TIDMSFE
RNS Number : 4843I
Safestyle UK PLC
26 March 2015
26 March 2015
Safestyle UK plc
("Safestyle UK" or the "Group")
Final Results 2014
Safestyle UK plc (AIM: SFE), the window and door replacement
company, today announces its final results for the year ended 31
December 2014.
Financial Highlights
Year ended Year ended % change
31 December 2014 31 December 2013
GBPm GBPm
Revenue 136.0 124.8 9%
Gross profit 49.7 45.2 10%
Underlying* EBITDA** 17.8 16.1 11%
PBT 16.4 9.5 73%
Underlying PBT* 16.8 15.3 10%
Earnings per share
Basic 16.5p 8.3p 99%
Adjusted*** 16.5p 14.8p 11%
* Excludes items relating to share-based payments, 2013 admission
fees and historic tax settlement
** EBITDA reflects operating profit before depreciation and
amortisation
*** Adjusted for the effect of 2013 admission costs and historical
tax settlement
-- Recommended final dividend of 6.2p (2013: 5.5p) per share
giving a total dividend for the year of 9.3p per share
Operational Highlights
-- Leads generated from media and internet marketing grown by 10.9% to 52,842 (2013: 47,660)
-- A record 57,682 installations with volume of frames installed
increased by 7.0% to 267,642 (2013: 250,185)
-- Average unit sales price up 1.6% to GBP504 (2013: GBP496)
-- Average order value up 3.8% to GBP2,806 (2013: GBP2,704)
-- Growth in market share to 8.48% at 31 December 2014 from 7.85% at prior year end
-- 10(th) consecutive year of market share growth
Steve Birmingham, CEO of Safestyle UK plc, said:
"Safestyle UK has again achieved impressive revenue growth and
improved its margin which have resulted in a record level of profit
in 2014. We have continued to increase our market share and
therefore maintain our position as the leading player in the highly
fragmented and competitive replacement window and door market. The
business is well positioned to build on these results as the
general economy and RMI (repair maintenance & improvement)
market continues to recover. Moreover, our dedicated focus on
quality and price together with our continued geographic expansion
into the South and South East as well as our forthcoming entry into
the conservatory refurbishment market should lead to further
growth.
"Having introduced a price increase on 1 January 2015, I am
pleased that in the first 11 weeks of the current financial year
our order intake has been strong, and we are trading in line with
our expectations. With this in mind the Board looks to the future
with confidence."
Enquiries:
Safestyle UK plc Tel: 0203 727 1000
Steve Birmingham, Chief Executive Officer
Mike Robinson Chief Financial Officer
Zeus Capital (Nominated Adviser & Broker) Tel: 0207 533 7727
Nick How / Ross Andrews
Dominic King (Institutional Sales)
FTI Consulting (Financial PR) Tel: 0203 727 1000
Oliver Winters / Alex Beagley / James safestyle@fticonsulting.com
Styles
About Safestyle UK plc
The Group is the leading retailer and manufacturer of PVCu
replacement windows and doors to the UK homeowner market. For more
information please visit www.safestyleukplc.co.uk or
www.safestyle-windows.co.uk.
Chairman's Statement
I am pleased to report the Group's full year results for the
year ended 31 December 2014.
Summary of Financial Performance
The Group has delivered record revenue, market share and
operating profit. Revenue for the year increased 9% to GBP136.0m
(2013: GBP124.8m), delivering profit before tax of GBP16.4m, up 73%
(2013: GBP9.5m). Underlying profit before tax was GBP16.8m (2013:
GBP15.3m), an increase of 10% on 2013 and underlying EBITDA was
GBP17.8m, up 11% (2013: GBP16.1m) after adjusting for listing
costs, share based payments and pre-IPO tax settlement costs.
Adjusted earnings per share increased 11% to 16.5p (2013:
14.8p).
The business continues to be highly cash generative, with 2014
cash conversion (the ratio of net cash inflow from operating
activities before taxation to underlying EBITDA) at 88%, compared
with 82% for 2013 (after adjusting for the repayment of loans made
to directors in the period before the Group's IPO which amounted to
GBP1.8m). As a consequence, our balance sheet remains strong and
the business had GBP8.5m net cash at 31 December 2014, compared
with GBP5.2m at 31 December 2013, having paid dividends of GBP6.7m
in the second half of 2014.
Market Share
Whilst FENSA data reported a 3.1% contraction in the overall
market in 2014, the Company has continued to gain market share
increasing from 7.85% as at 31 December 2013 to 8.48% as at 31
December 2014. The FENSA data for 2014 showed mixed market
dynamics, with the first half up 4.3% by volume (Safestyle
installation volumes were up 4.8%), but the second half down by a
marked 10.0% (Safestyle up 4.7%).
We are pleased with our market share gain and continue to drive
towards our medium term target of 10%. We ended the year with our
order book up 3% by value compared with 2013.
Final Dividend
The Board recommends, subject to approval at the Annual General
Meeting to be held on 21 May 2015, a final dividend of 6.2p per
share payable to ordinary shareholders registered on 19 June 2015.
Together with our interim dividend already paid of 3.1p per share,
this takes total proposed distributions up to 9.3p per share
representing 56% of earnings per share of 16.5p.
Looking Ahead
The majority of general macro-economic indicators are favourable
which we believe will result in increased demand in the RMI market
from which the replacement windows and doors market should
benefit.
Since the year end I am pleased to report that incoming orders
have been encouraging and the Board looks forward to further
progress in 2015 driven by our compelling customer proposition,
continuing growth in market share and further geographic
penetration.
Finally, I would like to thank our many stakeholders, and our
employees in particular, for their continued support and their
contribution to our success.
RS Halbert
Chairman
26 March 2015
CEO's Statement
I am pleased to report that Safestyle UK enjoyed a successful
first full year as a public company and I would like to formally
express my thanks to all our people for their dedicated hard work
and loyalty.
Business Review
In 2014, the Group increased its market share for the tenth
consecutive year to 8.48% (from 7.85% in 2013) maintaining its
sector leading position. During the period we carried out a record
57,682 installations (up 4.7% on 2013) consisting of 267,642 window
and door frames (up 7.0% on 2013). Our average frame sales price
excluding VAT increased by 1.6% to GBP504 and total average
installed order value increased from GBP2,704 to GBP2,806. This
strong operational performance enabled the Group to deliver
increased revenue, up 9% to GBP136.0m, and profit before tax up 73%
from GBP9.5m in 2013 to GBP16.4m in 2014. Underlying profit before
tax of GBP16.8m increased by 10% from GBP15.3m in 2013 after
adjusting for listing costs, share based payments and pre-IPO tax
settlement costs.
Our focus on continued expansion into the South and South East
delivered sales growth of 17.0% in the region. We believe there is
further scope for Safestyle UK to continue to gain market share
across the South of England given the fragmented market, our
attractive pricing proposition compared to our competitors, and an
increasing awareness of our brand in the region. We opened two new
sales branches during the year in Sittingbourne and Avon, both of
which are performing well, and since the year end, we have opened a
new branch in Watford. A further sales branch opening is planned
for later this year in Surrey. During 2014 we opened a new
installation depot in Crawley to cater for our growing footprint in
the region. A further installation depot is planned for the Watford
area during 2015.
The Group has continued to grow its digital and internet
presence and leads generated from direct response channels now
account for 31% of all business. Whilst door canvassing will remain
an important source of lead generation, we believe our increased
focus on direct digital marketing will enable us to continue to
gain market share and reduce average lead generation costs.
During the year we invested significantly in our Wombwell
manufacturing facilities in Yorkshire. In particular we upgraded
the glass furnace, installed a new sash line and added a new
machining and cutting centre. We have already seen improvements in
efficiency and quality as a result of this investment. We will
retain the flexibility to further invest in our manufacturing site
to respond to our growth requirements and will keep the structure
and capacity of our site under review to ensure we can meet our
medium and long term plans.
After a long period of selling price stability we took the
decision to increase our prices from 1 January 2015 to reflect some
supply side cost inflation, in particular glass prices; more
stringent regulation and health & safety standards; and higher
TV advertising costs. Despite this price increase the order intake
in the first 11 weeks of the current financial year has been strong
and we remain significantly cheaper than our national rivals and
committed to our market leading price and value proposition.
Regulation
Reflecting our market leading position, the Group has continued
to work closely with the relevant industry bodies throughout the
introduction of new regulation in 2014. We welcome any new
legislation that will bring further professionalism to the industry
and improve standards, better protect customers and drive out
unscrupulous operators.
On 1 April 2014 the Financial Conduct Authority ("FCA") became
the regulatory body for organisations offering consumer credit. A
stated aim of the FCA is to ensure that businesses put consumer
protection and treating customers fairly ahead of profits. Unlike
many of our competitors, we do not offer commission or incentives
to our sales personnel based on selling finance to our customers
and already have the systems and standards in place to ensure we
comply with the FCA's legislation.
In June 2014, the industry introduced a competent person scheme
requiring verification of minimum technical competence and the
provision of mandatory insurance backed guarantees. Once again, we
already adhere to these requirements and believe we are ideally
positioned to benefit from any fall out at the smaller end of the
market resulting from this increased regulation.
Product Development
Whilst our core market and strength remains the manufacture and
installation of replacement windows and doors, the Group has been
conducting a feasibility study into the launch of a new product
offering focused on the conservatory market. We have been very
encouraged by the initial feedback and as a result will begin the
roll out of the new service across an initial eight sales branches
in April 2015.
The service will focus on conservatory refurbishment where we
will replace the roofs and frames of poorly performing
conservatories onto existing bases. The roofs will be sourced as
complete units from the leading UK conservatory roof manufacturer
and the frames will be produced in our own manufacturing
facility.
There are currently around four million conservatories in the
UK, many of which were installed in the 1980s and 1990s. We
estimate that the refurbishment market totals approximately 20,000
conservatories a year with further growth expected driven by new
glass and insulation technology that has vastly improved the energy
efficiency of a traditional conservatory. The refurbishment market
is highly fragmented with few national players and little brand
awareness. The Board believes that by utilising existing levels of
customer demand and Safestyle UK's strong brand, combined with our
current installation infrastructure and manufacturing capabilities,
the Group can, over time, secure a similar percentage share of the
total conservatory refurbishment market to that which it enjoys in
the retail replacement market.
Outlook
Turning to the future, we will continue our drive to grow our
market share whilst building our geographic penetration. We are
seeing material benefits from the significant investment we have
made in new manufacturing equipment and we are excited about the
prospects of our entry into the conservatory refurbishment market.
Moreover, our robust cash generation and strong financial position
enables the Group to retain the flexibility to balance shareholder
returns with the ability to take advantage of our leading position
within a fragmented market should the opportunity arise.
We believe that consumers will continue to invest in home
improvement, and our A-rated energy efficient products make both
financial and aesthetic sense for the homeowner.
The Group delivered record results in 2014 and it is our
intention to continue our successful journey in 2015. Early signs
from the first two months of 2015 are encouraging and we have
started the year in line with our expectations.
SJ Birmingham FCA
Chief Executive Officer
26 March 2015
Finance Review
Revenue
Revenue for the year was GBP136.0 million, an increase of 9.0%
over 2013. The key factors underpinning this growth were:
-- 10.9% growth in leads generated from direct response channels
-- 2.4% improvement in conversion from order to installation
-- 7.0% growth in the volume of frames installed from 250,185 to 267,642
-- 1.6% growth in average unit price from GBP496 to GBP504
-- 3.8% growth in average order value from GBP2,704 to GBP2,806
Gross margin
Gross profit increased by 10% in the year to GBP49.7 million
(2013: GBP45.2 million), with gross margin higher at 36.5% (2013:
36.2%). The gross margin improvement was driven by a slightly
higher average sales price, reflecting the higher growth of sales
in the South, and a continued increase in the proportion of direct
response leads. Margins in the second half of the year were
impacted by the cost of providing compulsory Insurance Backed
Guarantees to all our customers and by the imposition of a 20%
increase on our glass purchases.
Other operating expenses
Other operating expenses for 2014 were GBP33.3 million (2013:
GBP35.8 million), a reduction of 7.0%. The 2013 expenses included
items totalling GBP5.5 million which were the costs of the IPO and
the settlement of a historic tax planning scheme relating to
National Insurance and PAYE. After adjusting for these one-off
costs operating expenses increased from GBP30.2 million to GBP33.3
million, an increase of 10%. Salary costs increased slightly ahead
of revenues reflecting increased costs resulting from the annual
pay award and auto-enrolment. Marketing costs were GBP1.2 million
higher than 2013, an increase of 15%. This was driven by inflation
in TV advertising rates and an increased investment in digital
marketing which resulted in a 10.9% increase in leads and a 14%
increase in digital business.
EBITDA and PBT
Underlying EBITDA was GBP17.8 million for the year (2013:
GBP16.1 million), an increase of GBP1.7 million (after adjusting
for listing costs, share based payments and pre-IPO tax settlement
costs). PBT was GBP6.9 million higher at GBP16.4 million, but after
adjusting for share-based payments, listing costs and historic tax
settlement costs was 10% higher than last year at GBP16.8
million.
The earnings per share are 16.5p, up from 8.3p in 2013. However,
after adjusting for admission fees and tax settlement, the earnings
per share are up 11% from 14.8p in 2013. The basis for these
calculations is detailed in note 8.
Cash
Strong operating cash flow allowed the Group to increase its
cash balance from GBP5.3 million at 31 December 2013 to GBP8.5
million as at 31 December 2014 whilst paying GBP6.7 million in
dividends in the year.
Dividends
The Board is recommending a final dividend of 6.2 pence per
share subject to approval by shareholders at the AGM. The dividend
will be paid on 13 July 2015 to shareholders on the register at
close of business on 19 June 2015.
MJ Robinson
Chief Financial Officer
26 March 2015
Consolidated statement of comprehensive income for the year
ended 31 December 2014
Note 2014 2013
GBP000 GBP000
Revenue 136,012 124,797
Cost of sales (86,323) (79,620)
Gross profit 49,689 45,177
Other operating expenses (33,339) (35,830)
Operating profit 16,350 9,347
EBITDA before share based payments,
listing costs and historic tax
settlement 17,759 16,076
Equity settled share based payments
charges (363) (273)
Depreciation and amortisation (1,046) (923)
Operating profit before listing
costs and historic tax settlement 16,350 14,880
Listing costs and historic tax
settlement - (5,533)
Operating Profit 16,350 9,347
--------------------------------------------- -------- --------- ---------
Interest on bank deposits 97 164
Finance costs (44) (48)
Profit before taxation 16,403 9,463
Taxation 6 (3,572) (3,002)
Profit after taxation 12,831 6,461
Other comprehensive income - -
Total comprehensive profit for
the period attributable to shareholders 12,831 6,461
========= =========
Earnings Per Share
Basic (pence per share) 4 16.5p 8.3p
Diluted (pence per share) 4 15.9p 7.6p
All operations were continuing throughout all periods.
Consolidated statement of financial position as at 31 December
2014
2014 2013
Note GBP000 GBP000
Assets
Intangible assets - Trademarks 504 504
Intangible assets - Goodwill 20,758 20,758
Intangible assets - Software 492 449
Property, plant and equipment 7,153 6,610
Deferred tax asset 340 120
Non-current assets 29,247 28,441
--------- ---------
Inventories 1,463 1,350
Trade and other receivables 3,314 2,393
Cash and cash equivalents 8,457 5,237
Current assets 13,234 8,980
--------- ---------
Total assets 42,481 37,421
========= =========
Equity
Called up share capital 7 778 778
Share premium account 7 77,000 77,000
Profit and loss account 16,537 9,793
Common control transaction reserve 7 (66,527) (66,527)
Total equity 27,788 21,044
--------- ---------
Liabilities
Trade and other payables 10,317 11,352
Financial liabilities 96 279
Corporation tax liabilities 1,589 1,936
Provision for liabilities and
charges 690 727
Current liabilities 12,692 14,294
--------- ---------
Financial liabilities 179 275
Provision for liabilities and
charges 1,822 1,808
Non-current liabilities 2,001 2,083
--------- ---------
Total liabilities 14,693 16,377
========= =========
Total equity and liabilities 42,481 37,421
========= =========
Consolidated statement of changes in equity for the year ended
31 December 2014
Share Share Profit Common Total
capital premium and control equity
loss transaction
account reserve
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 31 December
2012 1 77,777 12,144 (66,527) 23,395
Total comprehensive
profit
for the year - - 6,461 - 6,461
Transactions with owners
of the Company:
Issue of bonus Shares 777 (777) - - -
Equity settled share
based
payment - - 23 - 23
Share warrants expense - - 250 - 250
Dividends - - (9,085) - (9,085)
--------------- --------------- --------------- --------------- ---------------
Balance at 31 December
2013 778 77,000 9,793 (66,527) 21,044
Total comprehensive
profit
for the year 12,831 12,831
Transactions with owners
of the Company:
Equity settled share
based
payments - - 363 - 363
Deferred taxation to
reserves - - 239 - 239
Dividends - - (6,689) - (6,689)
Balance at 31 December
2014 778 77,000 16,537 (66,527) 27,788
--------------- --------------- --------------- --------------- ---------------
For an explanation of components of shareholders' equity see
note 7.
Consolidated statement of cash flows for the year end 31
December 2014
2014 2013
GBP000 GBP000
Reconciliation of profit before
tax to net cash inflow from operating
activities
Profit before taxation 16,403 9,463
Interest on Bank Deposits (97) (164)
Finance Costs 44 48
Depreciation of plant, property
and equipment 907 855
Amortisation of intangible fixed
assets 139 68
Profit on sale of plant, property
and equipment (35) (6)
Increase in inventories (114) (269)
(Increase)/decrease in trade and
other receivables (921) 2,307
(Decrease)/increase in trade and
other payables (1,035) 2,389
(Decrease)/increase in provisions (23) 103
Equity settled share based payments 363 23
Share warrants expense - 250
Net cash inflow from operating
activities before taxation 15,631 15,067
Taxation (3,900) (2,150)
Returns on investments and servicing
of finance
Hire purchase interest (43) (42)
Other interest (1) (6)
Interest received 97 164
Net cash inflow for returns on
investments and servicing of finance 53 116
---------------------- --------
Net cash inflow from operating
activities 11,784 13,033
Cash flows from investing activities
Acquisition of property, plant
and equipment (1,573) (4,750)
Proceeds from sale of property,
plant and equipment 159 100
Acquisition of intangible fixed
assets (182) (429)
Net cash outflow from investing
activities (1,596) (5,079)
Cash flows from financing activities
Payment of hire purchase and finance
leases (279) (383)
Dividends paid (6,689) (9,085)
Net cash outflow from financing
activities (6,968) (9,468)
Net increase/(decrease) in cash
and cash equivalents 3,220 (1,513)
Cash and cash equivalents at start
of period 5,237 6,750
Cash and cash equivalents at end
of period 8,457 5,237
====================== ========
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 April 2015. The financial information set out in this
Preliminary Announcement does not constitute the Group's
Consolidated Financial Statements for the years ended 31 December
2014 or 2013, but is derived from those Financial Statements.
Statutory Financial Statements for 2014 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 2014 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
2014 ("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 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
2.
(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.
-- IFRS 10 Consolidated Financial Statements and IAS 27 (2011) Separate Financial Statements
-- IFRS 11 Joint Arrangements and Amendments to IAS 28 (2008)
Investments in Associates and Joint Ventures
-- IFRS 12 Disclosure of Interests in Other Entities
-- Amendments to IAS 32 'Offsetting Financial Assets and Financial Liabilities'
-- Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
-- Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)
(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 affective (and in some cases have not yet been adopted by the
EU):
-- Annual improvement cycles 2010 - 2012 and 2011 - 2013
(mandatory for year ending 31 December 2015)
-- IFRS 14 Regulatory Deferral Accounts (mandatory for year ending 31 December 2016).
-- Amendments to IFRS 11: Accounting for Acquisitions of
Interests in Joint Operations (mandatory for year ending 31
December 2016).
-- Amendments to IAS 16 and IAS 38: Clarification of Acceptable
Methods of Depreciation (mandatory for year ending 31 December
2016). R Amendments to IAS 16 and IAS 41: Bearer plants (mandatory
for year ending 31 December 2016)
-- Amendments to IAS 27: Equity method in separate financial
statements (mandatory for year ending 31 December 2016).
-- Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets (mandatory for year ending 31 December 2016).
-- Annual improvement cycles 2012-2014 (mandatory for year ending 31 December 2016).
-- IFRS 15 Revenue from contracts with customers (mandatory for year ending 31 December 2017).
-- IFRS 9 Financial Instruments (mandatory for year ending 31 December 2018).
The Group is currently considering the implication of these
standards, however it is anticipated the impact of these standards
on the financial position and performance of the Group will be
minimal and effects will principally relate to amendment and
extension of current disclosures.
The Board is aware of the effective dates and will continue to
review the potential impact on the financial statements.
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
2014 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 2014 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 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.
3 Dividends
The aggregate amount of dividends
comprises: 2014 2013
GBP000 GBP000
Interim dividends paid in respect
of the period of GBPnil (2013: GBPnil)
per Ordinary, Ordinary 'A', Ordinary
'B' and Ordinary 'C' share - 9,085
Final dividend paid of GBP0.055 (2013: 4,278 -
GBPnil) per ordinary share
Interim dividend paid of GBP0.031 2,411 -
(2013: GBPnil) per ordinary share
------- -------
6,689 9,085
Dividends in the prior year relate to payments made to
shareholders of Style Group Holdings Ltd prior to the acquisition
by Safestyle UK plc.
A final dividend of 6.2p per ordinary share is proposed by the
Board subject to approval at the AGM.
4 Earnings per share
2014 2013
Basic earnings per ordinary share
(pence) 16.5 8.3
Diluted earnings per ordinary
share (pence) 15.9 7.6
Note: Earnings per share
a) Basic earnings per share
The calculation of basic earnings per share has been based on
the following profit attributable to ordinary shareholders and
weighted-average number of shares outstanding.
i) Profit attributable to ordinary
shareholders (basic)
2014 2013
GBP000 GBP000
Profit attributable to ordinary
shareholders 12,831 6,461
========== =========
ii) Weighted-average number of
ordinary shares (basic)
No of No of
shares shares
'000 '000
In issue during the year 77,778 77,778
========== =========
On 4 December 2013 the share capital was increased by the
creation of 44,860,100 new ordinary shares, 44,950 new A ordinary
shares, 44,950 new B ordinary shares and 32,727,777 new C ordinary
shares each as bonus shares out of share premium to the existing
shareholders in proportion to their existing holdings. At the same
time the existing 2,000 shares with a nominal value of GBP0.50 were
subdivided into shares of GBP0.01 and all shares were reclassified
as ordinary shares. This resulted in their being 77,777,777
ordinary shares in issue. As these transactions have changed the
number of ordinary shares outstanding without a corresponding
change in resources the weighted average number of ordinary shares
outstanding during the year and for the comparative year for both
basic and diluted EPS have been adjusted.
4 Earnings per share (continued)
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)
2014 2013
GBP000 GBP000
Profit attributable to ordinary shareholders 12,831 6,461
======== ========
ii) Weighted-average number of ordinary
shares (diluted)
No of No of
shares shares
'000 '000
Weighted-average number of ordinary
shares (basic) 77,778 77,778
Effect of conversion of share options
and warrants 2,843 131
80,621 77,909
======== ========
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.
c) Earnings per share adjusted for the effect of admission costs
and historical tax settlement.
i) Profit attributable to ordinary
shareholders (basic and diluted)
2014 2013
GBP000 GBP000
Profit attributable to ordinary shareholders
(basic and diluted) 12,831 6,461
Admission costs and historic tax settlement - 5,023
Adjusted profit attributable to ordinary
shareholders (basic and diluted) 12,831 11,484
======== ========
Earnings per share adjusted for the effect of admission costs
and historical tax settlement.
2014 2013
Basic earnings per ordinary share
(pence) 16.5 14.8
Diluted earnings per ordinary share
(pence) 15.9 14.8
5 Admission costs and historic tax settlement
2014 2013
GBP000 GBP000
PAYE/NIC settlement - 3,148
Vesting of Share Warrants - 250
AIM Admission Costs - 2,135
Profit before Taxation - 5,533
---- -------
Corporation tax adjustment on
tax settlement - (510)
Profit after Taxation - 5,023
==== =======
The admission costs in the prior year related to legal and
professional costs associated with the AIM admission on 11 December
2013.
The Group also issued warrants to Zeus Capital in lieu of
payment for services related to the IPO. The warrant is for 3% of
the fully diluted share capital of the company following the
exercise of the subscription rights. The warrant is exercisable at
any time between the 1st and 10th anniversary of admission to AIM.
The fair value of the warrant has been determined by the estimated
value of services provided and has been charged as an IPO expense
in the period.
On 25 November 2013, the Group agreed to pay GBP3,148,000 to Her
Majesty's Revenue and Customs ("HMRC") to settle a previously
unprovided payroll liability following an investigation by HMRC.
The liability related to 2004/2005 and was unprovided at 31
December 2012 and earlier period ends because the Directors,
following advice from external advisors, were confident that they
were not liable. However, in October 2013, in preparing to float
the Group, the directors received external advice that they should
approach HMRC in order to resolve the matter and to avoid a lengthy
and drawn out investigation, which could ultimately lead to
financial settlement post floatation. A corporation tax adjustment
of GBP510,000 has been netted off these costs.
6 Taxation
2014 2013
GBP000 GBP000
Current tax
Current tax on income for the
period 3,610 2,986
Adjustments in respect of prior
periods (56) (8)
Total current tax 3,554 2,978
------------- ------
Deferred tax
Origination and reversal of timing
differences 7 4
Effect of change in tax rate (6) 15
Adjustments in respect of prior
periods 17 5
Total deferred tax 18 24
--------- ---------
Total tax expense 3,572 3,002
--------- ---------
The current year tax charge is
split into the following:
Underlying tax charge 3,572 3,512
Tax reclaimed on admission costs
and historic tax settlement - (510)
Total tax expense 3,572 3,002
--------- ---------
Reconciliation of effective tax
rate
2014 2013
Current tax reconciliation GBP000 GBP000
Profit before taxation 16,403 9,463
Admission costs and historic tax
settlement - 5,533
Profit before taxation, admission
costs and historic tax settlement 16,403 14,996
Expected tax charge based on the
standard rate of corporation tax
in the UK of 21.50% (2013: 23.25%) 3,527 3,487
Effects of:
Expenses not deductible for tax
purposes 90 13
Adjustments to tax charge in respect
of prior periods (39) (3)
Effect of change in tax rate (6) 15
Total on ordinary activities 3,572 3,512
Tax reclaimed on admission costs
and historic tax settlement - (510)
Total tax expense 3,572 3,002
--------- ---------
Reductions in the UK corporation tax rate from 24% to 23%
(effective from 1 April 2013) and to 21% (effective 1 April 2014)
and 20% (effective 1 April 2015) were substantively enacted on 3
July 2012 and 2 July 2013 respectively. This will reduce the
company's future current tax charge accordingly.
7 Share capital
2014 2013
GBP000 GBP000
Authorised
77,777,777 Ordinary Shares @ 1p each 778 778
778 778
======= =======
Allotted, issued and fully paid
77,777,777 Ordinary Shares @ 1p each 778 778
778 778
======= =======
On 3 December 2013 Safestyle UK issued 2,000 shares at
GBP38,888.89 each (total value of GBP77,777,777) to acquire a 100%
ownership of Style Group Holdings Limited. The 2,000 shares, which
each had a nominal value of 50p, comprised 998 ordinary shares, 1 A
ordinary share, 1 B ordinary share and 1,000 C ordinary shares.
On 4 December 2013 the share capital was increased to
GBP777,777.77 by the creation of 44,860,100 new ordinary shares of
GBP0.01 each, 44,950 new A ordinary shares of GBP0.01 each, 44,950
new B ordinary shares of GBP0.01 each and 32,727,777 new C ordinary
shares of GBP0.01 each as bonus shares out of share premium to the
existing shareholders in proportion to their existing holdings. At
the same time the existing shares with a nominal value of GBP0.50
were subdivided into shares of GBP0.01 and all shares were
reclassified as ordinary shares resulting in the Company having
77,777,777 ordinary shares of GBP0.01 in issue.
Common control transaction reserve
This reserve was created in 2013 through Safestyle UK plc's
acquisition of the group headed by Style Group Holdings Limited.
The reserve of GBP66.5m represents the difference in the fair value
of the consideration paid for Style Group Holdings of GBP77.8m and
the share capital and share premium held by Style Group Holdings
Limited at the time of acquisition of GBP11.3m.
8 Share Based Payments
Share award scheme
The Group operates an equity-settled LTIP remuneration scheme
for directors and certain management. The only vesting conditions
attached to the options are that the individual must remain an
employee of the Group for a minimum period.
The number of share options in existence during the year were as
follows:
2014 2013
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
price price
------------------------------ ---------- ---------- ---------- ----------
Outstanding at start of
period 4,083,333 GBP1.00 - -
Granted in year - - 4,083,333 GBP1.00
Outstanding at end of period 4,083,333 GBP1.00 4,083,333 GBP1.00
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.
2014 2013
Risk free interest rate 1.19% 1.19%
Expected volatility 38.90% 38.90%
Expected option life (in
years) 3.5 3.5
Weighted average share price after adjusting
for PV of dividends GBP0.77 GBP0.77
Weighted average exercise
price GBP1.00 GBP1.00
Weighted average fair value
of options granted 15.93p 15.93p
Expected dividends 8% 8%
At the grant date there was no share price history for the
company on which to calculate volatility. Volatility was therefore
estimated using companies classified in the 'Home Improvement
Retailers' subsector on the London Stock Exchange.
8 Share Based Payments (continued)
Sharesave scheme
In the period the company launched a sharesave (SAYE) scheme for
employees. This allowed 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. It commenced on the 27 March 2014 and
matures on 1 May 2017.
2014 2013
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
price price
----------------------------- ---------- ---------- ---------- ----------
Outstanding at start of
period - - - -
Granted in year 262,598 GBP1.31 - -
Outstanding at end of period 262,598 GBP1.31 - -
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.
2014 2013
Risk free interest rate 1.31% -
Expected volatility 40.40% -
Expected option life (in
years) 3.35 -
Weighted average share price
after adjusting for PV of dividends GBP1.57 -
Weighted average exercise
price GBP1.31 -
Weighted average fair value
of options granted 58.4p -
Expected dividends 8% -
At the grant date there was little share price history for the
company on which to calculate volatility. Volatility was therefore
estimated using companies classified in the 'Home Improvement
Retailers' subsector on the London Stock Exchange.
Warrants
In December 2013 the Group also issued warrants to Zeus Capital
in lieu of payment for services related to the IPO. The warrant is
for 3% of the fully diluted share capital of the company following
the exercise of the subscription rights. The warrant is exercisable
at any time between the 1st and 10th anniversary of admission to
AIM. The fair value of the warrant has been determined by the
estimated value of services provided and was charged as an IPO
expense in the year ended December 2013.
8 Share Based Payments (continued)
Expense recognised in consolidated statement of comprehensive
income
The total share-based expense comprises:
2014 2013
GBP000 GBP000
Equity settled - Share
award scheme 325 23
Equity settled - Sharesave
scheme 38 -
Warrants - 250
-------------------------------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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