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| 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 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Manufacturing Industries,nec | 154.32M | -6.51M | -0.0469 | -0.07 | 444.37k |
From May 2019 to May 2024
TIDMSFE
RNS Number : 5281I
Safestyle UK PLC
22 March 2018
22 March 2018
Safestyle UK plc
("Safestyle" or the "Group")
Final Results 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 final results for the 12 months ended 31 December 2017.
Financial and Operational highlights
Hot Features
Premium
Year ended Year ended % change
31 December 2017 31 December 2016
GBPm GBPm
-------------------- ------------------- ------------------- ----------
Revenue*** 158.6 159.4 -0.5%
-------------------- ------------------- ------------------- ----------
Gross profit 51.4 55.6 -7.6%
-------------------- ------------------- ------------------- ----------
Gross margin % 32.4% 34.9% -250bps
-------------------- ------------------- ------------------- ----------
EBITDA 15.5 20.4 -24.0%
-------------------- ------------------- ------------------- ----------
Underlying EBITDA* 16.8 21.6 -22.2%
-------------------- ------------------- ------------------- ----------
PBT 13.8 19.3 -28.5%
-------------------- ------------------- ------------------- ----------
Underlying PBT** 15.1 20.5 -26.3%
-------------------- ------------------- ------------------- ----------
EPS - Basic 13.1p 19.0p -31.1%
-------------------- ------------------- ------------------- ----------
Ordinary Dividend 11.25p 11.25p
-------------------- ------------------- ------------------- ----------
* Underlying EBITDA is defined as earnings before interest, tax, depreciation, amortisation, share based payments and non-recurring charges
** Underlying PBT is defined as earnings before taxation, share based payments and non-recurring charges
*** 2016 has been restated, as explained in note 1.
A reconciliation of the terms used in the above table and those in the financial statements can be found in note 5.
-- Volume of frames installed decreased by 7.9% to 265,716 (2016: 288,460) -- Average unit sales price up 7.6% to GBP608 (2016: GBP565) -- Continued growth in market share to 10.7% at 31 December 2017 (2016: 10.2%) -- Leads generated from media and on-line marketing grew by 6.4% to 78,402 (2016: 73,686) -- 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 GBP14.5 million (2016: GBP21.1 million)
Commenting on the results, Steve Birmingham, CEO said:
"During 2017 the market became increasingly challenging and although Safestyle again increased market share, the Group's financial performance was impacted primarily due to increases in lead generation costs, consumer finance subsidy costs and raw materials.
The start to 2018 has been difficult and as previously announced our order intake has been below management expectations as a result of the continued deteriorating market, declining consumer confidence and increased competitive environment.
We have already taken action to reduce our cost base and modernise our sales and canvass operations. We expect the major benefits of these efforts to take effect in the second half of 2018.
2018 will be a year of transition as we continue to invest in operational improvements so that by the end of the year we will have a leaner, fitter and more cost effective business."
Enquiries:
Safestyle UK plc Tel: 0207 653 9850 Steve Birmingham, Chief Executive Officer Mike Robinson, Chief Financial Officer Zeus Capital (Nominated Adviser & Joint Tel: 0203 829 5000 Broker) Nick How / Dominic King Liberum (Joint Broker) Tel: 0203 100 2100 Neil Patel / Jamie Richards FTI Consulting (Financial PR) Tel: 0203 727 1000 Alex Beagley / James Styles safestyle@fticonsulting.com
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 - Results Announcement for the year ended 31 December 2017
Summary of Financial Performance
The Group has delivered revenue of GBP158.6m (2016:GBP159.4m), down 0.5% from the corresponding period in 2016, and underlying profit before tax of GBP15.1m, down from last year's GBP20.5m. Reported profit before tax for the year was GBP13.8m (2016: GBP19.3m). Earnings per share decreased 31.1% to 13.1p (2016: 19.0p).
In a difficult market, which declined by an estimated 9.0% overall, the Group continued to gain market share (as measured by FENSA installation numbers), which was 10.7% at the year end (2016: 10.2%).
Market Contraction
Market conditions at the start of 2017 were relatively stable, with FENSA data showing that the overall market in Q1 2017 experienced a relatively modest volume decline. However, the market contraction accelerated thereafter, reflecting declining consumer confidence, with volume declining 10.2% for the remainder of the year. The current outlook for the market for large household discretionary purchases remains challenging and the Board expects market conditions to continue to be challenging in 2018.
We responded to these challenging market conditions through deployment of market leading consumer finance, although the increased cost has impacted gross margins. We continue to evolve our product range and will be offering both new build and refurbishment conservatory propositions throughout the course of 2018. We have continued to invest in technology and our digital lead generation performance continues to be strong although we have had to absorb significant cost inflation which has impacted margins.
Factory Expansion
We completed our new factory extension at Wombwell, South Yorkshire, on time and on budget. This modern facility is fully operational and delivering the anticipated manufacturing productivity gains.
Balance Sheet and Final Dividend
During 2017, we had capital expenditure of GBP4.7m, following the GBP5.9m in 2016, and this major programme, which primarily relates to our new manufacturing facilities, is substantially complete. We expect our capex to reduce in 2018 in line with historic norms, when our major investment will be in technology and digital transformation to modernise our customer experience and enhance operational efficiency.
Our business continues to be highly cash generative with 2017 cash conversion (the ratio of net cash inflow from operating activities before taxation to underlying EBITDA) at 87% (2016: 98%). Our balance sheet is strong with GBP11.0m net cash at 31 December 2017, slightly lower than we expected due to a delay in receipts from our consumer finance provider.
The Board recommends, subject to approval at the Annual General Meeting to be held on 17 May 2018, a final dividend of 7.5p per share payable on 9 July to ordinary shareholders registered on 15 June 2018. Together with our interim dividend of 3.75p per share which has already been paid, this takes the total proposed ordinary distributions to 11.25p per share, representing reduced cover of circa 1.2 times.
Directorate Change
After 10 years with the Company, Mike Robinson will step down as CFO and from the Board during May 2018 to pursue other business opportunities. On behalf of the Board, I would like to thank Mike for his contribution to the development of the Group over the last 10 years.
The Board will appoint Rob Neale to succeed Mike as CFO. Rob is currently Head of Leisure Travel Finance at Jet2.com and Jet2holidays, divisions of Dart Group plc. He will join the Group when a departure date from his current employer has been agreed.
Looking Ahead
The beginning of 2018 has been difficult with a continuing deterioration in the market resulting from declining consumer confidence. We estimate the overall market to be approximately 10% lower than the comparable period in 2017, reflecting the continuation of the trend seen for the final three quarters of 2017. As announced in our previous Trading Update on 28 February 2018, this has been exacerbated by the activities of an aggressive new market entrant in an already competitive landscape which has impacted the Group in certain areas of its operations, primarily in relation to our Canvass operations although not exclusively so. As a result of the deteriorating market conditions and the activities of the aggressive new competitor, the Group's order intake in 2018 to date has been weak and our market share is under pressure.
Whilst Canvass has been a declining part of our revenue for some time, it remains an important and significant part of our operations. We have responded to this by accelerating the modernisation of our Sales and Canvass operations and by selective recruitment to strengthen our operations. We expect the benefits of this response to take effect in H2 2018.
We are well invested in our manufacturing facilities and are focused on enhancing our operations, particularly through the effective deployment and utilisation of technology. Although 2018 is likely to be a year of significant challenge for all market participants, with our leading market position we are determined to participate strongly in a smaller more competitive marketplace.
Finally, I would like to thank our colleagues for their hard work and resilience.
RS Halbert
Chairman
22 March 2018
CEO Statement
During 2017 the market became increasingly challenging and continued to deteriorate as a result of declining consumer confidence. As a result, the Group's financial performance was impacted. Despite the disappointing financial result our people demonstrated continued hard work, dedication and commitment and I would like to formally express my thanks to them all.
Business Review
In 2017, Safestyle's market share increased for the thirteenth consecutive year to 10.7% (from 10.2% in 2016) further consolidating our sector leading position (Source: FENSA). During the period we carried out over 59,500 installations (down 4.8% on 2016) consisting of over 265,700 window and door frames (down 7.9% on 2016). Despite the challenging market conditions we were able to increase our average frame sales price by 7.6% to GBP608 and our average installed order value by 4.2% from GBP3,103 to GBP3,232, demonstrating the quality of our product and service. The increased average frame sales price and installed average order value largely compensated for the reduced volumes and resulted in revenue of GBP158.6m (2016: GBP159.4m).
Underlying profit before tax was GBP15.1m (see note 5), down GBP5.4m on 2016. This was primarily due to increases in door canvass and digital lead generation costs, increased finance subsidy costs and raw material price increases as a result of sterling weakness and commodity price inflation.
For the first time, orders generated from our digital activities and direct response channels exceeded those from other sources and accounted for 47% of all business in 2017 compared to 41% in 2016. Our intention is to build on this foundation and continue to invest in our technology and digital activities. Lead generation from our traditional door canvassing remains an important part of the marketing mix and we commenced a restructuring of this function during the fourth quarter of 2017 with the intention of creating a smaller, more efficient and more cost effective operation. In 2017, the proportion of orders from door canvass reduced from 45% to 39% of total orders. We plan to improve the cost effectiveness and productivity of both our digital marketing and door canvass operations during 2018 as we aim to reduce our average lead generation costs whilst increasing orders.
Health and Safety
We take the wellbeing of our people extremely seriously, and Safestyle has comprehensive Health and Safety procedures in place which we regularly review, and which we strive to continuously improve. We are particularly sensitive to the risks of working at height, which we have to do on around a third of our 60,000 annual installations. We manage these risks through a number of documented and approved processes, and as a result we have maintained a very good safety record over many years. Exceptionally, during 2017 however, Safestyle had two incidents involving installations at height which led to reportable injuries.
The Health & Safety Executive ("HSE") has carried out investigations into both of these cases, with our fullest co-operation. Whilst it continues to investigate one of the incidents, the HSE has advised the Company that it intends to prosecute Safestyle in relation to the other accident. We expect that in due course we may be fined, although the precise quantum of such a fine would depend on a number of factors including the level of culpability, the harm category and what mitigating factors may be taken into account. We will provide a further update in due course. Further information is available in note 11 to the accounts.
Manufacturing Expansion Plan Completed
During 2017, we completed the investment in our new factory and manufacturing equipment to plan and budget. We have seen the benefits of this investment in the form of improved quality, reduced waste and increased labour efficiency in the factory.
Training Academy
As part of our plans to develop our people and further strengthen our competitive position for the long term, the Group plans to establish a training academy in Barnsley. This will be one of the principle uses of the vacated former glass manufacturing factory and, having completed the design phase, we have submitted a planning application for approval. We are already utilising some of the space for an enhanced post consumer waste facility to deliver improved revenue from recycled material. Further detail will be provided on the planned training academy during the course of 2018. The intention of the training academy is to help develop our people to reinforce our market leading customer service proposition.
Modern Working Practices
We monitor developments in working practices carefully. We currently have approximately 750 employees and have access to the services of approximately 1,300 self-employed people, primarily in the areas of Sales and Canvass, Survey and Installation, in keeping with window industry custom and practice.
We welcome the Independent Review of Employment Practices in the Modern Economy led by Matthew Taylor and look forward to clarification of the various employment statuses being provided. We respect the rights of self determination of our self-employed people and will continue to manage this important area of our business.
Outlook
The start to 2018 has been difficult across the sector and our order intake has been below management expectations, as previously announced. Market conditions remain challenging, given the current economic uncertainties and the increased competitive environment.
During 2018 we will continue to invest in our digital transformation project which will have the benefits of further reducing our costs and increasing our sales and operational effectiveness.
2018 will be a year of transition and we have a strong financial position from which to continue to invest in operational improvements so that by the end of the year we will have a leaner, fitter and more cost effective business.
S.J. Birmingham FCA
Chief Executive Officer
22 March 2018
Financial Review
Revenue
Revenue for the period was GBP158.6 million against GBP159.4 million for the same period last year, representing a decline of 0.5%. Average unit prices increased by 7.6% in the year from GBP565 to GBP608. This follows a price list increase implemented at the start of 2017 to recover additional material costs incurred as a result of sterling weakness. It also reflects a change in product mix with growth in premium products including bi-fold and composite doors, coloured frames and conservatories.
The volume of frames installed in 2017 was 265,716, a decrease of 7.9% over the previous year (2016: 288,460). Average order value grew by 4.2% from GBP3,103 (inc VAT) in 2016 to GBP3,232 in 2017.
Lead mix continued the trend we have seen in recent years with sales from digital increasing by 13.1% in the year.
Gross margin
Gross margin for 2017 was 32.4%, below the previous year's level of 34.9%. We increased our price list on 1 January 2017 to recover the additional material costs incurred following the EU Referendum but further increases in PVCu profile and a shift in product mix towards more premium products that we currently do not manufacture has negatively impacted margins.
Further margin pressure has been felt from cost inflation in both digital and door canvass lead generation and an increased take up of our consumer finance offer has led to higher finance subsidies being incurred.
Other operating expenses
Other operating expenses in 2017 were GBP37.6 million (2016: GBP36.4 million), an increase of 3.3%. The 2017 expenses include GBP0.8 million of non-recurring restructuring costs while the costs in 2016 included one-off Employer National Insurance costs of GBP0.9 million which were incurred as a result of the exercise LTIP options granted when the Company completed its IPO in 2013.
The majority of the increase in expenses was depreciation which was GBP0.6 million higher following the major investment in the factory expansion. This project was completed on-time and on-budget.
Profit and EPS
Profit before tax decreased by 28.5% from GBP19.3 million in 2016 to GBP13.8 million in 2017. Underlying PBT (see note 5) before share based payments and non-recurring costs was GBP15.1 million for the period (2016: GBP20.5 million), representing a decrease of 26.3%.
The effective tax rate for 2017 was 21.6% compared to 19.5% in 2016. The 2016 tax rate benefitted from an adjustment to the prior year's tax.
Reported basic earnings per share for the period were 13.1p compared to 19.0p for the same period last year. The basis for the calculation is detailed in note 7 to the accounts.
Cash
The cash balance at 31 December 2017 was GBP11.0 million, slightly lower than we expected due to a delay in receipts from our consumer finance provider. This was a reduction of GBP2.5 million in the period and was after paying total dividends of GBP9.3 million (2016: GBP14.4 million). The 2016 dividend payment included a special dividend of GBP5.6 million.
Operating cashflow in the year was GBP11.7 million which was GBP5.5 million lower than the previous year. This primarily reflects the lower profitability in 2017 but was also impacted by an increase in working capital of GBP1.3 million. This was largely due to a reduction in trade creditors. The 2016 balance included a large stage payment to the contractor responsible for the factory extension which was subsequently paid in January 2017.
Capital expenditure in the period was GBP4.7 million (2016: GBP5.9 million). The factory expansion, including the new glass furnace, accounted for GBP2.7 million of this year's investment.
Dividends
The Board is proposing a final dividend of 7.5p per share, subject to the approval of shareholders at the Annual General Meeting on 17 May 2018. The dividend will be paid on 9 July 2018 to shareholders on the register at close of business on 15 June 2018.
Mike Robinson
Chief Financial Officer
22 March 2018
Consolidated statement of comprehensive income for the year ended 31 December 2017
`
Restated
2017 2016
Note GBP000 GBP000
Revenue 158,552 159,435
Cost of sales (107,133) (103,826)
---------- ----------
Gross profit 51,419 55,609
Other operating expenses (37,630) (36,362)
---------- ----------
Operating profit 13,789 19,247
EBITDA before non-recurring costs,
share based payments, depreciation
and amortisation 16,770 21,602
Non-recurring costs 2 (830) -
Equity settled share based payments
charges 6 (421) (1,187)
Depreciation and amortisation (1,730) (1,168)
Operating profit 13,789 19,247
---------------------------------------- -------- ---------- ----------
Finance income 35 98
Finance costs (10) (11)
---------- ----------
Profit for the year 13,814 19,334
Taxation 8 (2,986) (3,778)
---------- ----------
Profit after taxation 10,828 15,556
Other comprehensive income - -
---------- ----------
Total comprehensive income for
the period attributable to equity
shareholders 10,828 15,556
========== ==========
Earnings Per Share
Basic (pence per share) 7 13.1p 19.0p
Diluted (pence per share) 13.0p 18.9p
All operations were continuing throughout all periods.
Consolidated statement of financial position as at 31 December 2017
2017 2016
Note GBP000 GBP000
Assets
Intangible assets - Trademarks 504 504
Intangible assets - Goodwill 20,758 20,758
Intangible assets - Software 786 415
Property, plant and equipment 14,975 12,389
Deferred tax asset 28 180
Non-current assets 37,051 34,246
-------------------- ---------
Inventories 2,032 2,176
Trade and other receivables 4,559 4,560
Cash and cash equivalents 10,975 13,459
Current assets 17,566 20,195
-------------------- ---------
Total assets 54,617 54,441
==================== =========
Equity
Called up share capital 9 828 828
Share premium account 81,845 81,979
Profit and loss account 24,712 22,052
Common control transaction reserve (66,527) (66,527)
Total equity 40,858 38,332
-------------------- ---------
Liabilities
Trade and other payables 10,864 11,983
Financial liabilities - 70
Corporation tax liabilities 776 1,599
Deferred tax liability 90 61
Provision for liabilities and
charges 599 701
Current liabilities 12,329 14,414
-------------------- ---------
Provision for liabilities and
charges 1,430 1,695
Non-current liabilities 1,430 1,695
-------------------- ---------
Total liabilities 13,759 16,109
==================== =========
Total equity and liabilities 54,617 54,441
==================== =========
Consolidated statement of changes in equity for the year ended 31 December 2017
Share Share Profit Common Total
capital premium and loss control equity
account transaction
reserve
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
January 2016 803 79,440 24,278 (66,527) 37,994
Total
comprehensive
income
for the year 15,556 15,556
Transactions
with owners
recorded
directly in
equity:
Issue of shares 25 2,539 (2,564) - -
Equity settled
share based
payment
transactions - - 240 - 240
Deferred tax
asset taken to
reserves - - (1,091) - (1,091)
Dividends - - (14,367) - (14,367)
-------------------- -------------------- -------------------- -------------------- --------------------
Balance at 31
December 2016 828 81,979 22,052 (66,527) 38,332
Total
comprehensive
income
for the year 10,828 10,828
Transactions
with owners
recorded
directly in
equity:
Issue of shares
(see note
9) 2 256 - - 258
Buy back of
shares (see
note
9) (2) (390) - - (392)
Equity settled
share based
payment
transactions - - 421 - 421
Corporation tax
relief taken
to reserves - - 747 - 747
Dividends (see
note 4) - - (9,336) - (9,336)
Balance at 31
December 2017 828 81,845 24,712 (66,527) 40,858
-------------------- -------------------- -------------------- -------------------- --------------------
Consolidated statement of cash flows for the year ended 31 December 2017
2017 2016
GBP000 GBP000
Cash flows from operating activities
Profit for the year 10,828 15,556
Adjustments for:
Depreciation of plant, property and
equipment 1,489 954
Amortisation of intangible fixed assets 241 214
Finance income (35) (98)
Finance expense 10 11
Loss on sale of plant, property and
equipment - 7
Equity settled share based payments 421 240
Tax expense 2,986 3,778
---------------------- ----------------------
15,940 20,662
Decrease/(increase) in inventories 144 (676)
Decrease/(Increase) in trade and other
receivables 1 (702)
Increase/(decrease) in trade and other
payables (1,120) 1,824
Increase/(decrease) in provisions (367) 26
---------------------- ----------------------
(1,342) 472
Hire purchase interest paid (10) (11)
(10) (11)
Taxation paid (2,880) (3,893)
Net cash from operating activities 11,708 17,230
---------------------- ----------------------
Cash flows from investing activities
Acquisition of property, plant and
equipment (4,075) (5,901)
Interest received 35 98
Proceeds from issue of property, plant
and equipment - 42
Acquisition of intangible fixed assets (612) (20)
Net cash outflow from investing activities (4,652) (5,781)
Cash flows from financing activities
Proceeds from the issue of ordinary
shares 258 -
Purchase and cancellation of ordinary
shares (392) -
Payment of hire purchase and finance
leases (70) (108)
Dividends paid (9,336) (14,367)
Net cash outflow from financing activities (9,540) (14,475)
Net decrease in cash and cash equivalents (2,484) (3,026)
Cash and cash equivalents at start
of year 13,459 16,485
Cash and cash equivalents at end of
year 10,975 13,459
====================== ======================
Notes to the financial statements
1 Statement of compliance
Whilst the financial information included in this Preliminary Announcement has been prepared on the basis of the requirements of International Financial Reporting Standards (IFRSs) in issue, as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS.
The Group expects to publish full Consolidated Financial Statements in March 2018. The financial information set out in this Preliminary Announcement does not constitute the Group's Consolidated Financial Statements for the years ended 31 December 2017or 2016, but is derived from those Financial Statements. Statutory Financial Statements for 2017 will be delivered to the registrar of companies with the Jersey Financial Services Commission (JFSC), following the Company's Annual General Meeting. The auditor, KPMG LLP, has reported on the 2017 Financial Statements. Their report was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under Section 113B (3) or (6) of the Companies (Jersey) Law 1991.
Safestyle UK plc is a public 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.
Basis of preparation
The Group's financial statements for the year ended 31 December 2017 ("financial statements") have been prepared on a going concern basis under the historical cost convention and are in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the International Financial Reporting Standards Interpretations Committee interpretations issued by the International Accounting Standards Board ("IASB") that are effective or issued and early adopted as at the time of preparing these financial statements.
Safestyle UK plc was incorporated on 8 November 2013. On 3 December 2013 Safestyle UK plc acquired Style Group Holdings through a share for share exchange. This was accounted for as a common control transaction. The result of this is that the financial statements of Style Group Holdings have been included in the group consolidated financial statement 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.
-- Recognition of Deferred Tax assets for Unrealised Losses - Amendments to IAS 12 -- Annual Improvements to IFRSs - 2014-2016 Cycle -- Disclosure Initiative - Amendments to IAS 7
(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):
-- IFRS 9 Financial Instruments (effective 1 January 2018) -- IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)
-- Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12 (not yet endorsed)
-- Clarifications to IFRS 15 Revenue from Contracts with Customers
-- Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2 (not yet endorsed)
-- IFRS 16 Leases (effective 1 January 2019) -- Effective date of IFRS 15 - amendment to IFRS15. -- Amendments to IFRS 9 Financial Instruments (not yet endorsed)
The Group has investigated the effects of the implementation of IFRS 9 'Financial Instruments' and have assessed that the introduction of the standard is unlikely to have a material effect on the results of the Group. The standard will be implemented for the interim results for the 30 June 2018 and comparisons will be restated to reflect those changes from previous years.
The Group is satisfied that their current treatment of Revenue complies broadly with the remit of IFRS 15 'Revenue from contracts with customers'. Revenue is currently recognised when a service is delivered and when the contract is completed in accordance with the policy in note 2. Work is continuing to assess whether a proportion of the contract revenue should be recognised upon manufacture of goods, prior to installation under the performance obligations of the contract. Goods supplied are bespoke to the contract and these are manufactured, finished and delivered for installation on a 'just in time' basis. Considered together with the immaterial nature of finished goods in inventory, the Group feels that any changes to the accounting required to meet this standard are unlikely to be material to the financial results of the Group. The standard will be implemented for the interim results for the 30 June 2018 and comparisons will be restated to reflect those changes on previous years.
The Group has completed an initial impact assessment of the effect of IFRS 16 on the financial position of the Group. Given the annual value of operating lease costs, the change in accounting will have a material impact in the financial statements for the year ending 31 December 2019. Based on the analysis of leases held at 31 December 2017, this is expected to result in operating leases of GBP9.2m and an asset of GBP10.2m being recognised in the comparative balance sheet at 31 December 2018. This is subject to revision depending on changes in leases during 2018. The standard will be implemented for the interim results for the 30 June 2019 and comparisons will be restated to reflect those changes on previous years.
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.
Responsibility Statement
The Statement of Directors' Responsibilities is made in respect of the full Annual Report and Accounts not the extracts from the financial statements required to be set out in this Announcement.
The Directors confirm that to the best of our knowledge:
The Group Consolidated Financial Statements, contained in the 2017 Annual Report and Financial Statements prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and
The Strategic Report contained in the 2017 Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
Cautionary Statement
This Report contains certain forward looking statements with respect to the financial condition, results, operations and business of Safestyle UK plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this Report should be construed as a profit forecast.
2 Summary of significant accounting policies
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of business and is shown net of Value Added Tax. The Group primarily earns revenues from the sale, design, manufacture and installation of domestic double-glazed replacement windows and doors. Product sales revenues are recognised once the goods have been installed. Survey fees are recognised at the point at which they become non-refundable. The Group received no commissions for introducing finance products to customers in 2016, only paying subsidies which are recognised as a cost of sale. Revenue from maintenance is recognised on completion of the work carried out.
A review of accounting policies in the run up to the adoption of IFRS 15 has led to the revenue from sales where the customer takes out a corresponding finance product to be shown net of the commission charges incurred in those sales. Previously the revenue was presented gross with the commission charges in cost of sales. Revenue and cost of sales for the year ended 31 December 2016 have been restated for consistency. The effect of this is to reduce revenue in the prior period by GBP3,681k and to reduce cost of sales by the same amount. There is no effect on the gross profit, operating profit or Earnings per Share for the Group. Gross margin as a percentage of revenue has increased in the prior period from 34.1% to 34.8%.
Non-recurring costs
The current year includes GBP830k of non-recurring costs shown in the statement of comprehensive income. Of this GBP580k relates to restructuring costs, being primarily redundancy costs. Operational costs of GBP184k relate to the transition to the new manufacturing facility and a further GBP66k relates other one-off costs.
It is expected that restructuring costs will continue to be incurred throughout the next financial year as the process of digitalisation continues.
3 Accounting estimates and judgements
Details of the Group's significant accounting judgements and critical accounting estimates are set out in these financial statements and include:
Recoverability of trade receivables
The assessment of whether trade receivables are recoverable requires judgement. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
Warranty provisions
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.
4 Dividends
The aggregate amount of dividends
paid comprises: 2017 2016
GBP000 GBP000
Final dividend paid of GBP0.075 (2016:
GBP0.075) per ordinary share 6,224 5,631
Special dividend (2016: GBP0.075
per ordinary share) - 5,631
Interim dividend paid of GBP0.0375
(2016: GBP0.0375) per ordinary share 3,112 3,105
--------------------
9,336 14,367
==================== =======
5 Reconciliation of PBT, EBITDA and Underlying EBITDA
2017 2016
GBP000 GBP000
Profit before tax 13,814 19,334
add back
Non-recurring costs 830 -
Equity settled share based
payments charges 421 1,187
Underlying profit before tax 15,065 20,521
------- -------
Profit before tax 13,814 19,334
add back
Finance Income (35) (98)
Finance costs 10 11
Depreciation and amortisation 1,730 1,168
EBITDA 15,519 20,415
------- -------
add back
Non-recurring costs 830 -
Equity settled share based
payments charges 421 1,187
Underlying EBITDA 16,770 21,602
------- -------
6 Equity settled share based payments charges
2017 2016
GBP000 GBP000
Equity settled
- LTIP 351 153
Equity settled
- SAYE 70 87
Employers national insurance on issue
of LTIP with associated charges - 947
421 1,187
------- -------
7 Earnings per share
2017 2016
Basic earnings per ordinary share
(pence) 13.1 19.0
Diluted earnings per ordinary
share (pence) 13.0 18.9
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.
i) Profit attributable to ordinary
shareholders (basic)
2017 2016
GBP000 GBP000
Profit attributable to ordinary
shareholders 10,828 15,556
=============== ========
ii) Weighted-average number of
ordinary shares (basic)
No of shares No of
shares
'000 '000
In issue during the year 82,883 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.
i) Profit attributable to ordinary
shareholders (diluted)
2017 2016
GBP000 GBP000
Profit attributable to ordinary
shareholders 10,828 15,556
=============== ========
ii) Weighted-average number of
ordinary shares (diluted)
No of shares No of
shares
'000 '000
Weighted-average number of ordinary
shares (basic) 82,883 82,006
Effect of conversion of share
options and warrants 396 341
83,279 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.
8 Taxation
2017 2016
GBP000 GBP000
Recognised in the statement of
comprehensive income
Current tax
Current tax on income for the
period 2,805 3,958
Adjustments in respect of prior
periods - (211)
Total current tax 2,805 3,747
-------------------- --------------------
Deferred tax
Origination and reversal of timing
differences 180 22
Effect of change in tax rate (11) 9
Adjustments in respect of prior 12 -
periods
Total deferred tax (see notes
15 and 22) 181 31
-------------------- --------------------
Total tax expense 2,986 3,778
-------------------- --------------------
The current year tax charge is
split into the following:
Tax charge 2,986 3,778
Total tax expense 2,986 3,778
-------------------- --------------------
Reconciliation of effective tax
rate
2017 2016
Current tax reconciliation GBP000 GBP000
Profit for the year 10,828 15,556
Total tax expense 2,986 3,778
Profit excluding tax 13,814 19,334
-------------------- --------------------
Expected tax charge based on the
standard rate of corporation tax
in the UK of 19.25% (2016: 20.00%) 2,659 3,867
Effects of:
Expenses not deductible for tax
purposes 326 113
Adjustments to tax charge in respect
of prior periods 12 (211)
Effect of change in tax rate (11) 9
Total tax expense 2,986 3,778
-------------------- --------------------
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 31 December 2017 has been calculated based on these rates.
9 Share capital
2017 2016
GBP000 GBP000
Authorised
77,777,777 Ordinary Shares @ 1p each 778 778
97,223 Ordinary Shares @ 1p each on 17 July
2015 1 1
2,367,143 Ordinary Shares @ 1p each on 22
October 2015 24 24
2,564,427 Ordinary Shares @ 1p each on 22
April 2016 25 25
177,513 Ordinary Shares @ 1p each on 02 May 2 -
2017
2,201 Ordinary Shares @ 1p each on 09 May - -
2017
3,302 Ordinary Shares @ 1p each on 01 June - -
2017
4,128 Ordinary Shares @ 1p each on 01 June - -
2017
90,000 Ordinary shares @ 1p each cancelled (1) -
on 03 October 2017
90,000 Ordinary shares @ 1p each cancelled (1) -
on 04 October 2017
15,000 Ordinary shares @ 1p each cancelled - -
on 05 October 2017
10,182 Ordinary Shares @ 1p each on 20 November - -
2017
828 828
==================== ====================
Allotted, issued and fully paid
77,777,777 Ordinary Shares @ 1p each 778 778
97,223 Ordinary Shares @ 1p each on 17 July
2015 1 1
2,367,143 Ordinary Shares @ 1p each on 22
October 2015 24 24
2,564,427 Ordinary Shares @ 1p each on 22
April 2016 25 25
177,513 Ordinary Shares @ 1p each on 02 May 2 -
2017
2,201 Ordinary Shares @ 1p each on 09 May - -
2017
3,302 Ordinary Shares @ 1p each on 01 June - -
2017
4,128 Ordinary Shares @ 1p each on 01 June - -
2017
90,000 Ordinary shares @ 1p each cancelled (1) -
on 03 October 2017
90,000 Ordinary shares @ 1p each cancelled (1) -
on 04 October 2017
15,000 Ordinary shares @ 1p each cancelled - -
on 05 October 2017
10,182 Ordinary Shares @ 1p each on 20 November - -
2017
828 828
==================== ====================
During the year 197,236 ordinary shares of GBP0.01 each were issued relating to the SAYE 2013 LTIP scheme at an exercise price of GBP1.308 per share, settled in cash. GBP1,972 was credited to share capital and GBP256,012 was credited to the share premium account. The scheme is now closed and no further shares will be issued from the scheme. In October 2017 the company purchased and cancelled 195,000 shares in a share buyback scheme for a purchase price of GBP2.00 per share. GBP1,950 and GBP388,050 was debited to the share capital and share premium accounts respectively. Costs incurred in the purchase of shares of GBP1,953 were also debited from the share premium accounts.
10 Share based payments
At 31 December 2016 the Group had the following share based payment arrangements:
LTIPS
On 10 April 2017, a further 348,210 options were granted ("LTIP 2017"). The LTIP 2015, 2016 and 2017 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:
2017 2016
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
price price
------------------ ---------- ---------- ------------ ----------
Outstanding at
start of period 1,030,134 GBP2.18 4,581,976 GBP1.10
Granted during
the year 348,210 - 448,533 GBP2.68
Issued in the
year - - (2,564,427) GBP1.00
Cancelled in the
year - - (1,421,683) GBP1.00
Lapsed in the
year (470,985) GBP1.86 (14,265) GBP1.79
Outstanding at
end of period 907,359 GBP1.51 1,030,134 GBP2.18
Exercisable at
end of period - - - -
--------------------- ---------- ---------- ------------ ----------
Options are valued using the Black-Schools option pricing model. The following information is relevant in the determination of the fair value of the options granted during the period.
LTIP 2017 LTIP 2016 LTIP 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 33.60% 36.93% 43.13%
Expected option
life (in years) 6.50 6.50 6.50
Weighted average share price after GBP3.04 GBP2.67 GBP1.80
adjusting for PV of dividends
Weighted average GBP0.00 GBP2.68 GBP1.79
exercise price
Weighted average fair value
of options granted 256.00p 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 2015 and "SAYE 2016") for employees. The SAYE 2013 vested within the year with 197,236 shares being issued at an issue price of 130.8 pence per share. The scheme has now closed and no further shares will be issued.
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:
2017 2016
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
price price
------------------ -------------------- ---------- -------------------- ----------
Outstanding at
start of period 423,382 GBP1.49 452,460 GBP1.37
Granted during
the year 128,205 GBP2.40 87,485 GBP2.25
Issued in the
year (197,236) GBP1.31 - -
Lapsed during
the period (150,226) GBP1.68 (116,563) GBP1.57
Outstanding at
end of period 204,125 GBP2.10 423,382 GBP1.49
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 year.
SAYE 2017 SAYE 2016 SAYE 2015
Grant date 24/04/2017 01/04/2016 01/04/2015
Vesting date 01/06/2020 01/05/2019 01/05/2018
Lapsing date 01/12/2020 01/11/2019 01/11/2018
Risk free interest
rate 0.21% 0.56% 0.76%
Expected volatility 34.20% 32.88% 33.54%
Expected option
life (in years) 3.35 3.35 3.35
Weighted average share price after GBP3.14 GBP2.81 GBP1.80
adjusting for PV of dividends
Weighted average GBP2.51 GBP2.25 GBP1.43
exercise price
Weighted average fair value
of options granted 69.00p 71.93p 41.52p
Dividend Yield 5.53% 3.40% 5.20%
Remaining contractual
life 3.42 2.34 1.34
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:
2017 2016
GBP000 GBP000
Equity settled
- LTIP 351 153
Equity settled
- SAYE 70 87
421 240
------- -------
11 Contingent liability
During the year there were two incidents during installations which led to reportable injuries. The Health & Safety Executive ("HSE") has carried out investigations into both of these cases. Whilst it continues to investigate, the HSE has advised the Group, subsequent to the year end, that it intends to prosecute Safestyle in relation to one of the incidents, in which a contractor suffered a knee injury. The Group has taken legal advice and it is expected that a fine will be imposed. The range of the potential fine is believed to be GBP550k to GBP2.9m. This range may be reduced as the matter is progressed and the precise quantum depends on a number of factors including the level of culpability, the harm category and what mitigating factors may be taken into account, such as full cooperation with the HSE's investigation and the company's good health and safety record. Consequently management has not recognised a provision in these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAFDFAAKPEAF
(END) Dow Jones Newswires
March 22, 2018 03:01 ET (07:01 GMT)
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