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SFE Safestyle Uk Plc

0.32
0.00 (0.00%)
Last Updated: 00:00:00
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Safestyle Uk Plc LSE:SFE London Ordinary Share JE00BGP63272 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 0.32 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Manufacturing Industries,nec 154.32M -6.51M -0.0469 -0.07 444.37k

Safestyle UK PLC Interim Results (3932R)

21/09/2017 7:01am

UK Regulatory


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TIDMSFE

RNS Number : 3932R

Safestyle UK PLC

21 September 2017

21 September 2017

Safestyle UK plc

("Safestyle" or the "Group"))

Unaudited interim results for the six months ended 30 June 2017

Safestyle UK plc (AIM: SFE), the leading UK-focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, today announces its interim results for the six months ended 30 June 2017.

Financial and Operational highlights

 
                             Unaudited         Unaudited    % change 
                        6 months ended          Restated 
                          30 June 2017    6 months ended 
                                  GBPm      30 June 2016 
                                                    GBPm 
--------------------  ----------------  ----------------  ---------- 
 Revenue                          82.5              81.4       +1.4% 
--------------------  ----------------  ----------------  ---------- 
 Gross profit                     27.5              28.2       -2.5% 
--------------------  ----------------  ----------------  ---------- 
 Gross margin 
  %                              33.3%             34.6%     -130bps 
--------------------  ----------------  ----------------  ---------- 
 EBITDA                            9.6              10.1       -5.0% 
--------------------  ----------------  ----------------  ---------- 
 Underlying EBITDA*                9.8              11.1      -11.7% 
--------------------  ----------------  ----------------  ---------- 
 PBT                               8.8               9.5       -7.4% 
--------------------  ----------------  ----------------  ---------- 
 Underlying PBT**                  9.0              10.6      -15.1% 
--------------------  ----------------  ----------------  ---------- 
 EPS - Basic                      8.3p              9.4p      -11.7% 
--------------------  ----------------  ----------------  ---------- 
 Interim Dividend                3.75p             3.75p 
--------------------  ----------------  ----------------  ---------- 
 

* Underlying EBITDA is defined as earnings before interest, tax, depreciation, amortisation and share based payments charges

** Underlying PBT is defined as earnings before taxation and share based payments charges

   --    Volume of frames installed decreased by 6.8% to 139,612 (H1 2016: 149,742) 
   --    Average unit sales price up 6.0% to GBP599 (FY 2016: GBP565) 
   --    Continued growth in market share to 11.2% at 30 June 2017 (End 2016: 10.2%) 
   --    Leads generated from media and on-line marketing grew by 9.1% to 42,680 (H1 2016: 39,118) 
   --    New installation depot opened in South Wales 
   --    Completed our new factory extension at Wombwell, South Yorkshire, on time and on budget 
   --    Pre-tax operating cash flow of GBP8.3 million (H1 2016: GBP9.8 million) 

Commenting on the results, Steve Birmingham, CEO said:

"The first half of 2017 was an increasingly challenging market however Safestyle increased revenue and market share albeit at a higher cost than historically. As a result, we have experienced a decline in profits in what was the severest contraction of our market since 2008/09.

"So far in H2 we have maintained our order intake in line with the previous year and have already commenced a number of initiatives to reduce our cost base.

"The Group's cash conversion and balance sheet remain strong and the Board is confident of outperforming the market and gaining market share based on our differentiators of price competitiveness, promotional finance offers, quality energy efficient products and outstanding manufacturing capability."

Enquiries:

 
Safestyle UK plc                   Tel: 0207 653 9850 
Steve Birmingham, Chief Executive 
 Officer 
Mike Robinson, Chief Financial 
 Officer 
 
Zeus Capital (Nominated Adviser    Tel: 0203 829 5000 
 & Joint Broker) 
Nick How / Dominic King 
 
Liberum (Joint Broker)             Tel: 0203 100 2100 
Neil Patel / Jamie Richards 
 
FTI Consulting (Financial          Tel: 0203 727 1000 
 PR) 
Oliver Winters / Alex Beagley      safestyle@fticonsulting.com 
 / James Styles 
 

About Safestyle UK plc

The Group is the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market. For more information please visit www.safestyleukplc.co.uk or www.safestyle-windows.co.uk.

Chairman's Statement

Summary of Performance

The markets in which Safestyle operates have become more challenging in recent months, and it is with this backdrop that the Group reports its trading performance for the six months ended 30 June 2017.

Revenue was up 1.4% to GBP82.5 million (H1 2016: GBP81.4 million, having been restated following a review of accounting policies in the run up to the introduction of IFRS 15 Revenue Recognition - see Finance Review and Note 4). FENSA statistics show the rate of market decline in H1 2017 accelerated from a Q1 reduction of 2.4% to 17.2% in Q2, and we believe this significantly steeper rate of decline has continued into the first two months of Q3. Our response has been to protect revenues and gain market share, which now stands at 11.2% at 30 June 2017, which has increased the costs of lead generation and conversion into orders. Order intake was up 1.8% for the first 6 months of the year.

Profit before tax declined to GBP8.8 million (H1 2016: GBP9.5 million), with underlying EBITDA down 11.7% at GBP9.8 million. EPS for the period was down from 9.4p to 8.3p. The results reflect the increased cost of delivering sales revenues, and our underlying EBITDA margin declined from 13.6% to 11.8%.

The business continues to successfully convert profit into cash, with H1 2017 cash conversion (the ratio of net cashflow from operating activities before taxation to underlying EBITDA) for the period at 85%, compared with 88% for H1 2016. The Group's balance sheet is robust with cash of GBP17.7 million at 30 June 2017 (GBP13.5 million as at 31 December 2016).

Interim Dividend

We have declared an interim dividend of 3.75 pence per share which will be paid on 6 November 2017 (2016: 3.75p). The record date will be 29 September 2017.

Business Review

The sharp decline in our market has created a number of challenges and opportunities, and we have chosen to protect revenue despite the associated increased costs of lead generation and providing customer finance. We have seen a steady increase in the proportion of customers taking up our promotional finance offers with no deterioration in acceptance rates. Longer term, we continue to regard the potential for enhanced RMI expenditure by the homeowner to be positive, notwithstanding the short term weakness caused by the current uncertain economic outlook for consumers.

We have continued to evolve our business and in the period we have further developed our brand messaging, invested in our infrastructure, and continued to develop our conservatory replacement offer and product range.

We have completed our new factory extension at Wombwell, South Yorkshire, on time and on budget. This is a major step in ensuring we have the UK's leading production facilities. The facility is now fully operational and we expect to deliver manufacturing productivity gains throughout the remainder of the year.

Share Buyback

Our balance sheet is strong and we continue to generate cash. Whilst we take a cautious approach to long term planning, we have previously stated that the Board is committed to returning excess capital to shareholders where our cash resources are materially in excess of investment requirements. With the Company's major investment into its factory extension now complete, we will review this further when we announce our 2017 Full Year results in March 2018 but are today making a separate announcement on a share buy-back programme of up to GBP2.5m.

Outlook

Our expectation is that the market will continue to be weak for at least the remainder of 2017. Consumer confidence has declined, and our outlook is therefore cautious. We expect to continue to gain market share in H2, although sales will continue to be expensive to win and we expect operating margins to be challenging. While market conditions remain at the current low level we will continue to challenge our cost base for efficiencies, though the impact of cost elimination will primarily benefit 2018 and beyond.

We are determined that Safestyle will deliver out performance in its market and gain market share, based on our geographic spread, product range and commercial offerings.

RS Halbert

Chairman

21 September 2017

Finance Review

Revenue

Revenue for the period was GBP82.5 million against GBP81.4 million restated for the same period last year, representing growth of 1.4%. The key factors underpinning this growth were:

   --    9.1% growth in leads generated from direct response from 39,118 to 42,680 
   --    6.8% decline in the volume of frames installed from 149,742 to 139,612 
   --    8.3% growth in average unit price from GBP553 to GBP599 ex VAT 

The price list increase implemented at the start of the year to counterbalance the additional raw material costs resulting from the reduction in the value of Sterling has been secured. Unit prices have been further boosted by growth in higher value items including conservatory upgrades, composite doors and coloured frames.

A review of accounting policies in the run up to the adoption of IFRS15 has led to the revenue from goods relating to financed products to be shown net of the charges incurred in those sales. Previously these were shown as a cost of sale and the results of 30 June 2016 and 31 December 2016 have been restated to reflect these. This amounted to GBP1.7 million in H1 2017 and GBP2.2 million in the same period for 2016. There was no impact to the profit and net assets within these periods.

Gross margin

Gross profit reduced by 2.5% in the period to GBP27.5 million (H1 2016: GBP28.2 million). Gross margin has reduced to 33.3% (H1 2016: 34.6%).

The price list increase from 1 January 2017 more than offset the inflation in raw material costs resulting from Sterling weakness but other direct costs have also seen increases which have led to a dilution in gross margin. In particular, online marketing costs have seen a significant increase with the cost of lead acquisition increasing by 19% against the same period last year reflecting increased competition for leads in a tough market.

In addition, manufacturing costs were higher as a result of the planned disruption during the transfer of equipment into the new factory. This was completed on time and the second half of the year will benefit from the expected productivity and quality benefits.

Other operating expenses

Other operating expenses were unchanged for the period at GBP18.7 million (H1 2016: GBP18.7 million). Savings in charges related to the exercise of options in the prior year were offset by other costs as the business continued to invest in building its brand profile, developing its IT infrastructure and strengthening its management team.

EBITDA, PBT and EPS

Underlying EBITDA (as defined in the financial and operating highlights) was GBP9.8 million for the period (H1 2016: GBP11.1 million), a decrease of 11.7%. PBT decreased by 7.4% from GBP9.5 million in H1 2016 to GBP8.8 million.

Basic earnings per share for the period were 8.3p compared to 9.4p for the same period last year. The basis for these calculations is detailed in note 6 to the accounts.

Cash

The cash balance at 30 June 2017 was GBP17.7 million, an increase of GBP4.2 million since the year end.

Pre-tax operating activities generated GBP8.3 million (2016: GBP9.8 million). Capital expenditure in the period was GBP3.2 million of which GBP2.4 million related to the factory expansion.

Dividends

The Board is declaring an interim dividend of 3.75p per share. The dividend will be paid on 6 November 2017 to shareholders on the register at close of business on 29 September 2017.

Condensed consolidated interim statement of comprehensive income

 
                                    Unaudited   Unaudited       Audited 
                                                 Restated      Restated 
                             Note    6 months    6 months     12 months 
                                        ended       ended         ended 
                                      30 June     30 June   31 December 
                                         2017        2016          2016 
                                       GBP000      GBP000        GBP000 
 
  Revenue                              82,484      81,360       159,435 
  Cost of sales                      (54,964)    (53,173)     (103,826) 
 
  Gross profit                         27,520      28,187        55,609 
  Other operating 
   expenses                          (18,714)    (18,697)      (36,362) 
 
  Operating profit                      8,806       9,490        19,247 
 
 
  EBITDA before share 
   based payments 
   and charges relating 
   to exercised LTIP 
   options                              9,757      11,103        21,602 
 
  Equity settled 
   share based payments 
   charges                    8         (160)       (104)         (240) 
  Charges relating 
   to exercised LTIP 
   options                                  -       (947)         (947) 
  Depreciation and 
   amortisation                         (791)       (562)       (1,168) 
 
 
  Operating profit                      8,806       9,490        19,247 
 
 
  Finance income                           18          55            98 
  Finance expense                         (5)         (7)          (11) 
 
  Profit before taxation                8,819       9,538        19,334 
 
  Taxation                    7       (1,957)     (1,920)       (3,778) 
 
  Profit after taxation 
   for the period                       6,862       7,618        15,556 
 
  Other comprehensive                       -           -             - 
   income 
 
  Total comprehensive 
   profit for the 
   period attributable 
   to shareholders                      6,862       7,618        15,556 
                                   ==========  ==========  ============ 
 
  Earnings per share 
  Basic (pence)               6           8.3         9.4          19.0 
  Diluted (pence)             6           8.2         9.3          18.9 
 

All operations were continuing throughout all periods.

Condensed consolidated interim statement of financial position

 
 
                                       Unaudited   Unaudited       Audited 
                                Note    6 months    6 months     12 months 
                                           ended       ended         ended 
                                         30 June     30 June   31 December 
                                            2017        2016          2016 
                                          GBP000      GBP000        GBP000 
 Assets 
 Intangible assets 
  - Trademarks                               504         504           504 
 Intangible assets 
  - Goodwill                              20,758      20,283        20,758 
 Intangible assets 
  - Software                                 499         475           415 
 Property, plant 
  and equipment                           14,699       8,498        12,389 
 Deferred tax asset                          119          30           119 
 
 Non-current assets                       36,579      29,790        34,185 
 
 Inventories                               2,006       1,711         2,176 
 Trade and other 
  receivables                              6,438       6,752         4,560 
 Cash and cash equivalents                17,702      23,552        13,459 
 
 Current assets                           26,146      32,015        20,195 
 
 Total assets                             62,725      61,805        54,380 
                                      ==========  ==========  ============ 
 
 Equity 
 Called up share 
  capital                                    830         828           828 
 Share premium account                    82,216      81,979        81,979 
 Profit and loss 
  account                                 22,850      18,375        22,052 
 Common control transaction 
  reserve                               (66,527)    (66,527)      (66,527) 
 
                                          39,369      34,655        38,332 
 Liabilities 
 Trade and other 
  payables                                12,520      12,812        11,983 
 Dividends accrued               5         6,224      11,263             - 
 Financial liabilities                        35          70            70 
 Corporation tax 
  liabilities                              2,475         521         1,599 
 Provision for liabilities 
  and charges                                657         701           701 
 
 Current liabilities                      21,911      25,367        14,353 
 
 Financial liabilities                         -          35             - 
 Provision for liabilities 
  and charges                              1,445       1,748         1,695 
 
 Non-current liabilities                   1,445       1,783         1,695 
 
 Total liabilities                        23,356      27,150        16,048 
 
 Total equity and 
  liabilities                             62,725      61,805        54,380 
                                      ==========  ==========  ============ 
 

Condensed consolidated interim statement of changes in equity

 
                               Share      Share     Profit         Common     Total 
                             capital    premium        and        control    equity 
                                                      loss    transaction 
                                                   account        reserve 
                              GBP000     GBP000     GBP000         GBP000    GBP000 
 
 
 Balance at 30 
  June 2016                      828     81,979     16,387       (66,527)    32,667 
 
 Total comprehensive 
  profit for the 
  period                           -          -      9,872              -     9,872 
 
 Transactions with 
  owners of the 
  Company: 
 Issue of shares                   -          -          -              -         - 
 Equity settled 
  share based payment              -          -        136              -       136 
 Deferred tax on 
  equity settled 
  share based payments             -          -    (1,239)              -   (1,239) 
 Dividends                         -          -    (3,104)              -   (3,104) 
 Balance at 31 
  December 2016                  828     81,979     22,052       (66,527)    38,332 
 
 Total comprehensive 
  profit for the 
  period                           -          -      6,862              -     6,862 
 
 Transactions with 
  owners of the 
  Company: 
 Issue of shares                   2        237          -              -       239 
 Equity settled                    -          -          -              -         - 
  share based payment 
 Deferred tax on 
  equity settled 
  share based payments             -          -        160              -       160 
 Dividends                         -          -    (6,224)              -   (6,224) 
 Balance at 30 
  June 2017                      830     82,216     22,850       (66,527)    39,369 
                           =========  =========  =========  =============  ======== 
 

Condensed consolidated interim statement of cash flows

 
 
                                 Unaudited   Unaudited       Audited 
                                  6 months    6 months     12 months 
                                     ended       ended         ended 
                                   30 June     30 June   31 December 
                                      2017        2016          2016 
                                    GBP000      GBP000        GBP000 
 
 
 Cash flows from 
  operating activities 
 Profit for the year                 6,862       7,618        15,556 
 Adjustments for: 
 Depreciation of 
  plant, property 
  and equipment                        671         461           954 
 Amortisation of 
  intangible fixed 
  assets                               120         101           214 
 Finance income                       (18)        (55)          (98) 
 Finance expense                         5           7            11 
 Profit on sale of 
  plant, property 
  and equipment                          -           7             7 
 Equity settled share 
  based payments                       160         104           240 
 Tax expense                         1,957       1,920         3,778 
                                ----------  ----------  ------------ 
                                     9,757      10,163        20,662 
 Decrease/(Increase) 
  in inventories                       170       (211)         (676) 
 Increase in trade 
  and other receivables            (1,878)     (2,894)         (702) 
 Increase in trade 
  and other payables                   536       2,654         1,824 
 Increase/(decrease) 
  in provisions                      (294)          79            26 
                                ----------  ----------  ------------ 
                                   (1,466)       (372)           472 
 Hire purchase interest 
  paid                                 (5)         (7)          (11) 
 Other interest paid                     -           -             - 
                                       (5)         (7)          (11) 
 Taxation paid                     (1,080)     (1,734)       (3,893) 
 Net cash from operating 
  activities                         7,206       8,050        17,230 
                                ----------  ----------  ------------ 
 
 Cash flows from 
  investing activities 
 Acquisition of property, 
  plant and equipment              (3,092)     (1,007)       (5,901) 
 Interest received                      18          55            98 
 Proceeds from issue 
  of property, plant 
  and equipment                          -          42            42 
 Acquisition of intangible 
  fixed assets                        (93)           -          (20) 
                                ----------  ----------  ------------ 
 Net cash outflow 
  from investing activities        (3,167)       (910)       (5,781) 
 
 Cash flows from 
  financing activities 
 Proceeds from the                     239           -             - 
  issue of ordinary 
  shares 
 Payment of hire 
  purchase and finance 
  leases                              (35)        (73)         (108) 
 Dividends paid                          -           -      (14,367) 
                                ----------  ----------  ------------ 
 Net cash outflow 
  from financing activities            204        (73)      (14,475) 
 
 Net increase in 
  cash and cash equivalents          4,243       7,067       (3,026) 
 Cash and cash equivalents 
  at start of year                  13,459      16,485        16,485 
 
 Cash and cash equivalents 
  at end of year                    17,702      23,552        13,459 
                                ==========  ==========  ============ 
 

Notes to the interim financial information

   1              General information 

The condensed interim financial information set out herein is in respect of Safestyle UK plc and its subsidiaries (the Group) for the period ended 30 June 2017.

Safestyle UK plc is a public listed company incorporated in Jersey. The registered office address of Safestyle UK plc is 47 Esplanade, St Helier, Jersey JE1 0BD.

The financial information presented for the year ended 31 December 2016 is not the statutory accounts for that financial year. These accounts have been reported on by the company's auditor. The report of the auditor was unqualified and did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report.

The company is not required to present parent company information.

   2              Basis of preparation 

The condensed consolidated interim financial information for the period ended 30 June 2017 has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2016.

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the period ended 31 December 2016 which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The accounting policies adopted in the condensed interim financial information are consistent with those set out in financial statements for the period ended 31 December 2016.

   3              Going concern 

The Group has considerable financial resources and has prepared forecasts that show the Group is expected to continue to trade solidly. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.

The assessment of the Group's ability to execute its strategy by funding future working capital requirements involves judgement. The Directors monitor future cash requirements to assess the Group's ability to meet these funding requirements.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

   4              Significant  accounting policies 

Accounting estimates

In preparing this condensed consolidated interim financial report, significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2016.

Revenue recognition

A review of accounting policies in the run up to the adoption of IFRS15 has led to the revenue from goods relating to financed products to be shown net of the charges incurred in those sales. Previously these were shown as a cost of sale and the results of 30 June 2016 and 31 December 2016 have been restated to reflect these. The effect on revenue in the period was GBP1,735k (GBP2,188k 30 June 2016, GBP3,681k 31 December 2016).

There is no effect on the overall gross margin or operating profit for the Group within these periods.

   5              Dividends 
 
                               Unaudited   Unaudited       Audited 
                                6 months    6 months     12 months 
                                   ended       ended         ended 
                                 30 June     30 June   31 December 
                                    2017        2016          2016 
 The aggregate amount 
  of dividends comprises:        GBP'000     GBP'000       GBP'000 
 
 Dividends paid in 
  respect of the period                -           -        14,367 
 Dividends declared                6,224      11,263             - 
 
                                   6,224      11,263        14,367 
                              ----------  ----------  ------------ 
 

A final dividend for the year end 31 December 2016 of 7.5 pence per ordinary share totaling GBP6,224,219 was paid on 10 July 2017.

A proposed interim dividend for the half year end 30 June 2017 of 3.75 pence per ordinary share will be paid on 6 November 2017.

   6              Earnings per share 

a) Basic earnings per share

 
 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. 
                                   Unaudited      Unaudited        Audited 
                                    6 months       6 months      12 months 
                                       ended          ended          ended 
                                     30 June        30 June    31 December 
                                        2017           2016           2016 
                                     GBP'000        GBP'000        GBP'000 
 
 Profit attributable 
  to ordinary shareholders             6,862          7,618         15,556 
                               =============  =============  ============= 
 
 Weighted-average 
  number of ordinary 
  shares (basic) 
 
                                No of shares   No of shares   No of shares 
                                        '000           '000           '000 
 
 Issued ordinary 
  shares at period 
  end                                 82,868         81,184         82,006 
                               =============  =============  ============= 
 

b) Diluted earnings per share

 
 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. 
 
                                   Unaudited      Unaudited        Audited 
                                    6 months       6 months      12 months 
                                       ended          ended          ended 
                                     30 June        30 June    31 December 
                                        2017           2016           2016 
                                     GBP'000        GBP'000        GBP'000 
 
 Profit attributable 
  to ordinary shareholders             6,862          7,618         15,556 
                               =============  =============  ============= 
 
 
                                No of shares   No of shares   No of shares 
                                        '000           '000           '000 
 
 Weighted-average 
  number of ordinary 
  shares (basic)                      82,868         81,184         82,006 
 Effect of dilutive 
  share options and 
  warrants                               319            385            341 
 
 Weighted-average 
  number of ordinary 
  shares (basic) at 
  period end                          83,187         81,569         82,347 
                               =============  =============  ============= 
 
 The average market value of the Company'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. 
 
 
                         Unaudited   Unaudited       Audited 
                          6 months    6 months     12 months 
                             ended       ended         ended 
                           30 June     30 June   31 December 
                              2017        2016          2016 
 Earnings per share 
  (pence)                      8.3         9.4          19.0 
 Diluted earnings 
  per share (pence)            8.2         9.3          18.9 
 
 
   7              Taxation 

The condensed interim financial information includes a tax charge based on management's best estimate of the full year effective tax rate. The effective tax rate applied in the period was 22.19% (period ended 30 June 2016: 20.13%) which compares to the standard corporation tax rate of 20.00%.

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2017. This will reduce the Group's future current tax charge accordingly. The deferred tax asset at 30 June 2017 has been calculated based on these rates.

   8              Share based payments 

At 30 June 2017 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 2015", "LTIP 2016" & "LTIP 2017").

On 10 April 2017, a further 348,210 options were granted ("LTIP 2017"). 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:

 
                                   Unaudited               Unaudited                   Audited 
                                    6 months                6 months                 12 months 
                                       ended                   ended                     ended 
                                30 June 2017            30 June 2016               31 December 
                                                                                          2016 
                        Number     Weighted     Number     Weighted      Number      Weighted 
                        of share    average     of share    average      of share     average 
                        options     exercise    options     exercise     options      exercise 
                                     price                   price                     price 
-------------------   ----------  ----------  ----------  ----------  ------------  ---------- 
 Outstanding 
  at start of 
  period               1,030,134     GBP2.18     452,460     GBP1.37     4,581,976     GBP1.00 
 Granted during 
  the year               348,210           -      87,485     GBP2.25       448,533     GBP1.79 
 Issued in the 
  year                         -           -           -           -   (2,564,427)     GBP1.00 
 Cancelled in 
  the year                     -           -           -           -   (1,421,683)     GBP1.00 
 Lapsed in the 
  year                 (118,318)     GBP2.09    (59,093)     GBP1.49      (14,265)     GBP1.79 
 Outstanding 
  at end of period     1,260,026     GBP1.58     480,852     GBP1.51     1,030,134     GBP2.18 
 Exercisable 
  at end of period             -           -           -           -             -           - 
--------------------  ----------  ----------  ----------  ----------  ------------  ---------- 
 

Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the fair value of the options granted during the period.

 
                                                                 Unaudited 
                                                                  6 months 
                                                                     ended 
                                                              30 June 2017 
                                            LTIP         LTIP         LTIP 
                                            2017         2016         2015 
 Grant date                           10/04/2017   29/04/2016   01/04/2015 
 Vesting date                         10/04/2020   29/04/2019   01/04/2018 
 Lapsing date                         10/04/2027   01/04/2026   01/04/2025 
 
 Risk free interest 
  rate                                     0.15%        1.22%        1.28% 
 Expected volatility                      33.56%       36.93%       43.13% 
 Expected option 
  life (in years)                           6.50         6.50         6.50 
 Weighted average share                  GBP3.04      GBP2.67      GBP1.80 
  price after adjusting for 
  PV of dividends 
 Weighted average                        GBP0.00      GBP2.68      GBP1.79 
  exercise price 
 Weighted average fair 
  value of options granted               255.90p       65.79p       44.78p 
 Dividend Yield                            5.71%        3.60%        5.20% 
 Remaining contractual 
  life                                      9.78         8.76         7.76 
 

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.

SAYE

On 1 April 2017 the company launched a new share save (SAYE) scheme ("SAYE 2017") in addition to the existing schemes ("SAYE 2013", "SAYE 2014" and "SAYE 2015") 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 "SAYE 2013" matured within the period and as of the 30 June 2017, 183,016 options were issued at a price of 130.8 pence per share from 198,714 options granted.

The numbers of share options in existence during the year were as follows:

 
                                       Unaudited                         Unaudited                           Audited 
                                        6 months                          6 months                         12 months 
                                           ended                             ended                             ended 
                                    30 June 2017                      30 June 2016                       31 December 
                                                                                                                2016 
                         Number        Weighted          Number          Weighted          Number          Weighted 
                        of share        average          of share         average          of share         average 
                         options        exercise         options          exercise         options          exercise 
                                         price                             price                             price 
----------------   -----------------  ----------  --------------------  ----------  --------------------  ---------- 
 Outstanding 
  at start of 
  period                     423,382     GBP1.49               452,460     GBP1.37               452,460     GBP1.37 
 Granted during 
  the year                   119,955     GBP2.51                87,485     GBP2.25                87,485     GBP2.25 
 Issued in the 
  year                     (183,016)     GBP1.31 
 Lapsed during 
  the period                 (5,750)     GBP1.78              (59,093)     GBP1.49             (116,563)     GBP1.57 
 Outstanding 
  at end of 
  period                     354,571     GBP1.93               480,852     GBP1.51               423,382     GBP1.49 
 Exercisable 
  at end of 
  period                      15,686     GBP1.31                     -           -                     -           - 
-----------------  -----------------  ----------  --------------------  ----------  --------------------  ---------- 
 

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.

 
                                                                             Unaudited 
                                                                              6 months 
                                                                                 ended 
                                                                          30 June 2017 
                                           SAYE         SAYE         SAYE         SAYE 
                                           2017         2016         2015         2014 
 Grant date                          25/04/2017   01/04/2016   01/04/2015   27/03/2014 
 Vesting date                        01/06/2020   01/05/2019   01/05/2018   01/05/2017 
 Lapsing date                        01/12/2020   01/11/2019   01/11/2018   01/11/2017 
 
 Risk free interest 
  rate                                    0.21%        0.56%        0.76%        1.31% 
 Expected volatility                     34.17%       32.88%       23.80%       52.80% 
 Expected option 
  life (in years)                          3.35         3.35         3.35         3.35 
 Weighted average share                 GBP3.14      GBP2.81      GBP1.80      GBP1.57 
  price after adjusting for 
  PV of dividends 
 Weighted average                       GBP2.51      GBP2.25      GBP1.43      GBP1.31 
  exercise price 
 Weighted average fair 
  value of options granted               68.60p       71.93p       41.52p       58.40p 
 Dividend Yield                           5.53%        3.40%        5.20%        8.00% 
 Remaining contractual 
  life                                     3.35         2.34         1.34         0.34 
 

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.

The total share-based expense comprises:

 
                                  Unaudited      Unaudited       Audited 
                                   6 months       6 months     12 months 
                                      ended          ended         ended 
                               30 June 2017   30 June 2016   31 December 
                                                                    2016 
                                     GBP000         GBP000        GBP000 
 Equity settled 
  - LTIP                                121             60           369 
 Equity settled 
  - SAYE                                 39             44            74 
 Employers national 
  insurance on issue 
  of LTIP with associated 
  charges                                 -              -           947 
 
                                        160            104         1,390 
                              -------------  -------------  ------------ 
 
   9              Seasonality 

Order intake is subject to small seasonal fluctuations with higher demand in the first and fourth quarters as a result of seasonal weather factors. The business can, within limits, smooth this demand by flexing its order book and aims to level load its operations to minimize costs. As a result revenues and profits would normally be similar for both halves of the year.

INDEPENDENT REVIEW REPORT TO SAFESTYLE UK PLC

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2017 which comprises the Condensed Consolidated Interim Statement of Comprehensive Income, the Condensed Consolidated Interim Statement of Changes in Equity, the Condensed Consolidated interim Statement of Financial Position, the Condensed Consolidated Interim Statement of Cash Flows and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 30 Junsafe 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the AIM Rules.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Directors' responsibilities

The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Ian Beaumont

for and on behalf of KPMG LLP

Chartered Accountants

1 Sovereign Square,

Sovereign St,

Leeds

LS1 4DA

21 September 2017

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR UAVVRBKAKURR

(END) Dow Jones Newswires

September 21, 2017 02:01 ET (06:01 GMT)

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