safestyleukplc.co.uk
Safestyle UK plc
Annual Report & Accounts 2020
Safestyle UK plc
Safestyle UK plc
Annual Report 2020
The UK’s No.1 for replacement
windows and doors³
New
Nottingham
Installations Depot
Financial Overview
Contents
Revenue (£m)
2018
116.4
2019
126.2
2020
113.2
8%
-10%
Underlying (loss) before taxation¹ (£m)
2018
2019
2020
(8.7)
(1.5)
83%
(4.8)
-213%
Reported (loss) before taxation (£m)
2018
(16.3)
2019
2020
(3.8)
76%
(6.2)
-61%
Net cash² (£m)
2018
0.3
2019
0.4 71%
2020
7.6
1,607%
Average installed order value (£)
1%
4%
5%
4%
2018
3,319
2019
3,337
2020
3,474
Average frame price (£)
2018
2019
2020
646
678
704
Frames installed
2018
184,184
2019
190,252
3%
2020
163,617 -14%
01
Welcome page and Financial Overview
Strategic Report
06
18
20
22
28
34
What we do
Chairman’s Statement
CEO’s Statement
Financial Review
Risk Management
Corporate Social Responsibility
38
Safestyle People
Governance
46
48
50
64
69
Board of Directors
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Independent Auditor’s Report
Financials
80
81
82
83
84
Consolidated Income Statement
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
¹ See the Financial Review for definition of underlying (loss) before taxation
² See the Financial Review for definition of net cash
³ Based on Fensa data
Annual Report & Accounts 2020
01
Safestyle UK plc
Over 19,000 five star
reviews and counting
Safestyle UK have more reviews than any
other window company rating us ‘great’
Trustpilot February 2021
Highly Recommended
All figures from February 2021
Trustpilot score 4.2 - ‘Great’
Safestyle UK currently have
From a total number of
25,364
independent customer
reviews rating us great
18,669
of those gave us 5 stars
with a further
2,493
giving us a 4 stars
In 2020 alone we received
7,010
Trustpilot reviews with
4,889
of those giving us 5 stars
Excellent service
Friendly sales people,
Great communication,
Prompt service,
Professional fitters,
Kept within guidelines,
Lay covering over floors and
tidied up afterwards,
No rubbish left,
Extremely happy with the
service received,
Have already, and would
recommend again.
Marie Hickin
New composite
Guard Doors
introduced January 2021
customers reviews, a huge
10,385
7,906
of those are 5 star
reviews, with a further
1,398
4 star reviews,
meaning that in total
89%
of our customers would
highly recommend us
Great installation
Every window and door replaced
in two days, no mess to clean up
afterwards, no decorating
damaged. Excellent job.
David from Oldham
A job well done
From start to finish everything
went smoothly. Great price which
matched our budget. Great
communication, dates which
suited our diary and most
importantly the installation was
speedy but done to a very high
standard. Well done Safestyle!
Shirley Walmsley
Annual Report & Accounts 2020 03
Safestyle UK plc
Safestyle UK plc
Strategic
Report
06
18
20
22
28
34
What we do
Chairman’s Statement
CEO’s Statement
Financial Review
Risk Management
Corporate Social Responsibility
38
Safestyle People
Please deliver to: Safestyle Uk, Unit 2, Glaisdale Point, Glaisdale Parkway, Nottingham. NG8 4GP
Safestyle UK plc
Our nationwide
branches & depots
We currently have 33 sales branches and
13 installation depots across the UK
New Bury
St Edmunds
Installations Depot
New
Nottingham
Installations Depot
Operation headlines
1 Head Office
33 Sales Branches
1 Manufacturing Facility
13 Installation Depots
33 Sales Branches
Liverpool
Sales Branch
Opened November 2020
Our 33 sales branches, over five regions spread
our influence across the country with our teams
generating enquiries and responding locally to
our customers’ needs.
North West: Blackburn, Chester,
Liverpool, Manchester, Preston,
Salford and Stoke
North East: Doncaster, Gateshead,
Hull, Leeds, Middlesbrough, Bradford
and Sheffield
Midlands: Coventry, Edgbaston,
Norwich, Nottingham, Peterborough
and Wolverhampton
South East: Brighton, Guildford,
Hemel Hempstead, Romford,
Sittingbourne and Southampton
South West: Bristol, Exeter, Plymouth,
Reading, Swansea, Swindon and Truro
Hemel
Hempstead
Sales Branch
Opened November 2020
Bury St
Edmunds
Installation Depot
Opened August 2020
Nottingham
Installation Depot
Opened December 2020
13 Installation Depots
Our 13 installation depots are the hubs from
which our fitting operation can efficiently
fulfil our customers' orders. Our expert
fitting teams visit their branch each day to
unload and reload their vehicles, connect
with the nerve centre of the company and
set off to carry out the day's orders.
Annual Report & Accounts 2020 07
Safestyle UK plc
Strategic Report
Governance
Financials
The customer journey
We are proud to be the UK's largest supplier of replacement windows and doors to the UK
homeowner market. We control all aspects of the customer journey from start to finish which
creates a personalised and long-term relationship with each of our customers.
01
02
03
04
05
06
MARKETING
MARKETING
MARKETING
SALES
SALES
SALES
SURVEY
SURVEY
SURVEY
MANUFACTURE
MANUFACTURE
MANUFACTURE
INSTALLATION
INSTALLATION
INSTALLATION
SERVICE
SERVICE
SERVICE
We generate thousands
of appointments
through various
marketing channels
with potential
customers each year
We help thousands of
customers navigate the
complexity of options
that they face when
changing their windows
or doors
We survey over 50,000
properties to precisely
specify products ready
for bespoke
manufacture
Efficiently manufacture
customer specific, high
quality, energy saving
products in Barnsley
and distribute to 13
installation depots
Expertly install the new
windows and doors
before recycling the
items we replace in
1,000 homes per week
Complete peace of
mind on every
installation with our ten
year warranty period
08
Annual Report & Accounts 2020
Annual Report & Accounts 2020 09
Safestyle UK plc
Strategic Report
Governance
Financials
Go figure, Safestyle in numbers for 2020
Established
since 1992
That’s 29 years or 10,585 days
Just enough time to walk around
the world roughly 30 times
without stopping
11,276,733
Safestyle UK web
pages viewed
78.53%
increase
in web traffic vs 2019
4,282,652
minutes
71,377 hours, 2,974 days, 424 weeks
or 8.148 years of web browsing
Based on web browsing 24 hours a day,
365 days a year
40+ new
bespoke
training courses
introduced
1,054
on-line GDPR
modules completed
2,280
Covid-19 secure
on-line training
modules completed
26,582
Reactions to
Workplace posts
More than the number
of windows in the
Burj Khalifa
9,180
Workplace
comments
1,837
Workplace
posts created
In total we completed
a lot of training
courses during 2020
8,590
1,757
Senior Manager & FCA
courses completed
That’s more than the entire
number of steps in the
Empire State Building
In total for 2020 we recycled
the equivalent weight of...
28 Boeing
airliners
That’s 5,253 tonnes of all
post consumer waste
426
tonnes
of rubble was
also recycled
And we used
Teams a lot
80,151 messages
12,337 meetings
15,870 calls
We recycled lots
of general waste
3,012
tonnes
753
tonnes
of glass was
recycled
1,062
tonnes
of wood was put
to good use
During 2020 we made
a lot of phone calls, over
2,168,358
We sent a lot
of emails too...
764,971
312,000
pairs of COVID safe
gloves supplied
157,740
face masks
provided
244 football
pitches long
Now that’s long
Equivalent to the length of
12,825 composite doors made
in 2020 laid end to end
26,768
PVC doors made
in the year
Plus a huge
85,254
white windows were
made during 2020
That’s one window manufactured
roughly every 6 minutes
Last year we made
52,327
coloured windows
10
Annual Report & Accounts 2020
Annual Report & Accounts 2020 11
Safestyle UK plc
Strategic Report
Governance
Financials
2020, another busy year...
2020 has been a year in which we have had to navigate through all the difficulties presented to us
as a result of the COVID-19 pandemic and we have always prioritised the safety of our people and
our customers. However, alongside facing these challenges, we have continued to make progress
on many improvement projects.
New van fleet
roll out
Gary Pickering
Commercial Director
Ÿ A promising start to the
year – order intake,
revenues and profitability
all growing year on year
Ÿ New van fleet roll out begins
Ÿ Gary Pickering, our new
Commercial Director, joins
Safestyle
Ÿ First COVID-19 lockdown starts
– manufacturing and all visits to
customers' homes cease
Ÿ Manufacturing operations
Ÿ
restart mid-May
In-home selling, surveying
and installations restarts at
end of May
New Liverpool Sales branch
Ÿ
Strong trading performance
achieved in the period following
restart – the start of a sustained
period of year on year order
intake growth
Ÿ Recruitment drive launches for
Ÿ
Ÿ
new surveyors, order processing
staff and installation teams
ISO 45001 occupational Health
and Safety Management
accreditation achieved
Journey Further – our new
digital media agency – are
appointed
Commercial Leadership Team:
Left to right: Eddie Sims, Mark Oldham, Saf Chisty, Tayyib Ali, Sarah Spacey,
Paul Croft, Richard Stoate, Azmat Ali, Gary Pickering, Lee Davenport,
Tom Morley, Jim Babb and Clare Haycock
New Hemel Hempstead
Sales branch
Ÿ The Safestyle UK Commercial
Leadership Team assembles,
headed up by Gary Pickering,
Commercial Director
Sales recruitment seminars via
Zoom launched
Ÿ
Ÿ
Second national lockdown
starts with Door Canvass
operations paused
Ÿ New Liverpool sales
branch opens
Ÿ New Hemel Hempstead
sales branch opens
January 2020
March 2020
May 2020
July 2020
September 2020
November 2020
February 2020
April 2020
June 2020
August 2020
October 2020
December 2020
Ÿ Detailed contingency
planning for response to
COVID-19 begins
Ÿ New server room project
commences
Ÿ
Share Placing occurs raising
£8.2m
Ÿ Remote selling over Zoom starts
Ÿ Over 90% of staff furloughed
Ÿ New agreement concludes with
Duraflex which includes the
building of significant buffer
stocks
Ÿ Factory returns to pre-
lockdown pattern of two
shifts per day
Ÿ The majority of colleagues
return to work from furlough
during the month
Ÿ New Bury St Edmunds
Ÿ
installation depot opens
Supply chain experiences some
temporary challenges which
disrupts operations
ISO 14001 environmental
certification achieved
Ÿ New consumer finance
portfolio launched
Ÿ
WORKING TOGETHER
TO STAY SAFE
WORKING TOGETHER
TO STAY SAFE
WORKING TOGETHER
TO STAY SAFE
12
Annual Report & Accounts 2020
Bury St Edmunds - Installations depot
Ÿ Order book reaches record
high – over twice October
2019's level
Ÿ Rollout of new phone
Ÿ
system begins
Leadership Excellence
Accreditation Programme
(LEAP) training commenced
Ÿ New Nottingham installation
depot opens
Ÿ New ClawGrip additional
security device launches
Ÿ New Composite Guard Door
Ÿ
styles and colour range launches
Sales branch Standard
Operating Procedures launched
newcolours & styles
Rose Pink
Taupe
Dove Grey
Imola
Cotswold
Ambleside Modena
Annual Report & Accounts 2020 13
Safestyle UK plc
Strategic Report
Governance
Financials
How many composite door combinations?
When you multiply together the number of different door types, designs, colours and other
options, you won't believe the number of different doors we can offer our customers...
20 COMPOSITE
COMPOSITE
COMPOSITE
DOOR TYPES
DOOR TYPES
DOOR TYPES
15 EXTERNAL
EXTERNAL
EXTERNAL
COLOURS
COLOURS
COLOURS
02 INTERNAL
INTERNAL
INTERNAL
COLOURS
COLOURS
COLOURS
10 FRAME
FRAME
FRAME
COLOURS
COLOURS
COLOURS
Canterbury Cheltenham Exeter Gloucester Oxford
Richmond
Anthracite Black
Blue
Chartwell
Green Duck Egg
Stratford Warwick Windsor Milano
Roma
Turin
White
Red
Rosewood Oak
Slate
Cream
Ambleside
Imola
new
new
Flat White
Irish Oak
Slate Grey
Textured White
Golden Oak
Rosewood
Cream
Chartwell
Venice
Ilkley
Padstow Florence
Cotswold
Modena
Dove Grey
Taupe
Rose Pink
White
Same as external
Black
Anthracite
03
ABOVE
ABOVE
ABOVE
WINDOW
WINDOW
WINDOW
OPTIONS
OPTIONS
OPTIONS
Toplight
Arched Head
Or none
HANDLE
HANDLE
HANDLE
OPTIONS
OPTIONS
OPTIONS
09
PRIVACY OR COLOURED
PRIVACY OR COLOURED
PRIVACY OR COLOURED
GLASS OPTIONS
GLASS OPTIONS
GLASS OPTIONS
20
SIDE FLAG
SIDE FLAG
SIDE FLAG
OPTIONS
OPTIONS
OPTIONS
10
03
LETTER
LETTER
LETTER
PLATE
PLATE
PLATE
OPTIONS
OPTIONS
OPTIONS
05
KNOCKERS
KNOCKERS
KNOCKERS
Urn
Lion head
Standard
handle
Pad
handle
Pro Style
handle
Curved
handle
new
Middle
Low
None
Pony Tail
Oval Victorian Scroll
Long Bar handle:
800mm, 1200mm & 1800mm
Pull
Escutcheon
Standard
Escutcheon
02
02
07
02
SPY HOLE
SPY HOLE
SPY HOLE
OPTIONS
OPTIONS
OPTIONS
CHAIN
CHAIN
CHAIN
OPTIONS
OPTIONS
OPTIONS
FURNITURE
FURNITURE
FURNITURE
COLOURS
COLOURS
COLOURS
THUMB TURN
THUMB TURN
THUMB TURN
OPTIONS
OPTIONS
OPTIONS
With or
without
With or
without
White, black, gold, polished chrome, satin
chrome, pewter & brushed chrome
With or
without
Options vary
depending on the
door design
Full
Three quarters
Half
Side panel
None. Or one of our 5 composite side panels
=
27,216,000,000
COMPOSITE DOOR CHOICES AND EVERY
ONE MADE TO MEASURE TO EVERY
CUSTOMER’S EXACT SPECIFICATIONS
14
Annual Report & Accounts 2020
Annual Report & Accounts 2020 15
Safestyle UK plc
Strategic Report
Governance
Financials
The journey of an order
1
2
3
4
5
6
INTEREST REGISTERED
ARRANGE APPOINTMENT
DISTRIBUTE TO BRANCH
VISIT THE PROPERTY
Up and down the country,
millions of people every year
contact Safestyle UK through
various channels to register
their interest in energy efficient
windows & doors and request a
free quote.
Our appointment agents based
at Head Office in Bradford or in
our Sales Branches speak to the
customer, confirm their interest
and agree upon a convenient
time and date for one of our
representatives to visit. The
appointment is then created
within our lead management
system 'Polaris'.
Through our lead management
system, the appointment data is
received by the local branch. At
which time the appointment is
then assigned to a specific
representative for the visit.
The representative will visit the
property and go through all
relevant product and service
information with the potential
customer. Next they will
measure up, confirm all the
requirements and present a
totally free quote.
CONFIRM AND
BOOK SURVEY
If the customer is happy and
wants to go ahead then back
in Bradford the order is
received, confirmed and all
details are double checked. A
survey will then be booked on
our system and the customer
will be notified.
SURVEY THE PROPERTY
One of our expert surveyors
will visit the property to double
check all measurements and
aspects of the job. All details
are confirmed with the
customer including styles,
designs etc. and we make sure
we are meeting the full
requirements of the customer.
11
10
9
8
7
PEACE OF MIND
HAPPY CUSTOMER
Then the customer can sit back,
relax and enjoy their brand new
windows and doors knowing
that for the next 10 years we are
only a phone call or e-mail away
should they need us. Our expert
service engineers are on hand to
help with any issues, big or small
should they arise.
At the agreed time and date our
fitting team will arrive ready for
the transformation. All work will
be carried out quickly, carefully
and professionally, installing the
customer’s new products to
their exact specifications. We
will take great care leaving the
customers home as tidy and
clean as we found it.
4.2 stars - rated ‘Great’
READY FOR
INSTALLATION
SAFESTYLE
MANUFACTURING
FINALISE SURVEY
TO ORDER
Once the products arrive at the
depot, the assigned team will
collect these bright and early on
the morning of installation.
They will check in with the
depot, go through the work
sheets and head off to the
installation.
Under the watchful eyes of our
highly skilled craftsmen, every
window & door is manufactured
in our state-of-the-art facility in
Barnsley to the customer’s exact
specifications. Having passed
through all quality control checks,
the products are then transferred
to our network of installation
depots ready for installation.
Head Office receive the detailed
survey. It is then passed through
Quality Control for final checks
before sending to the pricing
team. Lastly, the installation
date is confirmed with the
customer, the order is created
and is electronically sent to our
manufacturing facility for
production to start.
16
Annual Report & Accounts 2020
Annual Report & Accounts 2020 17
Safestyle UK plc
Strategic Report
Governance
Financials
Chairman’s Statement
Introduction
The challenge of managing the business
through the COVID-19 pandemic took
centre stage in 2020. I am pleased to
report that the Group reacted well to
the challenge, bolstering its finances,
moving rapidly out of lockdown at the
end of May and recovering strongly in
the second half of the year, achieving
revenue, profit and order book growth in
that period.
Trading and financial performance
The Group's financial performance was
adversely impacted by the cessation of
installation activity for nine weeks in H1
as a result of the COVID-19 pandemic
and lockdown period.
Prior to the lockdown, the Group had
started the year well, with the first two
months of the year seeing revenue
growth of £0.6m (3.4%), gross profit
growth of £0.6m (11.4%) and an
underlying profit before taxation¹ of
£0.9m, an improvement of £1.4m versus
the same period in 2019.
Following the 'Stay at Home' measures
guidance published by the Government
on 23 March 2020 in relation to the
COVID-19 outbreak, the Group took
prompt and decisive action with the
aims of:
Ÿ
Ÿ
Ÿ
protecting its people, business and
customers;
providing the best service possible
through the crisis; and
ensuring it had both the capability
and plans in place to accelerate
rapidly out of the crisis.
Consequently, the Group temporarily
closed all of its locations across the
country and ceased all installation
activities for what eventually became a
nine-week period between late March
and the end of May. The Group
recorded a loss of over £6m in this three
month period.
During this lockdown, the Group
implemented numerous steps to protect
and strengthen cash. These steps
included furloughing 95% of the Group's
staff at 80% pay at the end of March; the
CEO, each of the Non-Executive
Directors and I took a 50% reduction in
salary / fees for the duration of the
crisis.
Total Job Retention Scheme support
totalled £1.8m for the year, almost all of
which was received in relation to
furloughed staff in the April and May
period.
Alongside these measures, to
strengthen the balance sheet and put in
place a strong cash buffer to support the
Group through and out of the crisis, the
Group achieved an equity Placing and
raised £8.2m in net proceeds from
existing and new shareholders; in
support of the Placing, lenders reduced
covenant targets for both the duration
of the lockdown and our restart and
extended the borrowing facility to
October 2023.
The strong and rapid support from our
shareholders and banking partners was
a critical enabler for managing the
business smoothly through this
challenging time.
Following the restart of operations at
the end of May, the Group returned to
profitability for the second half of the
year with installation revenue increasing
by 15% versus H2 2019. Underlying
profitability was achieved despite the
Group incurring significant costs related
to growing the Group's order book
which closed the year 83% higher than
2019. This investment reduced the
profit in the year, but the strong order
book has contributed to the Group
making a strong and profitable start to
2021 despite the ongoing and
challenging operational context.
Revenue for the full year was £113.2m, a
reduction of 10.3% across the year, but
including growth in the second half of
the year of 15% at £71.1m. Gross
margin was £28.5m for the year, a
reduction of 10.8% versus 2019; but a
strengthening trend was achieved in the
second half of the year with gross
margin growing ahead of revenues by
22.7%.
As a result of the first half loss, the
Group's underlying (loss) before
taxation for the full year was £(4.8)m
compared to £(1.5)m with a reported
(loss) before taxation of £(6.2)m
compared to £(3.8)m in the prior year.
Basic EPS fell from (4.0)p in 2019 to
(4.3)p this year.
Non-underlying items² reduced to
£1.4m (2019: £2.3m) predominantly as a
result of lower restructuring costs.
Balance sheet and dividend
As noted above, the Group's £7.5m
committed finance facility was extended
in the year and now runs to October
2023. This facility will continue to
support the Group's working capital
needs over the next few years and
provide a source of additional liquidity if
required.
The net cash³ position at the end of the
year improved to £7.6m (2019: £0.4m)
thanks to the £8.2m share Placing in
April and the deferral of a £2.5m VAT tax
payment into 2021. £3m of the Group's
£7.5m facility, representing the
revolving credit facility, remains
undrawn.
The Board does not propose a final
dividend for the year (2019: £nil) which
will underpin the maintenance of
suitable liquidity levels in the immediate
future. The Board expects to revisit its
dividend policy later in 2021 assuming
that the Group has returned to a
consistent delivery of profitability.
2
The Group's CO emissions per frame
installed in 2020 have reduced by 6.1%
versus 2019. The Group has achieved
ongoing reductions in energy
consumption through its furnace energy
usage reduction programme, a
significant component of our
manufacturing process, resulting in a
25% reduction at like for like operating
levels. We target a further 10%
reduction in CO emissions per frame
over the next three years.
2
The Group is also now halfway through
replacing its leased van fleet,
representing 333 vans in total. This will
be fully completed by the middle of
2021. Each new van produces 8% less
CO emissions than the previous model
and this will make an important
contribution to our programme of
reducing the impact on the environment
of our business.
2
Pages 34 to 37 provide further details
on our various sustainability initiatives
and activities in the last year and also
detail our recycling processes.
consequential need to furlough over
90% of our employees for a short time
and withhold work from our self-
employed colleagues were made simpler
by their cooperation and understanding.
In this difficult year where so many have
contributed, I feel I must mention the
small number of individuals who worked
throughout the entire lockdown period.
Their enormous contribution at such an
uncertain time enabled us to maintain
contact with our people, our customers
and our many other stakeholders and
their efforts underpinned our ability to
restart operations quickly when it was
safe to do so.
Our people's resilience and
determination continues to truly make a
difference and I thank them all once
again for all their hard work and
dedication and look forward to sharing
Safestyle's success with them all in the
future.
Sustainability
Safestyle's people
The Group is proud of how it has
embedded its approach to sustainability
in its operations. The Group recycles
95% of all materials removed from a
customer's home during an installation;
few of the removed materials are sent to
waste disposal sites by either the
customer or by Safestyle. We believe
we set the highest benchmark in the
industry in this regard.
After a period of significant disruption in
2018, we have suffered another
extraordinary year. It is down to all our
skilled and dedicated colleagues that we
have again navigated through extremely
challenging circumstances.
The COVID-19 pandemic placed a
significant strain on the Group and our
people have inevitably been at the
centre of that. The cessation of
operations in March and the
Alan C Lovell
Chairman
24 March 2021
18
Annual Report & Accounts 2020
¹ See the Financial Review for definition of underlying profit / (loss) before taxation
² See the Financial Review for definition and detail of non-underlying items
³ See the Financial Review for definition of net cash
Annual Report & Accounts 2020 19
Safestyle UK plc
Strategic Report
Governance
Financials
CEO’s Statement
Summary
2020 has been an extraordinary trading
year, with huge levels of disruption and
sustained uncertainty. Despite this, the
business has emerged strongly, building
momentum in H2 and making progress
on our core strategic priorities. I am
immensely proud of the response of our
staff who showed enormous flexibility
and resilience in responding to the
sustained challenges the business faced
during 2020.
The business started the year with good
growth sustained from Q4 2019 but our
priorities shifted rapidly in Q1 to a focus
on protecting our staff, customers and
the business through the pandemic. Our
results in H1 were impacted significantly
by the cessation of business operations
between March and the end of May.
However, as a result of the support of
shareholders and our lenders in April,
the business was able to recapture its
strong momentum in H2, delivering
double-digit revenue growth of 15%
while also growing the order book by
83%. The strong order book has allowed
us to entirely mitigate the disruption
caused by the interruption in sales and
canvass operations during Q1 2021.
COVID-19 response
The business began contingency
planning in February and this ensured a
rapid cessation of operations on 23
March, in line with government
guidance. The hibernation of the
business at that point encompassed
canvassing, in home sales, survey,
processing, manufacturing and
installations. We retained a small
remote selling team together with a
skeleton customer service function.
This enabled us to minimise our cash
outflow during this period of
uncertainty.
The support of shareholders and our
lenders during April was critical given
the business was still recovering
financially from 2018. The funds
provided allowed the business to
emerge strongly from the first lockdown
in May and navigate the further
disruption arising from the second
lockdown in November.
Within the business we developed
COVID-safe practices that allowed our
offices and factories to operate without
interruption from May, with key staff
20
Annual Report & Accounts 2020
split into socially distanced bubbles and
extensive use of remote working. Staff
operating in customers' homes were
subject to new working practices, with
the mandatory use of face masks and
other personal hygiene measures.
Again, this approach enabled us to
sustain our business operations through
H2.
The COVID-safe measures taken in
2020 carried cost and inevitably drove a
level of inefficiency but were successful
in allowing us to operate commercially
throughout H2, while also protecting
our staff and maintaining the confidence
of our customers.
Generating momentum through the
turbulence - H2 performance
Furnished with the support of
shareholders, the phased restart was
rapid and we quickly found that
consumer demand was strong. The
strength of the market reflected the
multiple restrictions on other forms of
consumer spending and was seen across
the wider Repair, Maintenance and
Improvement (RMI) sector.
In response to this growth we invested
in expanding our capacity across survey,
processing, manufacturing and
installations. The resulting capacity
increase lagged the growth in sales but
delivered revenue growth of 15% in H2.
This meant our order book grew by 83%
versus 2019 as we exited the year,
setting us up for a strong start to 2021.
During H2 we also made significant
progress in driving margin, with reduced
complexity, reduced finance subsidy
costs and enhanced management of
discounting, all of which contributed to a
3.8% year on year improvement in
average frame price. This partially offset
the financial impact of building the order
book in H2 and it is contributing to the
improved financial performance for Q1
2021.
Progress on strategic priorities
Despite the challenges of 2020, I am
pleased that we were able to make
progress against our longer term
strategic agenda with some critical
milestones achieved.
Improving our national sales and depot
network: Q1 saw the arrival of our new
Commercial Director Gary Pickering
and the recruitment of a new regional
sales leadership team during H1. These
appointments have enabled an
acceleration in the transformation of our
sales and canvass functions, supported
by sophisticated and transparent
management information.
In Q4 we were also able to launch our
new training programme for our self-
employed branch managers, an initiative
that will continue in 2021 as all
managers will be required to complete
the programme. This is the first
structured national training programme
of its sort at Safestyle and it is supported
by clarified responsibilities and a new
pay structure aligned to business
results.
Concurrently our installations network
embarked on a parallel programme,
again establishing a new leadership
team and updating our national depot
network through a series of closures and
openings across the UK.
Sustaining momentum in compliance
and customer service: While COVID
safety was our prime focus in 2020, we
completed a number of key actions that
further developed our business
compliance. These included the
development of our new canvass app,
which now enables tracing of all sales
leads and the recruitment of a new Data
Compliance Manager to embed and
audit our practices.
The progress made on improving
customer service was hampered during
2020 as we sought to mitigate the
impact of significant supply disruption
during Q3. This was caused by a
combination of restart challenges with
two key suppliers, industry-wide raw
material constraints and global shipping
disruption. These challenges were not
unique to Safestyle, but they
demonstrated the difficulty of
recovering from this type of issue and
the importance of maintaining a smooth
and robust supply chain.
Modernising our value brand: We
progressed two elements during 2020;
brand development and establishing a
digital competitive advantage. Our
appointment of 'Journey Further' as our
new digital agency has proved
successful as we have leveraged our
scale to bring best in class practices to
our digital marketing work. Our brand
work, which seeks to build on the
investment of the past, will be used to
shape our TV investment and brand
experience in the years ahead.
As we move into 2021 and embed the
progress that has been made through
the turnaround programme we have
updated and refreshed our key strategic
objectives for 2021 and beyond. These
will be:
Delivering our financial roadmap:
Reshaping our financial performance to
deliver sustained improvements in
profitability through a combination of
revenue growth, margin improvement
and measured investment.
Levelling up / standardising depots &
branches: Building on and embedding
the work done to date on improving the
consistency of local performance using
Standard Operating Procedures
('SOPs'), role descriptions, effective
management reporting and
performance management for all our
branches and depots.
Driving profitable growth: This
encompasses our planned brand
investment, building a digital
competitive advantage, developing
consumer insight and expanding our
national sales footprint.
Transforming our customer
experience: Our ratings and feedback
show that the majority of customers
have a seamless experience. However,
we know that we can do better, using
technology and improved
communications to address customer
issues more rapidly. We will support this
by embedding the use of Net Promotor
Score (NPS) customer interviews, which
we recently introduced to the business.
Embedding compliance and
sustainability: I am pleased that we
have made great progress in these areas,
but we also want to drive further
improvements at Safestyle and
throughout the wider industry. We have
embedded sustainability into our
operations and now recycle 95% of all
materials removed from a customer's
home as part of their installation.
As described in the Chairman's
Statement, the Group continues to make
good progress on reducing its CO 2
emissions per frame and we fully intend
to continue with this important agenda.
Moreover, our existing impressive
environmental initiatives will be
broadened and form part of our
consumer offer.
These priorities will be supported by the
key enabling initiatives of developing
our people, our culture and our systems.
Together, these initiatives set an exciting
direction for the business, aimed at
sustaining improved financial delivery,
growth and continued modernisation of
the business.
Current trading & outlook
Our deliberate strategy of building a
large order book has enabled us to
entirely mitigate the impact of the
further restrictions on sales and canvass
that came with the third national
lockdown in January 2021. This has
meant that despite geographic and
national interruptions we have been
able to maintain our survey, processing,
manufacturing and installations
operations. As a result, we have now
reduced our order book to a more
normalised level which is still c.20%
higher than the prior year and further
strengthened our cash position.
During Q1 we have taken the
opportunity to improve our customer
service levels, with further investments
in call centre staffing and in resolving
the backlog of service issues that were
caused by the first lockdown and the
significant supply-chain disruption in
Q3. Our intent is to enter Q2 having put
the operational challenges of 2020 fully
behind us as we focus on accelerating
the transformation of the business and
delivering improved financial results.
Clearly the outlook remains uncertain,
but I am optimistic that the progress
made by the business will allow us to
maximise any opportunity that comes as
the economy reopens. Our intention
remains as before the crisis; to build
long term value for shareholders by
consolidating our position as the UK's
number 1 choice for replacement
windows and doors.
As a result of this encouraging start to
the year, the Board expects 2021
financial performance to be significantly
ahead of market expectations.
Mike Gallacher
Chief Executive Officer
24 March 2021
Annual Report & Accounts 2020 21
Safestyle UK plc
Strategic Report
Governance
Financials
Financial Review
Financials
Underlying
£’000
113,191
(84,732)
28,459
(32,057)
(3,598)
1
(1,161)
(4,758)
Revenue
Cost of sales
Gross profit
Other operating expenses³
Operating (loss)
Finance income
Finance costs
(Loss) before taxation
Taxation
(Loss) for the year
4
Basic EPS (pence per share)
Diluted EPS (pence per share)
Cash and cash equivalents
Borrowings
Net cash²
2020
Non-
underlying
items¹
£’000
Total
Underlying
£’000
£’000
2019
Non-
underlying
items¹
£’000
126,237
(94,337)
31,900
(32,018)
(118)
2
(1,402)
(1,518)
(2,314)
(2,314)
(2,314)
(1,399)
(1,399)
(1,399)
113,191
(84,732)
28,459
(33,456)
(4,997)
1
(1,161)
(6,157)
1,103
(5,054)
(4.3)p
(4.3)p
11,705
(4,127)
7,578
Change in
underlying
(10.3)%
10.2%
(10.8)%
(0.0)%
(2,949.2)%
(50.0)%
17.2%
(213.4)%
Total
£’000
126,237
(94,337)
31,900
(34,332)
(2,432)
2
(1,402)
(3,832)
526
(3,306)
(4.0)p
(4.0)p
4,435
(3,991)
444
KPIs
FY 2020
FY 2019
Change %
H2 2020
YOY
change %
H1 2020
5
Revenue £000
Gross margin %
Average Order Value (£ inc VAT)
Average Frame Price (£ ex VAT)
Frames installed units
Orders installed
Frames per order
113.2
25.1%
3,474
704
163,617
39,789
4.11
126.2
25.3%
3,337
678
190,252
46,412
4.10
(10.3)%
(13)bps
4.1%
3.8%
(14.0)%
(14.3)%
0.0%
71.1
26.3%
3,494
714
100,920
24,735
4.08
15.0%
165bps
3.6%
3.6%
10.6%
10.5%
0.0%
42.1
23.1%
3,440
688
62,697
15,054
4.16
YOY
change %
(34.7)%
(271)bps
4.1%
3.0%
(36.6)%
(37.4)%
1.1%
The Group's financial performance measures and KPIs in 2020 were adversely impacted by the cessation of installation activity for
nine weeks in H1 as a result of the COVID-19 pandemic and lockdown period.
In the first half of the year, the Group made an underlying profit before taxation of £0.9m for the first two months of the year
before the business entered a temporary lockdown in late March to the end of May where it incurred losses totalling in excess of
£6m.
The second half of the year saw the Group return to profitability, despite the ongoing disruption and cost of working in a
challenging context and material investment in the Group's order book which closed the year 83% higher than 2019.
This Financial Review details the changes in the financial measures of the business across the year within the above context and
draws particular attention to how the revenues and operating costs changed between the first and second half of the year.
¹ See the non-underlying items section in this Financial Review
² Net cash is cash and cash equivalents less borrowings
³ Underlying other operating expenses are defined in the 'Underlying performance measures' section below and the
reconciliation between this measure and the GAAP measure is shown in the 'Financials' table at the front of this Financial Review
Underlying (loss) before taxation is defined in the 'Underlying performance measures' section below and the reconciliation
between this measure and the GAAP measure is shown in the 'Financials' table at the front of this Financial Review
5
Gross margin % is gross profit divided by revenue
4
Financial and KPI headlines
Ÿ Revenue declined by 10.3% to
£113.2m for the full year, the
decrease entirely attributable to the
cessation of operations in H1 with
Q3 and Q4 revenues increasing
versus the prior year by 9.3% and
20.8% respectively.
Ÿ Frames installed decreased by 14.0%
to 163,617, the decline again fully
attributable to the first half
disruption.
Ÿ The Group continues to improve
average frame price, achieving a
3.8% increase in the year due to a
focus on discount management and a
small annualisation effect of 2019
price increases. This average price
improvement was achieved despite a
reduced mix of higher average-
priced composite guard doors which
was 7.6% in 2020 compared to 9.2%
in 2019.
Ÿ The Group also made changes to its
consumer finance portfolio in the last
part of the year which has
maintained a strong promotional
finance offering, but which has
resulted in a reduction in finance
subsidies of £0.8m. This benefit will
increase in FY21 when the impact is
annualised.
In H1, gross profit declined by 41.5%
to £9.7m and gross margin
percentage reduced by 271bps to
23.1%, which is again attributable to
the volume decline described above
although the impact was partially
offset by £0.7m of a total £1.8m
Ÿ
reclaim under the Government's
Coronavirus Job Retention Scheme
('CJRS') with the remainder included
within operating expenses as
described below.
Ÿ H2 gross profit improved versus the
prior year by 22.7% to £18.7m with
the growth attributable to the
increased installation volumes.
Gross margin percentage in the
second half increased by 165bps
versus H2 2019 to 26.3% due to the
combination of a higher average
price per frame as described above
and a year on year reduction in the
cost of lead generation (a reduced
rate) in the second half of the year.
The second half gross profit and
gross margin percentage
improvement would have increased
further were it not for the
investment into the closing order
book described above
Ÿ Underlying other operating
expenses³ for the year were the
same as the prior year. There was a
reduction in H1 operating expenses
as a result of no investment in TV
advertising and a £1.1m reclaim
under the Government's
Coronavirus Job Retention Scheme
('CJRS'). H2 operating expenses
increased year on year due to costs
associated with many of the Group's
COVID-safe measures – such as PPE
and cleaning – coupled with higher
operational capacity costs to support
the revenue growth and to increase
our customer-facing headcount.
Ÿ Reported other operating expenses
reduced by £0.9m (2.6%) to £33.5m
as a result of the items described
above along with a year on year
reduction in non-recurring costs
following completion of the actions
taken as part of the cost reduction
initiatives in 2019.
Ÿ Finance costs have decreased year
on year as a result of reduced
borrowing costs due to lower
utilisation (and thus lower fees) in
relation to the £3m revolving credit
facility.
Ÿ Underlying (loss) before taxation
4
was £(4.8)m for the year (2019: loss
of £(1.5)m). As described above, the
loss was generated in H1, totalling
£(5.1)m, before the Group returned
to profitability in H2.
Ÿ Non-underlying items were £1.4m
for the period (2019: £2.3m), full
details of which are provided on the
following pages of this Financial
Review and therefore reported (loss)
before taxation was £(6.2)m versus
£(3.8)m in 2019.
Ÿ Net cash² improved to £7.6m versus
£0.4m at the end of last year. The
improved cash position is despite the
losses incurred in the first half of the
year and is predominantly the result
of a successful Placing of New Shares
in April 2020 which raised net
proceeds of £8.2m and the agreed
deferral of £2.5m of VAT payments
originally payable during the
lockdown period which will be paid in
2021.
5
22
Annual Report & Accounts 2020
Annual Report & Accounts 2020 23
Safestyle UK plc
Strategic Report
Governance
Financials
Financial Review
Underlying performance measures
In the course of the last three years, the
Group has encountered a series of
unprecedented and unusual challenges.
These gave rise to a number of
significant non-underlying items in 2018
and consequential items continued into
2019 as the Group addressed the impact
of these challenges, predominantly as
part of its Turnaround Plan. The impact
of COVID-19 in 2020 has also given rise
to a material non-underlying item in the
form of a holiday pay accrual which is
described in detail below.
Consequently, adjusted measures of
underlying other operating expenses
and underlying (loss) before taxation
have been presented as the primary
measures of financial performance.
Adoption of these measures results in
non-underlying items being excluded to
enable a meaningful evaluation of the
performance of the Group compared to
prior periods.
These alternative measures are entirely
consistent with how the Board monitors
the financial performance of the Group
and the underlying profit / (loss) before
taxation is the basis of performance
targets for incentive plans for the
Executive Directors and senior
management team.
24
Annual Report & Accounts 2020
Non-underlying items consist of non-
recurring costs, share based payments
and Commercial Agreement
amortisation. A full breakdown of these
items is shown below. Non-recurring
costs are excluded because they are not
expected to repeat in future years.
These costs are therefore not included
in the Group's primary performance
measures as they would distort how the
performance and progress of the Group
is assessed and evaluated.
Share based payments are subject to
volatility and fluctuation and are
excluded from the primary performance
measures as such changes year to year
would again potentially distort the
evaluation of the Group's performance
year to year.
Finally, Commercial Agreement
amortisation is also excluded from the
primary performance measures because
the Board believes that exclusion of this
enables a better evaluation of the
Group's underlying performance year to
year.
Revenue
Revenue for the year was £113.2m
compared to £126.2m last year,
representing a decrease of 10.3% for the
year as a result of the cessation of
installation activity across late March,
April and the majority of May. The year
on year revenue performance up to the
end of February represented year on
year growth of 3.4% with Q3 and Q4
growth of 9.3% and 20.8% respectively
which depicts the improving trajectory
either side of the lockdown period.
Frames installed volume represented a
similar decline of 14.0% to 163,617
frames installed compared to 190,252 in
the prior year. The revenue decline
reduction was less than this volume
decline as a result of improvements in
the following areas:
Ÿ The average frame price increased by
3.8% to £704 (2019: £678). The
impact of an annualisation benefit of
modest list price increases in 2019
alongside a larger benefit coming
from reduced discount levels were
the major drivers of the
improvement.
Ÿ The improvement in the average
frame price was also despite a
reduced mix of higher average-
priced composite guard doors which
reduced to 7.6% of installed volumes
(2019: 9.2%).
Ÿ The favourable average price gains
were further augmented by a
reduction in the finance subsidy
costs linked to our consumer finance
offering. These reductions follow a
successful set of changes to our
promotional finance portfolio late in
2020 which generated a £0.8m
benefit in the second half of the year.
The Group continues to sell over
43% of its products alongside a
consumer finance agreement which
represents a flattening of a trend
that has been steadily rising over the
last five years.
Ÿ The metric of the average number of
frames per order remained
consistent with 2019 which halts the
declining trend of the last two years
and follows the rebalancing of mix
out of higher-value composite doors.
Ÿ Finally, the average order value also
improved by 4.1% to £3,474.
Progress in these operational KPIs
remains a critical area of ongoing
focus for the Group as it continues to
target an improving quality of
revenue into 2021.
Gross profit
Gross profit decreased by 10.8% to
£28.5m while the gross margin
percentage declined by (13)bps to 25.1%
(2019: 25.3%). In the first half of the
year, the gross margin percentage
reduced by (271)bps versus the prior
period to 23.1% before improving year
on year for the second half of the year by
165bps to 26.3% (H2 2019: 24.7%).
The reduction in installation volumes
described above was the main
contributor to the year on year
reduction in gross margin and the
dilution of gross margin percentage in
H1. The additional factors behind the
trends of first half dilution and
subsequent improvement in gross
margin percentage in the second half of
the year were as follows:
Ÿ Prior to the lockdown, the Group
was continuing to experience
increased costs per leads generated
as a result of continued competition
driving up 'Pay Per Click' and other
digital marketing channel costs.
Moving into the middle of the first
half, despite the cessation of
installation activities, the Group
continued, albeit on a much-reduced
scale, to respond via remote-selling
methods to customer enquiries
during the lockdown period. These
enquiries were generated with
minimal levels of investment as
compared to spend prior to the
lockdown.
Ÿ Following the restart of operations,
the Group experienced a strong
consumer response as it stepped up
its lead generation activities across
all lead sources and although the
costs per lead increased as volumes
grew when compared to the very low
levels during lockdown, these were
still lower than the first two months
of the year. The Group's cost to
order intake ratio across the second
half was 10.2% lower than H2 2019.
Ÿ This beneficial rate effect was more
than offset by the Group driving
order intake levels that exceeded the
level of installation activity which
resulted in an order book at the year
end that was 83% ahead of the prior
year. This investment diluted the
gross margin percentage across the
year.
Ÿ Aside from the above, gross margin
in the first half was impacted
favourably by a £0.7m reclaim under
the CJRS scheme from the UK
Government to contribute to the
costs of the Group's furloughed
factory employees.
Ÿ Despite this assistance, the Group
continued to incur some fixed costs
in H1 that could not be fully
mitigated during the lockdown such
as leased equipment costs. In
addition, as the business restarted its
factory in late May, the initial few
weeks of operation were part of a
staged return to work plan which
inevitably resulted in a lower level of
productivity than normal whilst
COVID-secure ways of working were
fully embedded. Both of these
factors diluted H1 gross margin.
In the second half of the year, the
growth in installation revenues, the
reduction in finance subsidies and
the continued improvement in
average price per frame increased
the gross margin percentage above
that of 2019.
Ÿ
Ÿ Gross margin in H2 would have
recovered more strongly were it not
for the lead generation effect
described previously alongside the
Group investing in recovering its
warranty and service backlog that
built up during the lockdown period.
This investment is expected to carry
on in the early part of 2021 before
reducing to pre-COVID levels in the
latter stages of the year.
furloughed in April with the
remaining half spread across May
and June. This reducing reclaim
profile after April reflects the
gradual return to work of furloughed
staff through the second half of May
with 60% of staff returned to work
by the end of May and 93% by the
end of June.
Ÿ Alongside the furlough support, the
benefits of the 2019 cost reduction
activities reduced H1 operating
expenses versus H1 2019 by a
further £1.0m. However, as the
Group moved into the second half of
the year, as described in the CEO's
statement, the high levels of demand
resulted in the Group taking steps to
increase its operational capacity.
This equated to an increased cost in
the second half of the year of £0.5m
as the Group re-opened a previously-
closed depot in Crawley and a new
installation depot in Nottingham
alongside growing headcount across
surveying, order processing,
installations and customer services.
Ÿ The Group also incurred bonus costs
of £1.0m in relation to the H2 bonus
scheme that was introduced to
incentivise a rapid restart of the
business, delivering profit alongside
the building of a strong order book.
IT licensing and infrastructure costs
increased by £0.3m versus the prior
year as the rollout of technology
across the Group continued, most
notably the implementation of Office
365 and Microsoft Teams which
proved crucial to underpin remote
working during the lockdown and to
enable a phased return to office
working after restrictions were
lifted.
Ÿ
Ÿ Finally, costs associated with the
Group's response to implementing
COVID-19 safeguards including
enhanced cleaning routines for
offices, the provision of Personal
Protective Equipment ('PPE') to the
workforce and providing safety
screens around workstations
totalled £0.4m in the year.
Underlying other operating expenses
Underlying (loss) before taxation
Underlying (loss) before taxation was
£(4.8)m (2019: loss of £(1.5)m), although
profitability was achieved either side of
the lockdown period as described above.
This loss is before the non-underlying
items described below.
Underlying other operating expenses
were consistent versus 2019 across the
full year.
Ÿ
Ÿ There were reductions in the amount
invested in TV advertising of £0.7m
which partially offset the increased
investment in digital media lead
generation channels referred to
above.
In addition to the amount received
and included within gross margin, the
Group also received £1.1m in the
first half of the year for its CJRS
reclaim for furloughed staff costs
that are expensed within underlying
other operating expenses. Half of
the amount reclaimed was for staff
Annual Report & Accounts 2020 25
Safestyle UK plc
Strategic Report
Governance
Financials
Financial Review
Non-underlying items
A total of £1.4m has been separately treated as non-underlying items for the year (2019: £2.3m). The prior period included £1.8m
of costs related to restructuring activities and asset impairment as part of phase two of the Turnaround Plan.
The current year's costs consist of £0.5m of non-recurring costs (2019: £1.9m), a £0.4m shared based payment charge (2019:
£0.0m) and £0.5m (2019: £0.5m) of Commercial Agreement (Intangible Asset) amortisation. The table below shows the full
breakdown of these items:
Non-underlying items
Holiday pay accrual
Litigation costs
Restructuring and operational costs
Impairment of right-of-use assets
Modification of right-of-use assets and liabilities
Reversal of prior year impairment of right-of-use assets
Commercial Agreement service fee
IT project Impairment
Total non-recurring costs (note 7)
Equity-settled share based payment charge (note 32)
Commercial Agreement amortisation
2020
£000
470
74
266
-
5
(292)
-
-
523
424
452
2019
£000
-
-
1,058
692
-
-
(13)
113
1,850
12
452
Total non-underlying items
1,399
2,314
The holiday pay accrual of £0.5m has
arisen as a result of the impact of the
shutdown of operations and resultant
extension of 2020 leave entitlement to
the end of 2021 which is in line with the
Government's recommendation. This
has significantly increased the level of
deferred holiday entitlement at the year
end which has been recognised as an
accrual and which will reverse in full in
2021. This item has been excluded from
the underlying performance measures
to ensure performance of the business is
not skewed by both the expense in 2020
or its subsequent full release in 2021.
Litigation costs of £0.1m are expenses
incurred as a result of an ongoing legal
dispute between the Group and an ex-
26
Annual Report & Accounts 2020
agent. These costs were predominantly
legal advisor's fees.
In 2020 and 2019, the Group incurred
restructuring and non-recurring
operational costs of £0.3m and £1.1m
respectively which reduced the Group's
overheads in some areas. In addition, in
2019, the Group recognised an
impairment of right-of-use assets of
£0.7m following closure of an
installation branch and a sales office in
the period. The installation branch was
re-opened in 2020 as the Group
increased its capacity levels and
consequently, £0.3m of the prior year's
impairment charge has been reversed.
The receipts in relation to the CJRS
described earlier in this Financial
Review have not been classified as a
non-recurring item on the basis that
these partially offset the wage costs of
unproductive labour in the lockdown
period.
In the prior year, the Commercial
Agreement service fee costs arose as a
result of an agreement entered into in
2018 with Mr M. Misra which
encompassed a five year non-compete
agreement and the provision of services
by Mr Misra in support of the continued
recovery of Safestyle. The Group agreed
consideration with Mr Misra subject to
the satisfaction of both clear
performance conditions by him over five
years and Safestyle's trading
performance in 2019.
Subject to satisfying the strict terms of
the agreement, the consideration took
the form of an allotment by Safestyle to
Mr Misra of four million ordinary shares
of 1 pence each in the capital of the
Group and a payment of cash
consideration of between £nil and £2.0
million.
The Commercial Agreement service fee
was originally assessed in 2018 at a
£1.0m fair value as the consideration
payable under the terms of the
Commercial Agreement that was
attributed to services received in 2018.
Following conclusion of the 2019 year,
the value of the services received was
confirmed based on the actual
performance in 2019, and the provision
for consideration to be paid was reduced
by £13k to £987k. This amount was paid
and four million ordinary shares of 1
pence each were issued in October 2020
in accordance with this agreement.
The non-compete element of the
Commercial Agreement was accounted
for as an intangible asset on the basis
that it is an identifiable, non-monetary
item without physical substance, which
is within the control of the entity and is
capable of generating future economic
benefits for the entity. The intangible
asset was measured based on the fair
value of the consideration that the
Group expects to issue under the terms
of the agreement and is being amortised
over 5 years which matches the term of
the non-compete arrangement.
Further detail of all non-recurring costs
is contained in note 7.
The items classified as non-recurring
costs on the Consolidated Income
Statement, the share based payment
charge and the amortisation of the
intangible asset created as a result of
the Commercial Agreement reached in
2018 have all been excluded from the
underlying (loss) before taxation
performance measure to enable a
meaningful evaluation of the
performance of the Group from year to
year.
Earnings per share
Basic earnings per share for the period
were a loss of (4.3)p compared to a loss
of (4.0)p for the prior year. The basis for
these calculations is detailed in note 9.
Net cash and cashflow
A key aspect of the Group's response to
the COVID-19 pandemic to mitigate the
impact on the Group's liquidity as a
result of the cessation of revenue-
driving activity was to raise funds via a
share Placing.
The Placing was completed at the end of
April with net proceeds of £8.2m raised.
Alongside this injection of additional
liquidity, the Group also secured a two
year extension to its existing borrowing
facilities until October 2023. Covenant
waivers for the lockdown period and
reductions in covenant targets for the
remainder of the facility were also
secured.
At the end of the year, net cash was
£7.6m (2019: £0.4m). £4.5m of the
Group's £7.5m facility, being that of the
term loan, remains fully drawn with the
remaining £3.0m revolving credit facility
undrawn.
Net cash inflow from operating
activities, including the cashflow impact
of non-underlying items, was £3.4m
(2019: £4.5m). This inflow was despite
the losses in the year as a result of
favourable working capital movements.
The most significant increase is
attributable to the agreed deferral of
payments originally due in May 2020 to
HRMC totalling £2.5m. This deferral
will be paid from March 2021 in line
with HMRC's deferral repayment
scheme. Since the restart of operations,
the Group has not continued to defer
any further tax payments owed to
HMRC and, with the exception of this
deferred amount, continues to pay all
liabilities as they fall due.
The other working capital benefit within
operating cashflows is driven by an
increase in payments on account for
customer deposits received in line with
the growth in the order book of £2.6m.
This effect has been partially offset by
outflows driven by increases in buffer
stock levels for PVCu profile which have
been built as part of mitigation against
any potential supply chain disruption.
Capital expenditure of £0.6m increased
from £0.4m in 2019. Some capital
expenditure was deferred as part of the
Group's response to the pandemic, but
the Group continued with its investment
programme to replace and upgrade IT
hardware.
After the £8.2m proceeds in relation to
the share Placing and the lease
payments of £3.7m on leased assets
(2019: £3.6m), net cash inflow in the
period was £7.3m (2019: £0.3m).
Dividends
As the Group looks ahead to 2021, the
Board will focus on continuing to
increase the Group's net cash position
and consequently does not propose a
final dividend for this year end (2019:
£nil per share).
Rob Neale
Chief Financial Officer
24 March 2021
Annual Report & Accounts 2020 27
Safestyle UK plc
Strategic Report
Governance
Financials
Risk Management
Risk management
The Board's strategy is to grow the business organically and, if appropriate, through carefully planned acquisitions. This section sets
out the Group's risk management processes and the principal risks and uncertainties that the Board consider to be material and may
have a significant impact on the Group's financial performance.
Approach to risk
The Board has ultimate responsibility for setting the Group's risk appetite, for the Group's internal control systems and for the
effective monitoring and management of risk. The Board recognises risk can be fluid and can change unexpectedly with significant
consequences on the performance of the business.
The key features of the Group's systems of internal control are:
Ÿ The Group recognises ISO 31000: 2018 standards and processes. ISO 31000 is a framework that facilitates the development of a
risk management strategy which effectively identifies and mitigates risks, thereby enhancing the likelihood of an organisation
achieving its objectives and increasing the protection of its assets. The overarching goal is to develop a risk management culture
where employees and stakeholders are aware of the importance of monitoring and managing risk.
Ÿ Risks faced by the Group are identified during the formulation of the annual business plan and budget process, which sets
objectives and agrees initiatives to achieve the Group's goals, taking account of the risk appetite set by the Board.
Ÿ An ongoing process is in place to assess key risks which is performed by senior management and presented to the Board at least
annually. A risk register is maintained and regularly reviewed by the Executive Team. All risks are assessed and scored, taking
into consideration the likelihood of the event occurring and its consequence. Once the risks have been assessed, ownership and
mitigation measures as well as any proposed further actions (and timescale for completion) for each significant risk are identified
and enacted.
Ÿ The Group has a Compliance Committee which is chaired by Julia Porter, Non-Executive Director. This committee meets on a
regular basis (generally monthly). The status of the risks and mitigations are reviewed at each meeting, with the minutes being
reported and discussed at each Board meeting.
Ÿ The Group began an Internal Audit programme in late 2019 which was supported by outside service providers. In 2020, the
Group appointed an internal auditor who will provide additional independent assurance on key processes and controls.
Principal risks and uncertainties
Risk Description
Mitigation
Regulatory
The Group operates in a highly
regulated sector including consumer
protection and consumer credit
regulations. Should the Group be
found liable for breaches of such
regulations, the business could face
significant brand damage, financial or
existential consequences.
The Group has a wide-ranging set of programmes of appropriate training to ensure
legal compliance and to minimise mistakes. This training is for both new joiners and
also in the form of refresher training.
This is supported with comprehensive record keeping, audit trails and e-Learning
training modules for new colleagues alongside refresher programmes for existing
colleagues.
A Compliance Committee, chaired by one of the Group's Non-Executive Directors,
also meets on a monthly basis to ensure all regulatory requirements are being met.
Risk Description
Mitigation
Health & safety
The Group's operations take place in a
diverse range of domestic operating
environments. In 2020, there were
40k installations, 25k in the second
half of the year following resumption
of activities, of which approximately
50% involve working at height.
These operations require on-going
management of health and safety
risks in order to ensure a safe working
environment for our employees and
others we engage with.
A failure to manage these risks may
give rise to significant potential
liabilities or result in serious injury to
employees or agents.
Reputation with customer base
As the UK's largest provider of
replacement windows and doors, the
Group's success is affected by its
reputation with its customer base.
The disruption to normal operations
in 2020 as a result of the UK
lockdowns created additional
challenges to the maintenance of
acceptable customer service levels.
Should the Group's reputation fall,
future performance could be
adversely impacted.
The Group has continued its focused priority of managing its safety performance for
its employees and stakeholders, using a proactive strategy of focusing on risks in the
process and ensuring mitigation is in place across all our activities, specifically
working at height and glass handling to reduce accidents and risk.
The approach is aligned across all aspects of the Group with a structure that
supports positive engagement from suppliers to end customers. The Group
continues to engage with suppliers, specifically of working at height equipment, to
ensure that standardised solutions are delivered to meet operational needs for the
activities that are required to work safely. In addition to this, best practice exercises
have taken place with our main glass supplier to review methods of working with
glass and equipment used for Personal Protective Equipment (“PPE”) to ensure the
Group is operating at the highest level.
This strategy is supported by a team of health and safety professionals embedded
and working within the operational teams. This ensures continual improvement and
positive conversations which are supported by a programme of training and
investment in people and facilities. This is further underpinned by proactive audit
and data collection, allowing live confirmation of compliance direction for continued
improvement.
During 2020, the Group also attained the accreditation for Occupational Health and
Safety Management ISO 45001 which is a further indicator of the Group's focus on
the safety of its people.
This approach is fully supported by the Board and Executive Team who review
performance regularly and ensure that safety is the priority within the business,
challenging results and driving improvements.
Finally, numerous specific 'COVID-safe' measures were also implemented as part of
the Group's response to the Coronavirus pandemic which are detailed separately in
the Coronavirus risk section.
The Group recognises the importance of providing excellent customer service and
continues to invest in improving its systems and processes in this regard.
The Group has maintained its close working relationship with West Yorkshire
Trading Standards which was established in late 2018 and this continues a pro-
active response to any complaints that are escalated to third parties.
The Group continues to maintain its customer complaints process in order to
identify issues early and put corrective actions in place and has also again achieved
its accreditation to ISO 10002 Customer Satisfaction and Complaints Handling
standard.
The Group added additional resource to mitigate the impact of longer lead-times
created during the lockdown in 2020 and also those generated during a period of
supply disruption in Q3 2020.
The Group is now further developing a specific set of projects to improve the
customer experience which will build on initiatives already in place.
The Group has also invested in the resources available to monitor online reviews
and social media comments in order that complaints can be identified and responses
made promptly to maintain the Group's reputation.
28
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Safestyle UK plc
Strategic Report
Governance
Financials
Risk Management
Risk Description
Mitigation
Market and competition
The Group operates in a competitive
market which is exposed to the UK's
economic performance and general
consumer confidence.
Reasonably low barriers to entry exist
for new competitors to be established
on a regional scale which could
disrupt the market locally.
The Group has a strong brand and has historically taken market share in tough
market conditions as a value-based company.
The Board believe the Group remains well placed to compete effectively against
both existing and new competitors in the long term because of its people, speed and
modern manufacturing facility. The Group also appointed a new leading digital
media agency in 2020, Journey Further, which it believes will further underpin its
competitive advantage.
Furthermore, for a new competitor to establish significant scale and an efficient
operating model, substantial capital investment would be required.
Regular research on consumer confidence and the health of the brand are
undertaken including benchmarking of the competition to ensure the Group
maintains its leading market position.
Finally, the Group continues to invest in its brand via digital marketing channels and
also plans to invest further in its brand and consumer messaging via 'above the line'
marketing activities in 2021.
IT system dependency and
information security
The Group continues to invest in improvements to its IT systems and people, with
security, compliance and capacity planning at the forefront of its plans.
The Group is reliant on a number of
key IT systems and processes. A
failure in the Group's IT systems
could result in a loss of information,
cause significant disruption and lead
to a material financial loss.
Investment has been made into new Anti-Virus, Web Filtering and Firewall
technologies and the Group retired its on-site email servers to make way for the
introduction of Office365 and associated Advanced Threat Protection.
The Group has also invested in the building of a new, modern server infrastructure at
its Head Office which is part of a programme that will retire old servers in 2021 and
result in significantly improved capacity and resilience.
Furthermore, the Group has made steady progress in its drive towards Cyber
Essentials+ accreditation which is expected to be achieved in 2021. This programme
includes a Cyber awareness / IT security campaign that is active for all employees.
The Group has also progressed its implementation of the 'Information Technology
Infrastructure Library' (ITIL) operating framework, aimed at ensuring compliance in
IT operations.
The Group has financial crime protection and cyber liability insurance in place.
Facilities management
The Group is heavily dependent on its
physical infrastructure. Significant
business disruption could follow as a
result of interruption caused by
natural occurrence or other events.
The Group is focussed on creating safe operating environments to ensure the
protection of people, property, information and reputation providing the framework
in which the Group operates.
The Group has an Incident Management Plan with facility and business function-
specific business continuity plans that it continues to develop.
Plans capture natural events, critical infrastructure outage and malicious acts.
Mitigation measures include a robust physical and technical security plan.
Risk Description
Mitigation
Data security and data privacy
The Group's operations are subject to
complex regulatory requirements
relating to data security and data
privacy which will protect customers
and their data.
The Group takes data security and
privacy extremely seriously and
recognises the value in changes to
individual privacy rights brought about
by regulatory changes implemented by
the General Data Protection Regulation
('GDPR') and Data Protection Act 2018.
A major breach of regulations could
result in significant reputational
damage and financial loss.
Reliance on key suppliers
The Group relies upon certain key
suppliers. If relationships with such
suppliers are not maintained or key
suppliers fail, there could be potential
disruption to the Group's business.
This is particularly applicable in respect
of the suppliers of PVCu to the Group
who went through an administration
process before recommencing
operations in 2020.
Although alternative suppliers are
available to provide the supplies
required by the Group, the transition of
suppliers could cause disruption to
normal operations which may adversely
impact the Group's performance.
Dependence on key personnel
The current and future success of the
Group is reliant on the recruitment and
retention of the right people with the
right capabilities.
The Group has a relatively small
management team and the loss of key
individuals or the inability to attract
appropriate personnel could impact on
its ability to execute its business
strategy successfully and provide
quality services to its customers, which
could negatively impact upon the
Group's future performance.
Awareness is pivotal to data security and our GDPR training programme has
matured well, with a good rhythm built into refresher training across the
organisation and new people trained as they are inducted into the business.
As described above, the Group has formed a compliance committee, chaired by
one of its non-executive directors, which meets on a monthly basis to review the
activity of the business in terms of matters such as data subject rights requests
and responsiveness thereto, training statistics and data incident monitoring.
A data compliance officer was appointed in 2020 to aid the privacy programme
objectives and to assist in its continual development. This person will assist the
Data Protection Office ('DPO') who was appointed in 2018. Risks are identified
and captured within the risk register, with mitigating actions implemented as
appropriate.
A data breach and incident handling policy is in place and a programme of data
compliance audits planned to identify opportunities for improvement and to
report any non-compliance for action.
The Group maintains strong working relationships with key suppliers through
regular review meetings and open communication channels.
A risk register that includes all suppliers, both direct and indirect, is regularly
reviewed and actions that emerge from this process are taken to negate any
potential impact.
In addition, robust contractual arrangements are maintained and supplier
performance is constantly monitored against agreed standards.
Specifically in response to the potential risk of failure by the supplier of PVCu to
the Group, significant buffer stocks have been built during 2020 to mitigate the
potential impact of this key risk. This is further supplemented by enhanced
monitoring of the financial performance of the supplier.
In the event of significant disruption to supply, alternative suppliers have been
identified and a documented disaster recovery process is in place to minimise the
impact on performance.
The Group maintains competitive and attractive employment terms and
conditions, and takes proactive steps to maximise job satisfaction.
The Group incentivises key management through performance related pay in the
short term and through share options for medium and long term retention.
The Group also continues to develop its Senior Management Team using its
performance appraisal process which also facilitates personal development and
succession planning.
Finally, the Group continues to focus on improving employee engagement and
communication.
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Safestyle UK plc
Strategic Report
Governance
Financials
Risk Description
Mitigation
Risk Management
Risk Description
Mitigation
Reliance on key equipment
The Group relies on certain key
manufacturing equipment. Although
most of the manufacturing equipment
has back-up capacity there are some
machines that have no in-house back-up.
In the event of significant downtime on
these machines there is a risk of short
term disruption and increased costs.
The Group has an experienced maintenance and engineering team on site at its
manufacturing facility and it operates a preventative maintenance programme
for all key equipment.
For the critical machines identified there is either a critical spares holding or an
availability plan whereby the Group has sourced suppliers capable of
manufacturing the required products.
The Group has a documented disaster recovery process in place to minimise the
impact on performance. Site security is of a high standard and operates 24/7
throughout the year.
Liquidity risk
Liquidity risk is the risk that the Group
will have insufficient funds to meet its
financial obligations as they fall due.
The Group has implemented a clearly-defined and detailed forecasting process
that provides the basis for longer-term cashflow and liquidity forecasting.
Sensitivities are applied to the Group's forecasts to ensure that unexpected
events can be withstood and managed within the liquidity available.
The Group also prepares a detailed weekly cashflow forecast that is reviewed by
its Directors which looks forward 3 months. This forecast identifies any
emerging liquidity challenges in order that they can be managed proactively.
The Group renewed its committed £7.5m banking facility during the year which
is now in place until October 2023. As part of this renewal covenant thresholds
were lowered which has resulted in increased headroom. Regular forecasts and
assessments of the facility's covenant compliance are performed.
The Group's objective when managing its liquidity is to protect the Group's
ability to continue as a Going Concern whilst providing a sustainable return to
shareholders.
The Group has had 2 status audits performed by professional tax firms which
concluded that the status being applied was appropriate.
The Group continues to monitor developments in legislation and case law and
will review its arrangements accordingly.
The Group's approach in this area is comparable with many other companies
operating in this industry and wider sector where the use of self-employed
agents and contractors is the primary source of specialised resource.
The Group is aware that HMRC has previously agreed to its assessment of
some of its self-employed agents and has recovered unpaid taxes from these
individuals on that basis.
The Group will continue to work with HMRC to respond to any further queries
and believes that it has followed professional advice and applied the
requirements diligently.
Self-employed status
The Group uses the services of a large
number of self-employed individuals for
marketing, sales, surveying and
installation purposes.
These individuals are engaged as self-
employed agreements and payments are
accordingly paid on this basis.
The Group is currently involved in a
compliance review by HMRC that has
been ongoing for over 2 years.
There is a risk if HMRC determine that
the incorrect employment status has
been applied for some or all of its agents
that the Group could be required to pay
employment taxes not collected on this
basis.
Self-employed individuals
The Group uses the services of a large
number of self-employed individuals for
marketing, sales, surveying and
installation purposes.
These individuals are engaged on
standard form self-employed
agreements.
There is a risk of potential claims for
employee or worker status, resulting in
additional costs for the Group.
Legislation and case law are evolving in
this area and could have an impact on
self-employed status.
By their very nature self-employed
individuals are not required to give
notice or work specific hours which can
lead to higher levels of turnover and
short term resource gaps which in turn
could impact the consistent operation of
the Group.
COVID-19 (Coronavirus) risk
The COVID-19 (Coronavirus) pandemic
caused significant disruption to the
business in H1 2020. The impact of the
lockdown resulted in a cessation of all
operations for 2 months during which
time the Group secured additional
shareholder support to underpin the
recovery from this interruption.
The rollout of the vaccine programme in
Q1 2021 in the UK has resulted in a
steady lifting of restrictions to
businesses.
However, there remains the risk that
should infection rates increase once
again that the UK government would
possibly have to revert to new
restrictions that could impact business
operations.
The Group obtains confirmation from the individual of self-employed status.
The Group respects the rights of self-employed people to self-determine their
working hours.
The Group constantly monitors developments in legislation and case law and
will respond as necessary to any changes.
Historically, excluding what the Group believes was an exceptional set of
events in 2018, retention of agents has not been a significant issue for the
Group due to the opportunities that the scale of the business can provide. In
order to reduce self-employed individuals' turnover, the Group continues to
focus on the provision of what it believes are market-leading commission plans
and incentives.
The Board and the Group continues to closely monitor the evolving situation of
Coronavirus and has in place a number of processes and policies to protect its
customers, staff and the business which include:
Ÿ A number of COVID-safe policies and measures, developed throughout 2020,
which follow guidance on PPE, enhanced cleaning and minimising contact to
prevent the spread of the virus.
Ÿ
Investment in home-working capability such as laptops and communications.
Ÿ Development of department and site by site plans to respond to any
disruption caused to maintain business as usual wherever possible.
Ÿ A number of modelling scenarios which measure the impact of various
restrictions on its balance sheet and liquidity using a detailed weekly cashflow
forecasting model. This proactive approach enables the Group to identify
quickly emerging risks to liquidity.
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33
Safestyle UK plc
Strategic Report
Governance
Financials
Corporate Social Responsibility
We are committed to recycling as much waste as possible. We've refined our recycling programmes
to the point where we can re-use 95% of the waste we remove from a house, reducing landfill to an
absolute minimum.
01
OUT WITH THE OLD,
OUT WITH THE OLD,
OUT WITH THE OLD,
IN WITH THE NEW
IN WITH THE NEW
IN WITH THE NEW
02 THE OLD WINDOWS
THE OLD WINDOWS
THE OLD WINDOWS
ARE TAKEN AWAY
ARE TAKEN AWAY
ARE TAKEN AWAY
Our team of expert fitters install a beautiful new
set of windows for the happy customer.
All the old windows (and any other waste) are
loaded onto the van and brought back to the depot.
WHAT WE CAN’T USE OURSELVES WE SEND TO A RECYCLER WHO CAN, IN 2020...
WHAT WE CAN’T USE OURSELVES WE SEND TO A RECYCLER WHO CAN, IN 2020...
WHAT WE CAN’T USE OURSELVES WE SEND TO A RECYCLER WHO CAN, IN 2020...
GLASS
PLASTIC
WOOD
METAL
753 tonnes of old glass
(called cullet) went into
making new windows.
2,783 tonnes of post
consumer plastic is
recycled into drainpipes
& plastic decking etc.
1,062 tonnes of wood
got recycled into pellet
fuels for Biomass
heating systems.
75 tonnes of metal in
2020 was melted
down and reused.
06 BESPOKE WINDOWS
ARE NOW BORN
Highly-skilled craftsmen and state-of-the-art
machinery precisely manufacture new windows
to your exact order.
03
MATERIALS ARE SORTED
MATERIALS ARE SORTED
MATERIALS ARE SORTED
AND SEPARATED
AND SEPARATED
AND SEPARATED
We sort and separate all the different materials
ready to go back to our factory in Yorkshire.
OUR LORRIES COME BACK FULL
Rather than drive our lorries back to the depot empty, we converted
them all to carry waste materials. This means they now have an
important job to do, saving 200,000 miles of fuel per year when
they would have been empty.
05 NEW ENERGY EFFICIENT
GLASS IS MADE
Old glass, (called 'cullet') is crushed and recycled.
Every month 80 tonnes of it is made into brand
new, energy saving glass.
04 ALL MATERIALS ARE
EXPERTLY RECYCLED
The separate materials arrive back at our
dedicated recycling centre. Whatever we can't
use, we send to a recycler who can.
VIRGIN PVCu OFF CUTS
368 tonnes each year go back into making new frames.
WE CERTAINLY PACK IT IN
We use a Grab Machine to pick, crush and
compact the old PVCu, so that where our
lorries used to carry 4 tonnes, they can
now carry 16! Which means we can cut
5 lorries per day down - saving 250,000
miles in transport each year.
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Safestyle UK plc
Strategic Report
Governance
Financials
Going even greener
As part of our ongoing Corporate Social Responsibility we are always looking for ways in
which we can become even greener. We care about our planet and strive to lead the way
in our industry in looking after it.
COOL TEMPER FURNACE ENERGY SAVING PROJECT
COOL TEMPER FURNACE ENERGY SAVING PROJECT
COOL TEMPER FURNACE ENERGY SAVING PROJECT
ELECTRIC CHARGING POINTS
DESIGNATED CYCLE PARKING
At our manufacturing facility in Barnsley, the Cool Temper furnace is used for the glass toughening process.
What this means is, once glass is toughened and if it is subsequently broken, the glass will fragment into lots of
much smaller and safer pieces of glass - here’s how it works...
As more of our vehicle fleet become hybrid and
full electric we have installed various charging
points at our factory.
To encourage local workers to use leg power rather
than petrol power, we have installed a designated
cycle parking area.
01 The individual panes of glass are
loaded onto the in-feed bed of the
Cool Temper furnace.
02
The glass is then taken into the
furnace on rollers ready for the
transformation to take place.
03 Super heating the glass to
approximately 700°C before
being rapidly cooled.
04
The toughened glass is now
ready for the next stage of its
manufacturing process.
ENERGY SAVING PROJECT
After toughening a fragmentation test is performed, the glass is smashed
and we count the fragments within a small area. To pass the BSI test we
must have 40 fragments or more. Before our project, we had up to 140
meaning we were massively over-processing. Due to the furnace using a
lot of energy, the equivalent of 600 homes, we began testing and found
that by marginally lowering the heating and cooling time, this greatly
reduced the amount of energy we use. With approximately 80
fragments we also still pass the BSI test with flying colours. This has
resulted in huge amounts of energy being saved, the equivalent of
around 150 homes per year!
Before: 127 fragments
After: 74 fragments
SINGLE USE PLASTICS
Even the little things add up to make a big difference.
We’ve been consciously replacing any single use
plastics across the business with greener alternatives,
such as paper cups for our drinking water machines.
COMPRESSED AIR ENERGY
SAVING PROJECT
At our manufacturing facility many of our
machines and tools are powered by compressed
air. Making this process as efficient as possible
has also saved huge amounts of energy.
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Safestyle UK plc
Strategic Report
Governance
Financials
Safestyle People
Values
Integrity
We are honest, open, ethical and fair. We do the right thing.
Quality
What we do, we do well. Good enough is never enough.
Passion
We are enthusiastic and determined to do our best.
Customer service
We treat our customers as we want to be treated.
We put our customers first.
Simplicity
We focus on the essentials and reduce complexity.
Safety
We do everything safely and responsibly.
Team-working
We are committed to an environment in which
all our people act together with consistency,
respect, trust and compassion.
2020 people review
We entered 2020 with enthusiasm,
energy, and drive. We were rested and
ready to accelerate the work on our
People Agenda, to continue the cultural
transformation journey and ready to
enjoy seeing the impact of our projects.
Yet within a few short weeks we found
ourselves in a very different situation.
With our strategic agenda and long-
term value adding projects on pause, we
turned all our attention towards the
unknown, towards a Global pandemic,
towards the daily challenge to protect
our people and our customers, and
towards the unprecedented hibernation
and then re-start of our business.
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Annual Report & Accounts 2020
Whilst people were increasingly craving
clarity and certainty in a world where
things were anything but clear and
certain, our managers worked hard to
support their teams through everything
from the sudden necessity of remote
working to being placed on furlough to
returning to remote working whilst
family lives were often turned upside
down. Our philosophy has been to
provide support and flexibility where it
has been needed; in return our people
have supported the business with real
stoicism and determination. Because of
this, 2020 was still a productive year for
our People Agenda.
Communication
Despite hibernation and extended
periods of remote working, our
communication has improved in 2020
and although we have not been able to
introduce some of the new initiatives
that we had planned, these will roll
forward into 2021.
The saying “you're on mute” will
epitomise 2020 forever. In Safestyle,
remote working was not part of the way
we went to work before the pandemic
but, true to form our people embraced
the change and developed their use of
technology for effective
communications both during and
outside of the working day. We have
had our fair share of interruptions such
as doorbells ringing, parcels being
delivered, dogs barking, inquisitive
children, upset children – we've even
been entertained by a parrot! It is fair to
say that we have come to know each
other better and that seeing beyond the
'work persona' has often led to closer
team working.
relationships has not been easy for new
recruits and is something that we must
remember as we all start to return to
our offices in 2021.
Investment in people
During 2020 we recruited and on-
boarded 106 new Safestyle employees
and over 500 contractors.
There have also been real challenges
with remote working. Induction and on-
boarding have been particularly difficult
especially for those who have of people
with limited experience of work,
perhaps in their first job. Getting to
know the business and building
In March 2020, just 2 weeks before our
office doors closed, we welcomed Gary
Pickering as our new Commercial
Director. An accomplished sales
professional with a track record of
creating large remote teams and leading
them to deliver transformational
growth, Gary took the opportunity
presented by our hibernation to focus
on developing his commercial plan.
Through internal promotions and
external recruitment, we have now
assembled an exceptionally strong
Commercial Leadership team which
combines outstanding talent from our
existing senior management in Sales and
Canvass with people from leading
industry competitors and other highly
successful businesses. This team will in
turn recruit, develop and retain a world-
class commercial team, and at the heart
of everything they do will be providing
our customers with a sales experience
we are proud of.
Annual Report & Accounts 2020
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Financials
Safestyle People
2020 will have an impact for some time
to come for many people.
We are genuinely very proud of our
people and the way in which we worked
together to learn, to adapt, to
understand, to support, and ultimately
to make the best of a situation that
would have been incomprehensible only
6 months earlier. Our key strengths
have always included positivity,
resilience, and acceptance of change, all
of which stood us in good stead during
2020 and will do so again in 2021 …
albeit hopefully a more normal year!
Learning & development
We are committed to the development
of our people, recognising that our
business will only ever be as successful
as the people who bring our business
alive every day. As we continue to grow,
we will ensure that our colleagues have
the appropriate skills to perform their
roles effectively and efficiently in an
increasingly regulated industry. After
all, our people are a competitive
advantage in our market.
An example of our commitment is our
Leadership Excellence Accreditation
Programme (LEAP) which was launched
in our Sales function during the second
half of 2020. With our first cohort of
managers now graduated we look
forward to welcoming the second group
in early March.
Whilst we were able to launch LEAP,
other face-to-face training was a
challenge to deliver in 2020. To mitigate
this, we made further investment in our
E-Learning Platform with over 8,500
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Annual Report & Accounts 2020
courses completed in the year. All
Safestyle colleagues now have an
individual learning account and we have
added a further 40 bespoke training
modules to our library.
Utilising our Apprenticeship Levy in
2020 we funded training for 29
individuals across the business from
various departments and we are pleased
to report that 4 people completed their
apprenticeships before the close of the
year.
Looking forwards
As we come out of the pandemic in
2021, we will pick up the pace of the
development of our People Agenda. Our
focus will be on the development of
leadership and management skills,
building high performing sales and
installation functions, increasing
engagement, and developing reward
strategies to support delivery in line
with our cultural values. We will also
have a strong focus on the wellbeing of
our people as the stress and strain of
Annual Report & Accounts 2020
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Safestyle UK plc
Strategic Report
Governance
Financials
A day in the life of...
With a huge diversity of roles across the business, here’s a glimpse into a typical
day in the life of some of our unsung heroes working tirelessly behind the scenes.
What is your typical day?
I generally spend the first few
hours reviewing the prior day
sales data, looking at
Most important aspect of your
role or project worked on?
Creating the revenue dashboard
that underpins our daily sales
performance versus target on our
meeting and enables us to quickly
commercial KPIs, such as cost of
see how we are performing
lead generation, rep conversion
against our KPIs, and launching
etc. These KPIs are tracked in our
Tableau data analytics into our
sales dashboards and reviewed at
sales branches to give branch
What is your typical day?
A typical start to the day is
making sure that all critical IT
Most important aspect of your
role or project worked on?
Helping with the creation and
systems are running as expected,
implementation of Polaris was
before moving on to my planned
work for the week. This includes
designing, writing, testing and
implementing new software or
changes to existing systems to
the biggest project worked on to
date. Out-of-hours support,
when required, is important to
help ensure colleagues across the
business can keep the business
the daily sales meeting. I spend a
managers a data-driven view of
ensure the business processes are
running successfully.
lot of time working with the
commercial teams to drive
performance and investigate
issues, using data analysis tools
such as Tableau to take complex
data and turn it into usable
information.
What challenges do you face?
performance.
How do you measure success?
When the analysis I provide is
used to make decisions that
benefit the business.
Most proud moment?
Seeing people who were
as efficient and effective as
possible. This is combined with
resolving any issues that may
How do you measure success?
The size of the helpdesk queue
arise and providing a quick, but
and hitting deadlines, whilst
safe fix that will get the business
retaining customer satisfaction
back up to full speed as quickly as
when colleagues come to us with
possible.
questions or issues.
What challenges do you face?
Most proud moment?
Engaging a broad range of people
previously cautious around data
Balancing the resolution of issues
Finishing my apprenticeship at
to use and understand often
using data analytics to drive
with planned work on tight
quite complex data to drive the
performance.
deadlines.
Safestyle and getting recognition
from the company for my efforts.
right actions.
What is your typical day?
First I deal with urgent queries
from fitters and create the daily
scaffold plan of how many to
people whilst working hard to
achieve the best results. Access
Solutions has developed recently
with the ongoing projects and it's
order. I deal with invoice queries,
great being a part of this!
specials, urgent requests, creating
reports and much more. I also
How do you measure success?
negotiate scaffold prices and as a
Leaving my office daily knowing
Yorkshire lass I drive a hard
bargain! I live up to my name
everything is sorted. If you always
work to the best of your ability
being a busy Bee, which I couldn't
then the day's a success! A bit of
do without my colleagues help!
positive feedback is also nice.
What challenges do you face?
Most proud moment?
I face many challenges, site access
Can I have more than one please?
issues, scheduling problems,
Working my way up to where I
Access Solutions to name a few
am, receiving kind words &
but we always try our best to find
recognition from those in higher
a solution!
Most important aspect of your
role or project worked on?
Most important is enjoying work,
smiling and laughing with good
roles than me, being asked to
answer these questions and of
course getting my photo on as
many Marketing projects as I can.
What is your typical day?
I start work at 7:30am, review
my workload and prepare for a
project meeting which I lead. In
the meantime, I focus on actions
assigned to me from the project
‘Compressed Air Optimisation’
which combined resulted in huge
savings both monetary and in
energy usage. Currently I'm
leading three parallel projects
which are focused on improving
meetings. Trying to close as many
Safety, Quality and Service
actions as I possibly can, and in
through application of lean tools.
some cases, it requires
performing engineering trial on
relevant process. As a project
leader I challenge other project
team members on their actions.
What challenges do you face?
Breaking old-fashioned thinking
and convincing people to think
out of the box.
Nine more projects are on the
way in 2020!
How do you measure success?
Electricity usage data shows we
are using much less energy now
compared to before the two big
projects of 2019. We measure
cell performance and perform
audits in improved areas.
Most important aspect of your
Most proud moment?
role or project worked on?
The two big projects of 2019
were ‘Cool Temper’ and
Recognition for the project
achievements.
Tom Morley
Commercial Finance Manager
Based at Head Office
4 years with Safestyle UK
Adam Jacobs
IT Developer
Based at Manufacturing Facility
4 years with Safestyle UK
Bee Calam
Access Solutions Team Leader
Based at Head Office
5 years at Safestyle UK
Karolina Plonka
Manufacturing Engineer
Based at Manufacturing Facility
1 year at Safestyle UK
What is your typical day?
My role includes visiting all
when they need assistance or
advice. My most important
installation depots to aid in the
project was taking the Manager
daily running and the overall
management of depot
performance. Implementing
Standard Operating Procedures
with a clear goal of getting each
position at Warrington depot and
turning the depot into one of the
best performing depots.
How do you measure success?
depot to run in line with company
I measure success by giving
policies.
What challenges do you face?
On a daily basis my challenges
are organising depots and
ensuring they are providing a
good customers service, this in
smoothly and few issues arise.
myself clear goals; if I then
achieve these goals I would
consider myself successful.
Most proud moment?
My most proud moment was
turning the Warrington depot
to it’s maximum in all aspects.
This achievement is shared with
turn ensures depots are running
around and getting it to perform
Most important aspect of your
everyone involved. The fitters
role or project worked on?
Support the teams around me
and be available for anybody
and the depot staff who without
their support and hard work
would have made it impossible.
What is your typical day?
My day consists of contacting
customers that have any issues
with their orders. This could be
that extra money is required,
orders that are unable to be
installed due to technical issues
and customers that have
requested to cancel their orders.
What challenges do you face?
The main challenge is when
asking for any extras that are
required, mainly things like
scaffolding or building work that
has been requested by the
surveyor. This is made more
difficult as the customers are
unaware of these extras at this
stage, so the first time the
customer is notified of this is
when we call them from head
office to explain.
Most important aspect of your
role or project worked on?
Speaking to customers that have
requested to cancel their order to
see how we can help to keep their
business. Discuss extra amounts
that are required with customers
without losing their business.
How do you measure success?
Success is measured by Managers
running reports which show how
many files have been booked on
for an installation date.
Most proud moment?
I’m most proud at the end of each
day, when I have worked through
all my calls knowing that I have
helped our customers and
resolved any issues to the best of
my abilities.
What is your typical day?
When working in HR, no day is
ever the same. Since taking on
The most important project has to
be the Sales Rep recruitment
process, this was a new way of
the recruitment role alongside my
recruiting for me but with the rest
general HR role I have to be more
of the team, I managed to build a
structured, producing reports for
process successfully bringing in
the exec team. I have regular
meetings with my business
partners to support them with
any projects and HR needs.
What challenges do you face?
Ensuring that I give the best
new reps every week.
How do you measure success?
I believe within HR, people
relationships are top priority, if I
build one new relationship and
service to the business and the
me, I’ve been successful.
areas I work with. The business is
going through lots of change, so I
Most proud moment?
need to manage managers
expectations, understand their
thoughts whilst guiding them in
the right direction.
Smashing the record for number
of reps booked on one week’s
course. We worked so hard to
build the process and improve the
candidate experience. The
Most important aspect of your
positive comments from around
role or project worked on?
the business makes me feel proud.
What is your typical day?
7:30am start my prep for the
9:00am production meeting.
Check the number of reported
missed fits/deliveries and stock
issues, minimising any negative
impact. Oversee recycling's
wrong and how to prevent a
reoccurrence. Keeping fork lift
trucks running as they a critical in
the plants efficiency
Most important aspect of your
role or project worked on?
productivity making sure targets
Making sure the manufacturing
and standards are being met.
Next, it's onto checking in with
purchasing and the stores team
that everything is running
plant has the stock required to
make the frames on time to hit
delivery dates. Maintaining the
legality and service schedules of
and making sure the depots are
receiving feedback. Finally later
in the day I debrief our drivers,
checking the condition of our
potential down time.
How do you measure success?
We use OTIF reports to monitor
wagons, number of hours worked
our progress and as a driver for
and time sheets are completed.
constant improvement.
What challenges do you face?
Understanding unknown stock
outs, investigating what went
Most proud moment?
Watching promoted staff
members grow and surprise me.
employees feel they can approach
smooth. Reviewing depot queries
our HGV fleet to minimise any
Paul Willett
Branch Support Manager
Based Nationwide
9 years with Safestyle UK
Stacey Power
Contract Manager
Based at Head Office
3 years with Safestyle UK
Natalie Hellowell
Human Resources
Based at Head Office
2.5 years with Safestyle UK
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Annual Report & Accounts 2020
Dale Mallison
PCW, Stocks & Transport Manager
Based at Manufacturing Facility
22 years at Safestyle UK
Annual Report & Accounts 2020
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Financials
Together we will get through this...
In true Safestyle fashion, the commitment of our workforce in these turbulent times has been
inspirational. All around the country our colleagues have been going above and beyond to help
and support their local communities. Here’s just a few examples...
KEEPING SPIRITS HIGH!
KEEPING SPIRITS HIGH!
KEEPING SPIRITS HIGH!
CYSTIC FIBROSIS CHARITY BIKE RIDE
CYSTIC FIBROSIS CHARITY BIKE RIDE
CYSTIC FIBROSIS CHARITY BIKE RIDE
LOCAL FOOD BANK
LOCAL FOOD BANK
LOCAL FOOD BANK
VOLUNTEERING
VOLUNTEERING
VOLUNTEERING
Mike Smales, our Canvass
Manager at Hull and his
team of helpers supported
their local community
volunteering at a food
bank during lockdown.
Great work guys, we know
how appreciated it is!
Great community spirit!
ESSENTIAL PPE
ESSENTIAL PPE
ESSENTIAL PPE
DELIVERIES
DELIVERIES
DELIVERIES
Service Engineer Tom Savage
and his wife delivered PPE
and essential supplies to over
200 nursing homes during
lockdown. Just another
example of going above and
beyond to help those in need.
Helping those in need...
FUNDRAISING
FUNDRAISING
FUNDRAISING
Our Middlesbrough Branch
Manager Ray Foster, has been
going through a very tough
time due to this wife having
terminal cancer. Despite this
incredibly upsetting news, Ray
and a group of close friends
decided to take on the Lake
District Mighty Hike for
Macmillan Cancer Support.
Services Manager
Tracey Hindle and
her family kept
people smiling on
their daily walks
around the
neighbourhood!
Keep smiling :)
ROYAL VOLUNTARY
ROYAL VOLUNTARY
ROYAL VOLUNTARY
NHS SERVICE
NHS SERVICE
NHS SERVICE
What an amazing thing to do! Our very
own Lynn Day, Regional Canvass
Manager has been volunteering as an
NHS responder, doing what she can to
help those in
need. Such an
important and
selfless act of
kindness.
Well done
Lynn.
What an amazing achievement
Well done Lynn!
THE GREAT SAFESTYLE BAKE OFF...
THE GREAT SAFESTYLE BAKE OFF...
THE GREAT SAFESTYLE BAKE OFF...
It looks like most of us have turned into Great
British bakers at one point or another this year.
Whether it has been to keep yourselves and the
children busy, celebrate VE day or bake lovely
treats for your neighbours or those in need!
Yummy...
Tasty treats :)
Simon Davis, one of our Branch Canvass Managers, with a
group of friends, embarked on a 700km bike ride for the Cystic
Fibrosis Trust from Land’s End to Chester over a total of 5 days.
The first day, Monday 14th September, took them from Land’s
End to Newquay. Then from Newquay to Exeter, Exeter to
Stonehenge, Stonehenge to Hereford and then to Chester for
the finish. The Cystic Fibrosis Trust is fighting for a brighter
future for people and their families by funding cutting-edge
research, driving up standards of care and supporting people
with the condition and their loved ones every step of the way.
An amazing £5,745 was raised for such a worthy cause,
what a fantastic effort!
A fantastic £5,745. 00 raised...
Day 2 complete!
FRIENDLY FACES
FRIENDLY FACES
FRIENDLY FACES
COMPETITION
COMPETITION
COMPETITION
We wanted to recognise local
lockdown heroes and shine a light on
some of these kind-hearted
individuals. We launched a
nationwide ‘Friendly Faces’
competition to discover some of the
most heartwarming and touching
stories across the UK, no matter how
big or small. Here’s a few
competition winners. From making
sure local communities had food,
dressing up to make people smile,
raising money, dog walking, keeping
people connected with a local
newsletter and much, much more.
WISHING YOU AN EGG-CELLENT EASTER
WISHING YOU AN EGG-CELLENT EASTER
WISHING YOU AN EGG-CELLENT EASTER
We’re proud to see our vans being used
to spread a little joy. Safestyle UK
colleagues have been volunteering with
Business in the Community Charity,
delivering these enormous Easter Eggs
to children’s homes and hospices across
the country. Huge thanks (yes we mean
huge – those eggs weighed 7kgs each) to
Gareth Rodgers and Harninder Nagra
from Birmingham Installations, along
with Andy Kyle from our Transport team.
Head of Transport, Steven Lambert, also
got involved delivering face visors on
behalf of SENSE to several children’s
homes, making sure staff had vital PPE.
KEEPING MOTIVATED
KEEPING MOTIVATED
KEEPING MOTIVATED
It’s good to see everyone
keeping fit and motivating
others during lockdown.
We’ve had loads of photos,
beautiful walks, runners
and bikers! Well done to
those that took part in
fundraising and donating
for our amazing NHS.
That’s a lot of chocolate...
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Annual Report & Accounts 2020
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NHS fundraising
Safestyle UK plc
Governance
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48
50
64
68
Board of Directors
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Independent Auditor’s Report
Safestyle UK plc
Strategic Report
Governance
Financials
Board of Directors
Alan Lovell
Mike Gallacher
Rob Neale
Fiona Goldsmith
Julia Porter
Prior to First Milk, Mike held a number
of senior roles at Mars Inc. including UK
Managing Director for Mars Petcare and
various business leadership roles for
Mars in Asia. His 8 years in Asia gave
him significant experience of putting in
place effective and appropriate systems,
processes and training for fast growing
branded businesses. Mike has been
focused throughout his career on
building growth businesses, establishing
brands, managing lean manufacturing,
leading effective management teams
and delivering financial results.
Prior to Mars, he was a British Army
Officer for eight years, serving as a
Bomb Disposal operator in the UK and
overseas.
Alan Lovell
Non-Executive Chairman
Alan joined the board as Non-Executive
Chairman on 16 July 2018. He has held
numerous listed company directorships,
both executive and, more recently, non-
executive. Alan has been Chairman of
Interserve Group Limited since July
2019 and Senior Independent Director
at SIG plc since July 2018. He was
National Chairman of the Consumer
Council for Water from 2015 to 2019
and a Non-Executive Council Member of
Lloyd's of London from 2007 to 2016.
Alan has a huge breadth of experience,
including both strategic and complex
situations, with a particular focus on
companies undergoing turnaround or
business improvement initiatives.
In his executive career, Alan was Chief
Executive Officer of six companies,
including two in the waste-to-energy
sector and three in the construction
sector, Jarvis plc, Costain Group plc and
Conder Group plc.
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Annual Report & Accounts 2020
In the not-for-profit world, Alan is Chair
of the Governors of the University of
Winchester, Chair of the Mary Rose
Trust and the Hampshire Cultural Trust
and a Trustee of Winchester Cathedral
Trust.
Mike Gallacher
Chief Executive Officer
Mike joined the Board as Chief
Executive Officer on 1 May 2018 and
has over 20 years' commercial and
operational experience of building and
managing businesses in the UK and
internationally. He brings significant
expertise in operational strategy,
business development and performance
improvement. Mike was most recently
CEO of First Milk Limited, the UK major
dairy company owned by British family
farms, where he developed and
implemented a major transformation
that resulted in a £30 million
improvement in business profitability in
24 months.
Rob Neale
Chief Financial Officer
Fiona Goldsmith
Non-Executive Director
Julia Porter
Non-Executive Director
Rob joined the board as Chief Financial
Officer on 16 July 2018. He was
previously Head of Leisure Travel
Finance at Jet2.com and Jet2 Holidays, a
division of AIM-listed Dart Group plc
where he worked since 2013. As Head
of Leisure Travel Finance, Rob was
responsible for providing all aspects of
finance support to both the commercial
and operational areas of the Leisure
Travel business that operates under the
brands of Jet2.com and Jet2holidays.
Rob's early career included roles at
Dyson Limited as well as Commercial
Finance Director for Europe, Africa and
ANZ for ghd, a designer, manufacturer
and supplier of professional hair styling
products. He also served as Finance
Director for Stanley UK, part of the $30
billion NYSE-listed Stanley Black &
Decker Inc. Group. Rob is a fellow of the
Institute of Chartered Accountants of
England and Wales and started his
career at Arthur Andersen.
Fiona joined the Safestyle Board in
September 2018 and she is Senior
Independent Director and Chair of the
Audit Committee. She is also a Non-
Executive Director, Audit Chair and
Employee Representative at the listed
housebuilder MJ Gleeson plc. She was
previously Chair of the Audit Committee
at Walker Greenbank plc (2008 to
2018).
Julia joined the Safestyle Board in
November 2018 and she is Chair of the
Remuneration Committee. Julia is an
experienced marketing leader, advisor,
mentor and board director. Her non-
executive career includes Chair of DMA
(Direct Marketing Association) and
board member of Origin Housing and
Freeview (UK's largest free to air digital
TV platform).
Fiona is a Chartered Accountant who
started her career with KPMG, where
for nine years she focused on the retail
and leisure sectors in various roles, she
then moved to First Choice Holidays plc,
where she became European Finance
Director. Prior to embarking on a
portfolio career, Fiona was CFO of Land
Securities Trillium, the outsourcing
division of Land Securities Group plc.
Julia's consulting roles include strategic
advice for business startups as well as
marketing and CRM/data strategy
consulting and accessible practitioner
led GDPR advice. Her executive
experience includes stints at Guardian
News & Media, Getty Images, ITV and
IPC Magazines. She also holds an MBA
from London Business School.
Annual Report & Accounts 2020
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Financials
Audit Committee Report
During the year the Committee has continued to assist the
Board in fulfilling its oversight responsibilities. The objective of
the Committee is to provide oversight and governance to the
Group's financial reports, its internal controls and processes in
place, its risk management systems and the appointment and
relationship with the external auditor. During the year the
Committee was additionally focused on the impact of the
COVID-19 pandemic on the business in terms of financial
performance, new and emerging risks, business continuity and
resilience.
This report provides details of the role of the Audit Committee
and the work it has undertaken during the year and at its
meeting in March 2021 when this annual report and financial
statements were approved.
Principal duties
in November to review and agree the Audit plan for the year
ahead. At meetings the findings of the external audit are
discussed, and the effectiveness of the Group's system of
internal controls and risk management is reviewed.
The Committee supports the Board in carrying out its
responsibilities in relation to financial reporting, risk
management and assessing internal controls. In September
2020 an internal auditor was appointed to the Group. During
the following 3 months the focus was on the review of revenue
processes and controls and stock. A detailed internal audit
plan for 2021 is under preparation and this will be reviewed
and approved by the Committee. The Committee also manages
the relationship with the external auditor.
The Committee undertook the following activities during the
year:
The principal duties of the Committee are to:
Financial reporting
Ÿ Oversee the integrity of the Group's financial statements
and public announcements relating to financial
performance.
Ÿ Review significant accounting and reporting judgements.
Ÿ Advise on the clarity of disclosure and information
contained in the Annual Report and Accounts.
Ÿ Ensure compliance with applicable accounting standards
and review the consistency of methodology applied.
Ÿ Review the adequacy and effectiveness of the internal
control and risk management systems.
Ÿ Oversee the relationship with the external auditor,
reviewing performance and advising the board on their
appointment and remuneration.
The Committee reviews the half year and annual financial
statements and matters raised by management and the
auditors. The Committee satisfied itself that;
Ÿ The accounting policies used are consistent both year on
year and across the Group (other than as disclosed in note 1
of the financial statements).
Ÿ The methods used to account for significant transactions
are appropriate.
Ÿ The financial statements give a true and fair view and the
disclosures made are balanced and understandable.
Ÿ Appropriate estimates and judgements have been used,
considering the views of the external auditor.
Ÿ Ensure appropriate arrangements are in place for
Ÿ The appropriate accounting standards have been applied.
individuals to raise concerns regarding breach of conduct
and legal and regulatory compliance.
External audit
Committee membership
The Committee comprises two independent Non-Executive
Directors: Julia Porter and myself. The Committee met three
times during the year and had 100% attendance. The Company
Secretary acts as secretary to the Committee. Although not
members of the Audit Committee, the Chief Executive Officer,
Chief Financial Officer and the Chairman of the Board usually
attend meetings by invitation, along with representatives from
the external auditor. Detailed information on the experience,
skills and qualifications of the Committee members can be
found on page 47. The Board is satisfied that the Committee
Chair has recent and relevant financial experience.
Terms of reference
These were adopted by the Board on 11th December 2013 and
are available on the Group website. The terms of reference are
reviewed annually.
Meetings
The Committee meets three times per year; in March and
September being the appropriate time to review the Annual
Report and Accounts and the interim report respectively, and
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Annual Report & Accounts 2020
Following a comprehensive Audit tender process Grant
Thornton UK LLP ('Grant Thornton') were appointed as the
Group and subsidiary companies' auditors at the AGM held on
14th May 2020.
The Committee held discussions with both Grant Thornton and
KPMG to ensure that there was a smooth and detailed
handover of responsibilities.
The Committee considers several areas when reviewing the
external auditor appointment namely their performance in
discharging the audit, the scope of the audit and terms of
engagement, their independence and objectivity and their
appointment and remuneration.
The Committee will review the objectivity and independence
of the auditors when considering reappointment. The external
auditor reports to the Committee on actions taken to comply
with professional and regulatory requirements and is required
to rotate the lead audit partner every five years.
During the year Grant Thornton only provided audit services
with tax compliance work provided by KPMG. To ensure
auditor objectivity and independence, the Committee has
adopted a policy on the engagement of external auditors for
the provision of non-audit services, which include financial
limits above which the Audit Committee must approve. Any
non-audit fees above £10,000 per engagement must be
approved by the Chair of the Audit Committee before the work
commences.
The Committee had discussions with the external auditor on
audit planning, fees, accounting policies, audit findings and
internal controls. The effectiveness of the audit was assessed
through the review of audit plans, reports and conclusions and
through discussions with management and the external
auditor.
The Committee has confirmed it is satisfied with the
independence, objectivity and effectiveness of Grant Thornton.
Risk management
The risks identified and the mitigating actions were reviewed
regularly by the Executive Committee and annually by the
Audit Committee. In managing risk, the Committee analyses
the nature and extent of risks and considers their likelihood
and impact, both on an inherent and a residual basis, after
taking account appropriate mitigation and the Group's
appetite. The Risk Management section on pages 28 to 33 sets
out the key risks that the business may face and how it
mitigates them. The Executive Committee implements the
internal controls and processes to put the Committee's policies
on risk and control into effect and provides assurance on
compliance with these policies and processes.
During much of the year the Executive Committee was
managing the risks associated with the impact of Covid-19.
There was a regular dialogue with the Board and members of
the Audit Committee to ensure that we were kept informed of
all actions designed to mitigate the risk to customers, staff and
the business.
The Compliance Committee is made up of managers from
across the business and is Chaired by an independent director.
This Committee meets monthly and is focussed on managing
Data Compliance risks.
The Group has commenced the process to gain 'Cyber
Essentials' certification. The Audit Committee will be kept
updated on the progress.
Internal controls
The Committee is responsible for reviewing and monitoring the
effectiveness of internal controls and risk management
systems on behalf of the Board. The Group's system of internal
control includes the following processes:
Ÿ Each department has defined procedures and controls to
identify and minimise operational and financial risks. These
procedures include segregation of duties and the regular
monitoring of KPI's.
Ÿ The Board and management meet regularly to monitor the
performance of the business against the KPI's.
In addition, our external auditors, Grant Thornton, report
annually to the Audit committee on their review of the control
environment.
Whistleblowing
The Group's whistleblowing policy was reviewed during the
year. All cases of whistleblowing are appropriately
investigated.
Significant issues considered during the financial year
Within its terms of reference, the Committee monitors the
integrity of the annual and interim reports, including a review
of the significant financial reporting issues and judgements
contained in them. At its meetings in September 2020 and
March 2021, the Committee reviewed the Group's results and
other information provided by the Chief Financial Officer to
support the Directors' going concern statements.
The Committee also considered a paper prepared by the
external auditor, which included significant reporting and
accounting matters.
The Committee considered the appropriateness of the
following areas of significant judgement, complexity or
estimation in the financial statements.
Going concern
The Audit Committee, and the Board, reviewed the financial
information prepared by management to support the fact that
it is appropriate to adopt the going concern basis of
preparation for the Group. This included financial forecasts
which reflected current trading and anticipated performance
for the period to the end of financial year 2022. These
forecasts were then sensitised to reflect reasonable possible
adverse effects which could arise. The Group's covenants were
then assessed against these downside sensitivities. The
Committee also considered mitigating actions proposed by
management including proposed reductions in discretionary
spend.
The Board and the Audit Committee have also considered the
ongoing possible impact of the COVID-19 restrictions on the
Group's trading and cashflow forecasts. When the Audit
Committee considered the potential impact of Covid-19 at the
start of the pandemic it was difficult to predict the overall
impact it could have on the business. This year the business has
significantly more clarity as to the potential impact and this
along with the improving operating context and the outcome of
the scenarios modelled, underpin the Director's conclusion
that the risk of the liquidity requirements exceeding the total
quantum of facilities available is now deemed remote. Detail
of the scenarios considered is set out in note 1 to the financial
statements.
The Audit Committee considered the basis of preparation of
the accounts and concluded that it is appropriate to prepare
the accounts on a going concern basis.
Valuation of Goodwill and Intangibles
Management undertook an impairment review of the goodwill
and intangible balances. As this involved judgement of the
future cashflows and the appropriateness of the discount rate
used it was considered by the Audit Committee. Sensitivities
were applied to the key assumptions in the impairment model
and these demonstrated that the recoverable amount exceeds
the carrying value of Goodwill and Intangibles in all reasonably
possible scenarios.
Fiona Goldsmith
Chair of the Audit Committee
24 March 2021
Annual Report & Accounts 2020
49
Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Remuneration Report
Statement from the Chair of the Remuneration Committee
Dear Shareholder
New policy
Ÿ
I am pleased to present the Directors'
Remuneration Report for the financial
year 2020, which comprises three
sections:
Ÿ This annual statement;
Ÿ The Directors' Remuneration Policy
(Policy); and
Ÿ The Annual Report on
Remuneration, which provides
details of the amounts earned in
respect of the financial year 2020
and remuneration for the financial
year 2021.
As an AIM company, Safestyle is not
subject to the remuneration reporting
regulations of fully listed UK companies,
and therefore provides these
remuneration disclosures on a voluntary
basis. The Remuneration Committee
has taken account of the remuneration
reporting regulations in the preparation
of the Directors' Remuneration Report
as a matter of best practice.
Similar to previous years, the Directors'
Remuneration Report is subject to an
advisory vote at the May 2021 AGM.
The Committee believes the advisory
vote provides a greater degree of
accountability and provides
shareholders with a say on executive
pay. We recognise that this is an
important area of corporate governance
attracting increasing media and societal
focus.
Our current Policy was approved by
shareholders at the May 2018 AGM, as
part of an advisory vote on the 2017
Directors' Remuneration Report, and is
reaching the end of its three-year term.
A new Policy will therefore be subject to
shareholder approval at the 2021 AGM,
as part of an advisory vote on the 2020
Directors' Remuneration Report.
The Committee considers that the
current Policy remains broadly fit for
purpose. Following consultation with
our major shareholders, three key
changes are proposed in order to better
support good governance. These are as
follows:
Ÿ Pension: The policy states that
Executive Directors are entitled to
receive a pension contribution of up
to 12% of salary. Under the new
Policy, we are reflecting the current
pension arrangements where
executives are entitled to receive a
pension contribution (or cash
allowance) of up to the level available
to the executive team (currently 8%
of salary).
Ÿ Recovery provisions: The malus and
clawback provisions contained
within the Safestyle UK plc 2017
Performance Share Plan have been
formally included within the Policy.
The malus and clawback provisions
apply to (i) a material misstatement
of the audited financial results; (ii) an
error in assessing a performance
condition; (iii) a material failure of
risk management; (iv) serious
reputational damage to the
Company; and (v) serious misconduct
on the part of the participant.
Shareholding guidelines: In order to
further align the Executive Directors'
long-term interests with those of
shareholders, share ownership
guidelines have been introduced that
include the expectation that the
Executive Directors build up and
maintain a shareholding in the
Company equivalent in value to
200% of salary.
Review of the 2020 financial year
As detailed in the Chief Executive
Officer's statement and Financial
Review, after a promising trading
performance at the start to the year, the
business ceased all operations in late
March 2020 in line with Government
guidance with activities resuming in late
May as COVID-19 lockdown restrictions
were eased. The Group recorded a loss
of c.£6m across the 3 months impacted
by lockdown.
The second half of the year saw strong
order intake performance which was
then followed by actions to increase
installation capacity to match this
performance. Year on year revenues
steadily increased in the second half of
the year with Q4 revenue over 20%
higher than the prior year. Alongside
this revenue growth, the Group
increased the size of its order book by
over 80% compared to the 2019 closing
position.
As part of the Group's response to the
challenges faced, the Chief Executive
Officer and Non-Executive Directors
reduced their salary and fees by 50%
during the period from when lockdown
started to the recommencement of
business in late May. The Board
remained fully active during this period.
After the recommencement of
operations in May the Committee
reviewed the 2020 annual bonus
structure for the Executive Directors
and wider workforce. For Executive
Directors, the Committee replaced the
original annual bonus scheme with a
structure focused on H2 performance, in
order to incentivise a rapid restart of the
business, the achievement of profit in
H2, and the build-up of a strong order
book and sustainable future.
The maximum opportunity under the
original bonus scheme was 100% of
salary (up to 70% based on PBT
performance and up to 30% based on
strategic and personal objectives). The
PBT element of the revised scheme was
based on performance for H2 where
35% of salary could be earned for
achievement of the H2 PBT target
(£0.93m) which was consistent with the
H2 element of the maximum PBT target
under the original annual bonus scheme.
In order to incentivise a rapid recovery, a
stretch target was introduced up to
52.5% of salary which could be earned
based on stretching H2 PBT
performance (£2.03m). The strategic
and personal objectives remained in
place with targets unchanged.
In total therefore, the maximum
opportunity under the revised structure
was reduced to 82.5% of salary (up to
52.5% based on H2 PBT performance
and up to 30% based on strategic and
personal objectives).
Mike Gallacher and Rob Neale earned a
bonus equal to 21% and 20%
respectively (against a maximum
opportunity of 30%) based on
performance against strategic and
personal objectives, which were focused
on key metrics to deliver the 2020 plan.
See page 59 for further details.
The Group achieved H2 PBT of £2.33m
resulting in an outcome of 52.5% of
salary for the PBT element of the
scheme for the Executive Directors.
Ÿ Mike Gallacher and Rob Neale
therefore earned a bonus equal to
73.5% and 72.5% of salary
respectively. Bonus outcomes in
2020 for the eligible wider
workforce ranged between 48% to
85% of the maximum opportunity.
The Committee carefully considered the
bonus outcome and considered it to be
appropriate taking into account
underlying business performance and
the experience of stakeholders during
the year. In particular, the following
factors and achievements were taken
into account:
Ÿ The business was closed for 2
months between March and May.
Through a programme of careful
planning in terms of operations,
including supporting home working
with technology and equipment
upgrading, and health & safety, we
were able to fully re-open the
business by the end of May. This
meant that the Group avoided any
COVID-19 related redundancies and
minimised the period of time for
which staff were furloughed.
Ÿ Given the high levels of uncertainty
in March, and mindful of protecting
the financial future of the business,
the Executives acted rapidly in April
to secure its financial stability.
Measures included a share placing,
an extension of financing
arrangements to October 2023 and
covenant targets also reduced to
underpin available liquidity.
Ÿ Upon restarting operations, the
Group's order book was significantly
increased during H2 (83% higher vs
2019 closing position) and key
supply contracts have been renewed
to ensure cost certainty, supporting a
strong start to 2021.
Ÿ As a result of sustained sales and
marketing activity, market share has
increased from 8.4% to 9.2% over
the course of the year whilst key
competitors continue to face
difficulties.
Ÿ The Group has achieved a strong
commercial performance following
the first lockdown with share price
increasing from a low of 14.5p to
39.7p at 31 December 2020.
Performance share plan awards were
granted to Mike Gallacher and Rob
Neale in 2018. Vesting of the awards
were subject to EPS targets over the
three-year performance period to the
end of the financial year 2020. The
threshold EPS target was not met and
the awards lapsed in full. See page 59
for further details.
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Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Remuneration Report
Statement from the Chair of the Remuneration Committee
Share awards granted in respect of the
2020 financial year
compared to the normal award level
under the Remuneration Policy (100% of
salary).
Performance share plan awards
Given the uncertain outlook presented
by the COVID-19 pandemic and in line
with guidance published by the
Investment Association, the Committee
chose to defer the grant of the 2020
performance share plan awards.
Following careful consideration of
quantum, performance metrics and
targets, and consultation with our major
shareholders, the 2020 awards were
subsequently granted on 23 February
2021.
When determining quantum, the
Committee was sensitive to the need to
balance incentivising executive
performance at a time when our
management teams are being asked to
demonstrate significant leadership and
resilience, whilst ensuring that the
executive experience is commensurate
with that of shareholders, employees
and other stakeholders. With these
factors in mind, the maximum
opportunity at grant was set at 45% of
salary for both Executive Directors,
representing a 55% of salary reduction
52
Annual Report & Accounts 2020
The Committee has been mindful of the
requirement to ensure that windfall
gains do not arise to the extent that the
awards vest. The Committee considers
that the reduction in quantum of 55% of
salary provides sufficient protection
against this eventuality.
Vesting is subject to the achievement of
EPS performance (as regards 75% of the
award) and absolute Total Shareholder
Return (TSR) performance (as regards
25% of the award), thereby incentivising
executives to deliver longer term
earnings and share price growth
performance. The vesting date is 23
February 2024 - three years after the
date of grant. See page 60 for further
details.
Restricted share awards
The Committee strongly believes that
the Executives Directors and the senior
management team have performed
exceptionally well and, in particular,
were instrumental in rescuing the
business from potential collapse in
2018. Since then, they have driven the
significant progress made in the
turnaround of the business. Despite
their best efforts, the 2018 performance
share plan awards have lapsed.
Therefore, in order to recognise the
performance of the Executive Directors
and the senior team and to continue to
motivate them to deliver long term
growth, the Committee considered it
appropriate to grant them restricted
share awards. On 21 October 2020,
Mike Gallacher and Rob Neale were
granted restricted share awards equal to
56% and 42% of salary respectively as
part of these awards.
These awards vest on 18 June 2021
subject to continued employment (being
the point at which the 2018
performance share plan awards would
have been capable of vesting) and are
subject to a one year post-vesting
holding period. The Executive Directors
will retain all shares following the post-
vesting holding period (after selling
sufficient shares to cover tax liabilities
arising on exercise) in order to build up
their shareholdings.
The Committee has been mindful of the
requirement to ensure that windfall
gains do not arise to the extent that the
awards vest. The Committee considers
that there is sufficient protection
against windfall gains given the award
levels and that the awards are capable of
vesting on 18 June 2021.
Outlook for the 2021 financial year
Salary / fees
Mike Gallacher received an exceptional
increase in his base salary from
£275,000 to £300,000 (9%) which was
effective from 1 January 2021. This is
his first salary increase since he joined
the Company almost three years ago
and is the result of his contribution to
the business since he joined and
consideration of wider benchmarks.
Rob Neale has also received an increase
in his base salary to £220,000 which was
also effective from 1 January 2021 and
is part of a phased set of salary increases
across a two year period which ends in
2021. This pay structure was also a
result of benchmarking and linked to his
significant development in role, the
additional management responsibilities
assumed and overall contribution to the
business since he joined. The increases
at each stage are subject to a personal
performance achievement assessment
which the Remuneration Committee are
satisfied has been achieved.
Alan Lovell, Non-Executive Chairman,
and both Non-Executive Directors
waived a general cost of living increase
to their base fees for 2021.
Annual bonus
There will be a bonus for 2021 which
will be based on delivering against
stretching PBT targets (as regards 70%
of the award) and a range of strategic
and personal objectives (as regards the
remaining 30% of the award). See page
63 for further details.
Performance share plan awards
Performance share plan awards in
respect of 2021 are expected to be
made at the normal levels permitted
under the Policy (i.e. up to 100% of
salary). Awards will be subject to
performance targets based on the
Company's EPS and TSR performance
for the financial year 2023. The
weighting of the performance measures
and targets will be disclosed in the 2021
Annual Report on Remuneration.
Summary
The Committee aims to provide clear
and transparent reporting on executive
pay and performance at Safestyle, taking
into account best practice amongst
larger AIM listed companies. I look
forward to receiving your support at our
May 2021 AGM, where I will be
available to respond to any questions
shareholders may have on this
Directors' Remuneration Report or in
relation to any of the Committee's
activities.
Julia Porter
Chair of the Remuneration Committee
24 March 2021
Annual Report & Accounts 2020
53
Safestyle UK plc
Strategic Report
Governance
Financials
Component
Purpose and
link to strategy
Operation
Maximum
opportunity
Performance
measures
Directors’ Remuneration Policy
This part of the report sets out the Company's Directors' Remuneration Policy.
The Policy is determined by the Committee.
Executive Directors
Component
Purpose and
link to strategy
Operation
Maximum opportunity
Salaries are usually
reviewed annually.
Base salary
Fixed remuneration
to provide a
competitive base
salary for the
market in which the
Company operates
to attract and
retain Executive
Directors of a
suitable calibre.
No overall maximum has
been set under the policy.
However, salaries are
determined taking into
consideration a range of
factors, which may include:
Ÿ Underlying Company
performance
Ÿ Role, experience and
individual performance
Ÿ Competitive salary levels
and market forces
Ÿ Pay and conditions
elsewhere in the
Company
Performance
measures
n/a
Set at a level which the
Committee deems
appropriate.
n/a
Other
benefits
To provide a market
competitive
benefits package as
part of total
remuneration.
Executive Directors
receive benefits in line
with market practice.
These include:
Ÿ
Ÿ
Ÿ
Ÿ
Ÿ
life assurance;
private medical
insurance (including
family cover);
company car or car
allowance;
private fuel; and
SAYE.
Other benefits may be
provided based on
individual circumstances.
Retirement
benefits
To provide an
appropriate level of
retirement benefit
(or cash allowance
equivalent).
Executive Directors are
eligible to participate in
the Group defined
contribution pension
plan or an approved
personal pension (or
receive a cash allowance
equivalent).
n/a
The maximum employer
pension contribution (or
cash allowance equivalent) is
aligned with the level
available to the majority of
the wider workforce
(currently 8% of base salary).
Targets are set
annually reflecting the
Company's strategy
and aligned with key
financial, strategic
and/or individual
targets. Stretching
targets are required
for maximum pay-out.
At least 50% of
vesting will be subject
to achievement of
financial objectives.
This will generally
include a profitability
measure. The balance
will be based on the
delivery of key
strategic corporate
and personal
objectives.
Relevant performance
measures are set that
reflect underlying
business performance.
Performance
measures and their
weighting where
there is more than one
measure are reviewed
annually to maintain
appropriateness and
relevance.
Maximum bonus
opportunity is 100% of
annual base salary.
Executive Directors
may receive an award,
in respect of any year,
over shares worth up
to a maximum of 100%
of base salary under
either the PSP or the
ESOP (or a
combination of both
the PSP and ESOP).
In exceptional
circumstances such as
recruitment, a
maximum award of up
to 200% of salary may
apply under either the
PSP or the ESOP (or a
combination of both
the PSP and ESOP).
Annual
bonus
To incentivise
Executive
Directors to
deliver against
short and
medium term
objectives of the
Company.
Long term
incentive
To drive and
reward the
achievement of
longer-term
objectives,
support
retention and
promote share
ownership for
Executive
Directors.
Performance
share plan
(“PSP”)
Executive
Share
Option Plan
(“ESOP”)
Awards are based on annual
performance.
Pay-out levels are determined
by the Committee after the
year end based on
performance against targets.
The Committee has discretion
to amend the pay-out should
any formulaic output not
reflect the Committee's
assessment of overall business
performance.
Annual bonus awards may be
subject to malus provisions at
the discretion of the
Committee. Further details
are set out on page 56.
Long term incentive awards
may be granted under either
the 2017 Performance Share
Plan (“PSP”) or the Executive
Share Option Plan (“ESOP”).
The vesting of awards will
normally be subject to the
achievement of specified
performance conditions,
normally over a period of at
least three years.
Dividend equivalents may be
earned on vested awards.
Long-term incentive awards
may be subject to malus
provisions at the discretion of
the Committee. Further
details are set out on page 56.
Under the PSP, awards will
be in the form of nil-cost
share options, conditional
shares or other such form as
has the same economic
effect.
Under the ESOP, awards of
share options may be
granted with an exercise
price equal to the market
value of the shares at the
date of grant.
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Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Remuneration Policy
This part of the report sets out the Company's Directors' Remuneration Policy.
The Policy is determined by the Committee.
Non-Executive Directors
Component
Purpose and link to strategy
Operation
Annual fees
Sole element of Non-Executive
Director remuneration, set at a level
that reflects market conditions and is
sufficient to attract individuals with
appropriate knowledge and
experience.
Fees are normally reviewed annually. Fees paid to Non-
Executive Directors for their services are approved by the
Board. Fees may include a basic fee and additional fees for
further responsibilities (for example, chairmanship of board
committees). Non-Executive Directors do not participate in the
ESOP, PSP or annual bonus scheme nor do they receive any
pension contributions. Non-Executive Directors may be eligible
to receive benefits such as the use of secretarial support, travel
costs or other benefits that may be appropriate.
employees. There is no consultation with employees regarding Directors' remuneration.
Approach to recruitment remuneration
The policy aims to facilitate the appointment of individuals of sufficient calibre to lead the business and execute the strategy
effectively for the benefit of shareholders. When appointing a new Director, the Committee seeks to ensure that arrangements are
in the best interests of the Company and not to pay more than is appropriate.
The Committee will take into consideration a number of relevant factors, which may include the calibre of the individual, the
candidate's existing remuneration package, and the specific circumstances of the individual including the jurisdiction from which
the candidate was recruited.
The Committee will typically seek to align the remuneration package with the Company's remuneration policy (as set out in the
policy table).
The Committee retains discretion to include other remuneration components or awards which are outside the specific terms of the
policy to facilitate the hiring of candidates of an appropriate calibre, where the Committee believes there is a need to do so in the
best interests of the Company.
In some circumstances, the Committee may make payments or awards to recognise or “buy-out” remuneration arrangements
forfeited on leaving a previous employer. The Committee will normally aim to do so broadly on a like-for-like basis taking into
account a number of relevant factors regarding the forfeited arrangements which may include the form of award, any performance
conditions attached to the awards and the time at which they would have vested.
Fees payable to a newly-appointed Non-Executive Director will be set at a level commensurate with their experience and
responsibilities, with consideration of the fee policy in place at the time of appointment.
Application of malus and clawback
Service contracts
Malus and clawback apply to annual bonus and long term incentive awards as follows:
All of the Executive Directors have service contracts with the Company. The notice period of all Executive Directors' service
contracts is kept under review by the Committee.
Annual fees
To such time as payment is made
Up to two years following payment
Details of the Directors' service contracts, notice periods and, where applicable, expiry dates, are set out below:
Purpose and link to strategy
Operation
All Non-Executive Directors have fixed-term agreements with the Company.
Long term incentive awards
To such time as the award vests
Up to two years following vesting
Malus and clawback may apply in the following circumstances:
Ÿ
Ÿ
Ÿ
Ÿ
Ÿ
a material misstatement of the audited financial results;
an error in assessing a performance condition applicable to the award or in the information or assumptions on which the award
was granted or vests;
a material failure of risk management;
serious reputational damage to the Company; or
serious misconduct.
Name
M Gallacher
R Neale
A C Lovell
F C Goldsmith
J Porter
Payments for loss of office
Commencement
Expiry
Notice period
1 May 2018
16 July 2018
16 July 2018
N/A
N/A
15 July 2021
17 September 2018
16 September 2021
5 November 2018
4 November 2021
12 months
12 months
3 months
3 months
3 months
Explanation of performance measures chosen
The principles on which the determination of payments for loss of office will be approached are set out below:
Performance measures are selected that are aligned with the performance of the Company and the interests of shareholders.
Stretching performance targets are set each year for the annual bonus and for long term incentive awards. When setting these
performance targets, the Committee will take into account a number of different reference points, which may include the
Company's business plans and strategy and the economic environment. Full vesting will only occur for what the Committee
considers to be stretching performance.
The annual bonus is predominantly based on PBT as this is the primary financial measure of the business. PSP awards are typically
based on EPS and TSR performance. The Committee considers EPS to be the key external measure of financial performance over
the longer term. TSR provides alignment with shareholder interests.
Shareholding guidelines
In order to further align the Executive Directors' long term interests with those of shareholders, share ownership guidelines have
been introduced that expects the Executive Directors to build up and maintain a shareholding in the Company equivalent in value
to 200% of salary. Until the level of shareholding has been reached, Executive Directors are expected to retain at least 50% of
shares exercised under PSP awards (after selling sufficient shares to cover tax liabilities arising on exercise).
Policy for the remuneration of employees more generally
Remuneration arrangements throughout the Company are heavily performance driven. The Committee considers the general
basic salary increase, remuneration arrangements and employment conditions for the broader employee population when
determining remuneration policy for the Executive Directors. The Company operates an SAYE scheme which is open to all
Policy
Payment in lieu of notice
Base salary and the value of contractual benefits for the duration of the notice period.
Annual bonus
At the discretion of the Committee dependent upon the circumstances of departure and
contribution to the business during the bonus period.
Long term incentives
The extent to which any unvested award will vest will be determined in accordance with the
rules of the ESOP or PSP. Unvested awards will normally lapse on cessation of employment,
other than when the individual is considered to be a “good leaver”.
Other payments
In appropriate circumstances, payments may also be made in respect of accrued holiday,
outplacement legal fees and under the terms of the SAYE plan.
Statement of consideration of shareholder views
The Committee considers shareholder feedback received on remuneration matters, including issues arising in relation to the AGM,
as well as any additional comments received during any other meetings with shareholders. The Committee engages directly with
major shareholders and their representative bodies where it considers there to be material changes to the executive remuneration
framework.
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Strategic Report
Governance
Financials
Directors’ Remuneration Report
Annual Report on Remuneration
2020 Remuneration
The table below details the elements of remuneration received by each Director for the financial year 2020, and the total
remuneration received by each Director for that financial year and also for the financial year 2019.
Salary¹
and fees
Benefits²
Annual
bonus
Long term
incentives
Pension³
£000
£000
£000
£000
£000
Total
remuneration
2020
£000
Total
remuneration
4
2019 1
£000
Executive Directors
M Gallacher
R Neale
Total
Non-Executive Directors
A C Lovell
F Goldsmith
J Porter
Total
257
197
454
110
50
50
210
20
14
34
-
-
-
-
202
148
350
-
-
-
-
-
-
-
-
-
-
-
37
16
53
-
-
-
-
516
375
891
110
50
50
210
401
256
657
120
47
44
211
¹Salary and fees are stated after the 50% salary and fee reductions taken by the Chief Executive Officer and Non-Executive Directors
for the period 1 April to 15 May as part of the Group's COVID-19 measures.
²Benefits include car allowance, private fuel and private medical insurance.
³Pension for Mike Gallacher includes payment for pension entitlement deferred in 2018 and 2019.
4
Mike Gallacher and Rob Neale earned bonuses of £82,500 and £52,500 in respect of 2019 based on performance against personal
objectives. The bonus payments were deferred as part of the Group's COVID-19 measures. The bonuses have now been paid and
the total remuneration for 2019 has been restated.
Individual elements of remuneration
Base salary
The annualised salaries for 2020 and 2019 are as set out below.
2020 base salary 1
July 2020
£000
2020 base salary 1
January 2020
£000
2019 base salary
£000
% increase in
salary between
2019 and 2020
Annual bonus
After the recommencement of operations in May the Committee reviewed the 2020 annual bonus structure for the Executive
Directors and wider workforce. For Executive Directors, the Committee replaced the original annual bonus scheme with a
structure focused on H2 performance, in order to incentivise a rapid restart of the business, the achievement of profit in H2, and
the build-up of a strong order book and sustainable future.
The maximum opportunity under the original bonus scheme was 100% of salary (up to 70% based on PBT performance and up to
30% based on strategic and personal objectives). The PBT element of the revised scheme was based on performance for H2
where 35% could be earned for achievement of the H2 PBT target (£0.93m) which was consistent with the H2 element of the
maximum PBT target under the original annual bonus scheme. In order to incentivise a rapid recovery, a stretch target was
introduced up to 52.5% which could be earned based on stretching H2 PBT performance (£2.03m). The strategic and personal
objectives remained in place with targets unchanged.
In total, the maximum opportunity under the revised structure was reduced to 82.5% of salary (up to 52.5% based on H2 PBT
performance and up to 30% based on strategic and personal objectives).
The Group achieved H2 PBT of £2.33m resulting in an outcome of 52.5% of salary for the Executive Directors.
For the purposes of the annual bonus, PBT is stated after the costs of the bonus (i.e. is self-financing), before all non-underlying
items as defined in the Financial Review and is also adjusted to exclude costs of investment in growth of the order book.
The strategic and personal objectives were tailored to each executive and focused on key performance metrics to deliver the
2020 plan.
Director
Performance metrics
Bonus opportunity
(% of salary)
Performance
achieved (% of salary)
M Gallacher
Performance metrics related to operational targets
and strategic milestones, including establishing and
maintaining COVID safe practices, improvements in
Digital Marketing, brand development, targeted cost
improvements, effectiveness of the Executive Team,
compliance, depot and branch development and
customer fit quality.
30%
R Neale
Performance metrics related to operational and
strategic milestones, including margin development,
financial controls, internal audit, funding and our
financial strategy / roadmap.
21%
20%
Mike Gallacher and Rob Neale therefore earned a bonus equal to 73.5% and 72.5% of salary respectively. The Committee carefully
considered the bonus outcome and considered it to be appropriate taking into account underlying business performance and the
experience of stakeholders during the year (see page 51 for further details).
Share awards
Awards vesting in respect of the financial year
Performance share plan awards equivalent to 160% of salary were granted to Mike Gallacher on 18 June 2018 following his
appointment as Chief Executive Officer. Performance share plan awards equivalent to 120% of salary were granted to Rob Neale
on 15 August 2018 following his appointment as Chief Financial Officer. Vesting of the awards were subject to EPS targets over
the three-year performance period to the end of the financial year 2020. The threshold EPS target was not met and the awards
lapsed in full.
M Gallacher
R Neale
275
205
275
190
275
175
0%
13%
Adjusted underlying EPS for
the financial year 2020
Percentage of award vesting¹
As disclosed in the 2019 Directors' Remuneration Report, Rob Neale received a 9% increase in his salary effective from 1 January
2020. This was further increased on 1 July 2020 as part of a phased set of salary increases across a two-year period which ends with
a final increase on 1 July 2021. The Committee was satisfied that the increases were entirely appropriate following consideration of
wider market benchmarks, his significant development in role, additional management responsibilities assumed and his overall
contribution to the business since he joined the Group. At each stage, the increase is subject to a personal performance review.
9.66p
5.80p
100%
25%
¹
Straight-line vesting between threshold and maximum.
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Awards granted in respect of the financial year
Performance share plan awards
Given the uncertain outlook presented by the COVID-19 pandemic and in line with guidance published by the Investment
Association, the Committee chose to defer the grant of the 2020 performance share plan awards. Following careful
consideration of quantum, performance metrics and targets, and consultation with our major shareholders, the 2020
awards were subsequently granted on 23 February 2021.
When determining quantum, the Committee was sensitive to the need to balance incentivising executive performance at a
time our management teams are being asked to demonstrate significant leadership and resilience, whilst ensuring that the
executive experience is commensurate with that of shareholders, employees and other stakeholders. With these factors in
mind, the maximum opportunity at grant was set at 45% of salary for both executives, representing a 55% of salary
reduction compared to the normal award level under the Remuneration Policy (100% of salary).
The Committee has been mindful of the requirement to ensure that windfall gains do not arise to the extent that the
awards vest. The Committee considers that the reduction in quantum of 55% of salary provides sufficient protection
against this eventuality.
Executive
Director
Type of award
Date of grant
Percentage
of salary
Number of
shares
Exercise
price
Performance period
M Gallacher
Nil cost option
23 February 2021
45%
275,000
£nil
R Neale
Nil cost option
23 February 2021
45%
205,000
£nil
The beginning of the
financial year 2020
to the end of
financial year 2022
The beginning of the
financial year 2020
to the end of
financial year 2022
Vesting is subject to the achievement of EPS performance (as regards 75% of the award) and absolute TSR performance
(as regards 25% of the award), thereby incentivising executives to deliver longer term earnings and share price growth.
The vesting date is 23 February 2024 – three years after the date of grant.
The EPS and TSR targets for the financial year 2022 are set out below.
EPS for the financial
year 2022
Percentage of EPS
element vesting¹
6.23p or more
5.74p
5.25p
4.75p
Less than 4.75p
100%
75%
50%
25%
0%
¹Straight line vesting between points.
Absolute TSR for the
financial year 2022
Percentage of TSR
element vesting¹
90p or more
75p
60p
Less than 60p
100%
50%
25%
0%
¹Straight line vesting between points.
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Restricted share awards
The Committee strongly believes that the executives have performed exceptionally well over the last few years, making significant
progress towards the turnaround of the business. Despite best efforts, the 2018 performance share plan awards have lapsed.
Therefore, in order to recognise the performance of the executives and continue to motivate them to deliver long term growth, the
Committee considered it appropriate to grant restricted share awards to the executives. On 21 October 2020, Mike Gallacher and
Rob Neale were granted restricted share awards equal to 56% and 42% of salary respectively.
The awards vest on 18 June 2021 subject to continued employment (being the point at which the 2018 performance share plan
awards would have been capable of vesting) and are subject to a one year post-vesting holding period. The Executive Directors will
retain all shares following the post-vesting holding period (after selling sufficient shares to cover tax liabilities arising on exercise)
in order to build up their shareholdings.
The Committee has been mindful of the requirement to ensure that windfall gains do not arise to the extent that the awards vest.
The Committee considers that there is sufficient protection against windfall gains given the award levels and that the awards are
capable of vesting on 18 June 2021.
Executive
Director
Date of grant
Percentage of
salary
Number of
shares
Exercise price
Vesting date
Holding period
M Gallacher
21 October 2020
56%
550,000
Nil
18 June 2021
R Neale
21 October 2020
42%
262,500
Nil
18 June 2021
18 June 2021 to
18 June 2022
18 June 2021 to
18 June 2022
Payments made to former Directors during the year and payments for loss of office during the year
No payments to former Directors or payments for loss of office were made during the year.
Statement of Directors' shareholding and share interests
Executive Directors
M Gallacher¹
R Neale
Non-Executive Directors
A C Lovell
F Goldsmith
J Porter²
Year end 2020
Number
Year end 2019
Number
200,000
325,000
450,000
50,000
28,671
50,000
50,000
130,000
20,000
9,671
¹Mike Gallacher increased his shareholding by 120,240 shares on 10 February 2021, taking his total interest to 320,240 shares.
²Julia Porter increased her shareholding by 10,000 shares on 11 February 2021, taking her total interest to 38,671 shares.
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The interests of each individual, who served as a Director of the Group during the year, as at the end of financial year 2020 in the
Group's share schemes were as follows:
Director
Award
Options
held at
beginning
of year
Options
granted
in the
year
733,333
200,000
-
-
Date of
grant
18 June
2018
27 June
2019
Performance
share award
Performance
share award
Restricted
share award
21 October
2020
Performance
share award
23 February
2021²
Performance
share award
Performance
share award
13 August
2018
27 June
2019
Restricted
share award
21 October
2020
Performance
share award
23 February
2021²
-
-
550,000
275,000
350,000
127,273
-
-
-
-
262,500
205,000
Options
exercised
in the year
Options
lapsed in
the year
Options
held at end
of year
Status
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
733,333
Unvested¹
200,000
Unvested
550,000
Unvested
275,000
Unvested
350,000
Unvested¹
127,273
Unvested
262,500
Unvested
205,000
Unvested
250,000
125,000
vested
M Gallacher
R Neale
A C Lovell
Individual share
agreement
20 December
2018
250,000
-
¹The performance share plan awards granted on 18 June 2018 lapsed in full following the financial year 2020 as the threshold
EPS performance target was not achieved.
²Performance share plan awards granted on 23 February 2021 were awarded in respect of the financial year 2020. As such, the
awards have been included in the table for completeness.
Implementation of Directors' Remuneration Policy for the financial year 2021
Information on how the Group intends to implement the Policy for the financial year 2021 is set out below.
Salary / fees
Mike Gallacher received an exceptional increase in his base salary from £275,000 to £300,000 (9%), which is effective from 1
January 2021. This is his first salary increase since he joined the company almost three years ago and is the result of his
contribution to the business since he joined and consideration of wider benchmarks.
Rob Neale received an increase in his base salary to £220,000 which is also effective from 1 January 2021. He will then receive an
increase in his base salary to £235,000, effective from 1 July 2021, as the final element of the aforementioned salary review.
Alan Lovell, non-executive chairman, and both non-executive directors waived a general cost of living increase to their base fees for
2021.
Annual bonus
Executives will be awarded an annual bonus opportunity of up to 100% of salary, based on delivering against stretching PBT targets
(as regards 70% of the award) and a range of strategic and personal objectives (as regards the remaining 30% of the award). This
provides a balanced scorecard approach to measuring and rewarding management performance during the year. PBT will be
measured before share based payments and non-underlying items.
The strategic and personal objectives will be tailored to each executive and will focus around key performance metrics to deliver
the 2021 plan. The PBT targets and strategic and personal objectives will be disclosed in the 2021 Annual Report on
Remuneration, where further detail of performance against the targets and objectives will also be provided.
Performance share plan awards
Performance share plan awards in respect of 2021 are expected to be made at the normal levels permitted under the Policy (i.e. up
to 100% of salary). Awards will be subject to performance targets based on the Company's EPS and TSR performance for the
financial year 2023. The weighting of the performance measures and targets will be disclosed retrospectively in the 2021 Annual
Report on Remuneration.
Consideration by the Directors of matters relating to Directors' remuneration
The Committee is composed of the Group's independent Non-Executive Directors, Julia Porter (Chair), Alan Lovell and Fiona
Goldsmith. Executives only attend meetings by invitation.
The Committee's key responsibilities are:
Ÿ
Ÿ
Ÿ
Ÿ
reviewing the on-going appropriateness and relevance of remuneration policy;
reviewing and approving the remuneration packages of the executives;
monitoring the level and structure of remuneration of the senior management; and
production of the Directors' Remuneration Report.
Advisors
During the year, the Committee received independent advice from Deloitte LLP. Deloitte is a founder member of the
Remuneration Consultants Group and voluntarily operates under its code of conduct in its dealings with the Committee.
Directors' Remuneration Report voting at the 2020 AGM
The table below sets out the voting outcome at the Group's AGM held on 14 May 2020 in respect of the resolution to approve the
Directors' Remuneration Report contained in the Group's 2019 Annual Report and Accounts.
Votes for
% for
Votes against
% against
Total votes
cast
Votes
withheld
(abstentions)
Approval of Directors'
Remuneration report
87,581,769
86.23%
13,982,457
13.77%
101,564,226
0
Approval
This Report was approved by the Board on 24 March 2021 and signed on its behalf by:
Julia Porter
Chair of the Remuneration Committee
24 March 2021
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maintaining focus on the strategic priorities of the Group.
The Board fully appreciates that the Group can only grow and prosper through having regard for the views and needs of our
customers, colleagues and the communities in which we operate, as well as our suppliers, the environment and the shareholders to
whom we are accountable. The Board ensures that these requirements are met and the interests of our stakeholder groups are
considered through a combination of the following:
Standing agenda points and papers presented at each Board meeting.
Ÿ
Ÿ A rolling agenda of matters to be considered by the Board throughout the year, which includes strategy review days that
The Directors present their annual report and audited financial statements of the Group for the financial year 2020
consider the Group strategy for the longer-term.
Registered office
The registered office of Safestyle UK plc is 47 Esplanade, St Helier, Jersey, JE1 0BD.
Ÿ Board presentations and reports which include monthly updates on Health & Safety along with operational, performance and
people matters.
Ÿ Regular engagement with our stakeholders, including, but not limited to, suppliers, customers and employees.
Ÿ Consideration of the impact of the Group's operations on the community and the environment, and how this can be improved.
Principal activities
Shareholder communication
Safestyle UK plc is an AIM listed company. The Group's principal activities are the sale, manufacture and installation of
replacement PVCu windows and doors for the UK homeowner market.
The Board is committed to maintaining good communication with both institutional and private investors. Dialogue with fund
managers, institutional investors and analysts to discuss performance and future prospects is actively pursued. The Annual
General Meeting provides an opportunity for shareholders to address questions to the Chairman and the Board directly.
Business review
The Chairman's statement, the Chief Executive's statement and the Financial Review on pages 18 to 27 report on the Group's
performance during the year and future developments.
Dividends
Risk management and internal controls
The Board has overall responsibility for the Group's system of internal controls and for reviewing the effectiveness of this system.
It should be recognised that such a system is designed to manage rather than eliminate the risk of failure to achieve the business
objectives and can only provide reasonable, and not absolute, assurances against material misstatement or loss.
The directors do not propose a final dividend for the year (2019: £nil).
Directors' indemnities and insurance
Governance
Safestyle UK plc is an evolving organisation and one that has ethics, integrity and high standards of corporate governance as key
priorities. The Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code (2018) as its Governance
Framework. The Board understands its responsibility in managing the business for the long-term benefit of its stakeholders,
through effective and efficient decision making and acknowledges the importance of the ten principles set out within the QCA
code. Further details of how the Group applies each principle of the QCA code can be found on the Group's website at
www.safestyleukplc.co.uk/investor-relations/corporate-governance. An overview of the Group's corporate governance
procedures is given below.
The Board
The Group is controlled through a Board of Directors which comprises a non-executive chairman, two executive directors and two
non-executive directors. The non-executive chairman and the non-executive directors are considered to be independent and bring
a wide range of experience and provide a strong balance to the executive directors. The Board meets at least 9 times a year and is
responsible, amongst other things, for business strategy, approval of interim and annual financial results, approval of annual
budgets, approval of major capital expenditure and the framework of internal controls.
Safestyle UK plc indemnifies its officers and officers of its subsidiary companies against liabilities arising from the conduct of the
Group's business, to the extent permitted by law, by the placing of directors' and officers' insurance. The insurance policy
indemnifies individual directors' and officers' personal legal liability and cost for claims arising out of actions taken in connection
with Group business.
Directors' responsibilities
The directors are responsible for preparing the financial statements in accordance with applicable law and IFRS as adopted by the
EU. Company law requires the directors to prepare Group financial statements for each financial year which give a true and fair
view of the state of affairs of the Group and of the profit or loss of the Group for that year. In preparing those financial statements,
the directors are required to:
select suitable accounting policies and then apply them consistently;
Ÿ
Ÿ make judgements and estimates that are reasonable, relevant and reliable;
Ÿ
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained
in the financial statements;
assess the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
Ÿ
Ÿ use the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no
Audit Committee
realistic alternative but to do so.
The Audit Committee report on pages 48 to 49 provides details regarding the Audit Committee members and its responsibilities.
Remuneration Committee
The Chair of the Remuneration Committee is Julia Porter with Alan Lovell and Fiona Goldsmith as the other non-executive
members. The Committee reviews the performance of the executive directors and determines their terms and conditions of
service, including their remuneration and the grant of options. The Remuneration Committee meets at least once a year.
Nomination Committee
The Chairman of the Nomination Committee is Alan Lovell with Fiona Goldsmith and Julia Porter as the other non-executive
members. The Committee identifies and nominates for the approval of the Board candidates to fill board vacancies as and when
they arise. The Nomination Committee meets at least once a year.
Promoting the success of the Group
The Board consider, both individually and collectively, that they have acted in a way they consider, in good faith, to promote the
success of the company for the longer term. 2020 has been an extraordinary year due to the COVID-19 pandemic and the Board
responded to the many challenges presented in the year to ensure the safety of the Group's people and its customers whilst
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Jersey)
Law 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
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Substantial shareholdings
As at 5 March 2021 the Group has confirmed the following interests in more than 3% of its ordinary share capital.
Significant Shareholders
Shares Held
%
Alantra Asset Management
Soros Fund Management
Janus Henderson Investors
Jupiter Assest Management
27,272,423
19.93%
18,509,642
13.52%
16,553,708
12.09%
11,575,383
8.46%
Cambridge Global Asset Management
10,196,611
7.45%
Hargreaves Lansdown Asset Management
Invesco Advisors Inc
5,038,712
4,465,000
3.68%
3.26%
Carbon Reporting
Going concern
For the purposes of assessing the appropriateness of the preparation of the Group's accounts on a going concern basis, the
Directors have considered the current cash position, available banking facilities and forecasts of future trading through to the end
of financial year 2022, including performance against financial covenants. Further disclosure of the factors considered are given in
the basis of preparation note to the accounts.
Having considered this information, including the potential impact of COVID-19 which has been considered separately, the
Directors have a reasonable expectation that the Group has adequate resources to continue to trade for the foreseeable future.
Consequently, the Directors continue to adopt the going concern basis of preparation in preparing the financial statements for the
financial year 2020.
Auditors
Grant Thornton were appointed as the Group’s auditors in May 2020. The Board will put forward a resolution to reappoint Grant
Thornton as auditors at the forthcoming AGM of the Group.
Statement of disclosure of information to auditors
As at the date this report was signed, so far as each of the Directors is aware, there is no relevant information of which the auditor
is unaware and each Director has taken all steps that he ought to have taken as a Director in order to make himself aware of any
relevant audit information and to establish that the auditor is aware of that information.
Approved by the Board of Directors and signed on behalf of the Board on 24 March 2021
The energy used across our owned and leased properties, particularly at our manufacturing site, along with our large vehicle fleet
are the main sources of the Group's carbon emissions. We continue to upgrade to new, more efficient technologies, including the
renewal of our van fleet alongside the implementation of other key initiatives. These include a furnace energy reduction
programme which has, and will continue to, reduce our carbon emissions.
Rob Neale
Chief Financial Officer
24 March 2021
2020
2019
CO (Tonnes)
2
2
Co (Tonnes) /
Frame installed
CO (Tonnes)
2
2
Co (Tonnes) /
Frame installed
Manufacturing
Vehicles
Offices / depots
1,007
3,109
860
0.0062
0.0190
0.0053
1,232
3,922
1,008
0.0065
0.0206
0.0053
Total
4,976
0.0304
6,162
0.0324
The above carbon emissions data covers the Period of this Annual Report. For electricity and gas CO , the emissions have been
compiled using data from the Group’s energy suppliers and is converted to CO using conversion factors published by the
Department for Business, Energy and Industrial Strategy. For CO emissions created by the Group’s vehicle fleet, mileage data
from our in-house transport team has been used and converted to CO using the UK Government's conversion factors.
2
2
2
2
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80
81
82
83
84
Consolidated Income Statement
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
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Consolidated Income Statement
for the year ended 3 January 2021
Revenue
Cost of sales
Gross profit
Expected credit losses expensed
Other operating expenses¹
Operating (loss)
Finance income
Finance costs²
Net finance costs
(Loss) before taxation
Underlying (loss) before taxation before non-recurring costs,
Commercial Agreement amortisation and share based payments
Non-recurring costs
Commercial Agreement amortisation
Share based payments
(Loss) before taxation
Taxation
(Loss) for the year
Basic EPS (pence per share)
Diluted EPS (pence per share)
Note
2020
£000
2019
£000
2,5
113,191
126,237
(84,732)
(94,337)
28,459
31,900
(890)
(32,566)
(477)
(33,855)
(4,997)
1
(1,161)
(1,160)
(6,157)
(4,758)
(523)
(452)
(424)
(6,157)
1,103
(2,432)
2
(1,402)
(1,400)
(3,832)
(1,518)
(1,850)
(452)
(12)
(3,832)
526
(5,054)
(3,306)
(4.3p)
(4.3p)
(4.0p)
(4.0p)
18
6
12
7
14
32
13
9
9
¹Other operating expenses includes £523k of non-recurring items, £452k of Commercial Agreement amortisation and £424k
of share based payments. Adjusting for these gives underlying other operating expenses of £31,167k (2019: £31,541k). See
Financial Review for details.
²Finance costs includes £487k of lease related interest costs (see note 26).
There is no other comprehensive income for the period. 2019 represents the year ended 29 December 2019.
All operations were continuing throughout all periods.
The accompanying notes form part of the financial statement.
Consolidated Statement of Financial Position
at 3 January 2021
Assets
Intangible assets - Trademarks
Intangible assets - Goodwill
Intangible assets - Software
Intangible assets - Other
Property, plant and equipment
Right-of-use assets
Deferred taxation asset
Non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Called up share capital
Share premium account
Profit and loss account
Common control transaction reserve
Total equity
Liabilities
Trade and other payables
Lease liabilities
Deferred taxation liability
Provision for liabilities and charges
Current liabilities
Provision for liabilities and charges
Lease Liabilities
Borrowings
Non-current liabilities
Total liabilities
Total equity and liabilities
Note
14
14
14
14
15
26
16
17
18
19
20
21
26
22
23
23
26
24
2020
£000
504
20,758
850
1,284
11,475
8,004
1,980
2019
£000
504
20,758
1,122
1,736
12,633
6,012
886
44,855
43,651
4,545
5,663
11,705
2,725
3,999
4,435
21,913
11,159
66,768
54,810
1,368
89,495
5,347
(66,527)
828
81,845
10,009
(66,527)
29,683
26,155
21,929
2,524
-
1,118
15,384
2,482
17
990
25,571
18,873
1,801
5,586
4,127
11,514
1,891
3,900
3,991
9,782
37,085
28,655
66,768
54,810
The accompanying notes form part of the financial statements. 2019 represents the financial position at 29 December 2019.
The financial statements were approved by the Board of Directors and authorised for issue on 24 March 2021 and were signed
on their behalf by:
Rob Neale
Chief Financial Officer
80
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81
Safestyle UK plc
Strategic Report
Governance
Financials
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
for the year ended 3 January 2021
for the year ended 3 January 2021
Share
capital
Share
premium
Profit and
loss account
£000
£000
£000
Balance at 31 December 2018
Total comprehensive (loss) for the period
Transactions with owners recorded directly in equity:
Deferred taxation asset taken to reserves (note 16)
Equity settled share based payment transactions
828
-
-
-
81,845
-
13,347
(3,306)
-
-
(44)
12
Balance at 29 December 2019
828
81,845
10,009
Total comprehensive (loss) for the period
Transactions with owners recorded directly in equity:
Issue of new shares
Transaction costs relating to the issue of new shares
Deferred taxation asset taken to reserves (see note 16)
Issue of shares - Commercial Agreement
Equity settled share based payment transactions
-
500
-
-
40
-
-
(5,054)
8,000
(350)
-
-
-
-
-
8
(40)
424
Common
control
transaction
reserve
£000
(66,527)
-
-
-
-
(66,527)
-
-
-
-
-
-
Total
equity
£000
29,493
(3,306)
(44)
12
26,155
(5,054)
8,500
(350)
8
-
424
Balance at 3 January 2021
1,368
89,495
5,347
(66,527)
29,683
The accompanying notes form part of the financial statements.
Cash flows from operating activities
(Loss) for the year
Adjustments for:
Depreciation of plant, property and equipment
Depreciation of right-of-use assets
Amortisation of intangible fixed assets
Reversal of impairment loss
Modification of right-of-use assets and liabilities
Finance income
Finance expense
IT project impairment
Equity settled share based payments charge
Taxation (credit)
(Increase) in inventories
(Increase) / decrease in trade and other receivables
Increase in trade and other payables
Increase / (decrease) in provisions
IFRS 16 prepaid lease costs
IFRS 16 onerous leases
Other interest (paid)
Taxation received
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Interest received
Acquisition of intangible fixed assets
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Transaction costs relating to the issue of share capital
Proceeds from loans and borrowings
Repayment of borrowings
Transaction costs relating to loans and borrowings
Payment of lease liabilities
Net cash inflow / (outflow) from financing activities
Net inflow in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Note
15
26
14
26
26
12
14
32
13
15
14
24
24
24
26
2020
£000
(5,054)
1,559
3,745
880
(292)
5
(1)
1,161
-
424
(1,103)
1,324
(1,820)
(1,664)
6,545
38
-
-
3,099
(986)
-
3,437
(401)
1
(156)
(556)
8,500
(350)
2,000
(2,000)
(39)
(3,722)
4,389
7,270
4,435
11,705
2019
£000
(3,306)
1,666
4,322
904
-
-
(2)
1,402
113
12
(526)
4,585
(309)
479
98
(1,430)
(413)
67
(1,508)
(1,079)
2,540
4,538
(86)
2
(341)
(425)
-
-
2,500
(2,500)
(235)
(3,606)
(3,841)
272
4,163
4,435
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83
The accompanying notes form part of the financial statements. 2019 represents the year ended 29 December 2019.
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
General information
The financial statements set out herein are in respect of Safestyle UK plc (the Company) and its subsidiaries (the Group) for the
financial year 2020.
Safestyle UK plc is a publicly listed company incorporated in Jersey. The company's shares are traded on AIM. The company is
required under AIM rule 19 to provide shareholders with audited consolidated financial statements. The registered office address of
the Safestyle UK plc is 47 Esplanade, St Helier, Jersey JE1 0BD. The company is not required to present parent company information.
1
Basis of preparation
The Group's financial statements for the financial year 2020 (“financial statements”) have been prepared on a going concern basis
under the historical cost convention and are in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
EU and the International Financial Reporting Standards Interpretations Committee interpretations issued by the International
Accounting Standards Board (“IASB”) that are effective or issued and early adopted as at the time of preparing these financial
statements.
Safestyle UK plc was incorporated on 8 November 2013. On 3 December 2013 Safestyle UK plc acquired Style Group Holdings
through a share for share exchange. This was accounted for as a common control transaction. The result of this is that the financial
statements of Style Group Holdings have been included in the Group consolidated financial statements of Safestyle UK plc at their
book value at the IFRS transition date of 1 January 2010 with the assumption that the Group was in existence for all the periods
presented. The excess of the cost at the time of acquisition over its book value has been recorded as a common control transaction
reserve.
The accounting policies set out below have unless otherwise stated, been applied consistently to all periods presented in these
financial statements.
The preparation of financial statements requires Management to exercise its judgement in the process of applying accounting
policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to
these financial statements are disclosed in note 4.
(a) New and amended standards adopted by the Group.
The Group has adopted the following new standards and amendments for the first time. Unless otherwise stated, they have not had a
material impact on the financial statements.
Ÿ Definition of a Business (Amendments to IFRS 3)
Ÿ Definition of Material (Amendments to IAS 1 and IAS 8)
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
Ÿ
Ÿ Amendments to References to the Conceptual Framework (Various Standards)
Ÿ COVID-19 Rent Related Concessions (Amendments to IFRS 16)
(b) New standards, amendments and interpretations issued but not effective and not early adopted.
At the date of approval of these financial statements, the following standards, amendments and interpretations which have not been
applied in these financial statements were in issue but not yet effective (and in some cases have not yet been adopted by the EU):
Ÿ Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS 4)
Ÿ References to the Conceptual Framework
Ÿ Proceeds before Intended Use (Amendments to IAS 16)
Ÿ Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
Ÿ Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS 1, IFRS 9, IFRS 16, IAS 41)
Ÿ Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
Basis of consolidation
Subsidiaries are entities that the Company has power over, exposure or rights to variable returns and an ability to use its power to
affect those returns. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date control ceases.
Intragroup transactions and balances are eliminated on consolidation.
Year end
The financial statements are presented for the year ended on the closest Sunday to the end of December. This date was 3 January
2021 for the current reporting year and 29 December 2019 for the prior year. All references made throughout these accounts for
the financial year 2020 are for the period 30 December 2019 to 3 January 2021 and references to the financial year 2019 are for
the period 31 December 2018 to 29 December 2019.
Going concern
The financial statements are prepared on a going concern basis which the Directors believe to be appropriate for the following
reasons.
The Group made a statutory (loss) of £(5.1)m in financial year 2020 (2019: (loss) of £(3.3)m) and had net current liabilities of
£(3.7)m at the end of the financial year 2020 (2019: net current liabilities of £7.7m). As detailed in the Financial Review, the Group
incurred losses in the first half of the year due to the temporary cessation of operations as a result of the COVID-19 pandemic. The
Group returned to profit in the second half of the year whilst at the same time building a record level installation pipeline.
The Group obtained additional shareholder funding in April 2020 through the raising of £8.2m via a share placing which
strengthened the Group's cash position during the lockdown period and facilitated a return to profitability in H2 2020. The Group
also has banking facilities which consist of a £4.5m term loan and a £3.0m revolving credit facility. This facility matures in October
2023 having been extended by two years during 2020. The finance agreement contains certain covenants, including a minimum
EBITDA to be tested on a cumulative monthly basis which was revised during 2020 and included a covenant waiver for the loss-
making period in H1 2020. The subsequent minimum EBITDA for covenant compliance was also reduced for the remainder of
2020 and for all subsequent years. The covenant target for FY23 is lower than the target originally agreed for FY21. By the end of
financial year 2020, covenant headroom had increased significantly to £1.9m which has further increased in the first 2 months of
FY21. As at the end of financial year 2020, the £4.5m term loan was fully drawn on the facility, while the revolving credit facility
was unutilised. This remains the case at the date of signing the accounts. In addition, the Group's net cash position was £7.4m at
the end of February 2021 (February 2020: net cash of £0.1m).
The Directors have prepared forecasts covering the period to the end of the financial year 2022. The forecasts include a number of
assumptions in relation to sales volume, pricing, margin improvements and overhead investment. The Directors believe they have
taken a cautious approach to the forecast for 2021 with the core assumptions for order intake representing a decline of 7.4%
versus the levels achieved in H2 2020. However, revenues are forecast to grow, facilitated by the strong order book the Group
carried into the start of FY21 which, along with a number of margin-improving initiatives, forecasts considerable headroom above
EBITDA covenant targets alongside growth in net cash and liquidity.
Whilst the Group's trading and cash flow forecasts have been prepared using these assumptions, the operating environment
presents a number of challenges which could negatively impact the actual performance achieved. Excluding the potential impact of
COVID-19 which is considered separately below, these risks include, but are not limited to, achieving forecast levels of order
intake, the impact on customer confidence as a result of general economic conditions, achieving forecast margin improvements and
the director's ability to implement cost saving initiatives in areas of discretionary spend where required. If future trading
performance significantly underperforms the Group's forecasts, this could impact the ability of the Group to comply with its
covenant tests over the period of the forecasts.
The Group's cash flow forecasts and projections, taking account of reasonably possible changes in trading performance excluding
the potential impact of COVID-19 (which is considered below), offset by mitigating actions within the control of management
including reductions in areas of discretionary spend, show that the Group will be able to operate within the level of its facilities and
associated covenants for the period to at least the end of 2022. The Group has started the year well, with revenues and profits
significantly ahead of the pre-lockdown period in FY20 which the directors believe further supports this basis of preparation.
The uncertainty as to the future impact on the Group of the COVID-19 outbreak has been separately considered as part of the
directors' consideration of the going concern basis of preparation. As described in the CEO's Statement and Financial Review, the
COVID-19 pandemic had a material impact on the Group's performance in H1 2020 which required the directors to take swift
actions to protect the business and increase its cash and liquidity reserves. These actions were successful and the Group restarted
operations quickly and successfully in May 2020 and since then has been operating safely and profitably despite the impact of
ongoing restrictions that have affected normal ways of working.
The Directors have incorporated their considerations regarding the continuing impact of potential COVID-19 restrictions on the
Group in their scenario modelling although also note that these restrictions are reducing as the successful vaccination programme
gathers pace. In preparing this analysis, a number of scenarios were modelled which included a 26% drop in written sales versus
H2 20 performance levels. In this scenario, mitigating actions within the control of management, including reductions in areas of
discretionary spend have been modelled with the result being that despite this reduction in written sales, the Group would grow
covenant headroom in FY21 and increase its net cash balance.
In March 2020, the Directors highlighted it was difficult to predict the overall outcome and impact of COVID-19 and the duration
of disruption to written and fitted sales activity. The Directors now highlight the current and improving operating context which,
alongside the outcomes in the scenarios modelled, underpin the Directors’ conclusion that the risk of the liquidity requirements of
the business exceeding the total quantum of facilities available are now deemed remote.
Based on the above indications and work prepared, the Directors believe that it is appropriate to prepare the financial statements
on a going concern basis.
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85
Right-of-use assets
Property, plant and equipment
Motor Vehicles
Plant & Equipment
Right-of-use assets
Lease liabilities
Property, plant and equipment
Motor Vehicles
Plant & Equipment
Lease liabilities
Lease liabilities
Onerous leases
Right-of-use-assets
applied is 7%.
financial statements
Reconciliation between assets and liabilities at transition:
Prepayments relating to IFRS 16 Leases at 31 December 2018
When measuring lease liabilities for leases that were classified as operating leases, the Group
discounted lease payments using its incremental borrowing rate at 1 January 2019. The rate
Operating lease commitment at 31 December 2018 as disclosed in the Group's consolidated
Discounted using the incremental borrowing rate at 1 January 2019
Finance lease liabilities recognised as at 31 December 2018
Recognition exemption for leases with less than 12 months lease term at transition
Lease liabilities recognised at 1 January 2019
1 Jan 2019
£000
6,088
3,360
293
9,741
£000
5,831
3,271
293
9,395
£000
9,395
413
(67)
9,741
£000
12,470
9,409
-
(14)
9,395
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
Goodwill
Government grants
Grants under the Coronavirus Job Retention Scheme (CJRS) that compensate the Group for expenses incurred are recognised in
profit or loss in staff costs on a systematic basis in the periods in which the expenses are recognised.
2
Summary of significant accounting policies
Revenue recognition
The Group earns revenue from the design, manufacture, delivery of, and installation of domestic double-glazed replacement windows
and doors.
Identifying the contract with a customer
Identifying the performance obligations
There are five main steps followed for revenue recognition:
Ÿ
Ÿ
Ÿ Determining the transaction price
Ÿ Allocating the transaction price to the performance obligations; and
Ÿ Recognising revenue when or as an entity satisfied performance obligations.
The various stages of the performance obligations are the design, manufacture, delivery of and installation of domestic double-glazed
replacement windows and doors.
In applying the principal of recognising revenue related to satisfaction of performance obligations under IFRS 15, the Group considers
that the final end product is dependent upon a number of services in the process that may be capable of distinct identifiable
performance obligations. However, where obligations are not separately identifiable, in terms of a customer being unable to enjoy the
benefit in isolation, the standard allows for these to be combined. The Group considers that in the context of the contracts held these
are not distinct. As such the performance obligations are treated as one combined performance obligation and revenue is recognised
in full, at a point in time, being on completion of the installation. Revenue is shown net of discounts, sales returns, charges for the
provision of consumer credit and VAT and other sales related taxes. Revenue is measured based on the consideration specified in a
contract with a customer.
There is no identifiable amount included in the final price for a warranty, as the Group provides a guarantee on all installations.
Payments received in advance are held within other creditors, as a contract liability. The final payment is due on installation.
A survey fee is paid at the point of agreeing the contract and the customer has up to 14 days, defined in the contract to change their
minds. If the customer changes their mind after this cooling off period, the Group has the right to retain this survey fee and as such
revenue for this is recognised at the point in time that this becomes non-refundable.
In addition to the above, the Group recognises revenue from the sale of materials for recycling. The revenue is recognised when the
materials are collected by the recycling company which represents the completion of the performance obligation. The Group have
determined that this revenue is derived from its ordinary activities and as such this balance is recognised within revenue.
Foreign currencies
Functional and presentational currency
(a)
Items included in the financial statements are measured using the currency of the primary economic environment in which the Group
operates (“the functional currency”) which is UK Sterling (£). The financial statements are presented in UK Sterling (£), which is the
Group's presentational currency.
Transactions and balances
(b)
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in net profit or loss in the
statement of comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Cost of sales
Cost of sales principally comprises the costs of materials, direct labour, commissions and lead generation.
Employee benefits
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement when they
are due.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested annually for impairment.
Intangible fixed assets
Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated impairment
losses. The trademark is considered to have an indefinite useful life because there is no foreseeable limit to the period over which the
asset is expected to generate net cash inflows for the business. The trademark is not amortised but is tested annually to determine
whether there is any indication of impairment.
Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated
amortisation and accumulated impairment losses.
The non-compete element of the Commercial Agreement has been accounted for as an intangible asset on the basis that it is an
identifiable, non-monetary item without physical substance, which is within the control of the entity and is capable of generating
future economic benefits for the entity. The intangible asset has been measured based on the fair value of the consideration that the
Group expects to issue under the terms of the agreement.
Amortisation of other intangibles is done on a straight-line basis over the estimated useful economic lives of the particular asset
categories as follows:
Software development
Commerical Agreement
25% on cost
20% on cost
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost includes the original
purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation
is charged so as to write off the costs of assets over their estimated useful lives, on the following basis:
Leasehold improvements
Plant and machinery
Office and computer equipment
Mobile devices
Motor vehicles
25% on cost
15% on cost
20% to 33.3% on cost
50% on cost
25% reducing balance
Assets in the course of construction are not depreciated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the statement of comprehensive income.
Impairment
The carrying amounts of the Group's assets, other than inventories and deferred taxation assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is
estimated.
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is
estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in the income statement.
Impairment losses recognised (not relating to other intangible assets specifically) are allocated first to reduce the carrying amount of
any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit on a pro-rata
basis. A cash-generating unit is the group of assets identified on acquisition that generate cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
The recoverable amount of assets or the cash-generating unit is the greater of their fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxation discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating
unit to which the asset belongs.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Inventories
Inventories are stated at the lower of cost and net realisable value. Work in progress comprises direct materials, labour costs, site
overheads and other attributable overheads.
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Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
2
Summary of significant accounting policies (continued)
Bank and other borrowings
Interest bearing borrowings, bank and other borrowings are carried at amortised cost. Finance charges, including issue costs are
charged to the income statement using an effective interest rate method.
Provisions
A provision is recognised in the balance sheet if, as a result of a past event, the Group has a present, legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate which reflects current market
assessments of the time value of money and the risks specific to the liability.
A provision for warranties is recognised when the underlying products are sold, based on historical service call data and a
weighting of possible outcomes against their associated probabilities.
The Group gives guarantees against all its products which in the majority of cases covers a period of 10 years. The level of provision
required to cover the expected future costs of rectifying faults and the future rate of product failure arising within the guarantee
period requires judgement.
Financial instruments
Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes
party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash
flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-
recognised when the obligation specified in the contract is discharged, cancelled or expired.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Trade receivables
IFRS 9's impairment requirements use forward-looking information to recognise expected credit losses – the 'expected credit loss
(ECL) model'. Instruments within the scope of the requirements included trade receivables.
The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including
past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash
flows of the trade receivables.
The Group makes use of a simplified approach in accounting for trade and other receivable and records the loss allowance as
lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at
any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and
forward-looking information to calculate the expected credit losses.
The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have
been grouped based on age.
Refer to note 25 for a detailed analysis of how the impairment requirements of IFRS 9 are applied.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits, restricted cash paid over to various counterparties as
collateral against relevant exposures and other short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Trade and other payables
Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective
interest rate method; this method allocates interest expense over the relevant period by applying the “effective interest rate” to the
carrying amount of the liability.
Financial liabilities – non-current borrowings
Borrowings, including advances received from related parties are initially recognised at the fair value of the consideration received
less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest method.
Taxation
Income taxation on the profit or loss for the year comprises current and deferred taxation. Income taxation is recognised in the
income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Deferred taxation is recognised using the balance sheet method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxation is
not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences
relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the
foreseeable future. The amount of deferred taxation provided is based on the carrying amount of assets and liabilities, using the
prevailing taxation rates. The deferred taxation balance has not been discounted.
Current taxation is the expected taxation payable on the taxable income for the year, using prevailing taxation rates enacted or
substantively enacted at the reporting date, and any adjustment to taxation payable in respect of previous years.
Leases
At the inception of a contract, the Group assesses whether a contract is, or contains a lease. A contract is, or contains a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
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 adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the
lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the
right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated
over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition,
the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease
liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental
borrowing rate.
Lease payments included in the measurement of the lease liability comprise the following:
Ÿ fixed payments, including in-substance fixed payments
Ÿ
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement
date
amounts expected to be payable under a residual value guarantee
the exercise price under a purchase option that the Group is reasonably certain to exercise
lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option
penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
Ÿ
Ÿ
Ÿ
Ÿ
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, there is a change in the Group's estimate of the amount expected to
be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension
or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, to the extent that the right-of-use asset is reduced to nil, with any further adjustment required from the remeasurement
being recorded in profit or loss.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for lease of low-value assets and short-term leases.
The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
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Financials
Notes to the Consolidated Financial Statements
Financing decisions are made by the Board of Directors based on forecasts of the expected timing and level of capital and operating
expenditure required to meet the Group's commitments and development plans.
The Group's objective when managing capital is to maintain adequate financial flexibility to preserve its ability to meet financial
obligations, both current and long term. The capital structure of the Group is managed and adjusted to reflect changes in economic
circumstances.
2
Summary of significant accounting policies (continued)
Share based payments
The grant date fair value of share based payments awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair
value of the awards granted is measured using an option valuation model, taking into account the terms and conditions upon which
the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the
related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an
expense is based on the number of awards that do meet the related service and non-market based performance conditions at the
vesting date. For share based payment awards with non-vesting conditions, the grant date fair value of the share based payment is
measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
For share based transactions with parties other than employees, the fair value of the goods or services received and the length of
the vesting period is estimated. An expense is recognised for the fair value of the goods or services over the specified vesting
period or service with a corresponding increase in equity.
Where the fair value of the goods or services received cannot be reliably estimated, the entity measures the goods or services
received, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted,
measured at the date the entity obtains the goods or the counterparty renders service.
Dividends
Dividends are only recognised as a liability to the extent that they are declared prior to the year end.
3
Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk
management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on its
financial performance.
Risk management is carried out by the Board of Directors. They identify and evaluate financial risks in close co-operation with key
employees.
Market risk
3.1
Market risk is the risk of loss that may arise from changes in market factors such as commodity prices, interest rates and foreign
exchange rates.
Credit risk
3.2
Credit risk is the financial loss to the Group if a customer or counterparty to financial instruments fails to meet its contractual
obligation. Credit risk arise from the Group's cash and cash equivalents and receivables balances.
Liquidity risk
3.3
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk relates to the
Group's prudent liquidity risk management and implies maintaining sufficient cash. The Board monitors forecasts of the Group's
liquidity and cash and cash equivalents on the basis of expected cash flow.
Capital risk management
The Group is funded principally by equity and a long term borrowing facility. The components of shareholders' equity are as
follows:
Ÿ The share capital and the share premium account arising on the issue of shares.
Ÿ The retained surplus/deficit reflecting financial result incurred to date.
The Group funds its expenditures on commitments from existing cash and cash equivalent balances, primarily received from
issuances of shareholders' equity. There are no externally imposed capital requirements.
Fair value estimation
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values
because of the short term nature of such assets and the effect of discounting liabilities is negligible.
4
Accounting estimates and judgements
When preparing the Group's consolidated financial statements, management makes a number of judgements, estimates and
assumptions about the recognition and measurement of assets, liabilities, revenue and expenses. Actual results can differ from
these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised
prospectively.
Significant management judgements
The following are the judgements made by management in applying the accounting policies of the Group that have the most
significant effect on these consolidated financial statements.
Recognition of deferred taxation assets
The extent to which deferred taxation assets can be recognised is based on an assessment of the probability that future taxable
income will be available against which the deductible temporary differences and taxation loss carry-forwards can be utilised. The
deferred taxation asset of £1,980k has been recognised on the basis that the Group is forecasting to make sufficient levels of
profits in future periods. Further details can be found in note 16.
Estimation uncertainty
Impairment of goodwill
In assessing impairment, management estimates the recoverable amount of each asset or cash generating unit based on expected
future cash flows and uses an appropriate rate to discount them. Estimation uncertainty relates to assumptions about future
operating results and the determination of a suitable discount rate. A discount rate of 10% has been applied to the impairment
assessment calculation. This was calculated and compared to the discount rates disclosed by a range of comparable quoted
companies. Management used judgement in the decision to use a discount factor of 10%. Further detail can be found in note 14,
alongside the other key judgements made in calculating the value in use calculations, including expected growth.
Dilapidations provision
The Group has a portfolio of leased properties that sales branches and installation depots operate from. A dilapidations provision
is provided for leased properties where the lease agreement contains a contractual obligation to undertake remedial works at the
end of the lease term and where wear-and-tear or damage on the property has occurred. The calculation of the estimate is based
on historical experience of cost to rectify upon exiting similar properties. The estimated costs are subject to estimation uncertainty
as the final payment agreed may differ to the estimated cost given the process whereby dilapidations are negotiated. This value of
the provision at the year end is disclosed in note 23.
Product guarantee provision
The Group guarantees all of its products, which in the majority of cases covers a period of 10 years. The provision is calculated to
cover the cost of fulfilling any guanratee work to its customers and is based on the expected future costs of rectifying faults and the
future rate of product failure arising within the guarantee period. The level of provision required to cover this cost is subject to
estimation uncertainty. Further details can be found in note 23.
Expected credit loss for trade receivables
The Group assesses, on a forward-looking basis, the expected credit losses associated with its trade receivables. This is based on
historical experience, external indicators and forward-looking information to calculate the expected credit losses. Further detail
can be found in note 25.
5
Segmental information
The Directors consider that there are no identifiable business segments that are engaged in providing individual products or
services or a group of related products and services that are subject to risks and returns that are different to the core business. The
information reported to the Group's Executive Directors for the purposes of resource allocation and assessment of performance is
based wholly on the overall activities of the Group. The Group has therefore determined that it has only one reportable segment
under IFRS 8, which is “the sale, design, manufacture, installation and maintenance of domestic, double-glazed, replacement
windows and doors”. The Group's revenue and results and assets for this one reportable segment can be determined by reference
to the Group's statement of comprehensive income and statement of financial position.
The Group carries out all of its activities in the UK and as such only has a single geographic segment. During the periods of the
financial statements, no customer generated more than 10 per cent of total revenue.
The Group generally receives deposit payments prior to installation. Of the revenue recognised in financial year 2020, £0.5m
relates to revenue for unsatisfied performance obligations at the end of the financial year 2019. At the end of the financial year
2020, £3.1m of deposits are held on the balance sheet relating wholly to existing contracts where performance obligations are
unsatisfied at year end.
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Financials
Notes to the Consolidated Financial Statements
9
Earnings per share
Basic earnings per ordinary share (pence)
Diluted earnings per ordinary share (pence)*
2020
(4.3)
(4.3)
2019
(4.0)
(4.0)
6
Expenses and auditor's remuneration
a) Basic earnings per share
Operating (loss) is stated after charging / (receiving):
Income from the Coronavirus Job Retention Scheme
Depreciation of plant, property and equipment:
Owned assets
Amortisation of intangibles assets
Depreciation, reversal of impairment and net modification of right-of-use assets and liabilities
Auditor's remuneration¹:
Audit of financial statements relating to subsidiaries
Audit of financial statements relating to parent
Other services relating to taxation
Commissions
Lead generation costs
Staff costs
Cost of materials
Other items
Total
2020
£000
(1,805)
1,559
880
3,900
70
30
-
37,869
14,026
23,401
18,871
19,387
118,188
¹Auditor remuneration in 2020 relates to the provision of audit services by Grant Thornton (2019: KPMG).
7
Non-recurring costs
Holiday pay accrual
Litigation Costs
Restructuring and operational costs
Impairment of right-of-use assets
Modification of right-of-use assets and liabilities
Reversal of prior year impairment of right-of-use assets
Commercial Agreement service fee
IT project impairment
Total non-recurring costs
Note
a
b
c
d
e
f
g
h
2020
£000
470
74
266
-
5
(292)
-
-
523
2019
£000
-
1,666
1,017
4,322
91
39
24
42,968
15,712
21,648
21,434
19,748
128,669
2019
£000
-
-
1,058
692
-
-
(13)
113
1,850
a)
b)
c)
d)
e)
f)
g)
h)
8
The holiday pay accrual has arisen as a result of the impact of the shutdown of operations and resultant extension of 2020
leave entitlement to the end of 2021. This has significantly increased the level of deferred holiday entitlement at the year
end which has recognised as an accrual and which will reverse in full in 2021. This item has been excluded from the
underlying performance measures to ensure performance of the business is not skewed by both the expense in 2020 or its
subsequent full release in 2021.
Litigation costs are expenses incurred as a result of an ongoing legal dispute between the Group and an ex-agent. These
costs are predominantly legal advisor's fees.
Restructuring and operational costs are expenses incurred, including redundancy payments, as a result of changes being
made to reduce the cost structure of the business.
Impairment of right-of-use asset costs relate to vacating properties recognised as assets under IFRS 16 where the lease
commitment extended beyond 2019.
Modification of right-of-use assets and liabilities relates to the closure of properties identified as right-of-use assets and
liabilities during the period.
Reversal of prior year impairment of right-of-use assets is the reversal of an impairment charge made in 2019 following
closure of the Crawley installation depot which was subsequently reopened in 2020.
Commercial Agreement service fee was the assessed fair value of the consideration payable under the terms of the
Commercial Agreement that was attributed to services received. The provision was adjusted based on the actual
performance in 2019 and a £13k reduction to the original provision was made.
IT project impairment charge represented the impairment of a capital investment made in a new electronic survey system
that was stopped following results of field trials.
Dividends
No dividends in relation to 2020 or 2019 were either paid or declared.
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Annual Report & Accounts 2020
The calculation of basic earnings per share has been based on the following (loss) attributable to ordinary shareholders and
weighted-average number of shares outstanding.
i) (Loss) attributable to ordinary shareholders (basic)
(Loss) attributable to ordinary shareholders
ii) Weighted-average number of ordinary shares (basic)
In issue during the year
2020
£000
2019
£000
(5,054)
(3,306)
No. of shares
‘000
117,749
No. of shares
‘000
82,809
b) Diluted earnings per share
*Due to net loss for the period, dilutive loss per share is the same as basic.
For financial year 2020, there were 6,959k (2019: 4,409k) share options outstanding and, for financial year 2019, there were also
4,000k shares due to be issued in October 2020 as consideration under the Commercial Agreement. These have been excluded
from this calculation as they would have a dilutive effect on the loss per share.
The average market value of the Group's shares for the purpose of calculating the dilutive effect of share options was based on
quoted market prices for the period during which the options were outstanding.
10
Key management remuneration
Key management personnel, as disclosed under IAS 24 (Related Party Disclosures), have been identified as the Board of Directors
and other senior operational management.
A summary of key management remuneration is as follows:
Salary, bonus and other benefits
Pensions
Share based payments and associated costs
Compensation on loss of office
Total remuneration
Details of long term incentive plans can be found in note 32.
2020
£000
2,761
138
293
-
3,192
2019
£000
1,823
78
161
135
2,197
Annual Report & Accounts 2020
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Governance
Financials
Notes to the Consolidated Financial Statements
11
Staff numbers and costs
The average monthly number of persons (including directors) employed by the Group during the year analysed by category, were
as follows:
10
Key management remuneration (continued)
Detailed disclosures of individual remuneration, pension entitlements and share options, for the Directors who served during the
year are as follows:
Manufacturing
Sales and distribution
Administration
Salary and fees
£000
Benefits
£000
Annual bonus¹
£000
LTIP
£000
Pension
£000
Total
£000
2020
Number
2019
Number
279
92
264
635
2020
£000
20,122
1,940
915
424
23,401
276
90
291
657
2019
£000
18,927
1,920
789
12
21,648
The aggregate payroll costs were as follows:
Wages and salaries
Social security costs
Other pension costs (see note 27)
Share based payment expenses (see note 32)
The analysis of Directors' remuneration is shown in the Directors' Remuneration Report.
During the year, £1,805k was received under the Government Coronavirus Job Retention Scheme (CJRS). The note above
does not include the beneficial effect of the CJRS grant income.
12
Finance costs
On borrowing facility
On lease liabilities
2020
£000
674
487
1,161
2019
£000
876
526
1,402
2020
Executive directors
M Gallacher
R Neale
Non-executive
A C Lovell
F Goldsmith
J Porter
2019
Executive directors
M Gallacher
R Neale
G Richell
Non-executive
A C Lovell
C J Davies
F Goldsmith
J Porter
257
197
110
50
50
664
275
175
146
120
20
47
44
827
20
14
-
-
-
34
21
14
10
-
-
-
-
45
285
201
-
-
-
486
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15
9
-
111
-
-
-
135
37
16
-
-
-
53
22
14
9
-
-
-
-
45
599
428
110
50
50
1,237
333
212
165
231
20
47
44
1,052
¹The decision as to whether to award certain 2019 bonus payments was deferred as part of the Group's COVID-19 measures.
Once the business had restarted operations, Mike Gallacher and Rob Neale were awarded bonuses of £82,500 and £52,500 in
respect of 2019 performance against personal objectives. Bonuses for 2020 performance as described in the Directors'
Remuneration Report have also been accrued in 2020. Consequently, the Annual Bonus charge in 2020 reflects performance in
respect of both years.
G Richell resigned from the Board on the 5th March 2019 and his total remuneration for 2019 therefore reflect a part year.
C Davies resigned from the Board on the 16th May 2019 and his fees for 2019 therefore reflect a part year.
The interests of each individual who served as a director of the Group during the year, as at the end of financial year 2020 in the
Group's share schemes were as follows:
M Gallacher
R Neale
A C Lovell
M Gallacher
R Neale
M Gallacher
R Neale
Plan
LTIP 2018¹
LTIP 2018¹
Individual
LTIP 2019
LTIP 2019
RSA 2020
RSA 2020
Options
held at start
of period
Options
granted
in period
Options
exercised
in period
Options
lapsed in
period
Options
held at end
of period
733,333
350,000
250,000
200,000
127,273
-
-
1,660,606
-
-
-
-
-
550,000
262,500
812,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
733,333
350,000
250,000
200,000
127,273
550,000
262,500
2,473,106
¹The performance share plan awards granted on 18 June 2018 lapsed in full following the end of financial year 2020 as the
threshold EPS performance target was not achieved.
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Governance
Financials
Notes to the Consolidated Financial Statements
13
Taxation
Recognised in the statement of comprehensive income
Current taxation
Current taxation on income for the period
Adjustments in respect of prior periods
Total current taxation
Deferred taxation
Origination and reversal of timing differences
Effect of change in taxation rate
Adjustments in respect of prior periods
Total deferred taxation (see notes 16 and 22)
Total taxation (credit)
The current year taxation (credit) is split into the following:
Taxation (credit)
Total taxation (credit)
Reconciliation of effective taxation rate
Current taxation reconciliation
(Loss) for the year
Total taxation (credit)
(Loss) excluding taxation
Expected taxation (credit) based on the standard rate of corporation taxation in
the UK of 19.00% (2019: 19.00%)
Effects of:
Expenses not deductible for taxation purposes
Share based payments
Adjustments to taxation charge in respect of prior period
Effect of change in taxation rate
Total taxation (credit)
2020
£000
2019
£000
-
-
-
(994)
(103)
(6)
(1,103)
(1,103)
(1.103)
(1,103)
-
(253)
(253)
(489)
45
171
(273)
(526)
(526)
(526)
(5,054)
(1,103)
(6,157)
(3,306)
(526)
(3,832)
(1,170)
(728)
129
47
(6)
(103)
229
10
(82)
45
(1,103)
(526)
A reduction in the UK corporation taxation rate from 19% to 17% (effective from 1 April 2020) was substantively enacted on 6
September 2016, and the UK deferred taxation asset at the end of the financial year 2020 has been calculated based on this rate. In the
11 March 2020 Budget it was announced that the UK taxation rate will remain at the current 19% and not reduce to 17% from 1 April
2020. This will have a consequential effect on the Group's future taxation charge.
14
Intangible assets
Cost
At 31 December 2018
Additions
Transfer
At 29 December 2019
Additions
Transfer
At 3 January 2021
Accumulated amortisation and impairment
At 31 December 2018
Impairment
Charge for the year
At 29 December 2019
Charge for the year
At 3 January 2021
NBV at 30 December 2018
NBV at 29 December 2019
NBV at 3 January 2021
Goodwill
Trademark
Software
£000
£000
£000
Assets under
the course of
construction
£000
Commercial
Agreement
£000
Total
£000
20,788
-
-
20,788
-
-
20,788
30
-
-
30
-
30
20,758
20,758
20,758
504
-
-
504
-
-
504
-
-
-
-
-
-
504
504
504
2,296
-
606
2,902
27
25
2,954
1,389
-
452
1,841
428
2,269
907
1,061
685
439
341
(606)
174
129
(25)
278
-
113
-
113
-
113
439
61
165
2,263
-
-
2,263
-
-
2,263
75
-
452
527
452
979
26,290
341
-
26,631
156
-
26,787
1,494
113
904
2,511
880
3,391
2,188
1,736
1,284
24,796
24,120
23,396
The goodwill is allocated to one cash generating unit (“CGU”) being Style Group Holdings Ltd. Management have performed
impairment reviews on the carrying value of the goodwill at the end of the financial year 2020. As described in the going concern
basis of preparation, the Directors have prepared forecasts covering the period to the end of the financial year 2022. These
forecasts have also been used with regards to the impairment assessment. The forecasts include a number of assumptions in
relation to sales volume, pricing and margin improvements. The Directors believe they have taken a cautious approach in these
forecasts with the core assumptions for order intake representing a decline of 7.4% versus the levels achieved in H2 2020.
However, despite this declining order intake assumption, revenues are modelled to grow by 6.1% in 2021 versus H2 2020
annualised revenue. This growth is facilitated by the strong order book the Group carried into the start of 2021 along with a
number of initiatives that enhance revenues and margin, many of which are described in the Financial Review and are already being
realised in the exit rate performance levels of 2020. A growth rate of 10% has been modelled for the subsequent year, 2022, which
equates to a 4.7% increase in order intake versus H2 2020. This subsequent growth is attributed to modest inflationary price gains
alongside a minimal modelled return on the investment in sales and marketing as described in the CEO's statement. After the
second year, inflationary cost increases of 2.0% are forecast to be recovered through price increases which is entirely realistic
given the historic price rises delivered and this has been modelled into perpetuity. As a result, profitability and generated cash are
cautiously forecast to remain constant.
For the review at the end of the financial year 2020, the recoverable amount of the CGU of £201m has been determined from value
in use calculations. The assessment was performed on a value in use basis using a 10% discount rate (2019: 9%). There are no
reasonably possible changes in the key assumptions on which assessments of recoverable amounts have been based would cause
the carrying amount of goodwill to exceed its recoverable amount.
The trademark represents the Safestyle trademark which was acquired in 2010. The trademark is considered to have an indefinite
useful life because there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the
business. The trademark is not amortised but is tested annually to determine whether there is any indication of impairment and is
included in the review above.
The Commercial Agreement represents the fair value of the share consideration that the Group issued under the terms of the
Commercial Agreement for the non-compete services received. The Commercial Agreement is in place for a 5 year period,
therefore the cost is amortised over the 5 year period. Under the terms of the agreement, 4,000,000 shares were issued for nil
cash consideration in October 2020.
96
Annual Report & Accounts 2020
Annual Report & Accounts 2020
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Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
15
Plant, property and equipment
Freehold
property
Leasehold
improvement
Plant and
machinery
£000
£000
£000
Office and
computer
equipment
£000
Motor
vehicles
£000
Assets under
the course of
construction
£000
Cost
At 31 December 2018
Additions
Transfers
At 29 December 2019
Additions
Transfers
At 3 January 2021
Depreciation
At 31 December 2018
Charge for the year
At 29 December 2019
Charge for the year
At 3 January 2021
NBV at 30 December 2018
NBV at 29 December 2019
NBV at 3 January 2021
16
Deferred taxation asset
9,500
-
7
9,507
-
-
9,507
598
185
783
189
972
8,902
8,724
8,535
425
-
-
425
70
-
495
159
124
283
130
413
266
142
82
9,985
-
68
10,053
23
-
10,076
5,495
1,106
6,601
1,034
7,635
4,490
3,452
2,441
1,655
-
34
1,689
257
-
1,946
1,125
251
1,376
206
1,582
530
313
364
8
-
-
8
-
-
8
6
-
6
-
6
2
2
2
23
86
(109)
-
51
-
51
-
-
-
-
-
23
-
51
Balance at beginning of period
Movement in deferred taxation asset on losses recognised in income
Movement in deferred taxation asset on share based payments recognised in income
Share based payments credit / (charge) recognised in equity
Balance at end of period
The deferred taxation asset provided in the financial statements at 19% (2019: 17%) is as follows:
Losses
Share based payments
Provisions
Capital allowances
2020
£000
886
1,086
-
8
1,980
2020
£000
1,547
79
89
265
1,980
Total
£000
21,596
86
-
21,682
401
-
22,083
7,383
1,666
9,049
1,559
10,608
14,213
12,633
11,475
2019
£000
693
244
(7)
(44)
886
2019
£000
853
33
-
-
886
There are no unrecognised taxation losses (2019: £nil).
The deferred taxation asset of £1,980k has been recognised on the basis that the Group is forecasting to make sufficient levels of
profits to utilise the asset in approximately 2 years.
17
Inventories
Raw materials and consumables
Work in progress
Finished goods
An inventory provision is held of £60k (2019: £nil).
Stock recognised in cost of sales during the period was £18,871k (2019: £21,434k).
18
Trade and other receivables
Trade receivables (net ECL allowance)
Other receivables
Prepayments
2020
£000
3,272
51
1,222
4,545
2020
£000
2,111
492
3,060
5,663
2019
£000
2,149
42
534
2,725
2019
£000
1,702
16
2,281
3,999
Contractual payment terms with the Group's customers are typically zero days. Payment is due upon installation. The above receivables
are shown net of the ECL allowance.
Opening ECL allowance for trade receivables
Allowance utilised in year
Expensed in year
Closing ECL allowance for trade receivables
19
Cash and cash equivalents
Cash and cash equivalents
Balance at end of period
2020
£000
1,072
(245)
890
1,717
2020
£000
11,705
11,705
2019
£000
1,206
(611)
477
1,072
2019
£000
4,435
4,435
All of the Group's cash and cash equivalents are at floating interest rates and are denominated in UK Sterling (£). The Directors
consider that the carrying value of cash and cash equivalents approximates to their fair value. For details of the Group's credit risk
management policies, refer to note 25.
Included within cash and cash equivalents is £361k (2019: £470k) of cash which is restricted by the Group's merchant acquirers as
collateral and is paid to the Group after a set period of deferral days.
20
Share capital
Authorised
Balance at 29 December 2019
50,000,000 Ordinary Shares @ 1p each on 28 April 2020
4,000,000 Ordinary Shares @ 1p each on 23 October 2020
Balance at 3 January 2021
Allotted, issued and fully paid
Balance at 29 December 2019
50,000,000 Ordinary Shares @ 1p each on 28 April 2020
4,000,000 Ordinary Shares @ 1p each on 23 October 2020
Balance at 3 January 2021
Share capital
£000
828
500
40
1,368
828
500
40
1,368
98
Annual Report & Accounts 2020
Annual Report & Accounts 2020
99
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
21
Trade and other payables
Trade payables
Other taxation and social security costs
Other creditors and deferred income
Accruals
22
Deferred taxation liability
Balance at beginning of period
(Credit) to The Consolidated Income Statement for the period
Balance at end of period
There is no deferred taxation liability for the financial year 2020. The deferred taxation
provided in the financial statements in 2019 at 17% was as follows:
Capital allowances in excess of depreciation
23
Provisions for liabilities and charges
2020
£000
7,036
5,563
5,025
4,305
21,929
2020
£000
17
(17)
-
-
-
2019
£000
6,675
2,167
3,197
3,345
15,384
2019
£000
53
(36)
17
17
17
Dilapidations
Product guarantees
Commercial Agreement
Total
2020
£000
788
(531)
526
-
-
783
285
498
783
2019
£000
767
(182)
203
-
-
788
201
587
788
2020
£000
2019
£000
2020
£000
2,093
(1,297)
1,340
-
-
2,136
833
1,303
2,136
2,544
(1,187)
736
-
-
2,093
789
1,304
2,093
-
-
-
-
-
-
-
-
-
2019
£000
1,000
-
-
(13)
(987)
-
-
-
-
2020
£000
2019
£000
2,881
(1,828)
1,866
-
-
2,919
1,118
1,801
2,919
4,311
(1,369)
939
(13)
(987)
2,881
990
1,891
2,881
Balance at beginning of year
Utilised in year
Provided in year
Released in year
Reclassified in year
Balance at end of year
Current
Non current
Balance at end of year
24
Borrowing facilities
The total borrowing facilities available at the end of the financial year were as follows:
Amounts drawn down
Facilities available
Nominal
interest rate
Maturity
date
2020
£000
2019
£000
2020
£000
2019
£000
Term bank loan
Revolving credit facility
Less: Prepaid arrangement fees²
LIBOR + 7.0%
LIBOR + 7.0%¹
October 2023
October 2023
4,500
-
(373)
4,127
4,500
-
(509)
3,991
4,500
3,000
-
7,500
4,500
3,000
-
7,500
¹Interest is payable monthly and is charged at the rate of LIBOR +3.5% on all undrawn amounts on the revolving credit facility.
²Prepaid arrangement fees relate to legal, advisory and facility arrangement fees in relation to the borrowing facility. These
fees are prepaid and amortised over the term of the facility which expires in October 2023.
Changes in loans and borrowings from financing activities. See note 26 for changes in lease liabilities.
At beginning of year
Changes from financing cash flows
Proceeds
Repayment
Total changes from financing activities
Other changes
Transaction costs capitalised (cash)
Interest expense
Interest paid (cash)
Total liability-related other changes
At end of year
25
Financial instruments
2020
£000
3,991
2019
£000
3,903
2,000
(2,000)
2,500
(2,500)
-
-
(39)
674
(499)
136
4,127
(235)
876
(553)
88
3,991
The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and
processes of the Group for managing those risks and the methods used to measure them. Further quantitative information in
respect of these risks is presented throughout these financial statements.
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to
stakeholders. The Group is funded principally by equity although loans have been utilised during the review period of this financial
statements. As at the end of financial year 2020, £4,500k of loans were outstanding (2019: £4,500k). The capital structure of the
Group consists of equity, comprising issued share capital. The Group has no externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Group may return capital to shareholders or issue new shares.
As disclosed in note 4, the Group has a portfolio of leased properties which contain dilapidations clauses. A dilapidations provision is
provided for expected costs of rectifying existing wear-and-tear.
Principal financial instruments
Product Guarantee - The Group gives guarantees against all its products, which in the majority of cases covers a period of 10 years.
A warranty provision is made for the expected future costs of rectifying faults arising within the guarantee period and then
discounted at 10% to a net present value.
Commercial Agreement - The provision for the Commercial Agreement represented the cash consideration that the Group paid as
per the terms of the Commercial Agreement as described in the Financial Review. The provision was reclassified to accruals in 2019
when cash consideration was confirmed at £987k and was paid in October 2020.
The principal financial instruments used by the Group, from which financial instrument risk arises are as follows:
Ÿ Trade and other receivables
Ÿ Trade and other payables
Ÿ Cash and cash equivalents
The carrying value of these financial instruments is considered to approximate to their fair value.
The Group have identified an increased credit risk based on the profile of debtors and as such the expected credit loss expense has
increased. The weighted average loss rate in the year has not increased.
100
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101
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
25
Financial instruments (continued)
Financial assets
At the reporting date, the Group held the following financial assets:
Trade receivables
Other receivables
Cash and cash equivalents
Financial liabilities
2020
£000
2,111
492
11,705
14,308
2019
£000
1,702
16
4,435
6,153
The nature of the Group's business and current stage of its development are such that customers comprise a significant proportion
of its trade and other receivables at any point in time. The Group mitigates the associated risk by close monitoring of the debtor
ledger.
At the end of the financial year 2020, the Group's trade receivables balance was £2,111k (2019: £1,702k). The carrying amount of
financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk without taking
account of the value of any collateral obtained. In the Directors' opinion, there has been some impairment of trade receivables
during the year in the trade receivable ECL allowance table shown in note 18.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method less the expected credit loss (ECL) allowance. Appropriate loss allowances for estimated irrecoverable amounts are
recognised in the statement of comprehensive income at an amount equal to lifetime ECLs. Lifetime ECLs are the ECLs that result
from all possible default events expected over the life of a financial instrument.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects
to receive).
Debt over 1 yr old
Specific Debtors to be written off
Standing Orders
Debt less than 1 yr old
Debt with charges over property
Weighted average*
loss rate
100.0%
100.0%
33.0%
26.0%
0.0%
At the reporting date, the Group held the following financial liabilities, all of which were classified as other financial liabilities:
*The weighted average loss rates in the table above were in place for the financial years 2020 and 2019.
Trade payables
Lease liabilities
Other payables
Accruals
Borrowing facility
Market risk
2020
£000
7,036
8,110
1,344
4,305
4,127
24,922
2019
£000
6,675
6,382
1,466
3,345
3,991
21,859
The Group is not materially exposed to changes in foreign currency exchange rates or interest rate movements.
Trade receivables totalling £552k (2019: £519k) are secured by charges against the debtors' properties.
Interest rate sensitivity
The Group's policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore
usually at fixed rates. At the end of financial year 2020, the Group is exposed to changes in market interest rates through its borrowing
facility at variable interest rates. The exposure to interest rates for the Group's money market funds is considered immaterial.
The following table illustrates the sensitivity of profit to a reasonably possible change in interest rates of +/- 1% (2019: +/- 1%). These
changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a
change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive
to changes in interest rates. All other variables are held constant.
Profit for the year
-1%
+1%
75
75
(75)
(75)
Financial year 2020
Financial year 2019
Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit
risk arises principally from the Group's cash balances and trade and other receivables. The concentration of the Group's credit risk is
considered by counterparty.
The Group gives careful consideration to which organisation it uses for its banking services in order to minimise credit risk. The Group
has a significant concentration of cash held in accounts with one large bank in the UK, an institution with an A credit rating (long term,
as assessed by Moody's). The amounts of cash held on deposit with that bank at each reporting date can be seen in the financial assets
table above. All of the cash and cash equivalents held with that bank at each reporting date were denominated in UK Sterling.
The following table provides information about the exposure to ECLs for trade receivables at the end of financial years 2020 and 2019.
Gross
2020
£000
Loss allowance
2020
£000
338
472
538
1.091
1,389
3,828
(1)
(5)
(14)
(923)
(774)
(1,717)
Net
2020
£000
337
467
524
168
615
2,111
Gross
2019
£000
Loss allowance
2019
£000
454
259
121
674
1,266
2,774
(12)
(11)
(9)
(361)
(679)
(1,072)
Net
2019
£000
442
248
112
313
587
1,702
< 1 month overdue
1-2 months overdue
2-3 months overdue
3-12 months overdue
> 1 Year
Total receivables
All debtors are categorised the same and are not credit impaired.
The range of reasonably possible outcomes within the next financial year is that debtors provided for of £1,717k may be
recovered in full or some of the unprovided debtors may become irrecoverable.
£552k of trade receivables over one year overdue (2019: £519k) are secured by fixed charges over properties and therefore no
provision is made for these balances. £63k of the balance relates to customers setup on standing order (2019: £68k).
102
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103
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
25
Financial instruments (continued)
Liquidity risk management
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Ultimate
responsibility for liquidity risk management rests with the Board of Directors. The Board manages liquidity risk by regularly
reviewing the Group's cash requirements by reference to short term cash flow forecasts and medium term working capital
projections.
The Group's banking facilities have the following financial covenants:
Ÿ EBITDA - monthly test on a rolling 12 month basis
Ÿ Borrowing base - drawn facility has to be less than 75% of assets plus credit card finance/finance receivables
Ÿ Monthly cleandown - drawings on the RCF have to be zero for five business days each month
The Group has increased its covenant headroom during 2020 and forecasts ongoing compliance against these covenants. There is
no judgement applied in assessing compliance against any of these covenants.
At the end of financial year 2020, the Group had £11,705k (2019: £4,435k) of cash reserves. After deducting borrowings of
£4,127k, which are stated net of arrangement fees, net cash of the Group was £7,578k at the end of the year (2019: £444k). The
£3,000k revolving credit facility was undrawn at the end of the year. The Group had net cash of £7,375k at the end of February
2021 (February 2020: net cash of £77k).
The Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as
summarised below:
3 January 2021
Borrowings
Trade payables
Other creditors
Accruals
Lease liabilities
29 December 2019
Borrowings
Trade payables
Other creditors
Accruals
Lease liabilities
Less than
1 year
458
7,036
1,344
4,305
2,551
15,694
Less than
1 year
458
6,675
1,466
3,345
2,508
14,452
1-2 years
2-5 years
458
-
-
-
2,256
2,714
4,881
-
-
-
3,927
8,808
1-2 years
2-5 years
4,881
-
-
-
1,345
6,226
-
-
-
-
2,629
2,629
More than
5 years
-
-
-
-
932
932
More than
5 years
-
-
-
-
1,061
1,061
Foreign currency risk management
Historically, the Group's exposure to foreign currency risk has been limited, all of its invoicing and the majority of its payments are
in UK Sterling. There are no balances held in foreign currencies at each reporting date and it has made no payments in foreign
currencies other than US dollar and Euro. Accordingly, the Board has not presented any sensitivity analysis in this area as it is
immaterial.
The Group's borrowing facility, which previously matured in 2021 was extended by two years during 2020 and now matures in
October 2023. All of the Group's other non-derivative financial liabilities and its financial assets at each reporting date are either
payable or receivable within one year.
Motor vehicles:
Plant and machinery:
Less than one year
Between two and five years
Less than one year
Between two and five years
Land and buildings
Less than one year
Between two and five years
More than five years
2019
£000
-
-
-
-
-
-
-
-
2018
£000
2,907
1,136
198
146
1,431
4,428
2,224
12,470
26
IFRS 16
Assets
At 31 December 2018
Additions
Depreciation
Impairment
At 29 December 2019
Additions
Depreciation
Reversal of impairment
Modification
At 3 January 2021
Liabilities
At 30 December 2019
Modification
Payment
Additions
Interest
At 3 January 2021
Properties
Motor vehicles
Equipment
Total
6,088
219
(1,140)
(487)
4,680
1,265
(1,104)
292
(363)
4,770
5,046
(367)
(1,371)
1,265
326
4,899
3,360
374
(2,540)
-
1,194
4,376
(2,457)
-
(79)
3,034
1,193
(75)
(2,639)
4,376
141
2,996
1,193
(2,498)
(2,498)
4,376
(75)
141
(141)
4,301
2,996
1,145
1,851
2,996
293
-
(155)
-
138
251
(184)
-
(5)
200
143
-
(199)
251
20
215
9,741
593
(3,835)
(487)
6,012
5,892
(3,745)
292
(447)
8,004
6,382
(442)
(4,209)
5,892
487
8,110
143
6,382
(179)
(179)
(3,722)
(3,722)
251
-
20
(20)
251
215
116
99
215
5,892
(442)
487
(487)
5,450
8,110
2,524
5,586
8,110
Reconciliation of movements of liabilities to cash flows arising from financing activities
At 30 December 2019
Changes from financing cash flows
Payment of lease liabilities
Total changes from financing cash flows
Other changes
New leases
Lease modification
Interest expense
Interest paid (cash)
Total liability-related other changes
At 3 January 2021
Liabilities classification
Current (<1 year)
Long term (> 1 year)
5,046
(1,045)
(1,045)
1,265
(367)
326
(326)
898
4,899
1,263
3,636
4,899
The interest expense recognised in the profit and loss statement is in the table above. No expenses relating to short-term leases
and low value leases has been recognised. The total cash outflow for leases is £4,209k. This comprises the payment of lease
liabilities of £3,722k and the interest paid of £487k.
The Group has a number of leases within the business including properties for installation depots and sales branches, vehicles and
plant & equipment. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected in the
consolidated statement of financial position as a right-of-use asset and a lease liability. Leases are either non-cancellable or may
only be cancelled by incurring a substantive termination fee. For leases relating to properties, the Group must keep those
properties in a good state of repair and return the properties to their original condition at the end of the lease.
27
Pension costs
The charge for the period amounts to £915k (2019: £789k) and relates to contributions paid into a money purchase scheme in the
period.
28
Commitments
There were no capital commitments at the end of the financial year 2020 (2019: £nil).
104
Annual Report & Accounts 2020
Annual Report & Accounts 2020
105
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
29
Group companies
Safestyle UK plc holds more than 20% of the share capital of the following companies:
Principal activity
Country of
incorporation
Class of
shares
% held by
parent
Style Group Holdings Limited
Style Group UK Limited*
HPAS Limited*
Windowstyle UK Limited*
Safestyle UK Limited*
Style Group Europe Limited*
Holding company
Holding company
Home improvements and double
glazing contractors
Dormant
Dormant
Dormant
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
*Owned Indirectly
The registered address of all companies is Style House, 14 Eldon Place, Bradford, BD1 3AZ.
30
Related party transactions
During financial year 2020 there were no related party transactions, other than transactions with subsidiaries.
During the year, Safestyle UK plc charged management charges to subsidiaries of £2.4m (2019: £3.2m) and received no dividends
(2019: £nil). At the year end, total amounts receivable from subsidiaries were £17.5m (2019: £9.7m).
Transactions with key management personnel are shown in note 10.
31
Ultimate controlling party
Safestyle UK plc is quoted on the stock exchange (AIM) and ultimate control is exercised by the shareholders.
32
Share based payments
At the end of the financial year 2020 the Group had the following share based payment arrangements:
LTIP
The Group operates an equity-settled Long-Term Incentive Plan ("LTIP") remuneration scheme for Directors and certain
management ("LTIP 2017", "LTIP 2018" & "LTIP 2019").
All schemes require a combination of specific performance based criteria and remaining an employee for a minimum period. The
numbers of share options in existence during the year were as follows:
Outstanding at start of period
Granted during the year
Lapsed in the year
Outstanding at end of period
Exercisable at end of period
2020
2019
Number of
share
options
Weighted
average
exercise price
Number of
share
options
Weighted
average
exercise price
3,224,825
-
(91,836)
3,132,989
-
£nil
-
£nil
£nil
-
3,223,600
1,147,648
(1,146,423)
3,224,825
-
£0.17
£nil
£0.47
£nil
-
Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the
fair value of the options granted during the period.
LTIP 2019
LTIP 2019
LTIP 2018
LTIP 2018
LTIP 2018
Grant date
Vesting date
Lapsing date
Risk free interest rate
Expected volatility
Expected option life (in years)
Weighted average exercise price
Weighted average fair value of options granted
Dividend yield
Remaining contractual life
25/06/2019
25/06/2022
25/06/2029
0.52%
61.22%
3.00
£0.00
64.70p
0.00%
8.49
27/06/2019
27/06/2022
27/06/2029
0.56%
60.79%
3.00
£0.00
65.20p
0.00%
8.49
19/10/2018
18/06/2021
19/10/2028
0.85%
60.90%
2.67
£0.00
56.60p
0.00%
7.81
15/08/2018
18/06/2021
15/08/2028
0.75%
51.90%
2.84
£0.00
33.00p
0.00%
7.63
18/06/2018
18/06/2021
18/06/2028
0.78%
47.10%
3.00
£0.00
55.90p
0.00%
7.47
Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the
fair value of the options granted during the period.
Prior to 2019, at the grant date there was limited share price history for the company on which to calculate volatility. Volatility was
therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London
Stock Exchange. For 2019 options and beyond, there is a sufficiently long share price dataset over which to measure volatility for
the share awards.
RSA
On 21 October 2020, the company granted 1,556,482 share options under a Restricted Share Award Scheme (“RSA Scheme”) to its
Executive Directors and certain key management. The Directors' Remuneration Report provides more details on the scheme.
The numbers of share options in existence during the year were as follows:
Granted during the year
Outstanding at end of period
Exercisable at end of period
2020
Number of
share
options
Weighted
average
exercise price
1,556,482
1,556,482
-
£nil
£nil
-
The share price at the grant date has been used to value the RSA scheme. Management consider this appropriate as there are
no market performance conditions attached to the RSA awards.
The following information is relevant in the determination of the fair value of the options granted during the year.
Grant date
Vesting date
Lapsing date
Weighted average exercise price
Weighted average fair value of options granted
Remaining contractual life
21/10/2020
18/06/2021
21/10/2030
£0.00
£0.29
9.81
106
Annual Report & Accounts 2020
Annual Report & Accounts 2020
107
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
32
Share based payments (continued)
SAYE
On 11 November 2020, the company launched a new share save (SAYE) scheme ("SAYE 2020") in addition to the existing schemes
("SAYE 2018" and “SAYE 2019”) for employees. All schemes allow employees to acquire a certain number of shares at a discount of
20% of the share price prior to the invitation to join the scheme, using amounts saved under a 'Save As You Earn' savings contract.
The numbers of share options in existence during the year were as follows:
Alan Lovell Options
On 20 December 2018, the Group issued 250,000 options to its Non-Executive Chairman, Alan Lovell. In order to vest, Alan Lovell
must be the Chairman at the vesting date. There are no financial targets, but there is a general business performance underpin.
The number of share options in existence during the year were as follows:
Outstanding at start of period
Outstanding at end of period
Exercisable at end of period
2020
2019
Number of
share
options
Weighted
average
exercise price
Number of
share
options
Weighted
average
exercise price
250,000
250,000
125,000
£nil
£nil
£nil
250,000
250,000
-
£nil
£nil
-
Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the
fair value of the options in existence during the year.
Outstanding at start of period
Granted during the year
Lapsed during the period
Outstanding at end of period
Exercisable at end of period
2020
2019
Number of
share
options
Weighted
average
exercise price
Number of
share
options
Weighted
average
exercise price
933,817
1,092,160
(6,900)
2,019,077
-
£0.59
£0.23
£2.51
£0.39
-
803,292
449,800
(319,275)
933,817
-
£0.57
£0.72
£0.71
£0.59
-
Grant date
Vesting date
Lapsing date
Risk free interest rate
Expected volatility
Expected option life (in years)
Weighted average exercise price
Weighted average fair value of options granted
Dividend yield
Remaining contractual life
Alan Lovell Options
20/12/2018
16/07/2021
20/12/2028
0.73%
63.50%
1.57
£0.00
86.30p
0.00%
7.98
20/12/2018
16/07/2020
20/12/2028
0.71%
76.50%
0.57
£0.00
86.30p
0.00%
7.98
Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the
fair value of the options granted during the year.
Grant date
Vesting date
Lapsing date
Risk free interest rate
Expected volatility
Expected option life (in years)
Weighted average exercise price
Weighted average fair value of options granted
Dividend yield
Remaining contractual life
SAYE 2020
SAYE 2019
SAYE 2018
11/11/2020
11/11/2023
11/05/2024
0.02%
80.01%
3.36
£0.23
23.23p
0.00%
3.36
07/06/2019
01/07/2022
31/12/2022
0.49%
59.24%
3.32
£0.72
43.30p
0.00%
2.00
08/05/2018
08/05/2021
08/05/2021
0.92%
48.50%
3.35
£0.49
24.70p
0.00%
0.92
Prior to 2019, at the grant date there was limited share price history for the company on which to calculate volatility. Volatility was
therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London
Stock Exchange.
For 2019 options, there is a sufficiently long share price dataset over which to measure volatility for the share awards.
Prior to 2019, at the grant date there was limited share price history for the company on which to calculate volatility. Volatility was
therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London
Stock Exchange.
For 2019 options, there is a sufficiently long share price dataset over which to measure volatility for the share awards. The total
share based expense / (credit) comprises:
Equity settled - LTIP
Equity settled - RSA
Equity settled - SAYE
Equity settled - Alan Lovell Options
33
Contingent Liability
2020
£000
137
134
74
79
424
2019
£000
(125)
-
26
111
12
The Group uses the services of a large number of self-employed individuals for marketing, sales, surveying and installation
purposes. As disclosed last year, the Group is currently involved in a compliance review by HMRC in respect of the employment
status of these individuals. This review has been ongoing for over three years although there has been no contact from HMRC in
over a year on this matter. The Group has operated this self-employed model consistently for a number of years and there has been
no material change to the underlying business model during this time. The Group continues to monitor developments in legislation
and case law and has sought professional advice to ensure the rules are being applied correctly. The Group believes that its
approach in this area is comparable with many other companies operating in this industry and wider sector where the use of self-
employed agents and contractors is the primary source of specialised resource. Furthermore, the Group is aware that HMRC has
previously assessed some of its self-employed agents and has recovered unpaid taxes from these individuals on that basis. The
Group will continue to work with HMRC to respond to any further queries and believes that it has followed professional advice and
applied the requirements diligently.
Although there has been no communication received on this matter from HMRC in the last 12 months, the Group will continue to
treat this compliance review as an ongoing and open matter. Whilst this remains open, the Group acknowledges that there is a
potential risk of employee status findings by HMRC in respect of one or more groups of self-employed workers, however the Group
continues to believe that the chance of this is unlikely based on the facts and circumstances set out above. It continues to be
impracticable to indicate any potential financial impacts of any status rulings at this time.
108
Annual Report & Accounts 2020
Annual Report & Accounts 2020
109