Accumulated depreciation and impairment losses 414 761 – 1,175 963 – (155) 1,320 140 – 1,460 131 – – 1,983 1,591 4,926 5,469 5,856 4,308 4,439 4,579 389 79 – 468 54 – – 522 710 764 843 At 1 July 2020 Depreciation charge for year On disposals At 1 July 2021 Depreciation charge for year Write down of Assets held for sale On disposals At 30 June 2022 Net book value at 30 June 2022 Net book value at 30 June 2021 Net book value at 1 July 2020 14 Goodwill Cost: At 1 July and 30 June Impairment: At 1 July Write down of Assets held for sale At 30 June Net book value at 30 June Total £’000 28,800 2,439 (1,232) 30,007 2,883 (1,077) 31,813 11,855 2,146 (1,197) 12,804 2,515 45 (1,050) 14,314 17,499 17,203 16,945 310 – – 310 24 (179) 155 239 16 – 255 21 – (179) 97 58 55 71 15,089 2,065 (1,232) 15,922 2,439 (743) 17,618 9,493 1,150 (1,197) 9,446 1,346 45 (716) 10,121 7,497 6,476 5,596 2022 £’000 2021 £’000 19,428 19,428 723 10,179 10,902 723 – 723 8,526 18,705 The Alumasc Group plc Report and Accounts 2022 99 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 14 Goodwill continued 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 2022 £’000 3,820 2,264 – 225 2,217 8,526 2021 £’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 cash flow forecasts for the businesses, based on budgets and plans covering a five year period. The growth rate used to extrapolate the cash flows beyond this period was 1% (2021: 1%) for each CGU. Key assumptions included in the recoverable amount calculation are the discount rate applied and the cash flows 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 cash flows of these cash generating units with on-balance sheet goodwill was 12% (2021: 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 2022 was similar to the rate used in 2021. The surplus headroom above the carrying value of goodwill at 30 June 2022 was significant in the case of Timloc, Rainclear, Wade and Alumasc Roofing, with no impairment arising from either a 2% increase in the discount rate; a growth rate of -1% used to extrapolate the cash flows; or a reduction of 25% in the cash flow generated in the terminal year. The carrying value of goodwill at 30 June 2022 for Levolux was written down to £nil to reflect the sale of the business on 26 August 2022. 100 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Brands £’000 Computer software £’000 5,843 – – 2,644 330 (7) Total £’000 8,487 330 (7) 5,843 2,967 8,810 – – 123 (9) 123 (9) 5,843 3,081 8,924 3,248 238 – 3,486 238 874 – 1,887 123 (7) 2,003 187 19 (9) 5,135 361 (7) 5,489 425 893 (9) 4,598 2,200 6,798 1,245 2,357 2,595 881 964 757 2,126 3,321 3,352 15 Other intangible assets Cost: At 1 July 2020 Additions Disposals At 1 July 2021 Additions Disposals At 30 June 2022 Accumulated amortisation: At 1 July 2020 Amortisation for the year On disposals At 1 July 2021 Amortisation for the year Write down of Assets held for sale On disposals At 30 June 2022 Net book value at 30 June 2022 Net book value at 30 June 2021 Net book value at 1 July 2020 The Wade brand is being amortised over a life of 25 years from February 2018. The Levolux brand was written down to £nil at 30 June 2022 to reflect the sale of the business on 26 August 2022. 16 Inventories Raw materials Work in progress Finished goods 2022 £’000 4,067 280 9,047 13,394 2021 £’000 2,724 195 7,952 10,871 During the year the Group’s inventory provision increased by £9,000 (2021: decreased by £58,000). At 30 June 2022 the Group’s inventory provision was £1,166,000 (2021: £1,157,000). 17 Trade and other receivables Trade receivables Contract assets Other receivables Prepayments 2022 £’000 16,801 – 543 1,442 2021 £’000 15,945 2,772 384 2,288 18,786 21,389 The Alumasc Group plc Report and Accounts 2022 101 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 17 Trade and other receivables continued Contract 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 2022, trade receivables and other receivables at nominal value of £410,000 (2021: £750,000) were impaired and provided for. Movements in the provision for impairment of receivables were as follows: At 1 July (Credit)/charge for the year Amounts written off Write down of Assets held for sale At 30 June 2022 £’000 2021 £’000 750 (156) (44) (140) 410 469 336 (55) – 750 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 2022 2021 Gross receivable £’000 Loss provision £’000 Gross receivable £’000 Loss provision £’000 14,402 2,363 277 30 139 17,211 130 135 46 16 83 410 16,874 1,566 434 180 413 656 27 18 12 37 19,467 750 2022 £’000 14,257 1,916 724 – 2,134 19,031 2021 £’000 14,827 2,326 666 745 2,447 21,011 Contract liabilities arise from the Group’s Business Envelope division and represent payments in advance of revenue recognised under IFRS 15. 102 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 19 Borrowings Non-current liabilities: Non-current instalments due on bank debt 2022 £’000 2021 £’000 13,000 5,936 At 30 June 2022 the Group had a £20.0 million committed revolving credit facility which had an expiry date of April 2023. On 25 August 2022 the Group entered into a £25.0 million committed revolving credit facility which expires in August 2025 and two further single year extension periods to August 2026 and August 2027. 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 new facility: Group interest cover, based on underlying EBITDA (i.e. from continuing operations and before non-recurring items), to be at least three and a half times; and net bank 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, with an acquisition spike to be below two and three quarter times. At 30 June 2022 the Group also had £4.0 million (2021: £4.0 million) of bank overdraft facilities, renewed until August 2023 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 2022 £’000 4,251 881 5,132 2021 £’000 4,811 795 5,606 Lease liabilities are initially measured at the present value of future lease payments, discounted using the Group’s incremental borrowing rate. At 1 July Additions Disposals Interest on lease liabilities Amounts paid on lease liabilities At 30 June 2022 £’000 5,606 420 (181) 169 (882) 5,132 2021 £’000 5,924 374 – 178 (870) 5,606 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. The Alumasc Group plc Report and Accounts 2022 103 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 21 Financial instruments continued 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 Financial liabilities: Bank loans Lease liabilities Trade and other payables Derivative financial liabilities 30 June 2022 30 June 2021 Carrying amount £’000 Fair value £’000 Carrying amount £’000 Fair value £’000 8,284 16,801 – 543 325 8,284 16,801 – 543 325 4,999 15,945 2,772 384 – 4,999 15,945 2,772 384 – 25,953 25,953 24,100 24,100 13,000 13,000 5,132 17,115 – 5,132 17,115 – 5,936 5,606 17,940 268 5,936 5,606 17,940 268 35,247 35,247 29,750 29,750 Derivative financial assets and liabilities are carried at fair value as a designated hedge instrument. The other financial assets and liabilities are measured at amortised cost. 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 2022 and 2021 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 2022 Interest bearing loans and borrowings Lease liabilities Trade and other payables At 30 June 2021 Interest bearing loans and borrowings Lease liabilities Trade and other payables On demand £’000 Less than 3 months £’000 3 to 12 months £’000 More than 1 year £’000 – – 4,964 4,964 – – 6,698 6,698 90 264 11,210 11,564 79 246 10,384 10,709 270 794 941 13,300 5,560 – 2,005 18,860 237 738 858 1,833 6,237 6,486 – 12,723 Total £’000 13,660 6,618 17,115 37,393 6,553 7,470 17,940 31,963 Liquidity risk management The Group manages liquidity risk by monitoring its net cash/debt position regularly and ensuring that committed and uncommitted banking facilities are in place to provide adequate headroom for anticipated future cash flows. Details of the facilities are given above. The Group’s net bank debt position at 30 June 2022 was £4.7 million (2021: £0.9 million). 104 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 21 Financial instruments continued Liquidity risk management continued Details of the Group’s approach to capital structure are given within the Financial Review on page 23. 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 2022 £’000 13,000 13,000 2021 £’000 5,936 5,936 Interest rate risk The Group’s marginal pre-tax cost of debt finance at interest rates in place at 30 June 2022 under the banking facilities in existence at that time was approximately 2.2% (2021: 1.3%). The floating rate financial liabilities comprise the drawn down element of the revolving credit facility in existence at the balance sheet date that bears interest based on LIBOR. The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s profit before tax (through the impact of floating rate borrowings): Increase Decrease Basis Points Effect on profit before tax +50 –50 (34) 34 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 payment 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. 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 2022 or 30 June 2021 related to derivative trading activity. Where cash flow hedge accounting is applied, gains or losses on the financial instrument hedges are held in equity and only recognised in the consolidated statement of comprehensive income when the losses or gains on the hedged transactions are recognised in the consolidated statement of comprehensive income. The following shows the amounts of foreign currency denominated receivables, payables and cash balances at 30 June stated in local currency: 2022 Receivable ccy’ 000 2022 Payable ccy’ 000 2022 Cash ccy’ 000 2022 Net total ccy’ 000 2021 Receivable ccy’ 000 2021 Payable ccy’ 000 2021 Cash ccy’ 000 2021 Net total ccy’ 000 Euros US Dollars 183 607 Hong Kong Dollars 30,096 (168) (946) (144) 54 475 69 136 350 852 20,929 50,881 6,249 (91) (980) (119) 96 66 355 (62) 4,181 10,311 The Alumasc Group plc Report and Accounts 2022 105 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 21 Financial instruments continued Foreign currency risk continued 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: 2022 Increase Decrease 2021 Increase Decrease Effect on profit after tax and equity in Sterling Exchange rate change US $ £’000 Euro £’000 Hong Kong $ £’000 +10% –10% +10% –10% 13 (16) 46 (56) 3 (4) 28 (34) 101 (124) 89 (109) Hedging activities The net fair values of the Group’s derivative financial instruments at 30 June designated as hedging instruments are set out below: Forward foreign exchange contracts 2022 £’000 325 2021 £’000 (268) At 30 June 2022 the Group had forward foreign exchange contracts with principal amounts equivalent to £9,278,000 (2021: £7,997,000). The forward foreign exchange contracts hedge foreign currency cost and price risks of various currency purchases and sales across the Group. The cash flows associated with the forward foreign exchange hedges are generally expected to occur within the next 18 months. The derivative financial instruments carried at fair value have been valued using directly observable market inputs and therefore they are all considered to have been valued at Level 2, as described in the amendments to IFRS 7. 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, £1,090,000 (2021: £666,000) was in respect of defined contribution schemes. At 30 June 2022 there was an accrual of £110,000 payable in respect of defined contribution scheme contributions (2021: £98,000). 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 £1.2 million per annum, to include deficit reduction contributions and scheme running expenses, over a 7-8 year period from October 2022. These contribution levels are reviewed every three years with the next review due in June 2025. In April 2020 management consulted with the Group’s Pension Trustees and agreed to a deferral of three month’s 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 was fully settled during the financial year. 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. 106 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 22 Retirement benefit obligations continued Defined benefit schemes continued 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 2042 – male Future pensioners at 65 in 2042 – female The Alumasc Group Scheme 2022 % The Alumasc Group Scheme 2021 % 3.75 2.50 1.80 2.50 3.05–3.60 3.10–3.65 3.15 2.50 3.20 2.50 Years Years 21.5 23.5 22.8 24.9 21.5 23.4 22.8 24.9 A discount rate of 3.75% has been used in calculating the present value of liabilities of the pension scheme at 30 June 2022. A 0.1% change to this rate would have changed the present value of the pension fund liabilities at that date by approximately £1,099,000 before tax. A Retail Price Index inflation rate of 3.15% and a Consumer Price Index inflation rate of 2.50% have been used in calculating the present value of liabilities of the pension scheme at 30 June 2022. A 0.1% change to these rates would have changed the present value of the pension fund liabilities at that date by approximately £381,000 before tax. In valuing the liabilities of the pension scheme at 30 June 2022, 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 2022 would have increased by approximately £4,417,000 before tax. 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 2022 £’000 30,160 10,425 – 17,347 18,945 7,696 2,659 87,232 (89,346) (2,114) 2021 £’000 50,653 14,277 – 13,021 23,142 7,217 4,319 112,629 (117,210) (4,581) 2020 £’000 2019 £’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) 2018 £’000 40,966 – 13,681 12,041 23,853 6,783 1,387 98,711 (113,851) (15,140) Of the above assets, all have a quoted market price with the exception of £1,194,000 of insured annuities (2021: £1,484,000) and £845,000 of property (2021: £886,000). The Alumasc Group plc Report and Accounts 2022 107 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 22 Retirement benefit obligations continued Defined benefit schemes continued The whole of the defined benefit pension deficit is shown as a non-current liability. Amounts recognised in the statement of comprehensive income in respect of the defined benefit plan, before taxation, are as follows: Included in net operating expenses: Past service pension cost – Guaranteed minimum pension equalisation – (150) 2021/22 £’000 2020/21 £’000 Included in net finance costs: Net pension scheme finance costs Included in other comprehensive income: Actuarial (loss)/gain on plan assets Actuarial gain 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 2021/22 was a loss of £22,728,000 (2020/21: gain of £11,537,000). Changes in the present value of the defined benefit obligation before taxation are as follows: At 1 July Interest cost Past service cost – GMP equalisation Benefits paid Actuarial gain At 30 June Changes in the fair value of plan assets before taxation are as follows: At 1 July Expected return on plan assets Actuarial (loss)/gain Contributions by employer Benefits paid At 30 June (60) (268) (24,731) 24,697 (34) (94) 10,054 2,438 12,492 12,074 2022 £’000 2021 £’000 (117,210) (122,737) (2,063) – 5,230 24,697 (1,751) (150) 4,990 2,438 (89,346) (117,210) 2022 £’000 112,629 2,003 (24,731) 2,561 (5,230) 87,232 2021 £’000 103,468 1,483 10,054 2,614 (4,990) 112,629 The cumulative amount of actuarial losses recognised since 1 July 2004 in the Group statement of comprehensive income is £11,602,000 (2020/21: losses of £11,568,000). 108 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Dilapidations £’000 Note (i) Warranty £’000 Note (ii) Restructuring £’000 Note (iii) 971 225 – 1,196 271 (6) 1,461 527 934 1,461 206 990 1,196 287 255 (102) 440 (116) (121) 203 76 127 203 163 277 440 1,118 67 (720) 465 620 (328) 757 757 – 757 465 – 465 Total £’000 2,376 547 (822) 2,101 775 (455) 2,421 1,360 1,061 2,421 834 1,267 2,101 23 Provisions At 1 July 2020 Charge for the year Utilised At 1 July 2021 Charge/(credit) for the year Utilised At 30 June 2022 At 30 June 2022 Current liabilities Non-current liabilities At 30 June 2021 Current liabilities Non-current liabilities (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. 24 Share capital Allotted, called up and fully paid: 2022 £’000 2021 £’000 36,133,558 (2021: 36,133,558) ordinary shares of 12.5p each 4,517 4,517 25 Movements in equity Share capital and share premium The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue of the Company’s equity share capital net of issue costs. Capital reserve – own shares The capital reserve – own shares relates to 327,493 (2021: 360,017) ordinary own shares held by the Company. The market value of shares at 30 June 2022 was £519,076 (2021: £954,045). These are held to help satisfy the exercise of awards under the Company’s Long Term Incentive Plans. During the year 297,021 (2021: 9,228) shares with an original cost of £402,000 (2021: £10,000) were used to satisfy the exercise of awards. A Trust holds the shares in its name and shares are awarded to employees on request by the Group. The Group bears the expenses of the Trust. The Alumasc Group plc Report and Accounts 2022 109 Financial statements Notes to the Financial Statements continued For the year ended 30 June 2022 25 Movements in equity continued Hedging reserve This reserve records the post-tax portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. Foreign currency reserve This foreign currency reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. 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 64 to 72. Weighted average exercise price Weighted average exercise price (pence) Granted (pence) Exercised Weighted average exercise price (pence) n/a 214,020 n/a (228,511) 0.91 160,000 2.26 (78,810) n/a 1.22 Weighted average exercise price (pence) Weighted average exercise price (pence) As at 30 June 2022 n/a 1.16 698,858 460,000 n/a 1.30 Lapsed (109,713) (41,190) Weighted average exercise price Weighted average exercise price (pence) Granted (pence) Exercised Weighted average exercise price (pence) Weighted average exercise price (pence) Weighted average exercise price (pence) As at 30 June 2021 Lapsed n/a 1.23 265,760 170,000 n/a 0.79 – (30,000) n/a 1.29 (257,688) (150,000) n/a 1.61 823,062 420,000 n/a 0.91 As at 1 July 2021 823,062 420,000 As at 1 July 2020 814,990 430,000 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 2022 the weighted average remaining contractual life is 8.0 years (30 June 2021: 8.1 years). The exercise price of the options outstanding ranges between 79 pence and 226 pence. 30,000 share options are exercisable at 30 June 2022 (30 June 2021: 40,000). LTIP The October 2019 LTIP awards are expected to vest in October 2022. Fair value of awards 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. The fair values of awards granted in the year, together with the assumptions used in the option pricing model are as follows: ESOS LTIP 2022 226p 226p 30% 3 1.0% 4.3% 33p 2021 79p 79p 30% 3 1.0% 2.5% 14p 2022 226p nil 30% 3 1.0% 4.3% 211p 2021 79p nil 30% 3 1.0% 2.5% 73p 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 110 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 26 Share based payments continued Fair value of awards continued The expected volatility is based on historical volatility over the last three years. The risk free rate of return is based on the yield on government bonds due to mature on the expected maturity of the award. The net charge recognised for share based payments in respect of employee services rendered during the year to 30 June 2022 was £118,000 (2020/21: £397,000). Of this, £98,000 (2020/21: £383,000) is in respect of key management personnel, which are the Directors of The Alumasc Group plc. 27 Movement in borrowings At 1 July 2020 Cash flow movements Non-cash movements Effect of foreign exchange rates At 1 July 2021 Cash flow movements Non-cash movements Effect of foreign exchange rates At 30 June 2022 Cash at bank/bank overdrafts £’000 15,576 (10,531) – (46) 4,999 3,124 – 161 Bank loans £’000 Net bank (debt)/cash £’000 Lease liabilities £’000 Total borrowings £’000 (19,909) 14,000 (27) – (5,936) (7,000) (64) – (4,333) 3,469 (27) (46) (937) (3,876) (64) 161 (5,924) (10,257) 692 (374) – (5,606) 713 (239) – 4,161 (401) (46) (6,543) (3,163) (303) 161 8,284 (13,000) (4,716) (5,132) (9,848) 28 Financial commitments (i) Capital commitments At 30 June 2022 £121,000 (2021: £421,000) of capital expenditure had been authorised but not contracted, and no capital expenditure had been authorised and contracted but not provided for by the Group (2021: £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. 29 Related party disclosure The Group’s principal actively trading subsidiaries at 30 June 2022 are listed below: Principal subsidiaries Principal activity Country of incorporation Alumasc Building Products Limited Building products Levolux Limited Building products England England A full list of the Group’s subsidiaries is shown on page 132. % of equity interest and votes held 2022 100 100 2021 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 64 to 72. 30 Contingent liabilities At the balance sheet date there existed contingent liabilities amounting to £533,000 (2021: £529,000) in relation to outstanding Guarantees and £129,000 (2021: £197,000) in relation to outstanding Performance Bonds. The Alumasc Group plc Report and Accounts 2022 111 Financial statements Company Statement of Financial Position At 30 June 2022 Notes 2022 £’000 2021 £’000 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 Cash and cash equivalents Total assets Liabilities Non-current liabilities Interest bearing loans and borrowings Lease liability Amounts due to subsidiary undertakings Employee benefits payable Provisions Deferred tax liabilities Current liabilities Lease liability Trade and other payables Derivative financial liabilities Total liabilities Net assets Equity Share capital Share premium Capital reserve – own shares Profit and loss account reserve Total equity 5 5 6 9 7 19 442 456 55,571 222 56,691 805 2,627 3,432 60,123 10, 19 (13,000) (473) (9,823) (110) (196) (24) 507 468 69,994 401 71,370 393 875 1,268 72,638 (5,936) (476) (20,266) (246) (250) (34) (23,626) (27,208) (3) (1,436) – (3) (1,587) – (1,439) (1,590) (25,065) (28,798) 35,058 43,840 4,517 445 (601) 30,697 35,058 4,517 445 (406) 39,284 43,840 11 20 13 14 9 11 8 12 15 16 16 16 As permitted by Section 408 of the Companies Act 2006, the Company profit and loss account is not presented. The loss for the year after tax was £4,798,000 (2021: £5,423,000 profit). The financial statements were approved by the Board of Directors and authorised for issue on 6 September 2022. Paul Hooper Director 6 September 2022 Company number 1767387 Simon Dray Director 112 The Alumasc Group plc Report and Accounts 2022 Company Statement of Cash Flows For the year ended 30 June 2022 Strategic report Governance Financial statements Operating activities Operating profit Adjustments for: Depreciation (Increase)/decrease in receivables Decrease in trade and other payables Movement in provisions Cash contributions to retirement benefit schemes Share based payments 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 (Repayment)/draw down of amounts borrowed from subsidiaries Refinancing costs Purchase of own shares Payment of lease liabilities Net cash 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 Net cash at bank and bank overdraft carried forward Notes 2021/22 £’000 2020/21 £’000 9,195 5,612 82 (412) (170) (54) (141) 118 91 76 (494) 150 (143) 397 8,618 5,689 (5) (5) (157) (3,434) 7,000 (9,724) – (526) (20) (6,861) 1,752 875 1,752 2,627 – – (186) (1,878) (14,000) 5,438 (65) – (20) (10,711) (5,022) 5,897 (5,022) 875 5 13 4 19 19 19 The Alumasc Group plc Report and Accounts 2022 113 Financial statements Company Statement of Changes in Equity For the year ended 30 June 2022 At 1 July 2020 Profit for the period Net loss on cash flow hedges Tax on derivative financial liability Actuarial gain on defined benefit pensions, net of tax Dividends Share based payments Own shares used to satisfy exercise of share awards Tax on share options Exercise of share based incentives At 1 July 2021 Loss for the period Actuarial loss on defined benefit pensions, net of tax Dividends Share based payments Acquisition of own shares Own shares used to satisfy exercise of share awards Tax on share options Exercise of share based incentives At 30 June 2022 Share capital £’000 Share premium £’000 Capital reserve – own shares £’000 Hedging reserve £’000 Profit and loss account reserve £’000 Total equity £’000 4,517 445 (416) – – – – – – – – – – – – – – – – – – – – – – – – 10 – – 4,517 445 (406) – – – – – – – – – – – – – – – – – – – – (597) 402 – – 4,517 445 (601) 9 – (11) 2 – – – – – – – – – – – – – – – – 34,543 39,098 5,423 5,423 – – 572 (11) 2 572 (1,878) (1,878) 397 – 237 (10) 397 10 237 (10) 39,284 43,840 (4,798) (4,798) (2) (2) (3,434) (3,434) 118 – – (140) (331) 118 (597) 402 (140) (331) 30,697 35,058 114 The Alumasc Group plc Report and Accounts 2022 Notes to the Company Financial Statements For the year ended 30 June 2022 Strategic report Governance Financial statements 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 UK adopted international accounting standards. 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 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 85. The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report on pages 1 to 51. The financial position of the Group, its cash flows and liquidity position are set out in these financial statements. Details of the Group’s borrowing facilities are described within note 10. On 25 August 2022 the Group entered into a £25.0 million committed revolving credit facility which expires in August 2025 and two further single year extension periods to August 2026 and August 2027. 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 2022 the Group’s net debt was £4.7 million (2021: £0.9 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 Company 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 2022 and have been adopted for the Company financial statements where appropriate: • Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); • Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and • Amendments to IAS 1: Classification of Liabilities as Current or Non-current. Judgements 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 Alumasc Group plc Report and Accounts 2022 115 Financial statements Notes to the Company Financial Statements continued For the year ended 30 June 2022 2 Summary of significant accounting policies continued Property, plant and equipment continued 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 – over the period of the lease Plant and equipment – over the period of the lease – 25 to 50 years – 3 to 15 years Where parts of an item of property, plant and equipment have different useful lives, each part is accounted for as a separate item. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively. Impairment of fixed assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell, and its value in use. It is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset. Leases (i) Identification of a lease 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 amended, 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. 116 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 2 Summary of significant accounting policies continued Leases continued (ii) As a lessee continued 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. (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. Financial assets When financial assets are recognised initially under IFRS 9, 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 from 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 2022 117 Financial statements Notes to the Company Financial Statements continued For the year ended 30 June 2022 2 Summary of significant accounting policies continued Income taxes Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the statement of financial position date. Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions: • where the temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; • in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and • deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date. Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the statement of comprehensive income. Foreign currencies Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Exchange differences resulting from the settlement of such transactions and from the translation at exchange rates ruling at the year end date of monetary assets and liabilities denominated in currencies other than the functional currency are recognised in the income statement. Own shares The Alumasc Group plc shares held by the Company are classified in shareholders’ equity as ‘own shares’ and are recognised at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being taken to reserves. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation of equity shares. A Trust holds the shares in its name and shares are awarded to employees on request by the Company. The Company controls and bears the expenses of the Trust. Equity settled share based payment transactions The fair value of long term incentive awards and share options granted to employees is recognised as an employee expense from the date of grant, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the actual number of shares for which the related service and non-market vesting conditions are met. Investment in subsidiaries Investments in subsidiaries are stated at cost, less provisions for impairment where appropriate. Derivative financial instruments and hedging The Company uses derivative financial instruments to hedge its, and the Group’s exposure to interest rate and foreign exchange risk. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the statement of comprehensive income. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how effectiveness will be measured throughout its duration. Such items are expected at inception to be highly effective. For the purpose of hedge accounting, the hedges used by the Company are classified as cash flow hedges, as they hedge exposure to variability in cash flows that are attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction. 118 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 2 Summary of significant accounting policies continued Derivative financial instruments and hedging continued The portion of the gain or loss on a cash flow hedge that is determined to be an effective hedge is initially recognised directly in equity, while the ineffective portion is recognised in the statement of comprehensive income. Amounts taken to equity are transferred to the income statement at the time when the underlying transaction being hedged affects profit or loss, such as when the forecast sale or purchase of the hedged item occurs. Where the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability. If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the statement of comprehensive income. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction being hedged occurs and are transferred to the income statement or to the initial carrying amount of a non-financial asset or liability as above. If the related transaction is not expected to occur, the amount is taken to the statement of comprehensive income. 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 cash flows comprise cash at bank and in hand, and 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 cancellation of liabilities are recognised respectively in finance revenue and finance costs. Borrowing costs are recognised as an expense over the period to 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 Company has decided not to adopt early. The following amendments are effective for the period beginning 1 July 2022: • Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); • Classification of Liabilities as Current or Non-current (Amendments to IAS 1); • Definition of Accounting Estimates (Amendments to IAS 8); and • Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). 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 2021/22 £’000 18 2020/21 £’000 18 The Alumasc Group plc Report and Accounts 2022 119 Financial statements Notes to the Company Financial Statements continued For the year ended 30 June 2022 4 Dividends Interim dividend for 2022 of 3.35p paid on 6 April 2022 Final dividend for 2021 of 6.25p paid on 29 October 2021 Interim dividend for 2021 of 3.25p paid on 6 April 2021 Final dividend for 2020 of 2.0p paid on 30 October 2020 2021/22 £’000 1,201 2,233 – – 3,434 2020/21 £’000 – – 1,163 715 1,878 A final dividend of 6.65 pence per equity share, at a cash cost of £2,381,000, has been proposed for the year ended 30 June 2022, payable on 4 November 2022. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements. 5 Property, plant and equipment Cost: At 1 July 2020 Disposals At 30 June 2021 Additions Disposals At 30 June 2022 Depreciation: At 1 July 2020 Charge for the year At 1 July 2021 Charge for the year Disposals At 30 June 2022 Net book value: At 30 June 2022 At 30 June 2021 At 1 July 2020 Right-of-use asset (property) £’000 Freehold land and buildings £’000 Long leasehold property £’000 Plant and equipment £’000 485 – 485 – – 485 8 9 17 12 – 29 456 468 477 749 – 749 – – 749 322 11 333 8 – 341 408 416 427 235 – 235 – – 235 235 – 235 – – 235 – – – 738 (130) 608 5 (24) 589 446 71 517 62 (24) 555 34 91 292 Total £’000 2,207 (130) 2,077 5 (24) 2,058 1,011 91 1,102 82 (24) 1,160 898 975 1,196 Included within freehold land and buildings is land of £336,000 (2021: £336,000) which is not depreciated. 120 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 6 Investments in Group companies Cost: At 1 July 2020, 1 July 2021 and 30 June 2022 Provisions: At 1 July 2020 Provided in year At 30 June 2021 Provided in year At 30 June 2022 Net book value: At 30 June 2022 At 1 July 2021 At 1 July 2020 £’000 89,911 19,917 – 19,917 14,423 34,340 55,571 69,994 69,994 At close of business on 30 June 2022 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). During the year the investment in Levolux Limited was fully written down to £nil to reflect the sale of the business on 26 August 2022. All subsidiary companies are wholly owned and owned directly or indirectly by The Alumasc Group plc and have a registered office of Burton Latimer, Kettering, Northamptonshire, NN15 5JP. 7 Trade and other receivables Other receivables Prepayments 8 Trade and other payables Other payables Other taxation and social security Accruals 2022 £’000 598 207 805 2022 £’000 671 176 589 1,436 2021 £’000 107 286 393 2021 £’000 622 336 629 1,587 The Alumasc Group plc Report and Accounts 2022 121 Financial statements Notes to the Company Financial Statements continued For the year ended 30 June 2022 9 Deferred tax A reconciliation of the movement in deferred tax during the year is as follows: At 1 July 2020 (Charged)/credited to the statement of comprehensive income (Charged)/credited to equity At 30 June 2021 (Charged)/credited to the statement of comprehensive income (Charged)/credited to equity At 30 June 2022 Pension deferred tax asset £’000 Short term temporary differences £’000 Hedging £’000 Share options £’000 Total deferred tax asset £’000 Deferred tax liabilities £’000 200 (23) (115) 62 (34) – 28 16 3 – 19 3 – 22 (2) – 2 – – – – – 83 237 320 (8) (140) 172 214 63 124 401 (39) (140) 222 (75) 41 – (34) 10 – (24) Deferred tax assets and liabilities are presented as non-current in the statement of financial position. Deferred tax assets have been recognised where it is probable that they will be recovered. Deferred tax liabilities relate to accelerated capital allowances. 10 Borrowings Non-current liabilities: Non-current instalments due on bank loan 2022 £’000 2021 £’000 13,000 5,936 At 30 June 2022 the Group had a £20.0 million committed revolving credit facility which had an expiry date of April 2023. On 25 August 2022 the Group entered into a £25.0 million committed revolving credit facility which expires in August 2025 and two further single year extension periods to August 2026 and August 2027. 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 new facility: Group interest cover, based on underlying EBITDA (i.e. from continuing operations and before non-recurring items), to be at least three and a half times; and net bank 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, with an acquisition spike to be below two and three quarter times. At 30 June 2022 the Company and Group also had £4.0 million (2021: £4.0 million) of bank overdraft facilities, renewed until August 2023 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 2022 £’000 473 3 476 2021 £’000 476 3 479 Lease liabilities are initially measured at the present value of future lease payments, discounted using the Company’s incremental borrowing rate. 122 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 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 Cash at bank Financial liabilities: Bank loans Lease liabilities Trade, intercompany and other payables 30 June 2022 30 June 2021 Carrying amount £’000 Fair value £’000 Carrying amount £’000 Fair value £’000 598 2,627 3,225 13,000 476 11,881 25,357 598 2,627 3,225 13,000 476 11,881 25,357 107 875 982 5,936 479 21,853 28,268 107 875 982 5,936 479 21,853 28,268 Derivative financial assets and liabilities are carried at fair value as a designated hedge instrument. The other financial assets and liabilities are measured at amortised cost. 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 2022 and 2021 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 2022 Interest bearing loans and borrowings Lease liabilities Trade, intercompany and other payables At 30 June 2021 Interest bearing loans and borrowings Lease liabilities Trade, intercompany and other payables On demand £’000 Less than 3 months £’000 3 to 12 months £’000 More than 1 year £’000 Total £’000 – – – – – – – – – – 1,123 1,123 79 – 1,074 1,153 – 3 305 308 237 3 434 674 13,000 13,000 473 10,453 23,926 6,237 476 20,345 27,058 476 11,881 25,357 6,553 479 21,853 28,885 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 2022 was £10.4 million (2021: £5.1 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 bank debt at 30 June 2022 of £4.7 million (2021: £0.9 million). The Alumasc Group plc Report and Accounts 2022 123 Financial statements Notes to the Company Financial Statements continued For the year ended 30 June 2022 12 Financial instruments continued Liquidity risk management 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 2022 £’000 – 13,000 13,000 2021 £’000 – 5,936 5,936 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 2022 or 30 June 2021 related to derivative trading activity. Where cash flow hedge accounting is applied, gains or losses on the financial instrument hedges are held in equity and only recognised in the income statement when the losses or gains on the hedged transactions are recognised in the income statement. 13 Retirement benefit obligations Defined contribution schemes £130,000 (2021: £94,000) was charged to operating profit in the statement of comprehensive income for defined contribution pension scheme contributions. At 30 June 2022 there was an accrual of £108,000 payable in respect of the defined contribution scheme (2021: £94,000). 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 2022 triennial actuarial review in the 2022/23 financial year, the Company’s deficit reduction contributions decreased from £124,000 to £66,000 per year, with effect from 1 October 2022. 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 2042 – male Future pensioners at 65 in 2042 – female 124 The Alumasc Group plc Report and Accounts 2022 2022 % 3.75 2.50 2021 % 1.80 2.50 3.05 – 3.60 3.10 – 3.65 3.15 2.50 Years 21.5 23.5 22.8 24.9 3.20 2.50 Years 21.5 23.4 22.8 24.9 Strategic report Governance Financial statements 13 Retirement benefit obligations continued Defined benefit scheme continued A discount rate of 3.75% has been used in calculating the present value of liabilities of the pension scheme at 30 June 2022. A 0.1% change to this rate would have changed the present value of the pension fund liabilities at that date by approximately £48,000 before tax. A Retail Price Index inflation rate of 3.15% and a Consumer Price Index inflation rate of 2.50% have been used in calculating the present value of liabilities of the pension scheme at 30 June 2022. A 0.1% change to these rates would have changed the present value of the pension fund liabilities at that date by approximately £17,000 before tax. In valuing the liabilities of the pension scheme at 30 June 2022, 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 2022 would have increased by approximately £194,000 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 2022 £’000 1,318 – 458 758 827 452 3,813 (3,923) 2021 £’000 2,344 – 661 602 1,071 533 5,211 (5,457) 2020 £’000 2,012 – 815 598 891 391 4,707 (5,761) 2019 £’000 1,982 – 731 564 889 376 4,542 (5,249) 2018 £’000 1,730 620 – 503 1,024 332 4,209 (5,052) Defined benefit pension deficit (110) (246) (1,054) (707) (843) Of the above assets, all have a quoted market price with the exception of £52,000 of insured annuities (2020/21: £69,000) and £37,000 of property (2020/21: £41,000). The whole of the defined benefit pension deficit is shown as a non-current liability. Amounts recognised in the statement of comprehensive income in respect of the defined benefit pension plan, before taxation, are as follows: Included in net operating expenses: Past service pension cost – Guaranteed minimum pension equalisation Included in net finance costs: Net pension scheme finance costs Included in other comprehensive income: Actuarial (loss)/gain on plan assets Actuarial gain on retirement benefit obligations Total recognised in the statement of comprehensive income The actual return on plan assets for 2021/22 was a loss of £1,251,000 (2020/21: gain of £635,000). 2021/22 £’000 2020/21 £’000 – (3) (1,361) 1,359 (2) (5) (8) (14) 553 134 687 665 The Alumasc Group plc Report and Accounts 2022 125 Financial statements Notes to the Company Financial Statements continued For the year ended 30 June 2022 13 Retirement benefit obligations continued Defined benefit scheme continued 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 gain At 30 June Changes in the fair value of plan assets before taxation are as follows: At 1 July Expected return on plan assets Actuarial (loss)/gain Contributions by employer Benefits paid At 30 June 2022 £’000 (5,457) (113) – 288 1,359 (3,923) 2022 £’000 5,211 110 (1,361) 141 (288) 3,813 2021 £’000 (5,761) (96) (8) 274 134 (5,457) 2021 £’000 4,707 82 553 143 (274) 5,211 The cumulative amount of net actuarial losses recognised in the statement of comprehensive income is £734,000 (2020/21: losses of £732,000). 14 Provisions At 1 July 2020 Charged At 30 June 2021 Utilised At 30 June 2022 £’000 100 150 250 (54) 196 The Company has provided £196,000 (2021: £250,000) in relation to the anticipated cost of dilapidations and required restoration to its leasehold properties. 15 Share capital Allotted, called up and fully paid: 36,133,558 (2021: 36,133,558) ordinary shares of 12.5p each 2022 £’000 4,517 2021 £’000 4,517 16 Movements in equity Share capital and share premium The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue of the Company’s equity share capital net of issue costs. Capital reserve – own shares The capital reserve – own shares relates to 327,493 (2021: 360,017) ordinary own shares held by the Company. The market value of shares at 30 June 2022 was £519,076 (2021: £954,045). These are held to help satisfy the exercise of awards under the Company’s Long Term Incentive Plans. During the year 297,021 (2021: 9,228) shares with an original cost of £402,000 (2021: £10,000) were used to satisfy the exercise of awards. A Trust holds the shares in its name and shares are awarded to employees on request by the Group. The Group bears the expenses of the Trust. 126 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements 16 Movements in equity continued Hedging reserve This reserve records the post-tax portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. Distributable reserves The Company’s profit and loss account reserve shown on the balance sheet is £30,697,000 (2021: £39,284,000). Cumulative actuarial losses relating to defined benefit pension schemes of £734,000 (2021: losses of £732,000) have been deducted in calculating the distributable reserves figure above. 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 64 to 72. Weighted average exercise price Weighted average exercise price (pence) Granted (pence) Exercised Weighted average exercise price (pence) Weighted average exercise price (pence) As at 30 June 2022 Lapsed n/a 1.01 128,361 20,000 n/a (146,410) – (72,668) n/a 503,968 2.26 (20,000) 1.29 – – 70,000 Weighted average exercise price Weighted average exercise price (pence) Granted (pence) Exercised Weighted average exercise price (pence) n/a 1.21 156,529 20,000 n/a 0.79 – – – – Weighted average exercise price (pence) n/a 1.74 As at 30 June 2021 594,685 70,000 Lapsed (169,619) (10,000) Weighted average exercise price (pence) n/a 1.29 Weighted average exercise price (pence) n/a 1.01 As at 1 July 2021 594,685 70,000 As at 1 July 2020 607,775 60,000 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 2022 the weighted average remaining contractual life is 8.0 years (30 June 2021: 6.9 years). The exercise price of the options outstanding ranges between 79 pence and 226 pence. 10,000 share options are exercisable at 30 June 2022 (30 June 2021: 20,000). LTIP The October 2019 LTIP awards are expected to vest in October 2022. Fair value of awards 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. The fair values of awards granted in the year, together with the assumptions used in the option pricing model are as follows: Share price at grant date Exercise price Expected volatility Expected life (years) Risk free rate Dividend yield at date of grant Fair value per option ESOS LTIP 2022 226p 226p 30% 3 1.0% 4.3% 33p 2021 79p 79p 30% 3 1.0% 2.5% 14p 2022 226p nil 30% 3 1.0% 4.3% 211p 2021 79p nil 30% 3 1.0% 2.5% 73p The expected volatility is based on historical volatility over the last three years. The risk free rate of return is based on the yield on government bonds due to mature on the expected maturity date of the award. The net charge recognised for share based payments in respect of employee services rendered during the year to 30 June 2022 is £118,000 (2020/21: £397,000). The Alumasc Group plc Report and Accounts 2022 127 Financial statements Notes to the Company Financial Statements continued For the year ended 30 June 2022 18 Financial commitments (i) Capital commitments The Company had no capital commitments at the year end (2021: £nil). (ii) 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. 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 2020 Cash flow movements Non-cash movements At 1 July 2021 Cash flow movements Non-cash movements At 30 June 2022 Property 2022 £’000 Property 2021 £’000 40 160 400 600 40 160 440 640 Bank overdrafts /cash £’000 5,897 (5,022) – 875 1,752 – 2,627 Bank loans £’000 (19,909) 14,000 (27) (5,936) (7,000) (64) Net bank (debt)/cash £’000 Lease liabilities £’000 Total borrowings £’000 (14,012) 8,978 (27) (5,061) (5,248) (64) (482) 3 – (479) 3 – (14,494) 8,981 (27) (5,540) (5,245) (64) (13,000) (10,373) (476) (10,849) The Company is part of a Group offset banking arrangement, together with its subsidiary undertakings. 20 Related party disclosure Terms and conditions of transactions with related parties A full list of the Company’s subsidiaries is shown on page 132. The total non-current position with regards to amounts owed to subsidiary undertakings at 30 June 2022 was a £9,823,000 liability (2021: £20,266,000 liability). 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 64 to 72. 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 (2020: none) of the overdraft facilities guaranteed by the Company. 128 The Alumasc Group plc Report and Accounts 2022 Financial Summary Strategic report Governance Financial statements Income Statement Summary Continuing operations: Revenue Gross profit Gross margin Underlying operating profit Underlying operating margin Net interest cost on borrowings Interest on lease liabilities 2015/16 £’000 2016/17 £’000 2017/18 £’000 2018/19 £’000 2019/20 £’000 2020/21 £’000 2021/22 £’000 55,646 63,969 65,091 71,315 60,299 77,805 89,381 21,629 38.9% 6,056 10.9% (215) – 22,880 35.8% 6,714 10.5% 22,353 34.3% 5,438 8.4% 24,184 33.9% 6,973 9.8% 20,432 33.9% 5,053 8.4% 29,441 33,366 37.8% 37.3% 10,506 13,333 13.5% 14.9% (132) – (212) – (281) – (343) (153) (311) (178) (439) (169) Underlying profit before tax 5,841 6,582 5,226 6,692 4,557 10,017 12,725 Non-underlying items* Profit before taxation Taxation Profit for the year from continuing operations Discontinued operations - Profit/(loss) after tax Profit/(loss) for the year 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 (1,334) 4,507 (1,319) 3,188 3,296 6,484 13.0 18.2 6.5 (720) 5,862 (1,492) 4,370 2,170 6,540 14.7 18.3 7.15 (914) (4,431) 4,312 2,261 (967) (256) 3,345 2,005 972 4,317 1,636 3,641 11.6 12.0 7.35 14.8 10.1 7.35 (1,138) 3,419 (442) 2,977 (721) 2,256 10.2 6.3 2.0 (546) 9,471 (694) 12,031 (2,118) (2,421) 7,353 9,610 233 (16,657) 7,586 (7,047) 22.5 21.2 9.5 28.7 (19.7) 10.0 16,580 20,437 (8,632) (6,076) – – 24,421 4,812 – 25,445 5,095 – 19,841 4,333 5,924 18,588 17,095 12,566 10,749 15,608 (479) (334) (714) 359 – 36,145 25,732 937 5,606 3,436 – 4,716 5,132 1,585 – Capital Invested - continuing operations 26,057 31,122 41,085 41,648 45,706 46,124 37,165 Underlying return on capital invested (post-tax)** 17.7% 18.6% 12.0% 13.4% 9.2% 18.4% 25.8% Underlying tax rate 20.8% 20.6% 20.2% 20.4% 20.3% 19.5% 19.4% * Non-underlying items comprise brand amortisation and IAS 19 pension costs in all years. Further details of the 2020/21 and 2021/22 non underlying items can be found in note 5 of the Report and Accounts 2022. ** Underlying operating profit after tax from continuing operations calculated using the underlying tax rate, as a percentage of average capital invested from continuing operations. The Alumasc Group plc Report and Accounts 2022 129 Financial statements Additional Shareholder Information In accordance with the requirements of the Companies Act 2006 (Act) the following section describes the matters that are required for inclusion in the Directors’ report. Further details of matters required to be included in the Directors’ report that are incorporated by reference into this report are set out below. Directors The names of the members of the Board as at the date of this report and their biographical details are set out on pages 52 and 53. 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 15 and 16 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, and 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. 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 68 and 69. 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 327,495 shares held by the Alumasc Group Employee Share Ownership Trust (Trust) as of 30 June 2022. 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 2021 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 21 October 2022. The Directors will seek to renew this authority at the forthcoming AGM. This power will only be exercised if the Directors are satisfied that any purchase will increase the earnings per share of the Group as a result of the purchase and therefore, that the purchase is in the interests of shareholders. The Directors will also give careful consideration to the financial position of the Company and its general financial position. Any shares purchased in this way may be held in treasury which, the Directors believe, will provide the Company with flexibility in the management of its share capital. Where treasury shares are used to satisfy share awards, they will be classed as new issue shares for the purpose of the 10% limit on the number of shares that may be issued over a ten-year period under the relevant share plan rules. The Company currently holds no shares in treasury. 130 The Alumasc Group plc Report and Accounts 2022 Strategic report Governance Financial statements Significant agreements – change of control The Group has agreements in place 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 nor its 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 2022 is shown in note 19 to the financial statements. These agreements contain clauses such that, in the event of a change of control, subject to the lender, the Company can offer to or must repay all such borrowings together with accrued interest, fees and other sums owing as required by the individual agreements. The rules of the Company’s incentive plans contain clauses relating to a change of control resulting from a takeover and in such an event awards would vest subject to the satisfaction of any associated performance criteria. Major shareholders The Company’s share register recorded the following interests of 3% or more in the Company’s issued ordinary share capital as at 30 June 2022. This information was also checked on 15 August 2022 being the latest practical date prior to the publication of this report. Shareholder John McCall AXA Framlington Investment Managers Mr Philip H R Gwyn Hargreaves Lansdown Charles Stanley Chelverton Asset Management Unicorn Asset Management Number of Ordinary Shares % of issued share capital 4,359,668 3,300,000 3,057,605 2,557,845 1,825,088 1,400,000 1,300,000 12.07 9.13 8.46 7.08 5.05 3.87 3.60 Employment Information about the Group’s employees, employment of disabled persons and employment practices is contained within our ESG Report (Environmental, Social and Governance), the Section 172 Statement, and the Directors’ report on pages 25 to 45, and 73 to 75. Greenhouse gas emissions (GHG) Information about the Group’s Greenhouse Gas emissions is given in the ESG Report on pages 25 to 29. Annual General Meeting The Notice of the AGM, to be held on 27 October 2022 is available in this Report and Accounts on pages 135 to 140 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 2022 131 Financial statements List of Subsidiaries The Group’s subsidiary undertakings as at 30 June 2022 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. Subsidiary Principal activity Country of incorporation Alumasc Building Products Limited 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 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 132 The Alumasc Group plc Report and Accounts 2022 UK Hong Kong UK 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 Dormant Business and Operating Locations Strategic report Governance Financial statements Water Management Skyline, Alumasc Rainwater & Harmer Burton Latimer Station Road Burton Latimer Kettering Northamptonshire NN15 5JP Tel: +44 (0)1536 383810 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)800 644 4426 Email: sales@rainclear.co.uk Web: www.rainclear.co.uk Wade & Gatic (Slotdrain) Third Avenue Halstead Essex CO9 2SX Tel: +44 (0)1787 475151 Email: info@alumascwms.co.uk Web: www.alumascwms.co.uk Gatic (Covers) Hammond House Poulton Close Dover Kent CT17 0UF Tel: +44 (0)1304 203545 Email: info@alumascwms.co.uk Web: www.alumascwms.co.uk Elkington China Ltd Unit 2, 16/F, Cheung Tat Centre, 18 Cheung Lee Street Chai Wan Hong Kong Tel: +(852) 2305 0100 Email: ecl@biznetvigator.com Web: www.alumascwms.co.uk Building Envelope Waterproofing Systems Alumasc Roofing White House Works Bold Road St Helens Merseyside WA9 4JG Tel: +44 (0)1744 648 400 Email: info@alumascroofing.co.uk Web: www.alumascroofing.co.uk Green roofing Blackdown Greenroofs 3 The Waggon Shed Flax Drayton Farm South Petherton Somerset TA13 5LR Tel: +44 (0)1460 234582 Email: enquiries@blackdown.co.uk Web: www.blackdown.co.uk Rooftop management systems Roof Pro Systems Polwell Lane Off Station Road Burton Latimer Kettering Northants NN15 5PS Tel: +44 (0)1536 383865 Email: cad@roof-pro.co.uk Web: www.roof-pro.co.uk 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 Email: sales@timloc.co.uk Web: www.timloc.co.uk The Alumasc Group plc Report and Accounts 2022 133 Financial statements Company Information and Advisers Registered Office The Alumasc Group plc Burton Latimer Kettering Northamptonshire NN15 5JP Tel: +44 (0)1536 383844 www.alumasc.co.uk info@alumasc.co.uk Registered No: 1767387 Company Advisers Registrars Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA Auditors Crowe U.K. LLP Black Country House Rounds Green Road Oldbury West Midlands B69 2DG Investment Bankers Rothschild & Co 3 Lombard Street London EC3V 9AA 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 DLA Piper UK LLP 160 Aldersgate Street London EC1A 4HT Brokers Peel Hunt LLP 100 Liverpool Street London EC2M 1JJ NOMAD finnCap One Bartholomew Close London EC1A 7BL 134 The Alumasc Group plc Report and Accounts 2022 Notice of Annual General Meeting Notice is given that the 2022 Annual General Meeting (AGM) of The Alumasc Group plc (the Company) will be held at Timloc Building Products, Timloc House, Ozone Park, Howden, East Riding of Yorkshire DN14 7SD at 10am on Thursday 27 October 2022 to consider the following: Ordinary business Resolutions 1 to 9 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 2022 2 To receive the report of the Remuneration Committee for the year ended 30 June 2022 3 To declare a final dividend of 6.65 pence per share 4 To re-elect Vijay Thakrar as a Director 5 To re-elect Paul Hooper as a Director 6 To re-elect Stephen Beechey as a Director 7 To elect Karen McInerney as a Director 8 To re-appoint Crowe U.K. 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 9 That the Audit Committee be authorised to determine the Auditor’s remuneration Special business The following resolution will be proposed as an ordinary resolution. 10 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. All unexercised authorities previously granted to the Directors are hereby revoked. The following three resolutions will be proposed as special resolutions. 11 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 10 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: a. allotments for rights issues and other pre-emptive issues; and b. 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 26 October 2023). 12 Disapplication of statutory pre-emption rights: Acquisition or capital investment That if resolution 8 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 2022 135 Notice of Annual General Meeting continued 13 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 12.5 pence 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 12.5 pence per share; (iii) the maximum price (exclusive of taxes and expenses) which may be paid for such ordinary shares is an amount equal to 105% of the average of the middle market quotations for ordinary shares (derived from the Daily Official List of the London Stock Exchange plc) for the five dealing days immediately preceding the day on which such ordinary shares are contracted to be purchased; (iv) the authority hereby conferred shall expire on 26 October 2023, 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; and (v) this authority supersedes the Company’s authority to make market purchases granted by Special Resolution passed at the last AGM. By order of the Board Helen Ashton Group Company Secretary 6 September 2022 Burton Latimer Kettering Northamptonshire NN15 5JP Registered No: 01767387 136 The Alumasc Group plc Report and Accounts 2022 Explanatory Notes to the Notice of Annual General Meeting Covid-19: At the date of the approval of this Notice although Covid-19 is still affecting people, there are currently no public health measures in place and we will monitor any development. However, we will organise a conference call facility and the number will be published on our website. Please note that if you attend by conference call you will not be included in the quorum. Resolutions 1 to 10 are being proposed as Ordinary resolutions and Resolutions 11 to 13 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 2022, together with the Directors’ and Auditors’ report on those accounts. Resolution 2 – Directors’ Remuneration Report The Directors’ Remuneration Report is set out on pages 64 to 72. 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 2022. Resolution 3 – To declare a dividend Shareholders are being asked to approve a final dividend of 6.65 pence per ordinary share. If the recommended final dividend is approved it is expected to be paid on 4 November 2022 to all shareholders on the register on 30 September 2022. Resolutions 4 to 7 – Re-election and Election of Directors The Company’s Articles of Association require that Directors must retire by rotation and seek re-election at the third Annual General Meeting after the general meeting at which the postholder was appointed or re-appointed. New Directors need to seek election in their first year of appointment. Biographical details of each Director can be found on pages 52 and 53 of this 2022 Annual Report and Accounts. Resolution 4 – Re-election of Vijay Thakrar Your Board recommends that Vijay Thakrar be re-elected as a Director. Resolution 5 – Re-election of Paul Hooper as a Director Your Board recommends that Paul Hooper be re-elected as a Director. Resolution 6 – Re-election of Stephen Beechey as a Director Your Board recommends that Stephen Beechey be re-elected as a Director. Resolution 7 – To elect Karen McInerney as a Director Your Board recommends that Karen McInerney be elected as a 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. The Director who was appointed during the year is standing for election as required by the Company Articles of Association. Resolutions 8 and 9 – Re-appointment of Crowe U.K. LLP (Crowe) 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 the Auditor to serve until the next general meeting at which accounts are presented. The Directors appointed Crowe U.K. LLP in the year and are recommending that Crowe be re-appointed as Auditor. Resolution 9 authorises the Audit Committee of the Board to set the Auditor’s remuneration. This resolution follows standard practice. Resolution 10 – 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 2022 137 Explanatory Notes continued to the Notice of Annual General Meeting Resolutions 11 and 12 – Disapplication of statutory pre-emption rights Special resolutions 11 and 12 will allow the Directors to allot equity securities for cash pursuant to the authority under ordinary resolution 8, 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). 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 2022. 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 2023 Annual General Meeting of the Company or, if earlier, on 26 October 2023. 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 11 and 12. Resolution 13 – 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 2022). The Directors will only exercise the authority granted by Resolution 13 (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 26 October 2023, unless renewed earlier. Recommendation Your Directors believe that the resolutions set out in Resolutions 1 to 13 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 138 to 140 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. Notes to the Notice of Annual General Meeting (1) A member may appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their 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. (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)). 138 The Alumasc Group plc Report and Accounts 2022 (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 25 October 2022 (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 27 October 2022 and any adjournment(s) thereof by using the procedure described in the CREST manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland’s specifications and must contain the information required for such instructions as described in the CREST manual (available at www.euroclear.com). The message, regardless of whether it constitutes the appointment of a proxy or relates to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID RA19) by the latest time(s) for receipt for proxy appointments specified in the Notice of Annual General Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take, (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his/her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsor(s) or voting service provider(s) are referred, in particular, to those sections of the CREST manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended). (9) Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of the same powers as the corporation could exercise if it were an individual member provided that they do not do so in relation to the same shares. (10) As at 31 August 2022 (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. The Alumasc Group plc Report and Accounts 2022 139 Explanatory Notes continued to the Notice of Annual General 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 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. 140 The Alumasc Group plc Report and Accounts 2022 CBP00019082504183028 Printed by a CarbonNeutral® Company certified to ISO 14001 environmental management system. 100% of all dry waste associated with this production has been recycled. This publication is printed on an FSC® certified paper produced mix sourced material, manufactured at a mill that has ISO 14001 environmental standard accreditation. The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released. The Alumasc Group plc Station Road Burton Latimer Kettering NN15 5JP https://www.alumasc.co.uk 

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