We could not find any results for:
Make sure your spelling is correct or try broadening your search.
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 |
TIDMSFE
RNS Number : 8791M
Safestyle UK PLC
19 September 2019
19 September 2019
Safestyle UK plc
("Safestyle" or the "Group")
Interim Results 2019
Safestyle UK plc (AIM: SFE), the leading UK-focussed 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 2019.
Financial and operational highlights
Unaudited Unaudited 6 months 6 months ended ended 30-Jun-19 30-Jun-18 GBPm GBPm % change ---------- --------- Revenue 64.41 60.54 6.4% ---------- ---------- --------- Gross profit 16.64 14.57 14.2% ---------- ---------- --------- Gross margin % 25.8% 24.1% 177bps ---------- ---------- --------- Underlying (loss) before taxation(1) (0.83) (3.41) 75.7% ---------- ---------- --------- Non-underlying items(2) (1.65) (2.24) 26.3% ---------- ---------- --------- (Loss) before taxation (2.48) (5.65) 56.1% ---------- ---------- --------- EPS - Basic (2.8p) (5.7p) 50.9% ---------- ---------- --------- Net (debt) / cash(3) (0.64) 4.58 ---------- ---------- ---------
(1) Underlying (loss) before taxation is defined as reported (loss) before taxation before non-underlying items and is included as an alternative performance measure in order to aid users in understanding the ongoing performance of the Group.
(2) Non-underlying items consist of non-recurring costs, share-based payments and the Commercial Agreement amortisation.
(3) Net (debt) / cash is cash and cash equivalents less loan facility.
A reconciliation between the terms used in the above table and those in the financial statements can be found in the Financial Review.
-- Turnaround on track - The implementation of phase two of the three phase turnaround is making good progress; the focus for phase two is returning the Group to profitability.
-- Profitability achieved from Q2 - The business returned to profitability in Q2 2019 with levels forecast to increase in H2.
-- Gross profit increased by GBP2.1m (14.2%) to GBP16.6m and gross margin % of 25.8% improved by 177 basis points (bps) versus H1 2018 (24.1%) and 417bps versus H2 2018 (21.7%).
-- Underlying (loss) before taxation(1) - loss reduced by GBP2.6m (75.7%) to GBP(0.8)m. -- Reported (loss) before taxation - loss reduced by GBP3.2m (56.1%) to GBP(2.5)m.
-- Revenue growth - Revenue up 6.4% to GBP64.4m (H1 2018: GBP60.5m) and up 15.3% versus H2 2018.
-- Volume recovery - Frames installed of 98,966 broadly in line with H1 2018 of 99,491 and representing a 16.9% improvement on H2 2018.
-- Gaining market share - Market share as measured by FENSA now recovering; at 8.6% in H1 2019 (H2 2018: 7.0%)* with continued share recovery expected for H2.
-- Balanced growth - Growth achieved across all three lead generation channels with a focus on cost effectiveness and compliance.
-- Value improvement - Average price per frame up 8.6% versus H1 2018 to GBP669.
-- Cost control - Improvements in operational efficiencies and cost reductions in a number of areas underpinned the recovery in profitability.
* The market share figures for last year included in the 2018 Results Presentation and those referred to in the July 2019 trading statement have been updated and restated following a revision to the dataset from FENSA. The market share growth referred to in the July 2019 trading statement of 19.5% versus H2 2018 has increased to 22.9%.
Outlook
Since the Group's AGM Statement on 16 May 2019, management has continued to make good progress on phase two of its turnaround plan with the results for the first half of the year as expected. There has been improvement in many of the Group's core KPIs and a return to a small profit has been achieved in Q2.
Despite a challenging market where consumer demand appears soft across the Repair, Maintenance and Improvement (RMI) market, the Board expects a further increase in profitability during Q3 and into Q4 of this year. The Board remains highly focussed on ensuring that the trajectory of performance is carried through into 2020 with the aim to achieve acceleration in growth in revenue and profitability next year as part of phase three of the Group's turnaround plan.
To ensure the Group maintains its current momentum through the end of the year into Q1 2020, the Board is anticipating an increase in the levels of investment required in lead generation versus those previously projected and when compared to those of previous years. The Board also expects revenue to be marginally below previous expectations, although still expects double-digit growth in H2 versus the prior year alongside continued gains in market share. Consequently, the Board now expects a small underlying loss before taxation of c.GBP0.5m for the full year.
Looking further ahead, the Board remains confident that these actions will give the Group the best possible base from which to accelerate its revenue, margin and profit growth in 2020 as part of phase three of the turnaround plan. The Board therefore remains comfortable with market expectations for 2020.
Commenting on the results, Mike Gallacher, CEO said:
"We are making strong progress on delivery of the second phase of our three phase turnaround plan. We have increased our revenues, improved our margins and reduced costs and as a result the Group returned to profitability in Q2. We expect this to continue into Q3 and the momentum to be sustained through to the end of the year.
The Board and I are hugely encouraged by the progress we are making as we look to turnaround the performance of our business and build on our position as the UK market leader in the RMI industry. We believe we have an enviable position in this market with a strong, recognisable brand and a great value proposition. We also have highly skilled and dedicated people across the entire organisation.
There remains a lot of hard work to do, but it is rewarding that we are beginning to see the results of the work completed so far. We remain wholly focussed on modernising the business, improving customer service, strengthening our processes and leveraging technology whilst striving to make the business the industry benchmark in all areas of compliance. We believe delivery of these objectives, along with a relentless focus on maximising opportunities for growth, will position Safestyle for success in the years to come."
Enquiries:
Safestyle UK plc via FTI Consulting Mike Gallacher, Chief Executive Officer Rob Neale, Chief Financial Officer Zeus Capital (Nominated Adviser & Joint Broker) Tel: 0203 Andrew Jones / Dan Bate / Dominic King 829 5000 Liberum Capital Limited (Joint Broker) Tel: 0203 Neil Patel / Jamie Richards 100 2100 FTI Consulting (Financial PR) Tel: 0203 Alex Beagley / James Styles 727 1000
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
Following 2018's unprecedented period of disruption and change, 2019 represents the year in which we aim to establish the foundations to recover the financial performance of the Group. I am pleased to report that we have made good progress in the year so far and the return to profitability in Q2 represents an important milestone in phase two of our turnaround plan.
For the first half of the year, revenues have improved by 6.4% to GBP64.4m (GBP60.5m) with the underlying (loss) before taxation(1) improving to GBP(0.8)m versus a loss of GBP(3.4)m in H1 2018. Reported (loss) before taxation was GBP(2.5)m compared to a loss of GBP(5.7)m over the same period last year. Basic EPS for the period has improved from (5.7)p to (2.8)p.
There were fewer non-underlying items(2) incurred in the period of GBP1.6m (H1 2018: GBP2.2m). The current year items are predominantly a result of restructuring actions and right-of-use asset impairment of property taken as part of the turnaround plan totalling GBP1.1m along with a share-based payment charge of GBP0.3m.
The Group is now focussed on its rapid return to profitability. A detailed three phase turnaround plan was developed in the second half of 2018 which has clearly-defined projects and milestones that are designed to stabilise the Group, rebuild sales and margins, and manage costs effectively. The first phase of the turnaround, involving the stabilisation of the Group, was successfully completed in 2018. The second phase, which is to return the Group to profitability and to improve operational efficiencies, is well underway and I am pleased to report further good progress on this front during the period. The third phase, aimed at accelerating growth, will begin in 2020.
References
[1] see the Financial Review for definition of underlying (loss) before taxation
[2] see the Financial Review for definition and detail of non-underlying items
Looking ahead / outlook
2019 represents a hugely important year for our turnaround and it is encouraging to see the progress that we are making, including returning the Group to profitability in Q2, despite the well-documented backdrop of weaker consumer confidence.
As we look towards the remaining months of 2019 and beyond, the Group continues to implement its plans to modernise operations and develop a more efficient and professional business whilst retaining as much as possible of what made it successful in the past.
The Board remains confident in the Group's prospects, based on the successful implementation of the remaining stages of the three phase turnaround plan.
Finally, it is important to stress that the progress we have made would not have been possible without all our skilled colleagues who work tirelessly across the entire organisation. I would once again like to acknowledge their talent and dedication and thank them all for their continued commitment to Safestyle.
A C Lovell
Chairman
19 September 2019
CEO's Statement
Summary
The first half of 2019 has seen a significant recovery in the financial performance of the business driven by a balanced combination of volume growth, margin improvement and significant cost reductions. As a result, the business returned to profit in the second quarter and we expect this performance to continue in H2.
The focus for phase two of our turnaround plan has been on cash and profit, hence I am pleased that we have also been able to deliver good revenue growth, with the business gaining market share in H1. Major changes in our lead generation practices as a result of both GDPR and improvements in our regulatory compliance limited the scale of this growth and signal our intention to build solid foundations for sustainable growth over the long term.
Our cost base has been reduced by an annualised rate of over GBP2m through the simplification of management layers, general cost saving initiatives and the creation of leaner organisation structures across the business. Having taken these actions, we have now re-established our cost base at close to 2017 levels. The remaining additional costs relate to essential additional resource in HR, Health and Safety and Compliance.
Margins have been driven up by selective pricing moves that have consolidated our position as the value player of the three major national operators in the category. Improvements visible in H1 have continued in Q3 and, together with changes to our commissions structure, will drive improvements in our financial shape in Q4 and into 2020.
The basic operations of the business were significantly impacted during 2018 and, combined with the pressing need to establish robust and repeatable business processes, much effort has been focussed on embedding long-term operational improvements. These actions, together with a focus on enhancing the customer experience, represent a continuing transformation within the business. The changes are critical in providing the foundations for sustainable future growth.
Business Overview
While the market has been subdued through H1 with limited volume growth, Safestyle gained market share (as measured by FENSA) versus H2 2018, moving from 7.0% to 8.6% for H1 2019. Revenue grew by 6.4% versus H1 2018 and 15.3% versus H2 2018. We expect the current level of revenue growth to sustain through H2 2019.
Average Frame rates increased by 8.6% versus H1 2018 with Average Order Value remaining stable, largely due to the mix effect of higher demand for composite doors. Frames installed were in line with H1 2018, increasing by 16.9% versus H2 2018 and we again expect this to be sustained in H2 2019.
The financial shape of the business has progressed rapidly with a GBP2.6m (75.7%) improvement in underlying (loss) before taxation(1) year on year and a GBP4.5m (84.4%) improvement in the same measure between H2 2018 and H1 2019. The business has moved into profitability in H1 and is now showing sustained monthly improvements as margin enhancement, cost control and volume growth combine to drive profitability.
Our cash position has been closely managed through the turnaround programme, following the facility agreement with Aurelius in H2 2018. The business is now cash generative.
1 Underlying (loss) before taxation is defined as reported (loss) before taxation before non-underlying items and is included as an alternative performance measure in order to aid users in understanding the ongoing performance of the Group.
Turnaround Plan
The Executive Team developed a three phase turnaround plan in June 2018. The plan had clearly defined projects and milestones designed to stabilise the business in 2018, before returning it to profitability in 2019 and then accelerating growth in 2020.
The first phase of the turnaround plan was completed at the end of 2018 and successfully stabilised the business; taking legal action to address the NIAMAC legal case, putting in place financing to support the turnaround whilst establishing a new Board and strengthening the Executive team. We reached an early out of court settlement with NIAMAC, albeit after significant costs were incurred due to the scale and complexity of the legal action. Concurrently, new funding was quickly put in place and a series of highly experienced appointments were made to rebuild the Board and to bolster the Executive Team.
The second phase of the turnaround plan has been progressing well, with the central aim of restoring profitability to the business in a way that is balanced between cost effective revenue growth alongside the need for compliance. The key elements of phase two of our plan have been;
Embedding Regulatory Compliance and Health and Safety: Safestyle operates in an increasingly regulated industry and this requires a robust approach to our ways of working. The need to upgrade our systems and processes was clear from the fines received during 2017 and 2018 relating to historic Advertising, Communications, Health & Safety and Trading Standards issues. The Board and Executive Team are determined to establish best practice in this new operating context through working collaboratively with the relevant regulators.
Good progress was made in H1 2019, governed by a new Compliance Team and supported, in particular, by close engagement with West Yorkshire Trading Standards (WYTS). Actions have encompassed the development and delivery of new training for staff, the introduction of new feedback processes, new controls and processes and regular case reviews.
The introduction of GDPR has continued to drive significant change in our sales and lead generation operations. The resulting new policies and practices have increased cost and reduced growth during H1. However, as an Executive Team, we are determined to embed robust compliance across the business, in order to eliminate regulatory issues and build a solid foundation for long term growth.
Improving Margins: During 2018, margins were negatively impacted by a number of factors. These include commission costs which rose due to the competitive landscape, increased digital lead generation costs and higher overheads due to investment in compliance, customer service and IT systems. During H1, progress was made on most of these elements, however digital lead costs did not reduce as expected, with continuing competitive pressure sustaining the increasing cost trend of recent years.
The business continued to take selective price increases in H1 while the increases implemented in H2 2018 continue to flow through to the benefit of gross profit in H1 2019. We are focussed on maintaining our competitive position as the lowest cost national player in the category.
Operational effectiveness and cost: Significant additional costs were added to the business from late 2017. During H1 2019, we firmly addressed our cost base which will deliver annualised savings in excess of GBP2m versus 2018 exit rates. This has included the removal of additional layers of management and a number of specific senior management positions. The business has also responded well to improved financial controls with savings being generated widely across the business including fuel costs, property maintenance, material suppliers, fleet costs and sourcing.
During the period, we established project teams and gained momentum on a number of critical KPIs that had deteriorated since 2017. These include 'Right First Time' installation, the number of remakes and mis-measures and cancellation rates. These projects will continue into H2 and will be supported by embedded processes and metrics as we move into 2020.
Our Digital Transformation programme, delivered in 2018 despite the challenging context, remains the largest single change since the business was listed. The pace of change has continued with the introduction of new technology into our Telephone Canvass and Sales call centres. Work to embed and leverage this technology continues with benefits now being delivered.
One of our largest opportunities continues to be the levelling up of branch and sales rep performance enabled by targeted training. The prevalence of detailed performance data is transforming our ability to drive this and offers benefits that will flow through over coming years.
Rebuilding our staff & self-employed workforce: The business experienced a rapid loss of self-employed agents across canvass, sales and installations during H1 2018. These numbers have now substantially recovered with a 32% increase in canvassers, a 20% increase in sales reps and an 11% increase in installation teams versus the end of H1 2018. The business has worked to balance our self-employed workforce to support our ability to both fit current written sales and serve the regions cost effectively.
In addition to addressing headcount numbers, H1 2019 saw significant training activity aimed at improving the skills and capabilities of our self-employed agents. A new sales rep induction programme was launched and all installation teams received customer service training. These initiatives have been supported with improved communication, monitoring tools and regular customer feedback for installation teams. Further developments, such as a new App for door canvassers, are also planned for H2 2019.
Delivering Growth: Supported by increased headcount, revenue grew by 6.4% versus H1 2018 and by 15.3% versus H2 2018. Good growth on Media-generated business was supported by a limited TV campaign in H1. The business has also achieved growth through internal telephone canvassing, despite significant changes to our working practices.
The growth from our door canvass lead generation activities of 22.3% versus H1 2018 has been limited by a range of changes to our practices aimed at focusing our teams on compliance and established best practice. The business remains committed to growing our strong and highly professional door canvass force as a sustainable source of competitive advantage, unlocking latent consumer demand.
Outlook
The focus for H2 2019 remains phase two of our turnaround plan, recovering the business to sustainable levels of profitability to then achieve an acceleration of our growth in 2020. The business has made significant progress in H1 whilst also managing huge internal changes driven by new compliance requirements and the implementation of new technology. Combined, the work being done now will establish strong foundations for our future growth, building on the powerful and simple business model that has been successful in the past.
Our current performance trajectory is showing the results of the turnaround plan and points to further progress in our financial results in 2020.
Mike Gallacher
Chief Executive Officer
19 September 2019
Financial Review
6 months ended June 2019 6 months ended June 2018 Underlying Non-underlying Total Underlying Non-underlying Total Change in items items underlying % ------------ --------------- --------- ------------ --------------- --------- ------------- Financials GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ------------ --------------- --------- ------------ --------------- --------- ------------- Revenue 64,413 64,413 60,539 60,539 6.4% ------------ --------------- --------- ------------ --------------- --------- ------------- Cost of sales (47,771) (47,771) (45,970) (45,970) (3.9%) ------------ --------------- --------- ------------ --------------- --------- ------------- Gross Profit 16,642 16,642 14,569 14,569 14.2% ------------ --------------- --------- ------------ --------------- --------- ------------- Other Operating Expenses (16,745) (1,649) (18,394) (17,986) (2,241) (20,227) 6.9% ------------ --------------- --------- ------------ --------------- --------- ------------- Operating (Loss) (103) (1,649) (1,752) (3,417) (2,241) (5,658) 97.0% ------------ --------------- --------- ------------ --------------- --------- ------------- Finance Income 1 1 12 12 ------------ --------------- --------- ------------ --------------- --------- ------------- Finance Costs (728) (728) (5) (5) ------------ --------------- --------- ------------ --------------- --------- ------------- (Loss) Before Taxation (830) (1,649) (2,479) (3,410) (2,241) (5,651) 75.7% ------------ --------------- --------- ------------ --------------- --------- ------------- Taxation 170 933 ------------ --------------- --------- ------------ --------------- --------- ------------- (Loss) for the Year (2,309) (4,718) ------------ --------------- --------- ------------ --------------- --------- ------------- Basic EPS (pence per share) (2.8p) (5.7p) ------------ --------------- --------- ------------ --------------- --------- ------------- Diluted EPS (pence per share) (2.8p) (5.7p) ------------ --------------- --------- ------------ --------------- --------- ------------- Cash and Cash equivalents 5,374 4,582 ------------ --------------- --------- ------------ --------------- --------- ------------- Loan facility (6,016) - ------------ --------------- --------- ------------ --------------- --------- ------------- Net (debt) / cash(1) (642) 4,582 ------------ --------------- --------- ------------ --------------- --------- ------------- Change KPIs H1 2019 H1 2018 % Average Order Value (GBP inc VAT) 3,304 3,388 (2.5%) -------- -------- -------- Average Frame Price (GBP inc VAT) 669 616 8.6% -------- -------- -------- Frames installed - units 98,966 99,491 (0.5%) -------- -------- -------- Orders installed 24,029 21,724 10.6% -------- -------- -------- Frames per order 4.12 4.58 (10.1%) -------- -------- --------
Financial and KPI headlines
-- Frames installed of 98,966 consistent with H1 2018 of 99,491 and represents a 16.9% improvement on H2 2018.
-- Orders installed increased by 10.6% to 24,029 installations.
-- Average frame price improved by 8.6% to GBP669 as a result of price actions in H2 2018 and a larger mix of higher average-priced composite guard doors which increased to over 10% of all frames in H1 2019 (H1 2018: 8%).
-- Revenue increased by 6.4% to GBP64.4m, which is largely driven by the increased average frame price, partially offset by marginally lower volumes and higher consumer finance subsidy costs.
-- Gross profit increased by GBP2.1m (14.2%) to GBP16.6m due to the increase in revenue described above along with reduced costs across commissions, access solutions and installation-related materials. An increase in lead generation costs (specifically in digital media) partially offset these cost reductions.
-- Underlying other operating expenses(2) reduced by 6.9% to GBP16.7m. Reduced investment in TV advertising, all of which was reinvested into digital channel lead generation, represents the largest component of this change versus H1 2018. The adoption of IFRS 16 Leases reduces underlying other operating expenses(2) by GBP0.3m with a corresponding increased interest charge of GBP0.3m as described below.
-- Reported other operating expenses reduced by 9.1% to GBP18.4m with the decrease, in addition to the reasons above, also largely attributable to the reduction in non-recurring costs. For H1 2019, these consist of restructuring costs and right-of-use asset impairment linked to actions taken as part of the cost reduction initiatives of phase two of the turnaround plan.
-- Finance costs have increased as a result of the costs of the borrowing facilities secured in October 2018 and there is also GBP0.3m of interest on lease liabilities following the adoption of IFRS 16 Leases.
-- Underlying (loss) before taxation(3) was a loss of GBP(0.8)m (H1 2018: loss of GBP(3.4)m) which represents an improvement of GBP2.6m (75.7%).
-- Non-underlying items were GBP1.6m for the period (H1 2018: GBP2.2m), full details of which are provided on the following pages of this Financial Review.
-- Reported (loss) before taxation was a loss of GBP(2.5)m (H1 2018: loss of GBP(5.7)m) with the impact attributable to the recovery in profitability due to the improved trading and margin performance, coupled with the decrease in non-recurring costs versus H1 2018.
-- Net (debt) / cash(1) was GBP(0.6)m versus net cash of GBP4.6m the end of H1 2018 and GBP0.3m at 31 December 2018.
-- At 30 June 2019, assets and liabilities have been grossed up by GBP7.5m and GBP7.7m respectively following the adoption of IFRS 16 Leases. The impact on Underlying (loss) before taxation(3) and Reported (loss) before taxation is GBP0.0m.
References
1 Net (debt) / cash is cash and cash equivalents less loan facility
(2) Underlying other operating expenses are defined in the 'Underlying performance measures' section below and the reconciliation between this measure and the GAAP measure is shown in the 'Financials' table at the front of this Financial Review
(3) Underlying (loss) before taxation is defined in the 'Underlying performance measures' section below and the reconciliation between this measure and the GAAP measure is shown in the 'Financials' table at the front of this Financial Review
Underlying performance measures
Adjusted measures of underlying other operating expenses and underlying (loss) before taxation have been presented as the primary measures of financial performance. Adoption of these measures means that non-underlying items are excluded to enable a meaningful evaluation of the performance of the Group compared to prior periods.
Non-underlying items consist of non-recurring costs, share-based payments and Commercial Agreement amortisation. A full breakdown of these items is shown below. Non-recurring costs are excluded because they are not expected to repeat in future years. These costs are therefore not included in the Group's primary performance measures as they would distort how the performance and progress of the Group is assessed and evaluated.
Share-based payments are subject to volatility and fluctuation and are excluded from the primary performance measures as such changes year to year would again potentially distort the evaluation of the Group's performance period to period.
Finally, Commercial Agreement amortisation is excluded from the primary performance measures because the Board believes that exclusion of this enables a better evaluation of the Group's underlying performance year to year.
These alternative measures are entirely consistent with how the Board monitors the financial performance of the Group.
Impact of reporting under IFRS 16 Leases
In these interim results, the Group has reported under IFRS 16 Leases for the first time. This has resulted in a material grossing up of the Consolidated Statement of Financial Position with the recognition of right-of-use assets and corresponding lease liabilities for all qualifying leased vehicles, equipment and property.
The underlying (loss) before taxation has not been significantly impacted by this change as the right-of-use asset depreciation and interest charged on the lease liability is offset by rental charges no longer recognised.
There have also been no changes in the reported overall net cash flows for the period although operating cash inflows and financing cash outflows have both increased as described in the "Net (debt) / cash and cashflow section" further on in this Financial Review.
The financial impact of IFRS 16 has been to increase underlying operating profit by GBP0.3m and increase finance costs by the same amount resulting in a net impact of GBP0.0m. On the Consolidated Statement of Financial Position, the right-of-use asset recognised at 30 June 2019 is GBP7.5m and the corresponding lease liability recognised is GBP7.7m. An additional GBP2.0m of depreciation has been charged in the period and an incremental interest charge of GBP0.3m has also been expensed, largely offset by GBP2.3m of rental charges no longer recognised.
See note 4 for further analysis of the impact of this change on the financial statements.
Revenue
Revenue for the period was GBP64.4m compared to GBP60.5m last year, representing an increase of 6.4%. The key performance drivers were as follows:
-- The average frame price increased by 8.6% to GBP669 (H1 2018: GBP616), which is a result of price increases that were predominantly made in H2 2018 alongside the impact of an increased mix of higher value composite doors which exceeded 10% of all frames installed in H1 2019.
-- This favourable average price impact was partially offset by an increase in uptake of our consumer finance products and a higher proportion of our industry leading 3 year 0% option, the impact of which is deducted from revenue.
-- The increased mix of composite doors was also the main factor behind changes in the Group's other operational KPIs. The volume of orders installed increased from 21,724 to 24,029, representing an increase of 10.6%. However, the number of frames installed was consistent with the prior year and therefore the number of frames per order declined by 10.1% to 4.12 frames per order (H1 2018: 4.58). This trend of fewer frames per order largely reflects more consumers opting for a higher-value composite door as part of their order with average order value including VAT declining slightly by 2.5% to GBP3,304 (H1 2018: GBP3,388).
-- Finally, versus H2 2018, by way of demonstrating progress, revenue and the KPIs for average order value, frames and orders installed and average frames per order have all increased.
Gross profit
Gross profit increased by 14.2% in the period to GBP16.6m (H1 2018: GBP14.6m). Gross margin percentage increased to 25.8% (H1 2018: 24.1%).
Volume was consistent versus H1 2018 and the key drivers of the improved gross profit and margin represent the impact of actions taken as part of the turnaround plan which are partially offset by increased lead generation costs as described below:
-- The increased average frame price and mix of composite doors are the largest contributors to the gross profit and gross margin improvement.
-- In addition, as part of the turnaround plan, the Group has improved many of its cost ratios across commissions, access solutions and other direct cost areas that increased during 2018 and further progress in these areas is expected in H2.
-- All lead channels have achieved growth versus H1 2018. However, the costs of growing the number of leads and therefore orders have increased versus H1 2018. There has been continued increases in 'Pay Per Click' and other digital lead channel costs with competition to generate enquiries remaining high. These increases in lead generation costs within gross margin are partially offset by reduced spend in TV advertising investment which has contributed to a reduction in underlying operating expenses.
Underlying other operating expenses
Underlying other operating expenses decreased by 6.9% versus H1 2018. There were reductions in the amount invested in TV advertising versus H1 2018, which partially offset the increased investment in digital media lead generation channels referred to above.
Excluding the TV advertising reductions, all other operating expenses are GBP0.3m lower than the first half of last year with variances in specific areas as follows:
-- The adoption of IFRS 16 Leases reduces underlying other operating expenses by GBP0.3m with a corresponding increased interest charge of GBP0.3m as described above.
-- Salary and related costs decreased versus H1 2018 as the Group has simplified its organisational structure as part of the turnaround plan. The reductions will be larger in the second half of 2019 as the actions were phased across the first half of the year.
-- Recruitment costs have also reduced versus H1 2018 with the prior period incurring recruitment fees as part of the search for new senior management and executive directors.
-- Depreciation increased due to factory and IT capital investment in the last 2 years.
-- IT licensing and infrastructure costs have also increased versus H1 2018 which is a result of the Digital Transformation project and the rollout of technology across the branch network.
Underlying (loss) before taxation
Underlying (loss) before taxation was a loss of GBP(0.8)m in the period (H1 2018: a loss of GBP(3.4)m). This is before the non-underlying items described below.
Non-underlying items
A total of GBP1.6m has been separately treated as non-underlying items for the period (H1 2018: GBP2.2m). The current period includes restructuring costs of GBP0.6m and impairment of right-of-use assets of GBP0.5m following closure of an installation branch and a sales office in the period. In addition, there was a GBP0.3m shared based payment charge (H1 2018: credit of GBP0.6m) and GBP0.2m of Commercial Agreement (Intangible Asset) amortisation in the period.
The prior period included costs of GBP1.1m related to the NIAMAC litigation and a fine from the HSE of GBP0.9m following prosecution for a working at height accident in March 2017.
The table below shows the full breakdown of all items:
H1 2019 H1 2018 GBP000 GBP000 -------- -------- Litigation costs - 1,093 -------- -------- Restructuring and operational costs 571 417 -------- -------- Fines - 859 -------- -------- Onerous leases - 468 -------- -------- Impairment of right-of-use assets 524 - -------- -------- Total non-recurring costs (note 5) 1,095 2,837 -------- -------- Commercial Agreement amortisation 226 - -------- -------- Equity-settled share based payment charges / (credit) 328 (596) -------- -------- Total non-underlying items 1,649 2,241 -------- --------
Earnings per share
Basic earnings per share for the period were a loss of (2.8)p compared to a loss of (5.7)p in H1 2018. The basis for these calculations is detailed in note 6.
Net (debt) / cash(1) and cashflow
As reported at the year-end, the Group secured a GBP7.5m committed finance facility in October 2018 as part of phase one of its turnaround plan, which will remain in place until October 2020. GBP4.5m of the facility, being that of a term loan, was drawn on completion of the deal and at the half year-end, GBP2m of the available GBP3m revolving credit facility was also drawn.
At the end of the period, cash and cash equivalents were GBP5.4m (H1 2018: GBP4.2m). After deducting the loan facility of GBP6.0m, which is stated net of arrangement fees, net (debt)/cash(1) of the Group was GBP(0.6)m at the end of the year which is an increase in net debt since the year-end of GBP0.9m.
Net cash inflow / (outflow) from operating activities, including the cashflow impact of non-underlying items and the amended treatment of leases now classified as right-of-use assets following the adoption of IFRS 16, was an inflow of GBP1.6m (H1 2018: outflow of GBP(5.0)m). This positive cash inflow for the period included receipt of GBP2.5m of corporation tax which was recognised at the year-end following the Group's losses in 2018.
However, incorporating the cash outflow for payment of right-of-use assets, which is now disclosed outside of operating activity movements, the inflow from operating activities for the period becomes an outflow of GBP(0.5)m which is then directly comparable with the prior period outflow from operating activities of GBP(5.0)m.
Capital expenditure in the first half of GBP0.3m was significantly lower than the prior period of GBP1.4m. Investment has continued, albeit at a lower quantum and selectively, largely focussed on the development of our Electronic Lead and Electronic Contract platforms that were rolled out during 2018.
As described above, a GBP2.0m drawdown of the revolving credit facility was also made before the end of the period.
No dividends were paid in either period and the combined movements above resulted in a net cash inflow in the period of GBP1.2m (H1 2018: outflow of GBP(6.4)m).
References
1 Net (debt) / cash is cash and cash equivalents less loan facility
Dividends
The Board is not declaring an interim dividend for this year (2018: GBPnil per share).
R Neale
Chief Financial Officer
19 September 2019
Consolidated Income Statement
Unaudited Unaudited Audited Note 6 months 6 months 12 months ended ended ended 30 June 2019 30 June 2018 31 December 2018 GBP000 GBP000 GBP000 Revenue 64,413 60,539 116,426 Cost of sales (47,771) (45,970) (90,549) Gross profit 16,642 14,569 25,877 Other operating expenses (18,394) (20,227) (42,004) Operating (loss) (1,752) (5,658) (16,127) Finance income 1 12 7 Finance costs (728) (5) (142) ------------- ------------- ------------ Net Finance Costs (727) 7 (135) ------------- ------------- ------------ (Loss) before taxation (2,479) (5,651) (16,262) ------------- ------------- ------------ Underlying (loss) before taxation before non-recurring costs, Commercial Agreement amortisation and share based payments (830) (3,410) (8,744) Non-recurring costs 5 (1,095) (2,837) (7,817) Commercial Agreement amortisation (226) - (75) Share based payments 8 (328) 596 374 (Loss) before taxation (2,479) (5,651) (16,262) Taxation 7 170 933 2,964 (Loss) for the period (2,309) (4,718) (13,298) ============= ============= ============ (Loss) earnings per share Basic (pence per share) 6 (2.8p) (5.7p) (16.1p) Diluted (pence per share) 6 (2.8p) (5.7p) (16.1p)
There is no other comprehensive income for the period.
All operations were continuing throughout all periods.
Consolidated Statement of Financial Position
Unaudited Unaudited Audited Note 6 months 6 months 12 months ended ended ended 30 June 2019 30 June 2018 31 December 2018 GBP000 GBP000 GBP000 Assets Intangible assets - Trademarks 504 504 504 Intangible assets - Goodwill 20,758 20,758 20,758 Intangible assets - Software 1,783 1,038 1,346 Intangible assets - Other 1,962 - 2,188 Property, plant and equipment 12,980 15,151 14,213 Right-of-use assets 4 7,488 - - Deferred taxation asset 693 28 693 Non-current assets 46,168 37,479 39,702 Inventories 2,727 2,848 2,416 Trade and other receivables 6,880 5,118 4,478 Current taxation asset - 933 2,287 Cash and cash equivalents 5,374 4,582 4,163 Current assets 14,981 13,481 13,344 Total assets 61,149 50,960 53,046 ============= ============= ============ Equity Called up share capital 828 828 828 Share premium account 81,845 81,845 81,845 Profit and loss account 11,366 19,398 13,347 Common control transaction reserve (66,527) (66,527) (66,527) 27,512 35,544 29,493 Liabilities Trade and other payables 15,564 13,342 15,286 Lease liabilities 4 3,432 - - Deferred taxation liability 53 90 53 Provision for liabilities and charges 857 576 1,123 Current liabilities 19,906 14,008 16,462 Provision for liabilities and charges 3,468 1,408 3,188 Lease liabilites 4 4,247 - - Borrowing facility 6,016 - 3,903 Non-current liabilities 13,731 1,408 7,091 Total liabilities 33,637 15,416 23,553 Total equity and liabilities 61,149 50,960 53,046 ============= ============= ============
Consolidated Statement of Changes in Equity
Share Share Profit Common Total capital premium and loss control equity account transaction reserve GBP000 GBP000 GBP000 GBP000 GBP000 Balance at 30 June 2018 828 81,845 19,398 (66,527) 35,544 Total comprehensive (loss) for the period - - (8,580) - (8,580) Transactions with owners recorded directly in equity: Equity settled share based payment transactions - - 222 - 222 Deferred taxation asset taken to reserves - - 44 - 44 Equity settled Commercial Agreement - - 2,263 - 2,263 --------- --------- ---------- ------------- -------- Balance at 31 December 2018 828 81,845 13,347 (66,527) 29,493 --------- --------- ---------- ------------- -------- Total comprehensive (loss) for the period - - (2,309) - (2,309) Transactions with owners recorded directly in equity: Equity settled share
based payment transactions - - 328 - 328 Balance at 30 June 2019 828 81,845 11,366 (66,527) 27,512 ========= ========= ========== ============= ========
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited 6 months ended 6 months ended 12 months ended Note 30 June 2019 30 June 2018 31 December 2018 GBP000 GBP000 GBP000 Cash flows from operating activities (Loss) for the period (2,309) (4,718) (13,298) Adjustments for: Depreciation of plant, property and equipment 850 829 1,715 Depreciation and impairment of right-of-use assets 4 2,490 - - Amortisation of intangible fixed assets 433 125 400 Finance income (1) (7) (7) Finance expense 440 - 142 IFRS 16 Finance expense 4 287 - - Loss on sale of plant, property and equipment - 43 42 Equity settled share based payments charge / (credit) 328 (596) (374) Taxation (credit) (170) (933) (2,964) ------------------ ---------------- ------------------- 2,348 (5,257) (14,344) (Increase) / decrease in inventories (311) (816) (384) (Increase) / decrease in trade and other receivables (2,402) (559) 81 Increase in trade and other payables 278 2,478 4,422 Increase / (decrease) in provisions 14 (45) 2,282 IFRS 16 reclassification of prepaid lease costs 4 (428) - - ------------------ ---------------- ------------------- (2,849) 1,058 6,401 Other interest paid (327) - (142) ------------------ ------------------- (327) - (142) Taxation received / (paid) 2,457 (776) (757) Net cash inflow / (outflow) from operating activities 1,629 (4,975) (8,842) ------------------ ---------------- ------------------- Cash flows from investing activities Acquisition of property, plant and equipment (28) (804) (1,028) Acquisition of subsidiary - - (30) Interest received 1 7 7 Proceeds from sale of property, plant and equipment - 28 33 Acquisition of intangible fixed assets (231) (649) (855) Net cash outflow from investing activities (258) (1,418) (1,873) Cash flows from financing activities Proceeds from loans and borrowings 2,000 - 3,903 Payment of right-of-use leases 4 (2,160) - - Net cash (outflow) / inflow from financing activities (160) 3,903 Net inflow / (outflow) in cash and cash equivalents 1,211 (6,393) (6,812) Cash and cash equivalents at start of period 4,163 10,975 10,975 Cash and cash equivalents at end of period 5,374 4,582 4,163 ================== ================ ===================
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 2019.
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 unaudited interim financial report for the half year ended 30 June 2019 does not constitute statutory accounts as defined in s435 of the Companies Act 2006. The financial statements for the year ended 31 December 2018 were prepared in accordance with IFRS and have been delivered to the Registrar of Companies. The report of the auditor on those financial statements was unmodified. In this report, the comparative figures for the year ended 31 December 2018 have been audited. The comparative figures for the half year ended 30 June 2018 are unaudited.
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 2019 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 2018.
The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the period ended 31 December 2018 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 the financial statements for the period ended 31 December 2018, except for changes as a result of the adoption of IFRS 16 Leases on 1 January 2019.
3 Going concern
The financial statements are prepared on a going concern basis which the directors believe to be appropriate for the following reasons.
The Group made a statutory loss of GBP2.3m in the 6 months to 30 June 2019 (FY18: GBP13.3m loss). The Group entered into a two year financing arrangement on 26 October 2018 for GBP7.5m. As at 30 June 2019, the GBP4.5m term loan was fully drawn on the facility and GBP2.0m of the revolving credit facility has also been drawn. The Group had net debt of (GBP0.6m) as at 30 Jun 2019 (Dec 2018: GBP0.3m net cash). This increase in net debt since the year-end was expected.
The Directors have prepared forecasts covering the period to December 2020. The 2019 forecast includes a number of assumptions in relation to sales volume growth and margin improvements which captures up to date performance metrics. The Directors have considered reasonably possible downside scenarios which it believes can be offset by mitigating actions within the control of management including reductions in areas of discretionary spend.
Based on the above, whilst recognising the challenges in the turnaround plan, the directors have a reasonable expectation that the Group and company has adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the interim financial statements.
4 Significant accounting policies
Accounting estimates and judgements
In preparing this condensed consolidated interim financial report, significant judgements and estimates 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 2018, except for the new significant judgements related to lessee accounting under IFRS 16, which are described in the note below.
Impairment
The carrying amounts of the Group's assets, other than inventories and deferred taxation assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indicators exist, the asset's recoverable amount is estimated.
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.
Impairment losses recognised (not relating to other intangible assets specifically) are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash-generating unit is the group of assets identified on acquisition that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The recoverable amount of assets or the cash-generating unit is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxation discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
The Directors have completed their estimation of the recoverable amount and have concluded that there is no impairment of the Group's assets at 30 June 2019.
Changes in significant accounting policies
IFRS 16 Leases
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains a lease, if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
On transition to IFRS 16, the Group elected to apply the practical expedient to continue to apply the outcome of the assessments made under IAS 17 of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. The definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after 1 January 2019.
Previously, the Group classified property leases as operating leases under IAS 17. At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payment, discounted at the Group's incremental borrowing rate as at 1 January 2019. Right-of-use assets are measured at an amount equal to the lease liability and adjusted for any prepayment in place.
The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17.
- Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term.
- Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
- Safestyle has decided to rely on its view of whether leases are onerous applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of initial application as an alternative to perform an impairment review.
The Group leases motor vehicles and plant and equipment. These leases were classified as operating leases under IAS 17. For these leases, the carrying amount of the right-of-use asset and the lease liability at 1 January 2019 were determined at the carrying amount of the lease liability under IAS 17 immediately before that date.
Impact on financial statements
On transition to IFRS 16, the Group recognised additional right-of-use assets and additional lease liabilities. The impact on transition is summarised below.
1 Jan 2019 Right-of-use assets presented in property, plant and equipment GBP000 Property, plant and equipment 6,110 Motor vehicles 3,360 Plant & Equipment 293 Right-of-use assets 9,763 Lease liabilities Property, plant and equipment 5,771 Motor vehicles 3,271 Plant & Equipment 293 Lease liabilities 9,335 Reconciliation between assets and liabilities at transition: Lease liabilities 9,335 Prepayments relating to IFRS 16 Leases at 31 December 2018 428 Right-of-use assets 9,763 When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 January 2019. The rate applied is 7%. GBP000 Operating lease commitment at 31 December 2018 as disclosed in the Group's consolidated financial statements 12,470 Discounted using the incremental borrowing rate at 1 January 2019 9,558 Finance lease liabilities recognised as at 31 December 2018 - - Recognition exemption for leases with less than 12 months lease term at transition (12) - Recognition exemption for onerous leases identified at 1 January 2019 (211) Lease liabilities recognised at 1 January 2019 9,335
Impact for the period
As a result of initially applying IFRS 16, in relation to the leases that were previously classified as operating leases, the Group recognised GBP9,763k right-of-use assets and GBP9,335k of liabilities as at 1 January 2019.
Also, in relation to those leases under IFRS 16, the Group has recognised depreciation and interest costs, instead of operating lease expense. During the six months ended 30 June 2019, the Group recognised GBP1,965k of depreciation charges and GBP288k of interest costs from these leases. The P&L impact of adopting IFRS 16 versus IAS 17 is a cost reduction of GBP9k.
Motor Properties Vehicles Equipment Total ----------- ---------- ---------- -------- Assets GBP000 GBP000 GBP000 GBP000 1 January 2019 6,110 3,360 293 9,763 Additions 0 215 0 215 Depreciation (592) (1,294) (80) (1,966) Impairment (524) 0 0 (524) 30 June 2019 4,994 2,281 213 7,488 Liabilities GBP000 GBP000 GBP000 GBP000 1 January 2019 5,771 3,271 293 9,335 Payment (759) (1,316) (85) (2,160) Interest 189 90 8 287 Additions 0 217 0 217 30 June 2019 5,201 2,262 216 7,679 Liabilities classification GBP000 GBP000 GBP000 GBP000 Current (<1 year) 1,323 1,958 151 3,432 Long term (>1 year) 3,879 303 65 4,247 5,202 2,261 216 7,679 5 Non-recurring costs Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 2019 30 June 2018 31 December 2018 Non-recurring costs consist
of the following: GBP000 GBP000 GBP000 Litigation costs - 1,093 1,912 Restructuring and operational costs 571 417 1,167 Product guarantee provision - - 801 Fines - 859 1,079 Onerous leases - 468 294 Impairment of right-of-use 524 - - assets Dilapidations provision - - 618 Non-recurring pay awards - - 635 Commercial Agreement service fee - - 1,000 Commercial Agreement costs - - 311 1,095 2,837 7,817 ------------- ------------- ----------------
Restructuring costs are expenses incurred, including redundancy payments, as a result of changes being made to reduce the cost structure of the business.
Impairment of right-of-use assets relates to the closure of properties identified as right-of-use assets during the period. These would previously have been treated as an onerous lease charge pre the adoption of IFRS 16 Leases.
For further detail on the 2018 non-recurring charges, please refer to the 2018 Annual Report.
6 Earnings per share Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 2019 30 June 2018 31 December 2018 (Loss) per share (pence) (2.8) (5.7) (16.1) Diluted (loss) per share (pence) (2.8) (5.7) (16.1)
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 2019 30 June 2018 31 December 2018 GBP000 GBP000 GBP000 (Loss) attributable to ordinary shareholders (2,309) (4,718) (13,298) =============== ============== ================= Weighted-average number of ordinary shares (basic) No of shares No of shares No of shares '000 '000 '000 In issue during the period 82,809 82,809 82,809 =============== ============== =================
b) Diluted earnings per share
Due to the net loss for the period, diluted loss per share is the same as basic. 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 2019 30 June 2018 31 December 2018 GBP000 GBP000 GBP000 (Loss) attributable to ordinary shareholders (2,309) (4,718) (13,298) ============== ============== ============== No of shares No of shares No of shares '000 '000 '000 Weighted-average number of ordinary shares (basic) 82,809 82,809 82,809 Effect of conversion of share options and share consideration 7,155 552 2,270 Weighted-average number of ordinary shares (basic) at period end 89,964 83,361 85,079 ============== ============== ============== The average market value of the Group's shares for the purpose of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding. 7 Taxation
The condensed interim financial information includes a tax credit based on management's best estimate of the full year effective tax rate based on expected full year statutory losses to 31 December 2019. The effective tax rate applied in the period was 6.9% (period ended 30 June 2018: 16.5%) which compares to the standard corporation tax rate of 19.0%. The main reason for the effective tax rate being lower than the standard rate is due to some of the non-recurring costs in the year being not deductible.
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 and liability at 30 June 2019 has been calculated based on these rates.
8 Share based payments
At 30 June 2019 the Group had the following share based payment arrangements:
LTIPS
The Group operates an equity-settled Long Term Incentive Plan ("LTIP") remuneration scheme for Directors and certain management ("LTIP 2017", "LTIP 2018" & "LTIP 2019").
On 27th June 2019, 327,273 options were granted in addition to 820,375 options granted on 25th June 2019 ("LTIP 2019"). All schemes require a combination of specific performance based criteria and remaining an employee for a minimum period. The numbers of share options in existence during the year were as follows:
Unaudited Unaudited Audited 6 months ended 6 months ended 12 months ended 30 June 2019 30 June 2018 31 December 2018 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 3,223,600 GBP0.17 907,359 GBP1.51 907,359 GBP1.51 Granted during the year 1,147,648 - 1,333,333 - 2,788,163 - Issued in the year - - - - - - Cancelled in the year - - - - - - Lapsed in the year (580,390) GBP0.93 (471,922) GBP0.37 (471,922) GBP0.37 Outstanding at end of period 3,790,858 - 1,768,770 GBP0.30 3,223,600 GBP0.17 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.
LTIP LTIP 2019 LTIP 2019 LTIP 2018 LTIP 2018 LTIP 2018 LTIP 2017 Grant date 25/06/2019 27/06/2019 19/10/2018 15/08/2018 18/06/2018 10/04/2017 Vesting date 25/06/2022 27/06/2022 18/06/2021 18/06/2021 18/06/2021 10/04/2020 Lapsing date 25/06/2029 27/06/2029 19/10/2028 15/08/2028 18/06/2028 10/04/2027 Risk free interest rate 0.52% 0.56% 0.85% 0.75% 0.78% 0.15% Expected volatility 61.22% 60.79% 60.90% 51.90% 47.10% 33.60% Expected option life (in years) 3.00 3.00 2.67 2.84 3.00 3.00 Weighted GBP0.65 GBP0.65 GBP0.57 GBP0.33 GBP0.56 GBP3.04 average share price after adj for PV of dividends Weighted GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 average exercise price Weighted average fair value of options
granted 65.00p 65.00p 56.60p 33.00p 55.90p 256.00p Dividend yield 0.00% 0.00% 0.00% 0.00% 0.00% 5.71% Remaining contractual life 9.99 10.00 9.31 9.13 8.97 7.78
Prior to 2019, at the grant date there was limited share price history for the company on which to calculate volatility. Volatility was therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London Stock Exchange.
For 2019 options, there is a sufficiently long share price dataset over which to measure volatility for the LTIP Awards.
SAYE
On 7 June 2019 the company launched a new share save (SAYE) scheme ("SAYE 2019") in addition to the existing schemes ("SAYE 2017" and "SAYE 2018") for employees. All schemes allow employees to acquire a certain number of shares at a discount of 20% of the share price prior to the invitation to join the scheme, using amounts saved under a 'Save As You Earn' savings contract.
The numbers of share options in existence during the year were as follows:
Unaudited Unaudited Audited 6 months ended 6 months ended 12 months ended 30 June 2019 30 June 2018 31 December 2018 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 803,292 GBP0.57 204,125 GBP2.10 204,125 GBP2.10 Granted during the year 449,800 - 794,139 GBP0.66 794,139 GBP0.49 Issued in the year - - - - - - Lapsed during the period (225,550) GBP0.59 (194,972) GBP1.94 (194,972) GBP1.92 Outstanding at end of period 1,027,542 GBP0.63 803,292 GBP0.73 803,292 GBP0.57 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 SAYE 2019 SAYE 2018 SAYE 2017 Grant date 07/09/2019 08/05/2018 25/04/2017 Vesting date 01/07/2022 01/06/2021 01/06/2020 Lapsing date 01/01/2023 01/12/2021 01/12/2020 Risk free interest rate 0.49% 0.92% 0.21% Expected volatility 59.24% 48.50% 34.17% Expected option life (in years) 3.32 3.35 3.35 Weighted average share price after GBP0.90 GBP0.59 GBP3.14 adjusting for PV of dividends Weighted average GBP0.72 GBP0.49 GBP2.51 exercise price Weighted average fair value of options granted 90.00p 24.70p 68.60p Dividend yield 0.00% 0.00% 5.53% Remaining contractual life 3.51 2.42 1.42 Prior to 2019, at the grant date there was a limited share prices history for the company on which to calculate volatility. Volatility was therefore estimated using both Safestyle and companies classified in the "Home Improvement Retailers" subsector on the London Stock Exchange. For 2019 options, there is a sufficient long share price dataset over which to measure volatility for the SAYE Options. Alan Lovell Options On 20 December 2018, as described in the 2018 Annual Report, the Group issued 250,000 options to its Chairman, Alan Lovell. The number of share options in existence during the year were as follows: Unaudited Unaudited Audited 6 months ended 6 months ended 12 months ended 30 June 2019 30 June 2018 31 December 2018 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 250,000 - - - - - Granted during the year - - - - 250,000 - Issued in the year - - - - - - Cancelled in the year - - - - - - Lapsed in the year - - - - - - Outstanding at end of period 250,000 - - - 250,000 - Exercisable at end of period - - - - - - -------------- ---------- ---------- ---------- ---------- ---------- ---------- Grant date 20/12/2018 20/12/2010 Vesting date 16/07/2021 16/07/2020 Lapsing date 20/12/2028 20/12/2028 Risk free interest rate 0.73% 0.71% Expected volatility 63.50% 76.50% Expected option life (in years) 2.57 1.57 Weighted average share price after GBP0.86 GBP0.86 adjusting for PV of dividends Weighted average exercise price GBP0.00 GBP0.00 Weighted average fair value of options granted 86.30p 86.30p Dividend yield 0.00% 0.00% Remaining contractual life 9.48 9.48
Prior to 2019, at the grant date there was limited share price history for the company on which to calculate volatility. Volatility was therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London Stock Exchange.
The total share-based expense / (credit) comprises:
Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2019 2018 2018 GBP000 GBP000 GBP000 Equity settled - LTIP 274 (33) (2) Equity settled - SAYE (1) (563) (375) Equity settled - Alan Lovell Options 55 - 3 328 (596) (374) ---------- ---------- ------------
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR BIGDCCXBBGCI
(END) Dow Jones Newswires
September 19, 2019 02:01 ET (06:01 GMT)
1 Year Safestyle Uk Chart |
1 Month Safestyle Uk Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions