safestyleukplc.co.uk
The UK’s No.1 for
windows & doors
Safestyle UK plc
Annual Report & Accounts 2021
Safestyle UK plc
Strategic Report
Governance
Financials
Safestyle UK plc
2021, its been another busy year...
2021 has been another year in which we have had to navigate our way through
difficulties caused by the COVID-19 pandemic, in which our priority has always
been the safety of our people and our customers. That aside, we have been very
busy making great progress on our business objectives and focussing on the
long term success of Safestyle and what we need to do to achieve it...
Richard
Stoate
Ÿ UK economy
re-opening with
restrictions
beginning to be
lifted
Ÿ Appointed our
customer service
director Richard
Stoate
Rated ‘Great’ on
Over 25,000
5 star reviews
Ÿ New Customer
Retentions Team
launched
Ÿ Our first 'Young
Apprentice' joins
our new NVQ
training
programme
Ÿ Fit efficiency
project launched
reducing
cancellation rates
Sales conference and awards
Ÿ Goal keeping
legend David
Seaman selected
as Brand Partner
and star of new
TV campaign
Ÿ Sponsorship began
of the David
Seaman podcast
to start building
awareness before
the TV campaign
Ÿ Sales conference
and awards
evening with
special guest
Ÿ Government
start to put plans
in place as
Omicron variant
spikes in the UK
Jan
Mar
May
Jul
Sep
Nov
Feb
Apr
Jun
Aug
Oct
Dec
Ÿ 3rd National lockdown
Ÿ 29th March rules
Ÿ Appointed IMA
Ÿ Appointed Running
Ÿ Filmed our new TV
Home as Creative
Advertising Agency
following pitch
process
relaxed and lockdown
came to an end
Ÿ We received our
Association of
Professional Sales
‘Ethical Sales Business
Accreditation’ - the first
company to receive
this in the sector
with restrictions to
door canvassing and
sales activities
Ÿ Started tracking our
Net Promoter Score
and have seen a
strong upward trend
since
Ÿ
LEAP (Leadership
Excellence
Accreditation
Programme) rolled
out to all ASMs from
January to July
Total as Media
Partner following
pitch process
Ÿ Surge in national
COVID infection
rates ('pingdemic')
impacts customer
availability, supply
chain and
operational
capacity
Ÿ
Launch of New
Consumer Finance
Contracts in place
adverts with David
Seaman, MBE, for
imminent return to
TV advertising
Ÿ
14th installation
depot in Milton
Keynes opened
Ÿ We launched our very
own Safestyle Installer
Training Academy
Ÿ Created new roles for
sales branch
management and
recruited c.100 PAYE
employees into these
roles
Safestyle Technical
Training Academy
Safestyle UK plc
Annual Report 2021
The UK’s No.1 for replacement
windows and doors³
NEW
Training
academy
Launched Q4 2021
Highlights
Contents
01
Welcome page and Highlights
Strategic Report
06
16
18
20
26
42
What we do
Chairman’s Statement
CEO’s Statement
Financial Review
Strategic Highlights
Risk Management
Governance
50
52
54
62
67
Board of Directors
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Independent Auditor’s Report
Financials
78
79
80
81
82
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
Revenue (£m)
2018
2019
116.4
126.2
2020
113.2
2021
143.3
8%
-10%
27%
Underlying profit / (loss) before taxation¹ (£m)
2018
2019
2020
2021
(8.7)
(1.5)
(4.8)
7.6
Reported profit / (loss) before taxation (£m)
(16.3)
(3.8)
(6.2)
2018
2019
2020
2021
6.0
Net cash² (£m)
2018
2019
2020
2021
0.3
0.4
7.6
12.1
CO (tonnes) per frame installed
2
2018
n/a
2019
0.0324
2020
0.0304
6% reduction
2021
0.0246
19% reduction
Average frame price (£)
5%
4%
12%
2018
2019
2020
2021
646
678
704
791
Frames installed
2018
2019
183,184
190,252
3%
2020
163,617
-14%
2021
183,374
12%
20
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21
¹ See the Financial Review for definition of underlying profit / (loss) before taxation
² See the Financial Review for definition of net cash
³ Based on Fensa data
Annual Report & Accounts 2021
01
Safestyle UK plc
Rated great with over
25,000 five star reviews
More people rated Safestyle excellent
than any other window company
Trustpilot March 2022
We come very highly recommended
Figures February 2022
Rated ‘Great’ on
Safestyle currently have
34,005
independent customer
reviews rating us great
In 2021 alone we received
8,113 reviews, of those happy
5,450
customers
gave
five stars!
24,315
of those gave us
5 stars
with a further
3,925
customers happily
giving us 4 stars
Delighted with the service received
Excellent as always
Delighted with the service received
from beginning to end. The whole
process exceeded my expectations,
and I wouldn’t hesitate
recommending this company to
others and using them again.
Excellent fitters who worked in a
friendly yet professional manner to
instal two beautiful new windows in
under three hours (and that
included the clearing up too!).
24/01/22 by Judith Levin
«««««
Excellent as always. Safestyle
have over the last 10 years
replaced all the doors and
windows of our house. I have
gone back again and again as
we have always had good
service and the installers have
been excellent. Would
recommend them and should
we ever move will definitely use
them again.
24/01/22 by Christine Loader
«««««
Rated
4.5/5 stars
on
From a total number of
10,955
customer reviews, a huge
8,304
gave us a
5 star
rating
A huge
would
89%
highly
of customers
recommend us
Professional
Everything was better than expected. For 11 windows, the team finished
the work in 6 hours, including the cleaning. The guys were really polite
and professional. Will recommend to everyone!
21/01/2022 by Martin
«««««
Annual Report & Accounts 2021
03
For great saves,
you can’t beat Safestyle
You’re in safe hands with the UK’s No.1
Strategic
Report
06
What we do
16
18
20
26
42
Chairman’s Statement
CEO’s Statement
Financial Review
Strategic Highlights
Risk Management
Safestyle UK plc
Our nationwide
branches and depots
We have 29 sales branches and
14 installation depots across the UK
Operational headlines
1 Head Office
29 Sales Branches
1 Manufacturing Facility
14 Installation Depots
29 Sales Branches
Our 29 sales branches provide coverage
across the country with our teams
generating enquiries and responding
locally to our customers’ needs.
NEW
Milton Keynes
Installations depot
Milton
Keynes
Installation depot
opened Aug 2021
14 Installation Depots
Our 14 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 2021
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
Marketing
We generate 1,000s of appointments
through various marketing channels
with potential customers each year
Sales
We help 1,000s of customers navigate the
complexity of options that they face when
changing their windows or doors
Survey
We survey over 50,000 properties to
precisely specify products ready for
bespoke manufacture
04
05
06
07
Manufacture
We efficiently manufacture customer specific,
high quality, energy saving products in
Barnsley and distribute to 14 installation depots
Installation
We expertly install the new windows and
doors before recycling the items we
replace in 1,000s of homes every year
Service
We provide complete peace of mind
for every customer on every installation
with our ten year warranty period
Feedback
We contact our customers via email with
a survey of our overall quality of service
feeding into our Net Promoter Score
08
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09
Appearing in a host of high profile
spots such as Coronation Street,
Emmerdale, and Ant & Dec's Saturday
Night Takeaway, over 8 weeks it will be
aired to over 107 million households.
Initial response to the TV campaign is
very positive. David will feature heavily
in all our marketing, sales and canvass
collateral to further cement our
relationship with David in peoples
minds. David is an absolute
professional and here’s a few behind
the scenes photos of him nailing all his
lines first time, well almost...
Safestyle UK plc
Strategic Report
Governance
Financials
You’ll almost be spoilt for choice...
As the UK’s number one we offer a wide range of products, in a variety of styles
and designs, all available in many stunning finishes with a huge choice of glass
and furniture options to name but a few. Here’s just a little taster of what we do....
3 window types
Wide range of
furniture options
Including many door knockers to choose from, letter plates,
spy holes, safety chains, numbers and more...
20 composite door designs
15 colour options
Cotswold
Canterbury
Cheltenham
Exeter
Gloucester
Oxford
Padstow
Casement
Tilt & turn
Sliding sash
Chartwell
Green
Duck Egg
3 garden door options
Anthracite
Black
Blue
Stratford
Warwick
Windsor
Roma
Turin
Modena
Ambleside
White
Red
Rosewood
Oak
Slate
Cream
French door
Patio door
Bi-folding doors
7 furniture colours
Venice
Ilkley
Richmond
Florence
Imola
Milano
Dove Grey
Taupe
Rose Pink
11 PVCu door designs
White
Black
Gold
Polished
chrome
Satin
chrome
Pewter
Brushed
chrome
Lots of handle styles, here’s just a few...
Chatsworth
Burghley
Althorpe
Haddon
Hardwick
Harewood
Windsor
Woburn
Half/full glass
Stable style
Noble
10 colour options
Applicable to PVCu doors, all windows, garden doors and frames
Pro style
Standard
Pad handle
Hero handle
Monkey tail
Pear drop
Pull escutcheon
Curved
Long bar
10 privacy glass options
White
Cream
Chartwell
Flat White
Anthracite
Golden Oak
Rosewood
Irish Oak
Slate Grey
Black
10
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11
Safestyle UK plc
Strategic Report
Governance
Financials
Safestyle UK plc
Strategic Report
Governance
Financials
Safestyle UK plc
Strategic Report
Governance
Financials
Net Promoter Score
The journey of an order
Net Promoter Score
Net Promoter Score (’NPS’) is a simple idea. The system is designed to assess if
you like using a certain product or doing business with a particular company and
whether you would share your experience with others. We started tracking our
NPS from January 2021 and have seen a strong upward trajectory.
Here’s how it works
Safestyle’s NPS
score has seen
a solid upward
trajectory since
inception in
January 2021
Depending on the score that is given to the Net Promoter question, three categories of people can be distinguished:
Promoters = respondents giving a 9 or 10 score
Passives = respondents giving a 7 or 8 score
Detractors = respondents giving a 0 to 6 score
The benefits of a better NPS
Although the Net Promoter Score is calculated by subtracting the % Promoters and the % Detractors, the score itself isn’t a percentage but a number.
Increase customer satisfaction
Detractors
Passives
Promoters
They will rate you from 0-6
on the scale. They are not
particularly satisfied with
the company and there is
a danger they will spread
negative word of mouth.
They will rate you between
7-8. Passives are neutral
about the company and
are receptive to better
deals. They are left out of
the NPS score calculation.
They are very loyal and
highly committed to the
company. Promoters will
rate you between 9-10,
fuelling viral growth
through recommendations.
One of the main benefits of NPS is that you can directly see how satisfied customers are with the service
you offer. We want as many of our customers as possible to be happy and NPS gives us the opportunity
to measure this effectively.
Evaluate and increase customer loyalty
The NPS system goes past just measuring customer satisfaction, but actually determining how many of
these customers are loyal to our brand and will return time and again.
Create more advocates
Reduce detractors
What comes with customer loyalty is customer advocates, those who are going to recommend us to
friends, family and colleagues. Word of mouth is such a powerful marketing tool, especially in the
heavy-spend digital marketing world of today.
NPS Score calculation
It’s simple to calculate your final NPS score, just subtract the percentage of detractors from the
percentage of promoters. For example, if 10% of respondents are detractors, 20% are passives and
70% are promoters, your NPS score would be 70-10 = 60. In general, a score below 0 would indicate
It’s important to focus on how well your business is doing in creating promoters, but it’s also incredibly
important to focus on how to reduce detractors. Knowing our NPS enables us to target the drivers that
will create an unforgettable customer experience which encourages passives and detractors to
improvement needed. A score between 0 and 30 is good, but still room for progress. If an NPS score
become promoters.
is between 30 and 70 this would indicate a great company with far more happy customers than
unhappy. Above 70 and your customers’ love you with lots of positive referrals.
Business growth!
By understanding your net promoter score, you can understand the customers that fit into each
group and their thoughts - good or bad. This enables you to take action to turn detractors into
promoters, greatly improving the customer experience, resulting in positive word of mouth.
All in all, we’re after sustainable business growth and the actionable feedback NPS provides is exactly
what sets us up to achieve this. Promoters are the driving force and we want as many customers as
possible to be in the green. This is why NPS is so beneficial.
1
2
3
4
5
6
Interest registered
Arrange appointment
Distribute to branch
Visit the property
Confirm & book survey
Survey 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.
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 no-obligation quote.
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.
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.
12
11
10
9
8
7
Feedback
Peace of mind
Installation day
Ready for installation
Safestyle manufacturing
Finalise survey to order
Two days after installation is
complete, our customer’s
will receive an email with a
link to a survey. The
questions cover all relevant
aspects of our service so we
can accurately monitor our
performance and this feeds
into our Net Promoter Score.
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 email 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.
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.
12
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12
Annual Report & Accounts 2021
Net Promoter Score (NPS) is a simple idea. The system is designed to assesses if
you like using a certain product or doing business with a particular company and
wether you would share your experience and to others.
Here’s how it works
2021
Safestyle
Net promoter
score 34
Response breakdown
58% of respondents rated Safestyle 9 or 10
18% of respondents rated Safestyle 7 or 8
24% of respondents rated Safestyle 0 to 6
What is a good score?
In general, a score below 0 would improvement
needed. A score between 0 and 30 is good, but still
room for progress. If an NPS score is between 30 and
70 this would indicate a great company with far
more happy customers than unhappy. Above 70 and
your customers love you with lots of positive referrals.
Depending on the score that is given to the Net Promoter question, three categories of people can be distinguished:
Promoters = respondents giving a 9 or 10 score
Passives = respondents giving a 7 or 8 score
Detractors = respondents giving a 0 to 6 score
Although the Net Promoter Score is calculated by subtracting the % Promoters and the % Detractors, the score itself isn’t a percentage but a number.
Detractors
Passives
Promoters
They will rate you from 0-6
on the scale. They are not
particularly satisfied with
the company and there is
a danger they will spread
negative word of mouth.
They will rate you between
7-8. Passives are neutral
about the company and
are receptive to better
deals. They are left out of
the NPS score calculation.
They are very loyal and
highly committed to the
company. Promoters will
rate you between 9-10,
fuelling viral growth
through recommendations.
Response rate
Of the 32,775 surveys sent, a huge 41% of customers, that’s
13,311 customers completed our survey. The median response
rate on the customer Gauge platform is 17.4%, so we lie in the
92nd percentile for response rate which is a great result.
Median response 17.4%
59% no response
41% responsed
17.4%
59%
41%
NPS Score calculation
It’s simple to calculate your final NPS score, just subtract the percentage of detractors from the
percentage of promoters. For example, if 10% of respondents are detractors, 20% are passives and 70%
are promoters, your NPS score would be 70-10 = 60. By understanding your net promoter score and the
customers that fit into each group, you can take action to turn detractors into promoters and improve
the loyalty to your brand.
The overall score for Safestyle respondents in 2021 was 58-24 = 34.
Darlington installations was
the highest scoring depot in
2021 with an impressive NPS
of 46, comfortably within the
great category. In fact,
almost every depot scored
great between 30 and 70.
Depot scoring
Upward tarjectory
Our NPS score has
seen a solid upward
trajectory since
inception. In 2021
detractors dropped
by 19% all the way
down to 17% whilst
our promoter
category has seen a
big increase by 19%
to a huge 64%.
Dec 21
Jan 21
Jan 21
Dec 21
36%
17%
45%
64%
Detractors
Promoters
Annual Report & Accounts 2021
13
Safestyle UK plc
Strategic Report
Governance
Financials
Go figure, Safestyle in numbers for 2021
2,488
Workplace
posts created
8,113
happy customer
Trustpilot
reviews in 2021
4,762,791
minutes
1,075
tonnes
of wood was
put to good use
Knock, knock,
we made lots
of PVC doors too,
over
27,000
A huge
5,450
Trustpilot reviews
gave us 5 stars
Watching 66
movies nonstop
is roughly the
equivalent of
the 6,000
hours of
online training
completed
during 2021
Based on each module completed in a modest 15 minutes.
79,379 hours
3,307 days
472 weeks
9.061 years
of web browsing
Total time people spent browsing our website in 2021.
Based on web browsing 24 hours a day, 365 days a year.
We also recycled
lots and lots
of glass in 2021
3,717
tonnes
We produced
enough glass
to glaze the
Burj
Khalifa
over 3 times!
That’s
well over
400,000
square
metres
of glass
13,311
Net Promoter Score
survey responses,
the same number
of people as
190 full
double
decker
buses
We recycled
lots of post
consumer PVC
2,401
tonnes
We made a lot
of windows
during 2021,
almost
150,000
In total for 2021 we recycled
the equivalent weight of
271 full fuel
tankers!
That’s 11,917 tonnes of all
post consumer waste
31,902
Workplace
reactions
553
tonnes
of rubble
was recycled
10,011,540
page views
24,199
completed
online modules
Nearly 3 times
more than 2020!
3,661,328
new website users
More than
the combined
population of
Manchester
and Liverpool
Over 1,400
new people
joined our
online training
Adding a splash
of colour. In 2021
coloured products
alone came to over
60,000
250 football
pitches long
Roughly equivalent to the length
of 13,207 composite doors we
made in 2021 when laid end to end
John O’Groats
to Lands End
and back...almost twice!
Is the equivalent distance
of the 3,436,562m of old,
inefficient PVC we
have replaced with
our ‘A’ rated energy
saving products
Distance in a straight line
14
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15
Our brand new, market-leading training facility
based at our factory will give us the opportunity
to 'grow our own' fitters. Trained on all aspects
of the job they will gain a multitude of skills with
hands-on training, rigourous inspections and
completing module assessments to give them
everything they need to know to become top
class installers.
This unique training program has been
developed by Safestyle specifically to fast track
exceptional fitters in just 12 months. So far we
have seen very high demand, from nearly 300
applications we are already seeing the future
potential in our fantastic candidates. Here’s a
few of them getting to grips with our ladder
safety training. The future is bright.
Safestyle UK plc
Strategic Report
Governance
Financials
Chairman’s Statement
Introduction
Safestyle has navigated an
extraordinarily turbulent period
since the arrival of the new Board
and Executive Team in 2018. The
combination of the Safeglaze issues
in 2018/19, immediately followed by
the COVID pandemic through
2020/21 has represented a unique
range and intensity of management
challenges. Through this period, the
Group has completed a robust
turnaround and returned to
financial stability, evidenced by
improving profit before tax by
£22.2m between 2018 and 2021,
delivering the best financial
performance since 2017 and with
net cash of £12.1m at the end of 2021.
As importantly through the
turbulence, the Group has
transformed at an accelerating
rate, keeping the best elements of
the fast growth entrepreneurial
industry challenger while
modernising and building the
platform for sustained growth.
Trading and financial performance
The Group's financial performance
for 2021 was encouraging, especially
given the third national lockdown at
the start to the year. Covid
restrictions curtailed our sales
activities for the first two months of
the year although we were able to
maintain a good level of installation
activity by virtue of the record order
book at the start of the year.
Restrictions began to lift by the
beginning of March and the Group
was able to restore the balance
between order intake and
installation activity whilst at the
same time starting to address the
customer service backlog that had
increased in the 12 months since the
first lockdown in March 2020. This
recovery work continued to be
hampered by the ongoing supply
chain disruption as well as skilled
labour shortages that have been an
ongoing challenge as the UK
economy re-opened. I am pleased
to say that, by the end of the year,
the backlog had been recovered
and we are now able to work to a
reduced timescale to service our
customers.
The Group delivered strong progress
on revenues which increased to
£143.3m, representing growth of
13.5% versus 2019 (which is a more
appropriate comparative to assess
underlying performance given the
impact on revenues of the lockdown
in 2020). Alongside this top line
growth, the ongoing initiatives to
improve the Group's margins are
delivering results and gross profit
increased by 37.2% to £43.8m. This
represents an improvement in gross
margin percentage of 527bps
versus 2019. The Group has
reinvested some of this gross profit
growth back into its people,
operational capacity, customer
service and IT, all of which are
critical to deliver on the Group's
ongoing growth aspirations.
As a result, the Group achieved an
underlying profit before taxation¹ for
the full year of £7.6m compared to
an underlying loss in 2019 of £(1.5)m.
Reported profit before taxation was
£6.0m compared to £(3.8)m in 2019.
Basic EPS also turned round from a
loss of (4.0)p in 2019 to 3.5p this
year.
The Group has significantly
increased its covenant headroom in
2021 and the facility will provide a
source of additional liquidity if
required.
The Board does not propose a final
dividend for the year (2020: £nil).
The Group will continue to assess
opportunities to accelerate growth
in line with our strategy, which
encompasses acquisitions, new
business development and organic
core business growth. This will be
the prime call on our cash, but we
do intend, if our net cash position
grows from its current levels after
these growth opportunities, to return
to the dividend list in the relatively
near future.
Balance sheet and dividend
Sustainability
The net cash² position at the end of
the year improved to £12.1m (2020:
£7.6m) as a result of the trading
performance; that is after
repayment during the year of a
£2.4m VAT liability which was
deferred from May 2020.
The Group continues to retain a
£7.5m committed finance facility
which runs to October 2023. £3m of
the Group's £7.5m facility,
representing the revolving credit
facility, continued to be undrawn.
The Group continues to focus on its
approach to sustainability in all its
operations. It continued to recycle
over 95% of all materials removed
from a customer's home during an
installation. We believe that we set
the highest benchmark in the
industry in this regard.
2
I am very pleased to report that the
Group's CO emissions per frame
installed in 2021 have reduced by
19.1% versus 2020 which represents
an early over-achievement of our
targeted 10% reduction by 2024. The
Group has achieved these
reductions through its move to
cleaner renewable energy, realising
the benefits of lower emissions from
its more modern fleet and ongoing
energy usage reduction
programmes in the manufacturing
process.
Vehicle emissions now account for
over 80% of the Group's total and we
are developing long-term plans
which target reductions in this area
for the next fleet replacement cycle.
In light of us exceeding our original
target early, we now see an
opportunity for a further 6%
improvement before 2025. This will
be delivered by continued
incremental improvement ahead of
the introduction, when technology
and infrastructure enables it, of a
fully-electrified vehicle fleet. We will
continue to target the elimination of
the remaining 5% of consumer
waste going to landfill in
conjunction with both existing and
new partners. In addition, we will
conduct a Scope 3 audit of our ten
largest suppliers in 2022 to ensure
that progress on reducing
emissions is also being made
downstream.
Pages 30 to 33 provide further
details on our various sustainability
initiatives and activities in the last
year as well as an overview of our
recycling processes.
Safestyle's people
It is finally my pleasure to recognise
the efforts of all our people at
Safestyle. The business has gone
through a number of challenges
since 2018 and our strong financial
performance this year is
attributable to our skilled, dedicated
and tenacious colleagues.
The ongoing challenges of the
pandemic in 2021 continued to
place a strain on our people who
have worked with great flexibility
through unpredictable times with
spirit and good nature.
Ultimately, it is our team of people
who make the difference and I once
again thank them all for their hard
work. With their support, the Board
looks to the future with confidence.
Alan C Lovell
Chairman
20 April 2022
16
Annual Report & Accounts 2021
¹ See the Financial Review for the definition of underlying profit / (loss) before taxation
² See the Financial Review for the definition of net cash
Annual Report & Accounts 2021
17
Safestyle UK plc
Strategic Report
Governance
Financials
Safestyle UK plc
Strategic Report
Governance
Financials
CEO’s Statement
Faced with another year of
turbulence, our core challenge
through 2021 was to deliver both a
step change in our financial
performance and to accelerate the
pace of our strategic transformation.
I am delighted to report that against
these objectives in 2021, we delivered
our best financial performance since
2017 and made significant progress
across the breadth of our strategic
agenda.
Once again, I have been hugely
impressed by the agility and
resilience of our staff and self-
employed agents. The
overwhelming priority of maintaining
a safe working environment for our
people and our customers posed
day to day challenges through the
year. However, from our return to
work from the first lockdown in May
2020, we were able to sustain
manufacturing and installations
operations continually, despite the
impact of labour and supply
interruptions.
Financial delivery despite
turbulence
The Group's underlying profit before
tax for the year represents a £16.4m
turnaround from 2018's underlying
losses, a £22.2m improvement versus
2018's reported loss before taxation
and a strong step up from 2019 as
we continued to improve margins
and deliver growth. Our financial
delivery in H2 was impacted by an
investment in recovering customer
service levels, which were disrupted
by the operational challenges
associated with increased COVID
isolations in early summer the post
pandemic supply chain shortages
and latterly, the Omicron surge at
the end of the year. Despite this, the
financial progress we have made
demonstrates the underlying
potential and resilience of the
business model as we emerge from
three years of turbulence. The
performance also completes the
execution of the Group's Turnaround
Plan.
Revenue growth of 26.6% vs 2020
and 13.5% versus 2019 showed a
sustained trajectory of performance
and was underpinned by an early
and proactive response to emerging
cost pressure and capacity
constraints. The number of frames
18
Annual Report & Accounts 2021
installed improved by 12.1% year on
year and gross margin increased to
30.5%, an improvement of 540bps vs
2020 and 527bps vs 2019.
Our strong order intake in 2020 built
a record order book for the start of
2021 and allowed us to smooth the
interruptions in sales caused by the
third national lockdown.
Subsequently, the excellent order
intake continued through 2021 giving
us a closing order book 8.4% lower
than 2020's record closing level,
albeit more than 30% higher than
any other year in the Group's history.
The impact of operational disruption
on our customers meant that it was
imperative that we invested in
recovering our customer service
levels in H2. This required central
resource and, inevitably, utilisation of
our installation capacity to complete
orders that were partially delayed or
impacted by disruption. As a result,
we ended the year having returned
to normal levels of service.
The priority given to improving our
customer experience is in line with
our strategic work to focus on the
consumer experience, building our
brand through word of mouth
recommendation in addition to TV
investment. However, the
inefficiency associated with this
recovery underlined the need to
accelerate the modernisation of our
core business IT systems which is
underway.
Our net cash position improved
during the year to £12.1m at year end,
an increase of £4.5m from 2020. This
represents a return to a healthy and
stable financial position and is after
the Group repaid £2.4m of VAT that
was deferred from 2020 as part of
our COVID support measures.
Accelerated strategic delivery
The work done during 2020 enabled
us to accelerate the pace of change
within the business during 2021.
Levelling Up Depots and Sales
Branches: The range of performance
across our sites represents a
significant opportunity and is being
unlocked through embedding
Standard Operating Procedures
('SOPs'), effective IT systems and
through establishing training and
performance management
processes. During 2020, SOPs were
developed for both Operations and
Sales and H2 saw us establish, recruit
and train almost 100 new PAYE sales
branch management roles.
Delivering Profitable Growth:
Our brand development project
completed work on a modernised
brand logo and refreshed brand
communications campaign, fronted
by David Seaman MBE, the former
England goalkeeper. This work was
underpinned by new research and
consumer insight which informs
much of our business strategy during
2022. We continued to advance our
digital marketing capability, which
now encompasses the use of
artificial intelligence, to drive volume
and mitigate cost pressure in the
digital channel. We continued to
move pricing promptly in response
to emerging cost pressure and
capacity constraints and this
delivered revenue growth and
margin improvement.
Transforming the Customer
Experience: Our metrics show that
the vast majority of our customers
have a seamless experience from
sales through to installations, but we
know we have an opportunity to
improve this further. During 2021 we
implemented Net Promoter Score
('NPS') across our operations
divisions, combined with financial
incentives for quality performance
across our depot network. While
disrupted by supply and labour
issues in H2, the underlying progress
is clear and these actions support
our intent of placing customer
experience at the heart of the
business.
2
Embedding Sustainability and
Compliance: Our focus on delivering
against our CO reduction roadmap
allowed us to achieve our previously
disclosed 2024 target during 2021.
This focus will continue as we reset
our targets again and engage all our
staff and suppliers in supporting their
delivery. The year also saw us
become the first major sales force in
the industry to join the Association of
Professional Sales and be awarded
their Ethical Sales Business
accreditation.
Looking forward, we expect the
impact of inflation and consumer
confidence to be reflected in
consumer demand for the year
ahead, albeit our order book, which is
now at record levels, will allow us to
smooth the impact of any mid term
slowing of demand. Furthermore, our
historic performance as a value
brand has demonstrated resilience
through periods of reduced
consumer demand. Meanwhile, raw
material, labour and material cost
inflation are at record levels and we
intend to mitigate these impacts
through pricing whilst maintaining
focus on both costs and productivity
to limit the impact as far as possible.
Our strategic intent remains
consistent into 2022; to build long
term value by consolidating our
position as the clear UK market
leader. Despite the factors above,
the Board remains positive on the
outlook for 2022 as the business
emerges transformed after four very
challenging years and continues to
deliver a return to our historical
strong financial performance and
growth.
Mike Gallacher
Chief Executive Officer
20 April 2022
Go figure, Safestyle in numbers for 2021
2,488
Workplace
posts created
31,902
Workplace
reactions
3,661,328
new website users
More than
the combined
population of
Manchester
and Liverpool
4,762,791
minutes
79,379 hours
3,307 days
472 weeks
9.061 years
of web browsing
Total time people spent browsing our website in 2021.
Based on web browsing 24 hours a day, 365 days a year.
1,624
GDPR courses
completed
10,011,540
page views
24,199
completed
online modules
Nearly 3 times
more than 2020!
Watching 66
movies nonstop
Over 1,400
new people
joined our
online training
13,311
Net Promoter Score
survey responses,
the same number
of people as
190 full
double
decker
buses
is roughly the
equivalent of
the 6,000
hours of
online training
completed
during 2021
Based on each module completed in a modest 15 minutes.
8,113
happy customer
Trustpilot
reviews in 2021
A huge
5,450
gave us 5 stars
Adding a splash
of colour. In 2021
coloured products
alone came to over
60,000
We recycled
lots of post
consumer PVC
2,401
tonnes
We also recycled
lots and lots
of glass in 2021
3,717
tonnes
In total for 2021 we recycled
the equivalent weight of
271 full fuel
tankers!
That’s 11,917 tonnes of all
post consumer waste
1,075
tonnes
of wood was
put to good use
553
tonnes
of rubble
was recycled
We made a lot
of windows
during 2021,
almost
150,000
Knock, knock,
we made lots
of PVC doors too,
over
27,000
250 football
pitches long
Roughly equivalent to the length
of 13,207 composite doors we
made in 2021 when laid end to end
We produced
enough glass
to glaze the
Burj
Khalifa
over 3 times!
That’s
well over
400,000
square
metres
of glass
John O’Groats
to Lands End
and back...almost twice!
Is the equivalent distance
of the 3,436,562m of old,
inefficient PVC we
have replaced with
our ‘A’ rated energy
saving products
Distance in a straight line
Annual Report & Accounts 2021
19
18
Annual Report & Accounts 2021
Annual Report & Accounts 2021
19
Our progress in financial delivery and
against our strategic priorities has
been supported by sustained
investment in our people and in
modernising our systems. The latter
has encompassed the replacement
of legacy systems, system resilience
and most importantly, the
preparation for implementing a new
CRM system in 2022.
successful launch of our new TV
Advertising campaign, our largest
investment in our brand since 2017.
This saw the fruition of our 2021
brand development work. Our
communication focuses on value
with a 'Safestyle Saves' message,
fronted by David Seaman. Initial
results have been positive with the
campaign still underway.
We are particularly proud of the
launch of the Safestyle Academy, the
largest professional development
programme for installers in the UK.
This is a major long term investment
and illustrates our commitment to
raising professional standards
across the industry.
Sustaining the strategic
transformation in 2022
Despite the progress made in 2021,
we have more work ahead to
complete and embed the strategic
changes that are now underway in
the business.
Our key strategies will remain;
Ÿ Delivering our Financial Roadmap
Ÿ
Levelling Up our Depots and
Branches
Ÿ Driving Profitable Growth
Ÿ
Transforming our Customer
Experience
Embedding Sustainability and
Compliance
Ÿ
All supported by our two enabling
strategies; investing in the
development of our people and
modernising our systems and
processes.
Current trading and outlook
Our first quarter has seen robust
order intake supported by the
It was immensely frustrating that as
we emerged from four years of
turbulence and following strong
financial performance in 2021, the
business was hit on 25 January 2022
by a sophisticated cyber attack,
which originated from Russia.
Safestyle was one of a number of
businesses impacted by what we
understand to be a significant
increase in cyber attacks on mid-
size UK businesses. The immediate
response from our staff was prompt
and impressive and we were able to
sustain our core operations, sales,
surveying, manufacturing and
installations throughout the business
recovery period, which is now
complete.
It is clear that our programme of
recent IT investments contributed to
significantly mitigating the impact of
the attack.
Despite our ability to sustain our core
operations, the attack did cause a
level of disruption as we temporarily
reverted to our business continuity
processes. The business now has all
core systems back up and running
and concurrently has further
enhanced our cyber security
measures. Based on the increased
and likely persistent threat to UK
businesses, we plan to accelerate
our existing IT modernisation plan
further during 2022 and 2023.
Safestyle UK plc
Strategic Report
Governance
Financials
Financial Review
Financials
Revenue
Cost of sales
Gross profit
Other operating expenses²
Operating profit / (loss)
Finance income
Finance costs
Profit / (loss) before taxation³
Taxation
Profit / (loss) for the year
Basic EPS (pence per share)
Diluted EPS (pence per share)
Cash and cash equivalents
Borrowings
4
Net cash
Underlying
£000
2021
Non-
Underlying
items¹
£000
Total
£000
Underlying
£000
2020
Non-
Underlying
items¹
£000
Total
£000
2021 vs
2020%
change
2021 vs
2019%
change
113,191
(84,732)
28,459
(32,057)
(3,598)
1
(1,161)
(4,758)
143,251
(99,496)
43,755
(34,519)
-
-
-
143,251
(99,496)
43,755
(1,650)
(36,169)
9,236
(1,650)
7,586
-
(1,623)
7,613
-
-
(1,650)
-
(1,623)
5,963
(1,188)
4,775
3.5p
3.4p
16,351
(4,231)
12,120
-
-
-
113,191
(84,732)
28,459
(1,399)
(33,456)
(1,399)
(4,997)
1
-
-
26.6%
(17.4%)
53.7%
(7.7%)
n/a
n/a
13.5%
(5.5%)
37.2%
(7.8%)
n/a
n/a
(1,161)
(39.8%)
(15.8%)
n/a
n/a
n/a
n/a
n/a
n/a
(1,399)
(6,157)
1,103
(5,054)
(4.3p)
(4.3p)
11,705
(4,127)
7,578
Where appropriate we have included comparisons of the Group's financial and operating performance for 2020 and also
2019 with the latter, in many cases, a more meaningful comparative being prior to the disruption of the COVID-19
pandemic in 2020.
KPIs
5
Revenue £000
Gross margin %
Average Order Value (£ inc VAT)
Average Frame Price (£ ex VAT)
Frames installed (units)
Orders installed
Frames per order
2021
2020
2021 vs 2020
change
2019
2021 vs 2019
change
143,251
30.54%
4,032
791
183,374
43,167
4.25
113,191
25.14%
3,474
704
163,617
39,789
4.11
26.6%
540bps
16.1%
12.4%
12.1%
8.5%
3.4%
126,237
25.27%
3,337
678
190,252
46,412
4.10
13.5%
527bps
20.8%
16.7%
(3.6%)
(7.0%)
3.7%
2021 represents a return to full year profitability and further improvement to the Group's financial performance trajectory
which builds on the performance in H2 2020. The Group moved swiftly to mitigate inflationary pressures and gross margins
have improved materially versus 2020 and 2019 as a result of a number of margin-enhancing initiatives. 2021 also included
further investment in customer service resource and installation capacity as the Group focused on recovery from the
operational turbulence caused by the pandemic in 2020 and early 2021.
The Group made an underlying profit before taxation³ of £7.6m for the year, representing a strong recovery from the losses
sustained in 2020. Net cash also strengthened to £12.1m at the end of the period, an increase of £4.5m versus the prior year.
4
This Financial Review now provides further detail behind the changes in the financial measures and KPIs of the business and
will draw attention to how the performance compares to both 2020 and also 2019 which is, in many cases, a more
meaningful comparative being prior to the disruption of the COVID-19 pandemic in 2020.
1
2
3
4
5
See the non-underlying items section in this Financial Review
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 profit / (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
Net cash is cash and cash equivalents less borrowings
Gross margin % is gross profit divided by revenue
Financial and KPI headlines
Ÿ Revenue increased to £143.3m,
Ÿ
Ÿ
growth of 26.6% compared to the
COVID-impacted 2020 and by
13.5% compared to 2019.
Frames installed increased by
12.1% versus 2020 to 183,374 with
the prior year levels adversely
impacted by the first half COVID
disruption in 2020. Compared to
2019, frames installed reduced by
3.6% with the Group optimising
the balance between utilisation
of its available installation
capacity for new customers
alongside customer service
recovery work.
The Group has continued to
improve average frame price,
achieving a 12.4% increase over
2020 which is attributable to
necessary price increases to
negate input cost inflation,
favourable market conditions
and discount management.
Higher priced composite guard
doors were relatively consistent
year on year at 7.3% of frames
installed compared to 7.6% for
2020.
Ÿ Alongside the average price
improvement, the majority of the
benefit arising from changes
made to the Group's consumer
finance portfolio in the latter part
of 2020 is now being realised.
This has resulted in a reduction in
finance subsidy costs of £1.9m
versus 2020 and £3.3m versus
2019.
5
Ÿ Gross profit increased by 53.7%
and 37.2% over 2020 and 2019
respectively to £43.8m. Gross
margin percentage increased
by 540bps versus 2020 and by
527bps versus 2019 to 30.5%. This
is predominantly attributable to
the improvement in average
frame price, the reduction in
finance subsidy costs and finally,
lower lead generation costs
which are a result of both
internally-driven efficiencies and
favourable market conditions.
The latter effect was most
noticeable in the first half of the
year. Lead generation costs in
the second half of the year
normalised back towards pre-
pandemic levels of 2019.
Ÿ Underlying other operating
expenses² for the period
increased by £2.5m (7.7%)
compared to 2020. 2020 was
materially reduced as a result of
a £1.1m furlough reclaim benefit
as part of the Government's
Coronavirus Job Retention
Scheme ('CJRS') and reduced
levels of operating activity during
the lockdown period in the first
half of the year. Excluding this
impact, the year on year increase
represents ongoing investment in
the Group's installation capacity,
customer service resource and IT.
Finance costs increased versus
2020 despite reduced borrowing
costs due to lower utilisation (and
thus lower fees) in relation to the
£3m revolving credit facility. This
Ÿ
effect was offset by higher
finance costs on lease liabilities
following the renewal of the
Group's vehicle fleet and the
consequential higher interest
expense charged at the
beginning of the lease under IFRS
16.
Ÿ Underlying profit / (loss) before
taxation was a profit of £7.6m for
the period (2020: loss of £(4.8)m)
with the recovery in volume and
improvements in gross margin
described above driving the
£12.4m improvement.
Ÿ Non-underlying items¹ were £1.7m
for the period (2020: £1.4m) and
therefore reported profit / (loss)
before taxation was £6.0m versus
a loss of £(6.2)m in 2020.
Ÿ Net cash improved to £12.1m
compared to £7.6m at the end of
the prior year. The improved
cash position is directly related to
the profitability of the year with
this positive cash generation
being partially offset by
repayment of a £2.4m VAT
liability which was deferred from
May 2020 as part of the Group's
COVID support measures.
5
20
Annual Report & Accounts 2021
Annual Report & Accounts 2021
21
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. In
2021, the Group has incurred some
non-recurring restructuring and
operational costs. Further details are
provided below in this Financial
Review.
Consequently, adjusted measures of
underlying other operating expenses
and underlying profit / (loss) before
taxation have been presented as the
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.
Non-underlying items consist of
non-recurring costs, share based
payments and Commercial
22
Annual Report & Accounts 2021
Agreement amortisation. Non-
recurring costs are excluded
because they are not expected to
repeat in future years. These costs
are therefore not included in these
alternative 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 these alternative
performance measures as such
changes would again potentially
distort the evaluation of the Group's
performance year to year.
Finally, Commercial Agreement
amortisation is also excluded from
these alternative 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 2021 was £143.3m
compared to £113.2m for 2020,
representing an increase of 26.6%
with the prior period comparative
adversely impacted by the cessation
of installation activity between late
March and the end of May 2020.
Revenue versus 2019 represents
growth of 13.5% and this increase is
more representative of the Group's
improving revenue trajectory.
Frames installed volume improved
by 12.1% versus 2020 to 183,374
frames, which is 3.6% lower than 2019.
The revenue improvement exceeds
the volume performance for both
comparative periods as a result of
improvements in the following areas:
Ÿ
Ÿ
Ÿ
Ÿ
The average frame price
increased by 12.4% year on year
to £791 (2020: £704, 2019: £678).
The impact of necessary list
price increases alongside the
continued drive to reduce
discount levels and optimise
margins are the main
components to this
improvement.
The growth in the average
frame price was also despite a
marginal adverse average
price effect due to a lower mix
of higher-priced composite
guard doors of 7.3% versus 7.6%
and 9.2% for 2020 and 2019
respectively.
Alongside the favourable
average frame price change,
the results of the Group's
project to reduce finance
subsidy costs incurred as part
of its consumer finance offering,
which was launched in H2 2020,
are now being almost fully
realised this year. These
reductions follow changes to
our promotional finance
portfolio in late 2020 which
have generated a £1.9m benefit
versus 2020 and a £3.3m
benefit versus more
comparable volumes and full
year cost of 2019.
Following a comprehensive re-
tender process with both
existing and potential new
partners at the start of 2021, we
expect finance subsidy costs to
be a minimal net cost to the
Group. At the same time, we
Ÿ
remain focussed on ensuring
we have a market-leading set
of payment options available to
our customers.
The average number of frames
per order has also increased to
4.25 in the year, which
represents an increase of 3.4%
and 3.7% over 2020 and 2019
respectively. The Group has
driven a higher order size which,
alongside the average frame
price growth described above,
has resulted in an increase in
the average order value versus
2020 of 16.1% to £4,032. Focus
on improving metrics such as
these has underpinned the
improvements in the Group's
gross margin.
Gross profit
Gross profit was £43.8m, growth of
53.7% over 2020 and 37.2% over 2019.
The Group's gross margin
percentage improved significantly
by 540bps to 30.5% versus 2020's
25.1%. This also represents a 527bps
increase versus the 25.3% gross
margin percentage of 2019.
The combination of the installation
volume increase alongside the
average price and finance subsidy
reductions described above were all
contributors to the growth in gross
profit and the improvement in the
Group's gross margin percentage.
Further components behind the
improving trends were as follows:
Ÿ
Ÿ
The Group began the year with
an order book that was 83%
ahead of the prior year which
proved important in protecting
the Group from selling
restrictions at the start of the
year when a third national
lockdown was required in
response to the COVID
pandemic. By the end of 2021,
the order book had reduced by
8.4% versus the record closing
position of 2020. The order
book remains healthy with
2021's closing position still over
a third higher than any other
year excluding 2020. The year
on year reduction in the record
opening order book equates to
a £0.4m gross margin benefit in
2021.
The third national lockdown in
the UK restricted the Group's
selling and marketing activities
in January. Once the Group
was able to restart activities in
February 2021, the Group
experienced a strong consumer
response that was similar to
that experienced in the second
half of 2020. Lead generation
activities were increased across
all lead sources and costs per
lead remained low compared
to pre-pandemic levels. As
lockdown restrictions lifted in
late April and May, lead costs
increased and have returned to
levels similar to those in 2019.
Alongside the lead generation
cost context described above,
the Group has continued to
make strong progress on lead
management, conversion
optimisation and sales
performance which has
reduced cancellation rates and
mitigated some of the
inflationary pressures of lead
generation.
As a result of all these factors,
the cost to order intake ratio for
2021 was 8.6% lower than in
2020.
The improvement in gross profit
versus the prior period is also
despite a £0.7m reclaim in 2020
under the CJRS scheme to
contribute to the costs of the
Group's furloughed factory
employees during the 2020
lockdown.
Although there has continued
to be disruption caused by
COVID-required isolations and
illness across 2021, the return to
higher / more normal levels of
activity across the period has
driven an improved utilisation
of fixed costs included within
cost of sales. This has also
contributed to the improvement
in the Group's gross margin
percentage.
Ÿ
Ÿ
Ÿ
Ÿ
Underlying other operating
expenses
Underlying other operating expenses
were £34.5m for the year, which
represents an increase of £2.5m
compared to both 2020 and 2019.
2020 comparatives are reduced by
the receipt of a £1.1m furlough claim
and thus 2019 is a more meaningful
comparative to understand the
operating cost base of the business.
The key factors behind the increase
versus 2019 are as follows:
Ÿ
Ÿ
Ÿ
The Group has invested in both
its customer service resource
levels and its installations
capacity in the last 18 months.
Since 2019, the Group has re-
opened its Crawley depot and
also opened new depots in
Nottingham (prior to the end of
2020) and Milton Keynes
(August 2021). In conjunction
with this increased depot
footprint, further resources have
been added to manage
operations.
The Group has increased
investment in additional IT
licensing and infrastructure
costs as it continues to rollout
new technology. This includes
further upgrades to network
security and resilience
alongside the implementation
of Office 365 and Microsoft
Teams. The latter have
facilitated the continuation of
operations throughout the last
two years within the context of
the COVID pandemic which was
necessitated by more people
working remotely than prior to
the pandemic. This investment
has also helped to mitigate the
impact of the cyber attack in
January 2022.
Finally, marketing spend
increased by £0.3m versus 2019
which includes costs of brand
consultancy, consumer insight
research and other services
incurred in advance of the
Group's return to TV advertising
in February 2022.
Underlying profit / (loss) before
taxation
Underlying profit before taxation was
£7.6m versus a loss in 2020 of
£(4.8)m and a loss of £(1.5)m for
2019. This loss is before the non-
underlying items described below.
Annual Report & Accounts 2021
23
Ÿ
Following a comprehensive re-
selling and marketing activities
its customer service resource
Ÿ
tender process with both
existing and potential new
partners at the start of 2021, we
expect finance subsidy costs to
be a minimal net cost to the
Group. At the same time, we
remain focussed on ensuring
we have a market-leading set
of payment options available to
our customers.
The average number of frames
per order has also increased to
4.25 in the year, which
represents an increase of 3.4%
and 3.7% versus 2020 and 2019
respectively. The Group has
alongside the average frame
price growth described above,
has resulted in an increase in
the average order value versus
2020 of 16.1% to £4,032. Focus
on improving metrics such as
these has underpinned the
improvements in the Group's
gross margin.
driven a higher order size which,
Ÿ
Gross profit
Gross profit was £43.8m, growth of
53.7% versus 2020 and 37.2% versus
2019. The Group's gross margin
percentage improved significantly
by 540bps to 30.5% versus 2020's
25.1%. This also represents a 527bps
increase versus the 25.3% gross
margin percentage of 2019.
The combination of the installation
volume increase alongside the
average price and finance subsidy
reductions described above were all
contributors to the growth in gross
profit and the improvement in the
Group's gross margin percentage.
Ÿ
Ÿ
Ÿ
activities were increased across
(September 2021). In
in January. Once the Group
was able to restart activities in
February 2021, the Group
experienced a strong consumer
response that was similar to
that experienced in the second
half of 2020. Lead generation
all lead sources and costs per
lead remained low compared
to pre-pandemic levels. As
lockdown restrictions lifted in
late April and May, lead costs
increased and have returned to
levels similar to those in 2019.
Ÿ
Alongside the lead generation
cost context described above,
the Group has continued to
make strong progress on lead
management, conversion
optimisation and sales
performance which has
reduced cancellation rates and
mitigated some of the
generation.
As a result of all these factors,
the cost to order intake ratio for
2021 was 8.6% lower than in
2020.
versus the prior period is also
despite a £0.7m reclaim in 2020
under the CJRS scheme to
contribute to the costs of the
Group's furloughed factory
employees during the 2020
lockdown.
levels and its installations
capacity in the last 18 months.
Since 2019, the Group has re-
opened its Crawley depot and
also opened new depots in
Nottingham (prior to the end of
2020) and Milton Keynes
conjunction with this increased
depot footprint, further
resources have been added to
manage operations.
The Group has increased
investment in additional IT
licensing and infrastructure
costs as it continues to rollout
new technology. This includes
further upgrades to network
security and resilience
alongside the implementation
of Office 365 and Microsoft
Teams. The latter have
facilitated the continuation of
operations throughout the last
two years within the context of
necessitated by more people
working remotely than prior to
the pandemic. This investment
has also helped to mitigate the
impact of the cyber attack in
January 2022.
Ÿ
Finally, marketing spend
which includes costs of brand
consultancy, consumer insight
research and other services
incurred in advance of the
Group's return to TV advertising
in February 2022.
The improvement in gross profit
increased by £0.3m versus 2019
inflationary pressures of lead
the COVID pandemic which was
Although there has continued
operating expenses compared to
to be disruption caused by
2020 is a similar quantum to the
COVID-required isolations and
variance versus 2019 and is driven by
The increase in underlying other
The further components behind the
illness across 2021, the return to
the new depot openings and
improving trends were as follows:
higher / more normal levels of
ongoing investment in IT and
Ÿ
The Group began the year with
an order book that was 83%
ahead of the prior year which
activity across the period has
customer service resource. The
driven an improved utilisation
increase of £2.5m is, in reality, less on
of fixed costs included within
a like for like basis because 2020
cost of sales. This has also
expenses were reduced as a result of
proved important in protecting
contributed to the improvement
the business activity being curtailed
the Group from selling
in the Group's gross margin
for over 2 months in full lockdown
restrictions at the start of the
percentage.
year when a third national
lockdown was required in
response to the COVID
pandemic. By the end of 2021,
Underlying other operating
expenses
between late March and May 2020.
Furthermore, 2020 included £1.1m
received for the Group's CJRS
reclaim for furloughed staff costs
which further reduced operating
the order book had reduced by
Underlying other operating expenses
expenses in 2020.
8.4% versus the record closing
were £34.5m for the year, which
position of 2020. The order
book remains healthy with
represents an increase of £2.5m
Underlying profit / (loss) before
versus both 2020 and 2019. 2020
taxation
2021's closing position still over
comparatives are impacted by the
a third higher than any other
receipt of a £1.1m furlough claim and
Underlying profit before taxation was
year excluding 2020. The year
thus 2019 is a more meaningful
£7.6m versus a loss in 2020 of
on year reduction in the record
comparative to understand the
£(4.8)m and a loss of £(1.5)m for
opening order book equates to
operating cost base of the business.
2019. This loss is before the non-
a £0.4m gross margin benefit in
The key factors behind the increase
underlying items described below.
2021.
Ÿ
The third national lockdown in
the UK restricted the Group's
versus 2019 are as follows:
Ÿ
The Group has invested in both
Safestyle UK plc
Strategic Report
Governance
Financials
Financial Review
The holiday pay release represents a
release for part of an accrual made
at the end of 2020 which arose as a
result of the impact of the shutdown
of operations and resultant extension
of 2020 leave entitlement into future
holiday years in line with the
legislation. This increased the level
of deferred holiday entitlement of our
people at the end of 2020 which was
recognised as an accrual in 2020
and will reverse in full by 2023. This
item was excluded from the Group's
underlying performance measures
to ensure performance of the
business is not skewed by both the
expense in 2020, or its subsequent
use in 2021/22.
The Group incurred £0.3m (2020:
£0.3m, 2019: £1.1m) of restructuring
and non-recurring operational costs
which reduced the Group's
overheads in some areas. In
addition, non-recurring costs of
£0.1m were incurred linked to the
issuance of the Restricted Share
Award in June 2021 (see note 32).
As reported in the last three years,
the Commercial Agreement 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.
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 five years which
matches the term of the non-
compete arrangement.
Share based payment charges
predominantly increased versus
2020 due to charges in relation to the
Restricted Share Award granted in
October 2020 that vested in June
2021.
This builds on significant investment
in profile stock in 2020 which was
also to underpin continuity of supply;
this stock remains in place.
Furthermore, the overall net cash
inflow from operating activities is
also after the Group has repaid
£2.4m of VAT that was deferred in
2020 as part of the Group's COVID
support measures. The final
payment of £0.1m was made in
January 2022.
Capital expenditure increased to
£1.2m versus £0.6m in 2020 with the
prior year representing a reduced
level of activity similar to operating
expenses. The majority of the capital
expenditure in the year was in
relation to ongoing investment in the
Group's IT infrastructure and
systems.
Dividends
The Board does not propose a final
dividend (2020: £nil). As reported in
the Chairman's statement, based on
current performance expectations,
the Group will generate further net
cash by the end of 2022. The Board's
capital allocation policy is to firstly
utilise surplus cash to fund
forthcoming strategic initiatives. If all
current initiatives are funded as
required and surplus cash remains,
the Board signals its intent to return
to the dividend list in the relatively
near future.
Rob Neale
Chief Financial Officer
20 April 2022
The items classified as non-recurring
costs in the Consolidated Income
Statement, the share based
payment charges 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 profit / (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 3.5p for the year
compared to a loss of (4.3)p for
2020. Diluted earnings per share
were 3.4p (2020: loss of (4.3)p, 2019
loss of (4.0)p). The basis for these
calculations is detailed in note 9.
Net cash and cashflow
As reported previously, the actions
taken last year to protect liquidity
and maintain the Group's borrowing
facility ensured that it could invest
quickly to facilitate a strong restart to
trading following cessation of
business activity for the first
lockdown in 2020. The Group
continued to increase its net cash
last year, closing at £12.1m versus
£7.6m at the end of 2020. £4.5m of
the Group's £7.5m facility, being that
of the term loan, remains 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
£9.6m (2020: £3.4m). The inflow for
the period reflects the strength of the
Group's operating model with
trading results correlating positively
with cashflow generation.
Partially offsetting the impact of this
positive profit to cash conversion
was further working capital
investment of £0.7m in the Group's
raw material inventories last year to
protect ‘on time in full’ fulfilment from
short-term supply chain disruption.
Non-underlying items
A total of £1.7m has been separately treated as non-underlying items for the year (2020: £1.4m, 2019: £2.3m). The current
year's total consists of £0.5m of non-recurring costs (2020: £0.5m, 2019: £1.9m), a £0.7m share based payment charge
(2020: £0.4m, 2019: £0.0m) and £0.5m (2020 and 2019: £0.5m) of Commercial Agreement (Intangible Asset)
amortisation. The table below shows the full breakdown of these items:
Non-underlying items
Holiday accrual
RSA related costs
Litigation costs
Restructuring and operational costs
Modification of right-of-use assets and liabilities
Impairment of right-of-use assets
Reversal of prior year impairment of right-of-use assets
IT project Impairment
Commercial Agreement service fee
Total non-recurring costs (note 7)
Commercial Agreement amortisation (note 14)
Equity-settled share based payment charges (note 32)
2021
£000
(79)
147
90
300
(83)
122
-
14
-
511
452
687
2020
£000
470
-
74
266
5
-
(292)
-
-
523
452
424
2019
£000
-
-
-
1,058
-
692
-
113
(13)
1,850
452
12
Total non-underlying items
1,650
1,399
2,314
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25
Proudly transforming
homes since 1992
The window & door specialists
Strategic
Highlights
28
30
34
36
Delivering profitable growth
Embedding sustainability
Technical training academy
Safestyle people
Safestyle UK plc
Strategic Report
Governance
Financials
Safestyle UK plc
Strategic Report
Governance
Financials
Delivering profitable growth
Delivering profitable growth
We have modernised our brand logo and have a refreshed brand communications
campaign. Partnering with the goal-keeping legend David Seaman, MBE, just
seemed like the perfect fit. Known as ‘safe hands’ for making great saves,
Safestyle are well known for saving our customers money and for being the safe
choice.
Rationale of logo evolution
This is the result of extensive research and development to move towards a more modern, fresh feel.
Whilst there are many similarities, which is important, the new evolved version creates a more
recognisable and legible brand identity. Let’s take a look below at the changes and why...
The UK’s No.1
Original logo
New evolved logo
The original Safestyle logo has been in use since
the company was established in 1992 and
helped the business to create a strong,
memorable brand identity. This is why we didn't
want a complete new direction, instead more of
an evolved brand logo. Retaining recognisable
aspects whilst modernising and making the
logo cleaner and more legible.
The red has been brightened to feel more fresh
and contemporary. This will make it stand out
from the crowd and will work stronger on print &
digital artwork executions.
We have also introduced a space between the
words ‘safe’ and ‘style’ to create a clearer and
easier to read brand name.
The handwritten style font has been slightly
updated to make it more legible and in a more
contemporary feel.
The rectangular shape remains the same,
representing stability, trust and reliability.
Keeping the frame is also a nice nod towards
our product. The ‘UK’ has also been removed
from the new logo.
Safestyle tone of voice
Simple
The Safestyle brand speaks in a way that’s
simple, direct, reassuring and reiterative.
Simple because we don’t just help people save
money. We save them time and hassle too.
Direct because we want to jolt people into
action. We do that with urgency and clarity.
Reassuring because we’re a safe pair of hands.
The way we speak should build trust. Finally,
reiterative because sometimes repetition can
help to land our key messages.
Brand toolkit
As part of our evolving
visual identity we have
created a brand toolkit.
This toolkit looks at a
whole range of brand
aspects; how we use our
logo, the application of
colour, the fonts we use
and how we integrate our
new media campaign
front man David Seaman.
It’s also not just about the
visuals, it’s how we talk to
our customers, the
phrases and messaging
we use and our overall
tone of voice.
Direct
Reassuring
Reiterative
We have modernised our brand logo and have a refreshed brand communications
campaign. Partnering with the goal keeping legend David Seaman, MBE, just
seemed like the perfect fit. Known as ‘safe hands’ for making great saves, Safestyle
are well known for saving our customers money and for being the safe choice.
Rationale of logo evolution
This is the result of extensive research and development to move towards a more modern, fresh
feel. Whilst there are many similarities, which is important, the new evolved version creates a
more recognisable and legible brand identity.
Original logo
Brand toolkit
As part of our evolving visual identity we have created a
brand toolkit. This toolkit looks at a whole range of brand
aspects; how we use our logo, the application of colour, the
fonts we use and how we integrate our new media
campaign front man David Seaman. It’s also not just about
the visuals, it’s how we talk to our customers, the phrases
and messaging we use and our overall tone of voice.
New evolved logo
The UK’s No.1
Simple
Direct
Reassuring
Reiterative
You’re in safe hands with Safestyle
It’s an exciting time at Safestyle. Not only have we evolved our brand and visual
identity, we have also launched a brand new media campaign fronted by our
newly appointed brand ambassador, the one and only David Seaman, MBE.
As the UK’s number one, we wanted to partner with someone who is also known
for being the best in their field. The synergy between David and Safestyle
makes this a winning team, both are synonymous for great saves and for being
a safe pair of hands.
David’s successful career has spanned more than two decades. Best-known
for being Arsenal’s and England’s number one goal keeper and possibly one of
the best of all time. Following retirement, his on-screen presence and likeable
personality made him a popular choice for podcasts, chat shows and various
TV appearances including the high profile ‘Dancing on Ice’.
The first advert was filmed in our own
Nottingham Depot where David is
announced as our new hire, explaining to
the world why he is such a great fit and why
he joined the UK’s No.1 for windows & doors.
David is an absolute professional and here’s
a few behind the scenes photos of him
nailing all his lines first time, well almost...
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Safestyle UK plc
Strategic Report
Governance
Financials
Embedding sustainability
We are committed to recycling as much waste as possible. We've refined our
recycling programmes to the point where we can recycle 95% of the waste we
remove from a house, reducing landfill to an absolute minimum.
01
02
03
04
05
06
Out with the old, in with the new
It’s the big day. Our team of expert fitters install
a beautiful new set of energy efficient windows
made to the happy customers exact
requirements and specifications.
The old windows are taken away
After the installation and clean up is completed,
all the old windows (and any other waste) are
loaded onto the van and brought back to the
installation depot ready for the next step.
Sort and separate materials
Once the waste arrives back at the depot, we
sort and separate all the different materials
ready to be transported to our factory based
in the heart of Yorkshire.
Materials are expertly recycled
All the sorted and separated materials arrive
back at our dedicated recycling centre.
Whatever we can't use ourselves, we pass on
to expert recyclers who can.
New energy efficient glass is made
Old glass, (called 'cullet') is crushed ready to be
recycled. Every month 80 tonnes of clean glass
cullet was re-used and made into brand new,
energy saving glass for our ‘A’ rated windows.
New bespoke windows are born
Highly-skilled craftsmen combined with state-
of-the-art machinery precisely manufacture
new windows to the customer’s exact order
requirements.
11,916
tonnes
in total of post
consumer waste
recycled in 2021
What we can’t reuse we
send to a recycler who can...
Last year we recycled vast amounts of
various materials. Anything we couldn't use
like post consumer plastic was sent off to be
recycled into drainpipes and plastic decking.
Huge amounts of wood is reused for Biomass
heating fuels and metal waste gets melted
down and is reused in various forms.
3,739 tonnes of general waste
3,717 tonnes of glass
2,401 tonnes of post consumer PVC
1,075 tonnes of wood
553 tonnes of rubble
302 tonnes of virgin PVC
73 tonnes of metal
56 tonnes of card
Our lorries come back full
We certainly pack it in
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.
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 out 3 lorries per day -
saving 250,000 miles in transport each year.
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Safestyle UK plc
Strategic Report
Governance
Financials
Embedding sustainability
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...
We care about our planet and strive to lead the way in our industry in looking after it.
Cool Temper furnace process
The individual panes of glass are loaded onto
the in-feed bed of the Cool Temper furnace.
The glass is then taken into the furnace on
rollers ready for the transformation.
Super heating the glass to approximately
700°C before being rapidly cooled.
The toughened glass is now ready for the next
stage of its manufacturing process.
Energy saving project
After toughening, a fragmentation test is performed.
We smash the glass and count the fragments within
a small area. To pass the 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 test with flying colours.
This project has resulted in huge amounts of
energy being saved at our manufacturing facility,
the equivalent of around 150 homes per year!
Before
140 fragments
After
80 fragments
Electric charging points
As more of our vehicle fleet
become hybrid and full electric
we have installed various
charging points at our factory.
Designated cycle parking
To encourage local workers to use
leg power rather than petrol
power, we have installed a
designated cycle parking area.
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
Investing in our future
Safestyle Technical
Training Academy
Brand new, market-leading facility
In November 2021, we were proud to launch our
brand new, market-leading technical training
facility, The Safestyle Academy, based at the
headquarters of our Operations Division at
Wombwell. This long-planned strategic
initiative represents a £1m investment in
developing a pipeline of professionally trained
installers, surveyors and service engineers to
support our growth ambitions for the future. The
Academy will also provide continuing
professional development for those already
qualified.
Our first program was the 'Fast-Track Programme'
for Installers which takes new entrants through an
intensive 12 month mix of classroom and on the
job training, delivering fully qualified fitters who
can then take on the role within Safestyle. We
were delighted that we received more than 300
applications for the 30 places available and all
applicants were subject to a rigorous selection
process that emphasised practical skills and
attitude. Our first cohort of this leading
programme are progressing well and looking
forward to 'graduating' later in 2022.
We’ll be putting
30 trainees
though our
very own Safestyle
training academy
every year...
In addition, the Academy is now providing
support to our existing Youth Programme, which
is a formal apprenticeship scheme, and also to
our Continuous Improvement Programme. In
2022, we plan to widen the scope of the
Academy to offer similar opportunities for
existing and aspirant surveyors and service
engineers.
This investment is based on a clear strategic
intent to provide the best customer experience
and raise standards across the industry. Over
time we are confident that the Safestyle
Academy will be recognised as the leading
centre in the UK for developing the best
installers, service engineers and surveyors.
Skills
Knowledge
Coaching
Teaching
Development
Learning
Experience
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Safestyle UK plc
Strategic Report
Governance
Financials
Safestyle people
2021 people review
2021 was far from the normal year
that we had hoped for following the
extraordinary events of 2020.
Returning from the Christmas break
we were immediately faced with the
third national lockdown that
prevented our canvass force from
working and restricted our sales
activities. This pattern of disruption
continued throughout the year with
localised restrictions, increased
infection rates and associated
isolation requirements impacting
every area of operations and
deferring the keenly-awaited return
to office working.
Developing our people
Developing our people is a strategic
enabler to the delivery of our
business goals. During 2021 we
made significant progress through
a range of strategic initiatives:
Ÿ
We invested in establishing
dedicated training roles for the
first time in operations,
customer services, sales and
canvass.
We launched a Youth
Programme apprenticeship
scheme for window installers.
We designed and built our
Operations Training Academy,
launching our Adult Fast-Track
installer training programme in
November 2021.
Ÿ
Ÿ
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.
HR and Marketing teams
collaborating to ensure that our
brand values and consumer insight
work is translated into an engaging
internal communication
programme. This will be further
developed into our external
employer brand to promote
Safestyle as an attractive
employment proposition, linking to
our new TV advert and our brand
ambassador, David Seaman with
the strapline 'your career is in safe
hands with Safestyle'.
Compliance
Labour market challenges
Our focus on compliance training
continued to be strong in 2021 with
priority given to health and safety,
GDPR, COVID, Equality, Diversity and
Inclusion (EDI), cyber security and
policy awareness. We further
developed the use of our e-learning
platform and saw an increase in
employee and contractor
engagement in the tools available
to them for learning. In total, 16,000
modules were completed by our
staff and agents in the 12 months –
double that completed in 2020.
A combination of COVID disruption,
demographics and existing skill
shortages presented a challenging
labour market for many specialist
roles during 2021. This spurred us to
modernise our recruitment and
retention processes, with a
particular focus on self-employed
contractors which in turn allowed us
to increase our headcount despite
the headwinds.
Ÿ
Ÿ
Ÿ
Ÿ
We introduced a Master
Installer scheme that
recognises and rewards those
installers with exemplary safety
and quality records.
We fundamentally redesigned
our sales branch management
roles and then recruited
almost 100 staff into these
roles. This important change
was driven by our strategy to
level up performance across
the UK. Having made great
progress over the previous 18
months, the next step required
investment in training and
continuous development of the
management team to ensure
that they and their teams can
excel, enabling us to take the
best of what we do and make it
scalable and sustainable.
We delivered 'LEAP', our
Leadership Accreditation
Programme to our area sales
managers, assistant
managers, and to some of our
identified high performers in
our Commercial Team.
We launched our
Manufacturing Cell Leader
Training Programme which
includes modules to develop
skills in working with people,
managing self and others,
providing direction, managing
change, utilising resources,
and achieving results.
Developing our culture
We are committed to developing a
culture that puts our customers at
the heart of everything we do. In
2021, we appointed Richard Stoate
to the new role of Customer
Services Director to lead the delivery
of improved service levels and
communication. This was
supported by new support roles and
additional customer service agents.
We redesigned the onboarding
process for our call handlers and
introduced a dedicated trainer and
a new performance related pay
system. Outside of the customer
services department, we have
introduced the Net Promoter Score
system, backed by new incentives in
our installations network to drive
customer focussed behaviour.
Communication
The return from lockdown and even
to a partial lifting of remote working
enabled us to physically reconnect
with our people through more face-
to-face briefings, Depot Roadshows,
and a celebratory Sales Conference
in October. We supported this
interaction with our TEAM and Next
Instalment magazines as well as
with video updates from the
Executive Team.
In 2022, we will be delivering our new
communication strategy, with our
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Safestyle UK plc
Strategic Report
Governance
Financials
Safestyle people
Diversity and inclusion
We are committed to ensuring that
we provide a level platform for
people to access opportunities, to
increase our diversity, and to ensure
that we encourage inclusivity.
Working to improve the gender
balance in our organisation, we
have improved our support for
those on maternity leave with an
enhanced pay policy, and we have
expanded our already successful
Women in Commercial initiative to
a Women in Safestyle forum. Since
2017, we have significantly reduced
our gender pay gap, we are
succeeding in encouraging women
into historically male dominated
areas of the business, although
there is much more work to do in
this area.
We are also keen to support our
people to develop their
understanding of different cultures;
we have developed an information
programme to encourage people to
ask questions and share
information. A current example is
our Ramadan communication
programme designed to increase
knowledge, and awareness during
the Holy Month of Ramadan which is
observed by many of our
colleagues. The programme
concludes with an invitation for
colleagues to celebrate the
breaking of the fast together on 27th
April – an event that this year will be
even better as it will not be
impacted by the need to maintain
social distance.
Looking forwards
Despite 2021 being another volatile
year both personally and
professionally, Safestyle staff and
agents continued to give their best
and show their resilience,
determination, energy, and drive.
The business and its people
achieved great things in the face of
adversity, setting us up for a
successful 2022.
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89% of customers would
highly recommend us
Figures from Review Centre, February 2022
Risk
Management
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 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.
The Group has a Compliance Committee which was chaired by Julia Porter, Non-Executive Director throughout 2021
and which will be chaired by Rob Neale, Chief Financial Officer, in 2022. 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.
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 has been providing additional independent assurance on key processes
and controls during 2021. This programme will continue in 2022.
Ÿ
Ÿ
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 also meets on a monthly basis to ensure
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 2021,
there were 43k installations, 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.
The Group has continued its priority of managing its safety performance for its
employees and stakeholders, using a proactive strategy of focusing on key
control measures in the activities conducted to ensure mitigation of risk.
Although the Group has an expansive approach, emphasis is of course given
to the key risk areas involving working at height and glass handling.
The approach is aligned across all areas of the Group with a structure that
supports positive engagement from suppliers to end customers. The Group
engages with its suppliers, emphasising those providing working at height
equipment, to ensure that standardised solutions are delivered to meet
operational needs for the activities that are required to work safely.
The Group has commissioned bespoke Working at Height ('WAH') training
modules from Tetra, a leading WAH supplier. This is physical competency
training activity for all the Group's ladder users whether they are direct
employees or contractor stakeholders. 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. The resource levels of
this team have risen which has enabled an increase in the monitoring and
audit of on-site activities. This ensures continual improvement 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 to processes.
During 2021, the Group also maintained its accreditations for Occupational
Health and Safety Management ISO 45001.
Finally, numerous specific 'COVID-safe' measures were implemented or
continued to be maintained as part of the Group's response to the Coronavirus
pandemic. These are detailed separately in the Coronavirus risk section.
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 and 2021 as a
result of the UK lockdowns created
additional challenges to the
maintenance of acceptable
customer service levels.
The Group recognises the importance of providing excellent customer service
and continues to invest in improving its systems and processes in this regard.
A Director of Customer Services was appointed in H1 2021 and investment has
increased in both people and systems.
The Group continues to work closely with West Yorkshire Trading Standards
and the volume of complaints originating from this source have significantly
reduced over the last 18 months.
The Group continues to make enhancements to its customer complaints
handling process, with overall speed of complaint resolution improving during
2021. Our outstanding complaint volumes were at their lowest ever levels by
the end of the year despite the operational challenges faced.
Should the Group's reputation fall,
future performance could be
adversely impacted.
At the end of 2021, our warranty service backlogs were also at their lowest level
for four years, meaning customers can be offered a much-improved timescale
for appointments under their 10-year warranty service.
The Group has targeted further additional business improvement projects for
the coming year to further enhance the overall customer experience.
Finally, 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.
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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 has returned to TV advertising at the start of 2022; a return after a
four year gap in running above the line activity. The new campaign features
David Seaman, MBE, the ex-England Goalkeeper and proud Yorkshireman as our
brand ambassador. This investment is designed to raise our brand awareness
nationally, ensure we keep ahead of our competitors who have limited visibility
in this space and to continue to promote our 'brand value' messaging.
Our existing relationship with Journey Further continues to develop with the
emergence of new digital opportunities. The introduction of two new agencies –
Running Total (TV planning & buying) and IMA Home (brand) – means that we
have expanded our access to expertise that helps us to develop our brand
further.
These partnerships mean it continues to be difficult 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.
IT system dependency and cyber
security
The Group is reliant on a number of
key IT systems and processes. A
failure in the Group's IT systems or
a cyber attack could result in a loss
of information, cause significant
disruption and lead to a material
financial loss.
This risk has been clearly
highlighted and realised in January
2022 when the Group was the
victim of a highly sophisticated
cyber attack that emanated from
Russia.
During the last three years, the Group has invested significantly in its IT systems
and people, with security, compliance and capacity planning at the forefront of
its plans. Investment has been made into new Anti-Virus, Web Filtering and
Firewall technologies and the Group has retired systems such as its on-site
email servers to make way for the introduction of Office365 and associated
Advanced Threat Protection.
The Group has also segregated parts of its internal networks to protect key
parts of the infrastructure and invested in the building of a new, modern server
infrastructure at its Head Office. This is part of a programme that will retire old
servers by the middle of 2022 which will significantly improve capacity and
resilience.
The Group is developing further plans for upgrades to its key internal systems
and applications and expects this to include further migration of core systems
to cloud-hosted software services.
Finally, the Group has also focused on training and education of its system
users to raise awareness of the methods adopted by cyber criminals to cause
disruption and financial harm to a business.
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 focused 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.
The Compliance Committee regularly reviews the activity of the business
with regard to matters such as data subject rights requests and
responsiveness thereto, training statistics and data incident monitoring.
The development of our privacy programme continues and a data
governance platform has recently been invested in to make further
progress. Data compliance audits are undertaken by the data
compliance officer, risks and opportunities being identified and mitigating
actions implemented as appropriate.
The Group maintains strong working relationships with key suppliers through
regular review meetings and open communication channels.
A risk register that includes all large 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 monitored against agreed standards.
Specifically in response to the potential risk of failure by the supplier of PVCu to
the Group, significant buffer stocks were built during 2020 to mitigate the
potential impact of this key risk. These stocks remain in place. This is further
supplemented by enhanced monitoring of the financial performance of the
supplier.
Furthermore, additional stocks of other materials that are critical to
maintaining operational performance were acquired in the second half of 2021
as further mitigation to any short-term supply chain disruption.
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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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. Alongside this, the group has strong
relationships with the machinery Original Equipment Manufacturers ('OEMs')
and a network of local subject matter experts.
For the critical machines identified, there is either a critical spare 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 of factory machine downtime. 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 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 Chief Financial Officer which looks forward three months. This forecast
identifies any emerging liquidity challenges in order that they can be managed
proactively.
The Group has in place a committed £7.5m banking facility which is in place
until October 2023. This facility was renewed in 2020 and as part of this renewal,
covenant thresholds were lowered which has, alongside the Group’s improved
financial performance, resulted in increased headroom. Regular forecasts and
assessments of the Group's compliance with these covenants 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 platform for delivering
sustainable returns to its shareholders.
Self-employed status
The Group has had two status audits performed by professional taxation
firms which concluded that the status being applied was appropriate.
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 five years,
although there has been no contact
from HMRC since January 2020.
However, there remains a risk if HMRC
determine that the incorrect
employment status has been applied
for some or all its agents that the
Group could be required to pay
employment taxes not collected on
this basis.
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.
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 self-employed staff 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 Group has also reduced the number of self-
employed roles within some areas of its business.
The Board and the Group continues to monitor the risk of Coronavirus and has
in place a number of processes and policies to protect its customers, staff and
the business which include:
Ÿ Monitoring of COVID infection levels across all sites to highlight any
concerns.
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. Although some of these are not
currently being utilised, they remain available as a response to any
changes if required.
Investment in home-working capability such as laptops and
communications. The majority of the Group's people are now working as
they were before the first lockdown in H1 2020. However, these investments
do enable greater flexibility should the need to change arise.
Ÿ
Ÿ Development of department and site by site plans to respond to any
disruption caused to maintain business as usual wherever possible.
Ÿ Various financial models are maintained which measure sensitivities of the
Group's balance sheet and liquidity to changes in revenue streams. Some
of these changes would be similar to a return to various COVID-related
restrictions. This proactive approach enables the Group to quickly identify
emerging risks to liquidity.
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.
Since this lockdown, there have
been ongoing restrictions, some of
which impacted the Group's ability
to operate normally.
The rollout of the vaccine
programme in 2021 in the UK has
resulted in a steady lifting of
restrictions to businesses and, as of
April 2022, the UK is no longer under
any COVID-related restrictions.
There remains a risk that should
infection rates and related
hospitalisations increase that the UK
government would possibly have to
consider new restrictions that could
impact business operations.
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We are the UK’s No.1
for windows and doors
High quality, energy saving products
Governance
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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
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.
In the not-for-profit world, Alan is Chair of 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.
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.
Rob Neale
Chief Financial Officer
Rob joined the board as Chief Financial Officer on 16 July 2018. He was
previously Head of Leisure Travel Finance at AIM-listed Jet2 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, the multinational technology
company, 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 Goldsmith
Non-Executive Director
Fiona joined the Safestyle Board in September 2018 and she is Senior
Independent Director and Chair of the Audit Committee. She is also
Senior Independent 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).
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 Porter
Non-Executive Director
Julia joined the Safestyle Board in November 2018 and she is Chair of the
Remuneration Committee. Julia is an experienced CMO, advisor, mentor
and board director. Her non-executive career includes board member of
Freeview (UK's largest free to air digital TV platform) and Origin Housing as
well as Chair of DMA (Data and Marketing Association).
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
marketing and leadership roles at Guardian News & Media, Getty Images
and ITV. She also holds an MBA from London Business School.
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Alan Lovell
Mike Gallacher
Rob Neale
Fiona Goldsmith
Julia Porter
Alan Lovell
and Conder Group plc.
Prior to First Milk, Mike held a number
Non-Executive Chairman
In the not-for-profit world, Alan is
of senior roles at Mars Inc. including
Chair of the Governors of the
UK Managing Director for Mars
Alan joined the board as Non-
University of Winchester, Chair of the
Petcare and various business
Executive Chairman on 16 July 2018.
Mary Rose Trust and the Hampshire
leadership roles for Mars in Asia. His 8
He has held numerous listed
company directorships, both
executive and, more recently, non-
Cultural Trust and a Trustee of
Winchester Cathedral Trust.
executive. Alan has been Chairman
Mike Gallacher
of Interserve Group Limited since July
Chief Executive Officer
2019 and Senior Independent Director
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
the $30 billion NYSE-listed Stanley
Securities Group plc.
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 Goldsmith
Non-Executive Director
Rob Neale
Chief Financial Officer
Julia Porter
Non-Executive Director
Rob joined the board as Chief
Fiona joined the Safestyle Board in
Julia joined the Safestyle Board in
Financial Officer on 16 July 2018. He
September 2018 and she is Senior
November 2018 and she is Chair of the
at SIG plc since July 2018. He was
Mike joined the Board as Chief
career on building growth businesses,
was previously Head of Leisure Travel
Independent Director and Chair of the
Remuneration Committee. Julia is an
National Chairman of the Consumer
Executive Officer on 1 May 2018 and
establishing brands, managing lean
Finance at Jet2.com and Jet2
Audit Committee. She is also a Non-
experienced marketing leader,
Council for Water from 2015 to 2019
has over 20 years' commercial and
manufacturing, leading effective
Holidays, a division of AIM-listed Dart
Executive Director, Audit Chair and
advisor, mentor and board director.
and a Non-Executive Council Member
operational experience of building
management teams and delivering
Group plc where he worked since
Employee Representative at the listed
Her non-executive career includes
of Lloyd's of London from 2007 to 2016.
and managing businesses in the UK
financial results.
and internationally. He brings
Alan has a huge breadth of
significant expertise in operational
Prior to Mars, he was a British Army
2013. As Head of Leisure Travel
Finance, Rob was responsible for
providing all aspects of finance
housebuilder MJ Gleeson plc. She
Chair of DMA (Direct Marketing
was previously Chair of the Audit
Association) and board member of
Committee at Walker Greenbank plc
Origin Housing and Freeview (UK's
experience, including both strategic
strategy, business development and
Officer for eight years, serving as a
support to both the commercial and
(2008 to 2018).
largest free to air digital TV platform).
performance improvement. Mike was
Bomb Disposal operator in the UK and
operational areas of the Leisure Travel
undergoing turnaround or business
the UK major dairy company owned
most recently CEO of First Milk Limited,
overseas.
and complex situations, with a
particular focus on companies
improvement initiatives.
by British family farms, where he
developed and implemented a major
In his executive career, Alan was Chief
transformation that resulted in a £30
Executive Officer of six companies,
million improvement in business
including two in the waste-to-energy
profitability in 24 months.
sector and three in the construction
sector, Jarvis plc, Costain Group plc
business that operates under the
Fiona is a Chartered Accountant who
Julia's consulting roles include
brands of Jet2.com and Jet2holidays.
started her career with KPMG, where
strategic advice for business startups
for nine years she focused on the
as well as marketing and CRM/data
Rob's early career included roles at
retail and leisure sectors in various
strategy consulting and accessible
Dyson Limited as well as Commercial
roles, she then moved to First Choice
practitioner led GDPR advice. Her
Finance Director for Europe, Africa and
Holidays plc, where she became
executive experience includes stints
ANZ for ghd, a designer, manufacturer
European Finance Director. Prior to
at Guardian News & Media, Getty
and supplier of professional hair
embarking on a portfolio career, Fiona
Images, ITV and IPC Magazines. She
styling products. He also served as
was CFO of Land Securities Trillium,
also holds an MBA from London
Finance Director for Stanley UK, part of
the outsourcing division of Land
Business School.
Safestyle UK plc
Strategic Report
Governance
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 maintains oversight of the external auditor.
During the first quarter, the business continued to be
impacted by national lockdowns so the Committee
continued to focus on the impact on the business in
terms of financial performance, 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 April 2022 when these financial
statements were approved.
Principal duties
The principal duties of the Committee are to:
Ÿ Oversee the integrity of the Group's financial
statements and public announcements relating to
financial performance;
Ÿ Review and challenge the critical management
judgments and estimates which underpin the financial
statements;
Ÿ Advise on the clarity of disclosure and information
contained in the Annual Report and Accounts;
Ÿ Assist the Board in confirming that, taken as a whole,
Ÿ
the Annual Report is fair, balanced and
understandable;
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;
Ÿ Monitor the effectiveness of the Group's whistleblowing
process, including awareness within the business,
types of issues raised and how matters are
investigated.
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 50. The Board is
satisfied that the Committee Chair has recent and
relevant financial experience.
The Board has adopted the Quoted Companies Alliance
(’QCA ) Corporate Governance code (2018) as its
Governance framework.
’
’
Further details of how the Group applies each principle of
52
Annual Report & Accounts 2021
the QCA code, including the relevant Board Committees,
can be found on the Group’s website at
www.safestyleukplc.co.uk/investor-relations/corporate-
governance.
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 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 and the Board
also receives regular updates from the Compliance
Committee.
The Committee supports the Board in carrying out its
responsibilities in relation to financial reporting, risk
management and assessing internal controls. During the
year, the internal auditor reviewed payroll and customer
feedback processes, performed several audits in our
installation depots and ensured appropriate controls
were in place for the transfer of raw material buffer stocks
to a new warehouse location. A number of internal audits
are currently underway across procurement, IT and
payroll commissions. The Committee also manages the
relationship with the external auditor.
The Committee undertook the following activities during
the year:
Financial reporting
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).
The methods used to account for significant
transactions are appropriate.
The financial statements give a true and fair view and
the disclosures made are balanced and
understandable.
Ÿ
Ÿ
Ÿ Appropriate estimates and judgements have been
used, considering the views of the external auditor.
The appropriate accounting standards have been
applied.
Ÿ
External audit
During the year, the Committee reviewed the
independence and objectivity of the external auditor,
which was confirmed in their independence letter
containing information on procedures providing
safeguards established by the external auditor.
Relations with the external auditors are managed through
a series of meetings and regular discussions and the
Committee ensures a high-quality audit by challenging
the key areas of the external auditor's work.
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
UK LLP provided non-audit services for the review of the
interim financial statements for which the fee was £3k.
Taxation compliance work was 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 risk appetite. The Risk
Management section on pages 42 to 47 sets out the key
risks that the business may face and how it mitigates
them. The Executive Team 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.
One of the key risks included in the risk matrix is cyber
security. During 2021, the Group took further steps
towards achieving ‘Cyber Essentials’. As part of a wider
plan to retire all old servers by the middle of 2022, the
Group also segregated parts of the infrastructure and
invested in the building of a new modern server room at
Head Office. Unfortunately, the Group was hit by a Cyber
attack, emanating from Russia, at the end of January
2022. Business continuity actions helped mitigate the
impact although it caused a level of operational
disruption. The systems have now been recovered and
the Group plans to accelerate its existing IT
modernisation programme.
The Compliance Committee is made up of managers
from across the business and during the year was
chaired by an independent director. This Committee
meets monthly and is focussed on managing data
compliance and other regulatory risks.
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.
The Board and management meet regularly to
monitor the performance of the business against the
KPI's.
Ÿ
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 2021 and April 2022, 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 2023. The forecasts include a number of
assumptions in relation to sales volume, pricing, margin
improvements and overhead investment. For 2022, these
included a scenario which modelled a 9% reduction in
order intake versus 2020 and installation volumes at
similar levels to the Covid-impacted year of 2020.
Following the Cyber attack in January 2022, the Directors
have reviewed the impact of this on the business and
highlight the continued strong order intake performance,
record order book, maintained liquidity levels and swift
return to expected operating levels following the incident.
The Committee also considered mitigating actions
proposed by management including proposed
reductions in discretionary spend. The Audit Committee
concluded that it was appropriate to prepare the
financial statements on a going concern basis.
Fiona Goldsmith
Chair of the Audit Committee
20 April 2022
Annual Report & Accounts 2021
53
Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Remuneration Report
Statement from the Chair of the Remuneration Committee
Dear Shareholder
I am pleased to present the Directors'
Remuneration Report for the
financial year 2021, which comprises
two sections:
Ÿ
Ÿ
This Annual Statement; and
The Annual Report on
Remuneration, which provides
details of the amounts earned in
respect of the financial year 2021
and remuneration for the
financial year 2022.
Our Directors' Remuneration Policy
was approved as part of an advisory
vote on the 2020 Directors'
Remuneration Report at the May 2021
AGM. The Policy has not been
reproduced here, but is available in
our 2020 Directors' Remuneration
Report.
Similar to previous years, the
Directors' Remuneration Report is
subject to an advisory vote at the
June 2022 AGM. The Committee
believes the advisory vote provides a
greater degree of accountability and
provides shareholders with a say on
executive pay.
Review of the financial year 2021
As detailed in the CEO’s statement
and Financial Review, the Group's
financial performance represented a
strong recovery after the challenges
presented to the Group in the last 3
years. Underlying profit before tax
was £7.6m for the year and
54
Annual Report & Accounts 2021
represents a £16.4m turnaround from
the underlying losses sustained in
2018.
Annual bonus and performance
share awards
The Group continued to experience
the operational turbulence caused
by the pandemic during 2021, most
notably on its available installation
capacity and its ability to recover
from the customer service backlogs
created by various lockdowns.
Consequently, the Group had to
ensure a balanced utilisation of its
operational capacity to fulfil new
orders whilst also recovering from
these backlogs. This balance was
managed effectively and the Group
achieved revenue growth of 26.6%
versus 2020 and also recovered
customer service levels by the end of
the year. Concurrently, the Group
continued to maintain a healthy
order book whilst making good
progress in improving its gross
margins. Good progress was also
made on the Group's long-term
strategic initiatives which are
described fully in the CEO's
statement.
Overall, 2021 was a good financial
performance which was delivered in
challenging and unpredictable
conditions that the executives
responded to in an agile manner.
Despite a good performance level,
the Group fell short of maximum
stretch profit targets which resulted
in the bonus outcome linked to profit
performance as described below.
Mike Gallacher and Rob Neale were
granted an annual bonus with a
maximum opportunity equal to 100%
of salary, based on delivering
against stretching underlying PBT
targets (as regards 70% of the
award) and a range of strategic and
personal objectives (as regards the
remaining 30% of the award).
The Group achieved underlying PBT
of £7.6m resulting in an outcome of
10% of salary for the PBT element of
the annual bonus.
Mike Gallacher and Rob Neale
earned a bonus equal to 25% and
24%% of salary respectively based on
performance against strategic and
personal objectives, which were
focused on key metrics to deliver the
2021 plan. See page 57 for further
details.
Mike Gallacher and Rob Neale
therefore earned a total bonus equal
to 35% and 34% of salary
respectively.
In June 2019, performance share plan
awards with a maximum opportunity
equal to 47% of salary were granted
to Mike Gallacher and Rob Neale.
Vesting of the awards were subject
to EPS targets over a three-year
performance period to the end of the
financial year 2021. The Group
achieved EPS of 3.5p for the financial
year 2021 meaning that 28% of the
maximum award will vest in June
2022. See page 57 for further details.
The Committee carefully considered
the vesting outcome of the annual
bonus and performance share plan
awards and considered it to be
appropriate taking into account
underlying business performance
and the experience of stakeholders
during the respective performance
periods.
Restricted share awards
As disclosed in the 2020 Directors'
Remuneration Report, in October
2020, Mike Gallacher and Rob Neale
were granted restricted share
awards equal to 56% and 42% of
salary respectively. The awards
vested on 18 June 2021 and are
subject to a one year holding period.
Mike Gallacher and Rob Neale 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. See
page 58 for further details.
Performance share plan awards
granted during financial year 2021
In June 2021, performance share plan
awards were granted to Mike
Gallacher and Rob Neale with a
maximum opportunity equal to 100%
and 80% of salary respectively.
Vesting of the awards is subject to
EPS targets (as regards 75% of the
award) and absolute Total
Shareholder Return targets (as
regards 25% of the award) over the
three-year performance period to
the end of the financial year 2023.
The vesting date is 10 June 2024 –
three years after the grant date. See
page 58 for further details.
Outlook for the 2022 financial year
Salary / fees
Mike Gallacher and Rob Neale each
received a 3% salary increase
effective from 1 January 2022, in line
with the average increase awarded
to the wider workforce.
Alan Lovell, non-executive chairman,
received a fee increase of 4.2% to
£125,000 which is his first fee increase
since appointment in July 2018. Both
non-executive directors received a
fee increase of 3% to £56,650.
Annual bonus
Mike Gallacher and Rob Neale will
each be granted an annual bonus
with a maximum opportunity equal
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). See page 61 for
further details.
Performance share plan awards
Performance share plan awards are
expected to be granted in
accordance with the levels permitted
under the Directors' Remuneration
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
2024. The weighting of the
performance measures and targets
will be disclosed retrospectively in
the 2022 Annual Report on
Remuneration.
Conclusion
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 June
2022 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
20 April 2022
Annual Report & Accounts 2021
55
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
compared to the normal award level
2018. Since then, they have driven the
gains do not arise to the extent that the
at each stage are subject to a personal
Annual Report on Remuneration.
2020 financial year
under the Remuneration Policy (100% of
significant progress made in the
awards vest. The Committee considers
performance achievement assessment
Performance share plan awards
salary).
turnaround of the business. Despite
their best efforts, the 2018 performance
that there is sufficient protection
which the Remuneration Committee are
Summary
against windfall gains given the award
satisfied has been achieved.
Given the uncertain outlook presented
requirement to ensure that windfall
Therefore, in order to recognise the
by the COVID-19 pandemic and in line
gains do not arise to the extent that the
performance of the Executive Directors
The Committee has been mindful of the
share plan awards have lapsed.
levels and that the awards are capable of
vesting on 18 June 2021.
Alan Lovell, Non-Executive Chairman,
and transparent reporting on executive
and both Non-Executive Directors
pay and performance at Safestyle, taking
The Committee aims to provide clear
with guidance published by the
awards vest. The Committee considers
and the senior team and to continue to
Outlook for the 2021 financial year
waived a general cost of living increase
into account best practice amongst
Investment Association, the Committee
that the reduction in quantum of 55% of
motivate them to deliver long term
chose to defer the grant of the 2020
salary provides sufficient protection
growth, the Committee considered it
Salary / fees
against this eventuality.
appropriate to grant them restricted
share awards. On 21 October 2020,
Mike Gallacher received an exceptional
to their base fees for 2021.
Annual bonus
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
targets, and consultation with our major
EPS performance (as regards 75% of the
granted restricted share awards equal to
£275,000 to £300,000 (9%) which was
will be based on delivering against
Directors' Remuneration Report or in
shareholders, the 2020 awards were
award) and absolute Total Shareholder
56% and 42% of salary respectively as
effective from 1 January 2021. This is
stretching PBT targets (as regards 70%
relation to any of the Committee's
subsequently granted on 23 February
Return (TSR) performance (as regards
part of these awards.
his first salary increase since he joined
of the award) and a range of strategic
activities.
Vesting is subject to the achievement of
Mike Gallacher and Rob Neale were
increase in his base salary from
There will be a bonus for 2021 which
shareholders may have on this
performance share plan awards.
Following careful consideration of
quantum, performance metrics and
2021.
When determining quantum, the
25% of the award), thereby incentivising
executives to deliver longer term
earnings and share price growth
These awards vest on 18 June 2021
subject to continued employment (being
Committee was sensitive to the need to
performance. The vesting date is 23
the point at which the 2018
balance incentivising executive
performance at a time when our
February 2024 - three years after the
performance share plan awards would
date of grant. See page 60 for further
have been capable of vesting) and are
management teams are being asked to
details.
demonstrate significant leadership and
resilience, whilst ensuring that the
Restricted share awards
executive experience is commensurate
subject to a one year post-vesting
holding period. The Executive Directors
will retain all shares following the post-
vesting holding period (after selling
with that of shareholders, employees
The Committee strongly believes that
sufficient shares to cover tax liabilities
and other stakeholders. With these
the Executives Directors and the senior
arising on exercise) in order to build up
factors in mind, the maximum
management team have performed
their shareholdings.
opportunity at grant was set at 45% of
exceptionally well and, in particular,
salary for both Executive Directors,
were instrumental in rescuing the
The Committee has been mindful of the
representing a 55% of salary reduction
business from potential collapse in
requirement to ensure that windfall
the Company almost three years ago
and personal objectives (as regards the
and is the result of his contribution to
remaining 30% of the award). See page
the business since he joined and
consideration of wider benchmarks.
63 for further details.
Rob Neale has also received an increase
Chair of the Remuneration Committee
in his base salary to £220,000 which was
Performance share plan awards in
24 March 2021
Performance share plan awards
Julia Porter
also effective from 1 January 2021 and
respect of 2021 are expected to be
is part of a phased set of salary increases
made at the normal levels permitted
across a two year period which ends in
under the Policy (i.e. up to 100% of
2021. This pay structure was also a
salary). Awards will be subject to
result of benchmarking and linked to his
performance targets based on the
significant development in role, the
Company's EPS and TSR performance
additional management responsibilities
for the financial year 2023. The
assumed and overall contribution to the
weighting of the performance measures
business since he joined. The increases
and targets will be disclosed in the 2021
58
Annual Report & Accounts 2021
Annual Report & Accounts 2021
59
Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Remuneration Report
Annual Report on Remuneration
2021 Remuneration
Annual bonus
Mike Gallacher and Rob Neale were granted an annual bonus with a maximum opportunity equal 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).
The PBT element of the scheme was based on underlying PBT performance for the year. PBT is stated before non-
underlying items as defined in the Financial Review. The Group achieved a PBT of £7.6m for the year, resulting in an
outcome of 10% of salary for the executive directors. Despite this being the Group's first achievement of full year profitability
since 2017, the full stretch PBT targets were not met and thus the remaining 60% of the PBT element was not awarded.
The table below details the elements of remuneration received by each director for the financial year 2021, and the total
remuneration received by each director for that financial year and also for the financial year 2020.
Strategic and personal objectives (30% of award)
Salary
and fees
Benefits¹
Annual
bonus
Long term
incentives²
Pension
£000
£000
£000
£000
£000
Total
remuneration
2021
£000
Total
remuneration
2020
£000
Executive directors
M Gallacher
R Neale
Total
Non-executive directors
A C Lovell
F Goldsmith
J Porter
Total
300
227
527
120
55
55
230
21
7
28
-
-
-
-
104
75
179
-
-
-
-
357
175
532
-
-
-
-
24
18
42
-
-
-
-
806
502
1,308
120
55
55
230
516
375
891
110
50
50
210
The strategic and personal objectives were tailored to each executive and focused on key performance metrics to deliver
the 2021 plan.
Executive
director
Performance metrics
M Gallacher
Performance related to a set of metrics that included the financial performance of
the business, managing the operational and safety impact of COVID, customer
service levels, quality, delivering our ESG objectives and developing our Brand.
R Neale
Performance related to a set of metrics and deliverables that included the financial
performance of the business, further enhancements to management information
and reporting, implementing a levelling up measurement framework, rolling out
new cost of quality measures and working capital / liquidity enhancements.
Performance
achieved
(% of salary)
25%
24%
Mike Gallacher and Rob Neale therefore earned a bonus equal to 35% and 34% of salary respectively. The Committee
considered the bonus outcome to be appropriate taking into account underlying business performance and the
experience of stakeholders during the year.
¹Benefits include car allowance, private fuel and private medical insurance.
²Long term incentives includes the estimated gain on performance share awards at the time of vesting (see page 57) and
the actual gain on restricted share awards which vested in June 2021 (see page 58). Details of all options exercised in the
year can be found on page 60.
Share awards
Awards vesting in respect of the financial year
Performance share plan awards
Individual elements of remuneration
Base salary
The salaries for 2021 and 2020 are as set out below.
Executive
Director
2021 base salary
1 July 2021
£000
2021 base salary
1 January 2021
£000
2020 base salary
1 July 2020
£000
2020 base salary
1 January 2020
£000
% increase in
salary between
2020 and 2021
M Gallacher
R Neale
300
235
300
220
275
205
275
190
9%
15%
Mike Gallacher received an exceptional increase in his base salary from £275,000 to £300,000 (9%) effective from 1 January
2021. This was his first salary increase since he joined the company almost three years prior and was the result of his
contribution to the business since he joined and consideration of wider benchmarks.
Rob Neale's salary was increased to £220,000 effective from 1 January 2021 and further increased to £235,000 effective
from 1 July 2021. This was part of a phased set of salary increases across a two year period, which took into account his
significant development in role, additional management responsibilities assumed and his overall contribution to the
business since he joined the company.
In June 2019, performance share plan awards with a maximum opportunity equal to 47% of salary were granted to Mike
Gallacher and Rob Neale. Vesting of the awards were subject to EPS targets over the three-year performance period to the
end of the financial year 2021. The Group achieved EPS of 3.5p for the financial year 2021 meaning that 28% of the
maximum award will vest in June 2022.
Adjusted underlying EPS for
the financial year 2021
Percentage of award vesting
5.03p
3.45p
100%
25%
Straight-line vesting between threshold and maximum.
Actual performance: 3.5p
28%
Executive
director
Number of shares
granted
Number of shares vesting on
performance (28% of maximum)
Vesting date
Estimated gain on
award at vesting¹
M Gallacher
R Neale
200,000
127,273
56,000
27 June 2022
35,636
27 June 2022
£27,440
£17,462
¹Based on the average mid-market closing share price over the period 1 October 2021 to 31 December 2021 (£0.49).
The Committee considered the vesting outcome to be appropriate taking into account underlying business
performance and the experience of stakeholders during the three year performance period.
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Annual Report & Accounts 2021
Annual Report & Accounts 2021
57
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.
Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Remuneration Report
Annual Report on Remuneration
Restricted share awards
As disclosed in the 2020 Directors' Remuneration Report, in October 2020, Mike Gallacher and Rob Neale were granted
restricted share awards equal to 56% and 42% of salary respectively. The awards vested on 18 June 2021 and are subject to
a one year holding period. Mike Gallacher and Rob Neale 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.
Absolute TSR for the
financial year 2023
Percentage of TSR
element vesting
105p or more
97.5p
90p
75p
Less than 75p
100%
75
50%
25%
0%
Straight line vesting between points.
The Committee has discretion to amend the vesting outcome where it considers that it is not a fair and accurate reflection
of underlying business performance or the experience of stakeholders during the performance period. This includes
consideration of any potential “windfall gains” at the point of vesting.
Executive
director
Number of shares
vesting
Vesting date
Gain on award
at vesting¹
Holding period
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.
M Gallacher
550,000
18 June 2021
£300,000
18 June 2021 to 18 June 2022
Statement of Directors' shareholding and share interests
Executive directors
M Gallacher
R Neale
Non-executive directors
A C Lovell
F Goldsmith
J Porter
Year end 2021
Year end 2020
Number
Number
611,740
464,125
700,000
50,000
38,671
200,000
325,000
450,000
50,000
28,671
R Neale
262,500
18 June 2021
£157,500
18 June 2021 to 18 June 2022
¹Based on the share price on the vesting date (£0.60).
Awards granted in respect of the financial year
Performance share plan awards
In June 2021, performance share plan awards were granted to Mike Gallacher and Rob Neale with a maximum opportunity
equal to 100% and 80% of salary respectively. Vesting of the awards is subject to EPS targets (as regards 75% of the award)
and absolute Total Shareholder Return targets (as regards 25% of the award) over the three-year performance period to
the end of the financial year 2023. Thereby incentivising the executive directors to deliver long-term earnings and share
price growth.
Executive
director
Type of
award
Date of grant
Percentage
of salary
Number of
shares
Exercise
price
Performance
period
Date of grant
M Gallacher
Nil cost
option
10 June 2021
100%
461,538
£nil
R Neale
Nil cost
option
10 June 2021
80%
270,769
£nil
Beginning of the
financial year
2021 to the end
of the financial
year 2023
Beginning of the
financial year
2021 to the end
of the financial
year 2023
10 June 2024
10 June 2024
The EPS and TSR targets for the financial year 2023 are set out below.
EPS for the financial
year 2023
Percentage of EPS
element vesting
7.87p or more
7.10p
6.33p
5.85p
Less than 5.85p
100%
75%
50%
25%
0%
Straight line vesting between threshold and maximum.
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Annual Report & Accounts 2021
Annual Report & Accounts 2021
59
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
Number of
of salary
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
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.
Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Remuneration Report
Annual Report on Remuneration
The interests of each individual who served as a director of the Group during the year as at the end of financial year 2021 in
the Group's share schemes were as follows:
Options
held at
beginning
of year
Options
granted
in the
year
Options
vested in
the year
Options
exercised
in the year
Options
lapsed in
the year
Options
held at
end of
year
Status
Annual bonus
Mike Gallacher and Rob Neale will each be granted an annual bonus with a maximum opportunity equal 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 non-underlying items.
The strategic and personal objectives will be tailored to each executive and will focus around key performance metrics to
deliver the 2022 plan. The PBT targets and strategic and personal objectives will be disclosed retrospectively in the 2022
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 are expected to be granted in accordance with the levels permitted under the Directors'
Remuneration 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 2024. The weighting of the performance measures and targets will be
disclosed retrospectively in the 2022 Annual Report on Remuneration.
Director
Award
Performance
share award
Performance
share award
Date of
grant
18 June
2018
27 June
2019
M Gallacher
Restricted
share award
21 October
2020
Performance
share award
22 February
2021²
Performance
share award
10 June
2021
Performance
share award
13 August
2018
Performance
share award
27 June
2019
Restricted
share award
21 October
2020
Performance
share award
22 February
2021²
Performance
share award
10 June
2021
R Neale
733,333
200,000
550,000
275,000
-
-
-
-
-
461,538
350,000
127,273
262,500
205,000
-
-
-
-
-
270,769
550,000
(550,000)
-
-
-
-
-
-
-
-
-
-
262,500
(262,500)
-
-
-
-
A C Lovell
Individual share
agreement
20 December
2018³
250,000
-
250,000
(250,000)
-
(733,333)
-
n/a
Consideration by the directors of matters relating to directors' remuneration
-
-
-
-
200,000
Unvested¹
-
Vested and
exercised
275,000
Unvested
461,538
Unvested
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:
reviewing the on-going appropriateness and relevance of remuneration policy;
reviewing and approving the remuneration packages of the executives;
Ÿ
Ÿ
Ÿ monitoring the level and structure of remuneration of the senior management; and
Ÿ production of the Directors' Remuneration Report.
-
(350,000)
-
n/a
Advisors
-
-
-
-
-
127,273
Unvested¹
-
Vested and
exercised
205,000
Unvested
270,769
Unvested
-
Vested and
exercised
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 2021 AGM
The table below sets out the voting outcome at the Group's AGM held on 19 May 2021 in respect of the resolution to approve
the Directors' Remuneration Report contained in the Group's 2020 Annual Report and Accounts.
Votes for
% for
Votes
against
% against
Total votes
cast
Votes
withheld
(abstentions)
¹The performance share plan awards granted on 27 June 2019 will vest at 28% of maximum on 27 June 2022 based on
performance against targets. See page 57.
²Performance share plan awards granted on 22 February 2021 were awarded in respect of the financial year 2020.
³These options vested in 2 tranches in 2019 and 2020 and were exercised on 20 August 2021. Alan Lovell has retained all
these shares in his shareholding which now stands at 700,000 shares. The gain at exercise based on the share price on 20
August 2021 of £0.539 was £134,750. Further details of these options can be found in the 2018 Annual Report on pages 56
and 60.
Approval of Directors'
Remuneration Report
63,137,768
82.68%
14,068,948
17.32%
81,206,716
0
Implementation of Directors' Remuneration Policy for the financial year 2022
Approval
Information on how the Group intends to implement the Directors' Remuneration Policy for the financial year 2022 is set out
below.
Salary / fees
Mike Gallacher and Rob Neale each received a 3% salary increase effective from 1 January 2022, in line with the average
increase awarded to the wider workforce. Accordingly, effective from 1 January 2022, Mike Gallacher's and Rob Neale's
salaries are £309,000 and £242,050 respectively.
Alan Lovell, non-executive chairman, received a fee increase of 4.2% to £125,000 which is his first fee increase since
appointment in July 2018. Both non-executive directors received a fee increase of 3% to £56,650.
This report was approved by the Board on 20 April 2022 and signed on its behalf by:
Julia Porter
Chair of the Remuneration Committee
20 April 2022
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Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Report
The directors present their annual report and audited financial statements of the Group for the financial year 2021
Registered office
The registered office of Safestyle UK plc is 47 Esplanade, St Helier, Jersey, JE1 0BD.
Principal activities
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.
Business review
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. 2021 has been a challenging year with the continuation of the
impact of the COVID-19 pandemic on the business. The Board has continued to respond to these challenges with a focus
on ensuring the safety of the Group's people and its customers whilst also making progress on the strategic priorities of the
Group.
The Board understands 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:
Ÿ
Ÿ
Ÿ
Ÿ
Ÿ
Standing agenda points and papers presented at each Board meeting.
A rolling agenda of matters to be considered by the Board throughout the year, which includes strategy review days
that consider the Group strategy for the longer-term.
Board presentations and reports which include monthly updates on Health & Safety, compliance with regulatory
requirements along with operational, performance and people matters.
Regular engagement with our stakeholders, including, but not limited to, suppliers, customers and employees.
Consideration of the impact of the Group's operations on the community and the environment, and how this can be
improved.
The Chairman's statement, the CEO’s statement and the Financial Review on pages 16 to 25 report on the Group's
performance during the year and future developments.
Shareholder communication
Dividends
The directors do not propose a final dividend for the year (2020: £nil).
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.
Audit Committee
The Audit Committee report on pages 52 to 53 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.
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.
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.
Directors' indemnities and insurance
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:
Ÿ
Ÿ
Ÿ
Ÿ
Ÿ
Ÿ
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable, relevant and reliable;
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
use the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
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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Annual Report & Accounts 2021
63
Safestyle UK plc
Strategic Report
Governance
Financials
Directors’ Report
Substantial shareholdings
As at 11 Mar 2022, 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
UBS Securities
Hargreaves Lansdown Asset Management
Invesco Advisors Inc
FIL Investment International
31,911,957
27,156,173
16,097,411
6,544,029
5,764,738
4,816,740
4,465,000
4,337,503
23.02%
19.59%
11.61%
4.72%
4.16%
3.47%
3.22%
3.13%
Carbon reporting
Our manufacturing site and our large vehicle fleet are the main sources of the Group’s carbon emissions. We have
changed our sourcing of gas and electricity supplies for the majority of the properties we occupy to a cleaner source of
energy. We also completed the upgrade of our van and car fleets to more modern variants with a lower emissions
performance. We are pleased to report a 19% reduction in our CO per frame installed ratio in 2021, which represents the
early over-delivery of our 10% reduction target set for 2024.
2
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 2023, including performance against financial covenants. Further disclosure of the factors
considered are given in the basis of preparation note to the accounts.
As we have reported, the Group was the subject of a cyber attack in January 2022 which does not impact the financial
results for 2021, but has had a detrimental impact on the financial performance of the Group at the start of 2022. The
Group has now recovered from this incident and has quickly returned to trading profitably.
Aside from this short term impact on trading as described, the Directors do not expect there to be any consequential cash
outflows as a result of the cyber attack.
Having considered the impact of this attack, as well as any further potential impact of COVID-19, 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 2021.
Auditors
Grant Thornton UK LLP were reappointed as the Group's auditors in May 2021. The Board will put forward a resolution to
reappoint Grant Thornton UK LLP 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 20 April 2022
We now see an opportunity for a further 6% improvement before 2025. This will be delivered by continued incremental
improvement ahead of the introduction, when technology and infrastructure enables it, of a fully-electrified vehicle fleet.
We will continue to target the elimination of the remaining 5% of consumer waste going to landfill in conjunction with both
existing and new partners. In addition, we will conduct a Scope 3 audit of our ten largest suppliers in 2022 to ensure that
progress on reducing emissions is also being made downstream.
Rob Neale
Chief Financial Officer
20 April 2022
2021
2020
CO 2
(Tonnes)
CO (Tonnes) /
Frame installed
2
CO 2
(Tonnes)
2
CO (Tonnes) /
Frame installed
Manufacturing
Vehicles
Offices / depots
541
3,736
240
0.0030
0.0203
0.0013
1,007
3,109
860
0.0062
0.0190
0.0052
Total
4,517
0.0246
4,976
0.0304
This above data is aligned with the Greenhouse Gas Protocol methodology ('GHG Protocol'). The GHG Protocol establishes
comprehensive global standardised frameworks to measure and manage greenhouse gas ('GHG') emissions from private
and public sector operations, value chains and mitigation actions. The framework has been in use since 2001 and forms a
recognised structured format to calculate a carbon footprint. This is a market-based report and covers the fact that
emissions factors have been taken from each of Safestyle UK Plc's relevant suppliers where applicable (i.e. for green tariff it
would be zero emissions).
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Annual Report & Accounts 2021
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Strategic Report
Governance
Financials
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Annual Report & Accounts 2021
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Strategic Report
Governance
Financials
68
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Annual Report & Accounts 2021
69
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Strategic Report
Governance
Financials
70
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Annual Report & Accounts 2021
71
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Strategic Report
Governance
Financials
72
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Annual Report & Accounts 2021
73
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Strategic Report
Governance
Financials
74
Annual Report & Accounts 2021
Annual Report & Accounts 2021
75
NEW
Training
Academy
Opened Q4 2021
Financials
78
79
80
81
82
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
Safestyle UK plc
Strategic Report
Governance
Financials
Consolidated Income Statement
for the year ended 2 January 2022
Consolidated Statement of Financial Position
at 2 January 2022
7,586
(4,997)
Non-current assets
Revenue
Cost of sales
Gross profit
Expected credit losses expensed
Other operating expenses¹
Operating profit / (loss)
Finance income
Finance costs²
Profit / (loss) before taxation
Underlying profit / (loss) before taxation before non-recurring costs,
Commercial Agreement amortisation and share based payment charges
Non-recurring costs
Equity settled share based payment charges
Commercial Agreement amortisation
Profit / (loss) before taxation
Taxation
Profit / (loss) after taxation
Earnings per share
Basic EPS (pence per share)
Diluted EPS (pence per share)
18
6
12
7
32
14
13
9
9
Note
2021
£000
2,5
143,251
2020
£000
113,191
(99,496)
(84,732)
43,755
28,459
(362)
(35,807)
(890)
(32,566)
-
(1,623)
1
(1,161)
5,963
(6,157)
7,613
(511)
(687)
(452)
5,963
(1,188)
(4,758)
(523)
(424)
(452)
(6,157)
1,103
4,775
(5,054)
3.5p
3.4p
(4.3p)
(4.3p)
¹Other operating expenses includes £511k (2020: £523k) of non-recurring costs, £452k (2020: £452k) of Commercial
Agreement amortisation and £687k (2020: £424k) of share based payment charges. Adjusting for these gives underlying
other operating expenses of £34,157k (2020: £31,167k). See Financial Review for details.
²Finance costs includes £761k (2020: £487k) of lease related interest costs (see note 26) and £269k (2020: £nil) for the
unwind of the provision discount in the year.
There is no other comprehensive income for the period. 2020 represents the year ended 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
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
Corporation taxation liability
Provision for liabilities and charges
Current liabilities
Provision for liabilities and charges
Lease liabilities
Borrowings
Non-current liabilities
Total liabilities
Note
14
14
14
14
15
26
16
17
18
19
20
21
26
23
23
26
24
2021
£000
504
20,758
870
832
10,811
11,146
1,053
2020
£000
504
20,758
850
1,284
11,475
8,004
1,980
45,974
44,855
5,298
4,880
16,351
26,529
4,545
5,663
11,705
21,913
72,503
66,768
1,386
89,495
10,893
(66,527)
1,368
89,495
5,347
(66,527)
35,247
29,683
18,052
4,104
159
1,274
23,589
2,109
7,327
4,231
13,667
21,929
2,524
-
1,118
25,571
1,801
5,586
4,127
11,514
37,256
37,085
72,503
66,768
All operations were continuing throughout all years.
Total equity and liabilities
The accompanying notes form part of the financial statements.
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79
The accompanying notes form part of the financial statements. 2020 represents the financial position at 3 January 2021.
The financial statements were approved by the Board of Directors and authorised for issue on 20 April 2022 and were
signed on their behalf by:
Rob Neale
Chief Financial Officer
Safestyle UK plc
Strategic Report
Governance
Financials
Consolidated Statement of Changes in Equity
for the year ended 2 January 2022
Consolidated Statement of Cash Flows
for the year ended 2 January 2022
Share
capital
Share
premium
Profit and
loss
account
£000
£000
Common
control
transaction
reserve
£000
Total
equity
£000
Balance at 30 December 2019
Total comprehensive (loss) for the year
Transactions with owners reported directly in equity:
Issue of new shares
Transaction costs relating to the issue of new shares
Deferred taxation asset taken to reserves (note 16)
Issue of shares - Commercial Agreement
Equity settled share based payment transactions
£000
828
-
500
-
-
40
-
81,845
10,009
(66,527)
26,155
-
(5,054)
8,000
(350)
-
-
-
-
-
8
(40)
424
-
-
-
-
-
-
(5,054)
8,500
(350)
8
-
424
Balance at 3 January 2021
1,368
89,495
5,347
(66,527)
29,683
Total comprehensive profit for the year
Transactions with owners reported directly in equity:
Issue of new shares (see note 20)
Deferred taxation asset taken to reserves (see note 16)
Corporation taxation taken to reserves
Equity settled share based payment transactions
-
18
-
-
-
-
-
-
-
-
4,775
(18)
4
98
687
-
-
-
-
-
4,775
-
4
98
687
Balance at 2 January 2022
1,386
89,495
10,893
(66,527)
35,247
The accompanying notes form part of the financial statements.
Cash flows from operating activities
Profit / (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
Impairment of right-of-use assets
Modification of right-of-use assets and liabilities
Finance income
Finance expense
IT project impairment
Equity settled share based payment charges
Taxation charge / (credit)
(Increase) in inventories
Decrease / (increase) in trade and other receivables
(Decrease) / increase in trade and other payables
Increase in provisions
Other interest (paid)
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
Proceeds from loans and borrowings
Repayment of borrowings
Transaction costs relating to loans and borrowings
Payment of lease liabilities
Net cash (outflow) / inflow 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
26
12
14
32
13
15
14
24
24
24
26
2021
£000
4,775
1,473
3,882
842
-
122
(83)
-
1,623
14
687
1,188
14,523
(753)
783
(3,877)
195
(3,652)
(1,250)
9,621
(809)
-
(424)
(1,233)
-
-
-
-
-
(3,742)
(3,742)
4,646
11,705
16,351
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
The accompanying notes form part of the financial statements. 2020 represents the year ended 3 January 2021.
80
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81
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 2021 which ended on 2 January 2022.
The Group’s principal activities are the sale, manufacture and installation of replacement PVCu windows and doors for the UK
homeowner market. 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 2021 (“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
Limited 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
Ÿ Amendments to References to the Conceptual Framework (Various Standards)
Ÿ COVID-19 Rent Related Concessions beyond 30 June 2021 (Amendments to IFRS 16)
Interest Rate Benchmark Reform 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
IFRS 17 Insurance Contracts
(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
Ÿ Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS 4)
Ÿ
Ÿ
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)
Ÿ Deferred taxation related to Assets and Liabilities from a Single Transaction
References to the Conceptual Framework
Proceeds before Intended Use (Amendments to IAS 16)
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 2
January 2022 for the current reporting year and 3 January 2021 for the prior year. All references made throughout these
accounts for the financial year 2021 are for the period 4 January 2021 to 2 January 2022 and references to the financial year 2020
are for the period 30 December 2019 to 3 January 2021.
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 profit of £4.8m in the financial year 2021 (2020: (loss) of £(5.1)m) and had net current assets of
£2.9m at the end of the financial year 2021 (2020: net current liabilities of £(3.7)m. As detailed in the Financial Review, the profit
reported represents a return to full year profitability for the Group for the first time since 2017. Net cash improved further to £12.1m
at the end of the year, an increase of £4.5m versus the prior year. Actions taken to protect cash during the pandemic lockdown
in 2020 have ceased and the deferral of a £2.5m VAT liability has been settled; working capital is being managed as normal.
The Group has banking facilities which consist of a £4.5m term loan and a £3.0m revolving credit facility. This facility matures in
October 2023 and the finance agreement contains certain covenants, including a minimum EBITDA to be tested on a cumulative
monthly basis. By the end of the financial year, the EBITDA covenant headroom had increased significantly to £7.2m. The £4.5m
term loan was fully drawn at the end of the year, while the revolving credit facility was unutilised. This has been the case since
May 2020 and remains the case at the date of signing the accounts. The Group presently has sufficient liquidity to repay the
term loan prior to, or on the facility maturity date, if required.
The Directors have prepared forecasts covering the period to the end of the financial year 2023. The forecasts include a number
of assumptions in relation to sales volume, pricing, margin improvements and overhead investment. The Directors believe the
key assumptions to be cautious and realistic with order intake for FY22 to be 10% below the levels achieved in H2 20. This target is
deemed to be highly achievable. The Group has a strong opening order book and order intake at this level would match the
current capacity of the installation network. Installation volumes are forecast to grow by 5.5% versus 2020, due to a combination
of the full year effect of the new Milton Keynes Depot, the recovery of the post-lockdown customer service backlogs as well the
expectation that the ongoing workforce availability due to ongoing COVID resrrictions experienced throughout 2021 will subside.
The Group is forecasting significant increases in manufacturing costs as suppliers pass on increasing energy and raw matieral
prices that they are incurring themselves. Increases in overhead costs have also been forecast as the Group continues its
strategic agenda to invest in IT, customer services, field operations as well as annual pay increases in line with rising inflation.
These forecasts result in further increases in EBITDA covenant headroom, net cash and liquidity.
Whilst the Directors believe the assumptions above to be sensible, the operating environment is exposed to a number of risks
which could impact the actual performance achieved in 2022. These risks include, but are not limited to, reducing consumer
confidence due to the general economic conditions, delivering the required levels of order intake as the economy reopens and
competition from other sectors increases and the Group's ability to maintain margins given the rising input costs.
The Directors have modelled various sensitised downside scenarios for 2022 and 2023. For 2022, these included a scenario
which modelled a 9% reduction in order intake versus 2020 and installation volumes at similar levels to the COVID-impacted
year of 2020. In this scenario, mitigating actions within the control of management, including reductions in areas of
discretionary spend could be deployed. Even with the above significant reductions in activity, the resultant cash flow forecasts
and projections show that the Group will be able to increase its net cash position and operate within the financial covenants of
the borrowing facility.
A sensitised downside scenario has been modelled where performance is significantly worse than the scenario described
above. In this scenario, whilst a breach of the covenant tests on the borrowing facilities would occur, the Group would still have
sufficient cash to repay the borrowing facility.
On 25 January 2022, the Group was subject to a sophisticated cyber attack. The impact of the attack on the business was partly
mitigated by recent investments to modernise the Group's IT infrastructure. Business continuity plans enabled the business to
continue to sell, survey, manufacture, and install, albeit installations levels were reduced for several weeks. The Group's
customer service operations were also disrupted. However, with sales remaining strong, the order book has continued to grow
and net cash and liquidity has been maintained. The impact of the incident on installation activity levels is now fully overcome
and by the end of March, installation levels were fully back to original plans levels. The Group has maintained its hugely
important self-employed installation capacity which has underpinned the swift recovery from the disruption. Elements of the
pre-existing IT strategy have been accelerated following the attack to further increase the Group's cyber security defences.
The Directors have compared the financial impact of the cyber attack to its sensitivity scenarios and notes that the sales order
intake has remained well ahead of these scenarios and is largely in line with original plans. Whilst weekly installation revenue
dropped briefly below the sensitised scenario for a few weeks, the Group's weekly revenue by the end of March had recovered to
20% higher than the downside scenario. The Group has returned to trading profitably following the recovery from the incident.
The Directors have considered the cyber attack as a post balance sheet event and have determined that this is a non-adjusting
event as the event occurred after the reporting period. Aside from the short-term impact on trading described above, the
Directors do not expect there to be any consequential cash outflows as a result of the cyber attack and therefore no such items
have been included in any of the sensitivity scenarios.
In forming their view on preparing the financial statements on a going concern basis, the Directors have reviewed the impact of
the cyber attack on the business and highlight the continued strong order intake performance, record order book, maintained
liquidity levels and the swift return to expected operational levels following the incident.
Based on the above the above indications and work prepared, the Directors believe that it is appropriate to prepare the financial
statements on a going concern basis.
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
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Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
2
Summary of significant accounting policies
Revenue recognition
The Group earns revenue from the design, manufacture, delivery 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.
The Group offers consumer finance products from a range of providers whilst acting as a credit broker and not the lender. The
Group earns commission and pays subsidies for its role as a credit broker. As the Group is acting as the agent and not the
principal, commission is not disclosed as a separate income stream.
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.
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.
Goodwill
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-taxation rate which reflects
current market assessments of the time value of money and the risks specific to the liability.
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 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.
A provision for these guarantees is recognised when the underlying products are sold. The expected cost is calculated, based
on historical service call data and determined by discounting the expected future cash flows at a pre-taxation rate which
reflects current market assessments of the time value of money and the risks specific to the liability.
As a lessee
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 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 receivables 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 in 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.
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
Ÿ
fixed payments, including in-substance fixed payments
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date
Ÿ amounts expected to be payable under a residual value guarantee
Ÿ
Ÿ
Ÿ penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
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
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 leases of low-value assets and short-term
leases where the expected remaining term is less than 12 months. 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
Fair value estimation
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.
2
Summary of significant accounting policies (continued)
Share based payments
The 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 or with
market-based 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.
Non-underlying items
Non-underlying items consist of non-recurring costs, share based payments and Commercial Agreement amortisation. Non-
recurring costs are excluded because they are not expected to repeat in future years.
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 arises 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
Ÿ
The share capital and the share premium account arising on the issue of shares.
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 and its profits. There are no externally imposed capital requirements.
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.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values
because 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 £1,053k (2020: £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 pre-taxation discount rate of 11% 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 11%. 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. If the effect of discounting is material, the dilapidations provision is determined by calculating the expected
future cash flows at a pre-taxation rate that reflects current market assessments of the time value of money, and when
appropriate, the risks specific to the liability. 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 guarantee 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. If the effect of discounting is material, the guarantee provision is determined by calculating
the expected future cash flows at a pre-taxation rate that reflects current market assessments of the time value of money, and
when appropriate, the risks specific to the liability. 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 (’ECL’) 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 significant 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 Group generates a small income from the sale of recycling waste materials as part of the Group's ESG
agenda. Due to the non-significant value of the income generated, this is not identified as a separate business segment. 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 2021, £0.5m
(2020: £0.5m) relates to revenue which was sat within contract liabilities at the end of the financial year 2020. At the end of the
financial year 2021, £3.8m (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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Governance
Financials
Notes to the Consolidated Financial Statements
6
Expenses and auditor's remuneration
Operating profit / (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 remuneration:
Audit of financial statements relating to subsidiaries
Audit of financial statements relating to parent
Non-audit services; other related services
Commissions
Lead generation costs
Staff costs
Cost of materials
Other items
Total
7
Non-recurring costs
Holiday pay accrual
RSA related costs
Litigation Costs
Restructuring and operational costs
Modification of right-of-use assets and liabilities
Impairment of right-of-use assets
Reversal of prior year impairment of right-of-use assets
IT project impairment
Total non-recurring costs
2021
£000
2020
£000
(255)
(1,805)
1,473
842
4,317
80
35
3
44,502
13,238
26,123
24,146
21,161
135,665
2021
£000
(79)
147
90
300
(83)
122
-
14
511
1,559
880
3,900
70
30
-
37,869
14,026
23,401
18,871
19,387
118,188
2020
£000
470
-
74
266
5
-
(292)
-
523
Note
a
b
c
d
e
f
g
h
a The holiday pay accrual arose as a result of the impact of the shutdown of operations and resultant extension of 2020 leave
entitlement which, for some employees, is up to March 2023. The release in the current reporting period represents a partial-
unwinding of the original accrual booked in 2020 due to the deferred holiday subsequently taken in the year.
b RSA related costs are the employer related taxes associated with the issue of Restricted Share Award Scheme during the year.
Litigation costs are mainly expenses incurred as a result of an ongoing legal dispute between the Group and an ex-agent.
c
These costs are predominantly legal advisor's fees.
d 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.
e Modification of right-of-use assets relates to the closure of properties identified as right-of-use assets during the period.
f
Impairment of right-of-use asset costs relates to the closure of properties identified as assets under IFRS 16 where the lease
commitment extended beyond 2021.
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.
g
f
h 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.
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.
8
Dividends
No dividends in relation to 2021 or 2020 were either paid or declared.
9
Earnings per share
Basic earnings per ordinary share (pence)
Diluted earnings per ordinary share (pence)
a) Basic earnings per share
2021
3.5
3.4
2020
(4.3)
(4.3)
The calculation of basic earnings per share has been based on the following profit attributable to ordinary shareholders
and weighted-average number of shares outstanding.
i) Profit / (loss) attributable to ordinary shareholders (basic)
Profit / (loss) attributable to ordinary shareholders
ii) Weighted-average number of ordinary shares (basic)
In issue during the year
b) Diluted earnings per share
2021
£000
2020
£000
4,775
(5,054)
No. of shares
‘000
137,753
No. of shares
‘000
117,749
The calculation of diluted earnings per share has been based on the following profit attributable to ordinary shareholders
and weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential
ordinary shares.
i) Profit / (loss) attributable to ordinary shareholders (diluted)
Profit / (loss) attributable to ordinary shareholders
ii) Weighted-average number of ordinary shares (diluted)
Weighted-average number of ordinary shares (basic)
Effect of conversion of share options
2021
£000
2020
£000
4,775
(5,054)
No. of shares
‘000
137,753
3,589
141,342
No. of shares
‘000
117,749
-
117,749
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.
Diluted earnings per share is calculated by adjusting the earnings and number of shares for the effects of dilutive options.
In the event that a loss is recorded for the period, share options are not considered to have a dilutive effect.
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.
2021
£000
2,398
111
538
44
3,091
2020
£000
2,761
138
293
-
3,192
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91
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:
Salary and fees
£000
Benefits
£000
LTIP
£000
Pension
£000
Total
£000
Annual
bonus
£000
2021
Executive directors
M Gallacher
R Neale
Non-executive
A C Lovell
F Goldsmith
J Porter
Total
2020
Executive directors
M Gallacher
R Neale
Non-executive
A C Lovell
F Goldsmith
J Porter
Total
M Gallacher
R Neale
A C Lovell
M Gallacher
R Neale
M Gallacher
R Neale
M Gallacher
R Neale
M Gallacher
R Neale
300
227
120
55
55
757
257
197
110
50
50
664
21
7
-
-
-
28
20
14
-
-
-
34
104
75
-
-
-
179
285
201
-
-
-
486
160
76
216
-
-
452
-
-
-
-
-
-
24
18
-
-
-
42
37
16
-
-
-
53
609
403
336
55
55
1,458
599
428
110
50
50
1,237
Plan
LTIP 2018
LTIP 2018
Individual
LTIP 2019
LTIP 2019
RSA 2020
RSA 2020
LTIP 2020
LTIP 2020
LTIP 2021
LTIP 2021
Options
held at start
of period
Options
granted
in period
Options
exercised
in period
Options
Options
lapsed in
held at end
period
of period
733,333
350,000
250,000
200,000
127,273
550,000
262,500
-
-
-
-
-
-
-
(250,000)
(550,000)
(262,500)
-
-
-
-
-
-
-
-
(733,333)
(350,000)
-
-
-
-
-
200,000
127,273
275,000
205,000
461,538
270,769
-
-
-
-
-
-
-
-
-
-
-
-
-
275,000
205,000
461,538
270,769
2,473,106
1,212,307
(1,062,500)
(1,083,333)
1,539,580
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 in 2020. Bonuses for 2020 performance as
described in the Directors' Remuneration Report were also accrued in 2020. Consequently, the Annual Bonus charge in
2020 reflects performance in respect of both years.
The interests of each individual who served as a director of the Group during the year, as at the end of financial year 2021 in
reflects performance in respect of both years.
the Group's share schemes were as follows:
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
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:
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
2021
£000
2020
£000
13
Taxation
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:
Manufacturing
Sales and distribution
Administration
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)
2021
Number
2020
Number
272
116
312
700
2021
£000
22,439
2,317
680
687
26,123
279
92
264
635
2020
£000
20,122
1,940
915
424
23,401
The analysis of Directors' remuneration is shown in the Directors' Remuneration Report.
During the year £255k (2020: £1,805k) was received under the Government Coronavirus Job Retention Scheme (CJRS). The
above note does not include the beneficial effect of the CJRS grant income.
12
Finance costs
On borrowing facility
Unwind of discount on provisions
On lease liabilities
2021
£000
593
269
761
1,623
2020
£000
674
-
487
1,161
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 charge / (credit)
The current year taxation charge / (credit) is split into the following:
Taxation charge / (credit)
Total taxation charge / (credit)
Reconciliation of effective taxation rate
Current taxation reconciliation
Profit / (loss) for the year
Total taxation charge / (credit)
Profit / (loss) excluding taxation
Expected taxation charge / (credit) based on the standard rate of
corporation taxation in the UK of 19.00% (2020: 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 charge / (credit)
257
-
257
961
(10)
(20)
931
1,188
1,188
1,188
4,775
1,188
5,963
1,133
137
(23)
(20)
(39)
1,188
-
-
-
(994)
(103)
(6)
(1,103)
(1,103)
(1.103)
(1,103)
(5,054)
(1,103)
(6,157)
(1,170)
129
47
(6)
(103)
(1,103)
A reduction in the UK corporation tax rate from 19% to 17% (effective 1 April 2020) was substantively enacted on 6
September 2016. The March 2020 Budget announced that a rate of 19% would continue to apply with effect from 1 April
2020, and this change was substantively enacted on 17 March 2020. An increase in the UK corporation rate from 19% to 25%
(effective 1 April 2023) was substantively enacted on 24 May 2021. This will increase the company's future current taxation
charge accordingly. The deferred taxation asset at 2 January 2022 has been calculated based on these rates, reflecting
the expected timing of reversal of the related timing differences (2020: 19%).
Manufacturing
Sales and distribution
Administration
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)
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Governance
Financials
Notes to the Consolidated Financial Statements
14
Intangible assets
Goodwill
Trademark
Software
£000
£000
£000
Assets under
the course of
construction
£000
Commercial
Agreement
£000
Total
£000
Cost
At 30 December 2019
Additions
Transfer
At 3 January 2021
Additions
Transfer
At 2 January 2022
20,788
-
-
20,788
-
-
20,788
Accumulated amortisation and impairment
At 30 December 2019
Charge for the year
At 3 January 2021
Charge for the year
Impairment
At 2 January 2022
30
-
30
-
-
30
NBV at 29 December 2019
NBV at 3 January 2021
NBV at 2 January 2022
20,758
20,758
20,758
504
-
-
504
-
-
504
-
-
-
-
-
-
504
504
504
2,902
27
25
2,954
70
53
3,077
1,841
428
2.269
390
-
2,659
1,061
685
418
174
129
(25)
278
354
(53)
579
113
-
113
-
14
127
61
165
452
2,263
-
-
2,263
-
-
2,263
527
452
979
452
-
1,431
1,736
1,284
832
26,631
156
-
26,787
424
-
27,211
2,511
880
3,391
842
14
4,247
24,120
23,396
22,964
’
’
The goodwill is allocated to one cash generating unit (’CGU ) being Style Group Holdings Limited. Management have
performed impairment reviews on the carrying value of the goodwill at the end of the financial year 2021. As described in
the going concern basis of preparation, the Directors have prepared forecasts covering the period to the end of the
financial year 2023. 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 cost inflation. The Directors believe they have
taken a cautious approach in these forecasts with the core assumptions for order intake representing a 10% reduction
below those levels achieved in H2 2020. This is deemed highly achievable with the assumption curtailed to match the
capacity of the installation network. Revenues are modelled to grow by c.5% in 2022 and again in 2023. The growth vs 2021
is in part the full year effect of the new Milton Keynes depot opened in September 2021, as well as the recovery from COVID
and is supported by a strong opening order book. 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 cash generated are cautiously forecast to remain constant.
For the review at the end of the financial year 2021, the recoverable amount of the CGU of £200m has been determined
from value in use calculations. The assessment was performed on a value in use basis using an 11% discount rate (2020:
10%). There are no reasonably possible changes in the key assumptions on which assessments of recoverable amounts
have been based which 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 impairment of assets under the course of construction represents the impairment of a capital investment made in a
new electronic survey system that was stopped following results of field trials.
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.
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 30 December 2019
Additions
Transfers
At 3 January 2021
Additions
Transfers
At 2 January 2022
Depreciation
At 30 December 2019
Charge for the year
At 3 January 2021
Charge for the year
At 2 January 2022
NBV at 29 December 2019
NBV at 3 January 2021
NBV at 2 January 2022
16
Deferred taxation asset
9,507
-
-
9,507
20
-
9,527
783
189
972
279
1,251
8,724
8,535
8,276
425
70
-
495
22
-
517
283
130
413
42
455
142
82
62
10,053
23
-
10,076
77
22
10,175
6,601
1,034
7,635
940
8,575
3,452
2,441
1,600
1,689
257
-
1,946
288
28
2,262
1,376
206
1,582
210
1,792
313
364
470
8
-
-
8
-
-
8
6
-
6
2
8
2
2
0
-
51
-
51
402
(50)
403
-
-
-
-
-
-
51
403
Balance at beginning of period
Movement in deferred taxation asset on profit / (losses) recognised in income
Share based payments credits recognised in equity
Balance at end of period
The deferred taxation asset provided in the financial statements at 19-25% (2020: 19%) is as follows:
Losses
Share based payments
Provisions
Capital allowances
Balance at end of period
2021
£000
1,980
(931)
4
1,053
2021
£000
718
125
48
162
1,053
Total
£000
21,682
401
-
22,083
809
-
22,892
9,049
1,559
10,608
1,473
12,081
12,633
11,475
10,811
2020
£000
886
1,086
8
1,980
2020
£000
1,547
79
89
265
1,980
There are no unrecognised taxation losses (2020: £nil).
In accordance with IFRS 12, actual and expected taxation relief in excess of relief in respect of the related cumulative share-
based payment expense is reflected directly in equity.
The deferred taxation asset of £1,053k 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.
94
Annual Report & Accounts 2021
Annual Report & Accounts 2021
95
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
17
Inventories
Raw materials and consumables
Work in progress
Finished goods
Stock recognised in cost of sales during the period was £24,146k (2020: £18,871k).
18
Trade and other receivables
Trade receivables (net of ECL allowance)
Other receivables
Prepayments
2021
£000
4,329
80
889
5,298
2021
£000
1,271
476
3,133
4,880
2020
£000
3,272
51
1,222
4,545
2020
£000
2,111
492
3,060
5,663
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
At end of period
2021
£000
1,717
(573)
362
1,506
2021
£000
16,351
16,351
2020
£000
1,072
(245)
890
1,717
2020
£000
11,705
11,705
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 £54k (2020: £361k) 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
At 4 January 2021
1,556,482 Ordinary Shares @ 1p each on 18 June 2021
250,000 Ordinary Shares @ 1p each on 20 August 2021
At 2 January 2022
Allotted, issued and fully paid
At 4 January 2021
1,556,482 Ordinary Shares @ 1p each on 18 June 2021
250,000 Ordinary Shares @ 1p each on 20 August 2021
At 2 January 2022
21
Trade and other payables
Trade payables
Other taxation and social security costs
Other creditors and deferred income
Accruals
22
Deferred taxation liability
Share capital
£000
1,368
15
3
1,386
1,368
15
3
1,386
2021
£000
7,118
3,169
4,747
3,018
18,052
2020
£000
7,036
5,563
5,025
4,305
21,929
There was no deferred taxation liability at the end of the financial year 2021 (2020: £nil).
23
Provisions for liabilities and charges
Balance at beginning of year
Utilised in year
Unwind of discount (see note 12)
Provided in year
At end of year
Current
Non current
At end of year
Dilapidations
Product guarantees
Total
2021
£000
783
(253)
45
48
623
183
440
623
2020
£000
788
(531)
-
526
783
285
498
783
2021
£000
2,136
(1,917)
224
2,317
2,760
1,091
1,669
2,760
2020
£000
2,093
(1,297)
-
1,340
2,136
833
1,303
2,136
2021
£000
2,919
(2,170)
269
2,365
3,383
1,274
2,109
3,383
2020
£000
2,881
(1,828)
-
1,866
2,919
1,118
1,801
2,919
Dilapidations - 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 and then discounted at 11% to a
net present value.
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 11% to a net present value.
96
Annual Report & Accounts 2021
Annual Report & Accounts 2021
97
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
24
Borrowing facilities
The total borrowing facilities available at the end of the financial year were as follows:
Term bank loan
Revolving credit facility
Less: Prepaid arrangement fees²
Nominal
interest rate
Maturity
date
LIBOR + 7.0%
LIBOR + 7.0%¹
October 2023
October 2023
Amounts drawn down
Facilities available
2021
£000
4,500
-
(269)
4,231
2020
£000
4,500
-
(373)
4,127
2021
£000
4,500
3,000
-
7,500
2020
£000
4,500
3,000
-
7,500
¹Interest is payable monthly. In addition to the rates disclosed above, a non-utilisation fee of LIBOR +3.5% is charged 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.
The changes in loans and borrowings from financing activities, during the financial year were as follows:
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 other changes
At 3 January 2022
See note 26 for changes in lease liabilities.
2021
£000
4,127
-
-
-
-
593
(489)
104
4,231
2020
£000
3,991
2,000
(2,000)
-
(39)
674
(499)
136
4,127
25
Financial instruments
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 2021, £4,500k of loans were outstanding (2020: £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.
Principal financial instruments
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 a reduced credit risk based on the profile of debtors and as such the expected credit loss
expense has reduced. The weighted average loss rate in the year has not increased.
Financial assets
At the reporting date, the Group held the following financial assets:
Trade receivables
Other receivables
Cash and cash equivalents
Financial liabilities
2021
£000
1,271
476
16,351
18,098
2020
£000
2,111
492
11,705
14,308
At the reporting date, the Group held the following financial liabilities, all of which were classified as other financial liabilities:
Trade payables
Lease liabilities
Other creditors
Accruals
Borrowings
2021
£000
7,118
11,431
366
3,018
4,231
26,164
2020
£000
7,036
8,110
1,344
4,305
4,127
24,922
98
Annual Report & Accounts 2021
Annual Report & Accounts 2021
99
Safestyle UK plc
Strategic Report
Governance
Financials
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%
*The weighted average loss rates in the table above were in place for the financial years 2021 and 2020.
The following table provides information about the exposure to ECLs for trade receivables at the end of financial years 2021 and 2020.
< 1 month overdue
1-2 months overdue
2-3 months overdue
3-12 months overdue
> 1 Year
Total receivables
Gross
2021
£000
Loss allowance
2021
£000
244
285
249
631
1,368
2,777
(106)
(112)
(89)
(393)
(806)
(1,506)
Net
2021
£000
138
173
160
238
562
1,271
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
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 £1,506k may be
recovered in full or some of the unprovided debtors may become irrecoverable.
£546k of trade receivables over one year overdue (2020: £552k) are secured by fixed charges over properties and
therefore no provision is made for these balances. £211k of the balance relates to customers setup on standing order
(2020: £63k).
Notes to the Consolidated Financial Statements
25
Financial instruments (continued)
Market risk
The Group is not materially exposed to changes in foreign currency exchange rates or interest rate movements.
Trade receivables totalling £546k (2020: £552k) 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 2021, 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% (2020: +/- 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 2021
Financial year 2020
Credit risk
Credit risk refers to the risk that a 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 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 trade receivable ledger.
At the end of the financial year 2021, the Group's trade receivables balance was £1,271k (2020: £2,111k). 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 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).
100
Annual Report & Accounts 2021
Annual Report & Accounts 2021
101
Additional disclosure
2 January 2022
Lease liabilities
3 January 2021
Lease liabilities
Less than 1 year
1-2 years
2-5 years
More than 5 years
Less than 1 year
1-2 years
2-5 years
More than 5 years
4,240
4,240
2,551
2,551
3,862
3,862
2,256
2,256
4,802
4,802
3,927
3,927
886
886
932
932
Motor vehicles:
Plant and machinery:
Land and buildings
Less than one year
Between two and five years
Less than one year
Between two and five years
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
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:
EBITDA - monthly test on a rolling 12 month basis
Ÿ
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 2021 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 2021, the Group had £16,351k (2020: £11,705k) of cash reserves. After deducting borrowings of
£4,231k, which are stated net of arrangement fees, net cash of the Group was £12,120k at the end of the year (2020: £7,578k).
The £3,000k revolving credit facility was undrawn at the end of the year.
The Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable)
as summarised below:
2 January 2022
Borrowings
Trade payables
Other creditors
Accruals
Lease liabilities
3 January 2021
Borrowings
Trade payables
Other creditors
Accruals
Lease liabilities
Less than 1 year
1-2 years
2-5 years
More than 5 years
495
7,118
366
3,018
4,240
15,237
4,912
-
-
-
3,862
8,774
-
-
-
-
4,802
4,802
-
-
-
-
886
886
Less than 1 year
1-2 years
2-5 years
More than 5 years
458
7,036
1,344
4,305
2,551
15,694
458
-
-
-
2,256
2,714
4,881
-
-
-
3,927
8,808
-
-
-
-
932
932
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, 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.
26
Right-of-use assets and liabilities
Properties
Motor vehicles
Equipment
Total
Assets
At 30 December 2019
Additions
Depreciation
Impairment reversal
Modification
At 3 January 2021
Additions
Impairment
Modification
Depreciation
At 2 January 2022
Liabilities
At 3 January 2021
Payment
Additions
Interest
Modification
At 2 January 2022
4,680
1,265
(1,104)
292
(363)
4,770
2,080
(122)
(253)
(1,298)
5,177
4,899
(1,653)
2,080
388
(342)
5,372
1,194
4,376
(2,457)
-
(79)
3,034
5,123
-
(60)
(2,411)
5,686
2,996
(2,657)
5,123
357
(54)
5,765
Reconciliation of movements of liabilities to cash flows arising from financial activities
At 3 January 2021
Changes from financing cash flows
Payment of lease liabilities
Total changes from financing cash flows
Other changes
New leases
Modification
Interest expense
Interest paid
Total liability-related other changes
At 2 January 2022
Liabilities classification
Current (<1 year)
Long term (> year)
4,899
(1,265)
(1,265)
2,080
(342)
388
(388)
1,738
5,372
1,570
3,802
5,372
2,996
(2,300)
(2,300)
5,123
(54)
357
(357)
5,069
5,765
2,419
3,346
5,765
138
251
(184)
-
(5)
200
256
-
-
(173)
283
215
(193)
256
16
-
294
215
(177)
(177)
256
-
16
(16)
256
294
115
179
294
6,012
5,892
(3,745)
292
(447)
8,004
7,459
(122)
(313)
(3,882)
11,146
8,110
(4,503)
7,459
761
(396)
11,431
8,110
(3,742)
(3,742)
7,459
(396)
761
(761)
7,063
11,431
4,104
7,327
11,431
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 £4,503k (2020: £4,209k). This comprises
the payment of lease liabilities of £3,742k (2020: £3,722k) and the interest paid £761k (2020: £487k).
The Group has a number of leases within the business including properties for installtion 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 £680k (2020: £915k) and relates to contributions paid into a money purchase
scheme in the period.
28
Commitments
In 2021 the Group committed to incurring capital expenditure of £11k (2020: £nil) for the purchase of plant and machinery
that will be delivered in 2022.
102
Annual Report & Accounts 2021
Annual Report & Accounts 2021
103
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
LTIP 2021
LTIP 2020*
LTIP 2019
LTIP 2019
Grant date
Vesting date
Lapsing date
Risk free interest rate
Expected volatility
Expected option life (in years)
Dividend yield
Weighted average exercise price
Weighted average fair value of options granted
Remaining contractual life
10/06/2021
10/06/2024
10/06/2031
0.11%-0.15%
76.58%-81.87%
2.56-3.00
4.54%
£0.00
45.43p-54.89p
9.44
22/02/2021
30/06/2023-
22/02/2024
22/02/2031
0.00%-0.03%
73.26%-80.14%
1.85-3.00
0.00%
£0.00
22.20p-44.40p
9.15
25/06/2019
25/06/2022
27/06/2019
27/06/2022
25/06/2029
0.52%
61.22%
3.00
0.00%
£0.00
64.70p
7.49
27/06/2029
0.56%
60.79%
3.00
0.00%
£0.00
65.20p
7.49
Style Group Holdings Limited
Style Group UK Limited*
HPAS Limited*
Windowstyle UK Limited*
Safestyle Windows 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.
*LTIP’s granted on 22 February 2021 were awarded in respect of financial year 2020. These are therefore named ‘LTIP 2020'.
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:
30
Related party transactions
During financial year 2021 there were no related party transactions.
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
Outstanding at start of the year
Granted during the year
Exercised during the year
Outstanding at end of the year
Exercisable at end of the year
2021
2020
Number of
share
options
Weighted
average
exercise price
Number of
share
options
Weighted
average
exercise price
1,556,482
-
(1,556,482)
-
-
£nil
-
£nil
-
-
-
1,556,482
-
1,556,482
-
-
£nil
-
£nil
-
At the end of the financial year 2021, the Group had the following share based payment arrangements:
The following information is relevant in the determination of the fair value of the options.
At the end of the financial year 2021, the Group had the following share based payment arrangements:
LTIP
The Group operates an equity-settled LTIP remuneration scheme for Directors and certain management ("LTIP 2019", "LTIP
2020" & "LTIP 2021").
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 the year
Granted during the year
Lapsed during the year
Outstanding at end of the year
Exercisable at end of the year
2021
2020
Number of
share
options
Weighted
average
exercise price
Number of
share
options
Weighted
average
exercise price
3,132,989
2,994,186
(2,274,459)
3,852,716
-
£nil
£nil
£nil
£nil
-
3,224,825
-
(91,836)
3,132,989
-
£nil
-
£nil
£nil
-
2021 options are valued using both the Black-Scholes option pricing model and Monte-Carlo simulation. Prior to 2021, all
options were 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
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
29.00p
0.00
104
Annual Report & Accounts 2021
Annual Report & Accounts 2021
105
30
Related party transactions
During financial year 2021 there were no related party transactions.
During the year, Safestyle UK plc charged management charges to subsidiaries of £3.4m (2020: £2.4m) and received no
dividends (2020: £nil). At the year end, total amounts receivable from subsidiaries were £17.8m (2020: £17.5m).
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
LTIP
2020" & "LTIP 2021").
The Group operates an equity-settled LTIP remuneration scheme for Directors and certain management ("LTIP 2019", "LTIP
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:
Safestyle UK plc
Strategic Report
Governance
Financials
Notes to the Consolidated Financial Statements
32
Share based payments (continued)
SAYE
On 11 November 2021, the company launched a new share save (SAYE) scheme ("SAYE 2021") in addition to the existing
schemes ("SAYE 2019" and “SAYE 2020”) 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:
Outstanding at start of the year
Granted during the year
Cancelled during the year
Lapsed during the year
Outstanding at end of year
Exercisable at end of the year
2021
2020
Number of
share
options
Weighted
average
exercise price
Number of
share
options
Weighted
average
exercise price
2,019,077
1,084,986
(237,979)
(574,817)
2,291,267
-
£0.39
£0.43
£0.65
£0.49
£0.36
-
933,817
1,092,160
-
(6,900)
2,019,077
-
£0.59
£0.23
-
£2.51
£0.39
-
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)
Dividend yield
Weighted average exercise price
Weighted average fair value of options granted
Remaining contractual life
SAYE 2021
SAYE 2020
SAYE 2019
11/11/2021
11/11/2024
11/05/2025
0.62%
70.15%
3.25
5.80%
£0.43
22.43p
3.36
11/11/2020
11/11/2023
11/05/2024
0.02%
80.01%
3.36
0.00%
£0.23
23.23p
2.36
07/06/2019
01/07/2022
31/12/2022
0.49%
59.24%
3.32
0.00%
£0.72
43.30p
0.99
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 the year
Exercised during the year
Outstanding at end of the year
Exercisable at end of the year
2021
2020
Number of
share
options
Weighted
average
exercise price
Number of
share
options
Weighted
average
exercise price
250,000
(250,000)
-
-
£nil
£nil
-
-
250,000
-
250,000
125,000
£nil
-
£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.
Grant date
Vesting date
Lapsing date
Risk free interest rate
Expected volatility
Expected option life (in years)
Dividend yield
Weighted average exercise price
Weighted average fair value of options granted
Remaining contractual life
The total share based payment charges comprise:
Equity settled - LTIP
Equity settled - RSA
Equity settled - SAYE
Equity settled - Alan Lovell Options
Alan Lovell Options
20/12/2018
16/07/2021
20/12/2028
0.73%
63.50%
1.57
0.00%
£0.00
86.30p
0.00
2021
£000
224
318
122
23
687
2020
£000
137
134
74
79
424
106
Annual Report & Accounts 2021
Annual Report & Accounts 2021
107
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.
Safestyle UK plc
Strategic Report
Governance
Financials
Notes
Notes to the Consolidated Financial Statements
33
Contingent liability
The Group uses the services of a large number of self-employed individuals for marketing, sales, surveying and
installation purposes. As disclosed for the last two years, 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 five years
although there has been no contact from HMRC in over two years 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 two years, 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.
34
Post-balance sheet events
The Group was hit by a cyber attack, emanating from Russia, at the end of January 2022. Immediately following the
incident, there was a short term impact on the Group's operations as it implemented business continuity workarounds
as it recovered its systems. The Group now has all its core systems back up and running.
Aside from the impact above, no consequential cash outflows as a result of the attack are expected and this is treated
as a non-adjusting event as it occurred after the balance sheet date.
Full details of the incident, as well as the response by the Group, are included within the 'Current trading and outlook'
section of the CEO's Statement.
Notes
108
Annual Report & Accounts 2021
Annual Report & Accounts 2021
109