TIDMSFE
RNS Number : 5281I
Safestyle UK PLC
22 March 2018
22 March 2018
Safestyle UK plc
("Safestyle" or the "Group")
Final Results 2017
Safestyle UK plc (AIM: SFE), the leading UK-focused retailer and
manufacturer of PVCu replacement windows and doors for the
homeowner market, today announces its final results for the 12
months ended 31 December 2017.
Financial and Operational highlights
Year ended Year ended % change
31 December 2017 31 December 2016
GBPm GBPm
-------------------- ------------------- ------------------- ----------
Revenue*** 158.6 159.4 -0.5%
-------------------- ------------------- ------------------- ----------
Gross profit 51.4 55.6 -7.6%
-------------------- ------------------- ------------------- ----------
Gross margin % 32.4% 34.9% -250bps
-------------------- ------------------- ------------------- ----------
EBITDA 15.5 20.4 -24.0%
-------------------- ------------------- ------------------- ----------
Underlying EBITDA* 16.8 21.6 -22.2%
-------------------- ------------------- ------------------- ----------
PBT 13.8 19.3 -28.5%
-------------------- ------------------- ------------------- ----------
Underlying PBT** 15.1 20.5 -26.3%
-------------------- ------------------- ------------------- ----------
EPS - Basic 13.1p 19.0p -31.1%
-------------------- ------------------- ------------------- ----------
Ordinary Dividend 11.25p 11.25p
-------------------- ------------------- ------------------- ----------
* Underlying EBITDA is defined as earnings before interest, tax,
depreciation, amortisation, share based payments and non-recurring
charges
** Underlying PBT is defined as earnings before taxation, share
based payments and non-recurring charges
*** 2016 has been restated, as explained in note 1.
A reconciliation of the terms used in the above table and those
in the financial statements can be found in note 5.
-- Volume of frames installed decreased by 7.9% to 265,716 (2016: 288,460)
-- Average unit sales price up 7.6% to GBP608 (2016: GBP565)
-- Continued growth in market share to 10.7% at 31 December 2017 (2016: 10.2%)
-- Leads generated from media and on-line marketing grew by 6.4% to 78,402 (2016: 73,686)
-- New installation depot opened in South Wales
-- Completed our new factory extension at Wombwell, South Yorkshire, on time and on budget
-- Pre-tax operating cash flow of GBP14.5 million (2016: GBP21.1 million)
Commenting on the results, Steve Birmingham, CEO said:
"During 2017 the market became increasingly challenging and
although Safestyle again increased market share, the Group's
financial performance was impacted primarily due to increases in
lead generation costs, consumer finance subsidy costs and raw
materials.
The start to 2018 has been difficult and as previously announced
our order intake has been below management expectations as a result
of the continued deteriorating market, declining consumer
confidence and increased competitive environment.
We have already taken action to reduce our cost base and
modernise our sales and canvass operations. We expect the major
benefits of these efforts to take effect in the second half of
2018.
2018 will be a year of transition as we continue to invest in
operational improvements so that by the end of the year we will
have a leaner, fitter and more cost effective business."
Enquiries:
Safestyle UK plc Tel: 0207 653 9850
Steve Birmingham, Chief Executive Officer
Mike Robinson, Chief Financial Officer
Zeus Capital (Nominated Adviser & Joint Tel: 0203 829 5000
Broker)
Nick How / Dominic King
Liberum (Joint Broker) Tel: 0203 100 2100
Neil Patel / Jamie Richards
FTI Consulting (Financial PR) Tel: 0203 727 1000
Alex Beagley / James Styles safestyle@fticonsulting.com
About Safestyle UK plc
The Group is the leading retailer and manufacturer of PVCu
replacement windows and doors to the UK homeowner market. For more
information please visit www.safestyleukplc.co.uk or
www.safestyle-windows.co.uk.
Chairman's Statement - Results Announcement for the year ended
31 December 2017
Summary of Financial Performance
The Group has delivered revenue of GBP158.6m (2016:GBP159.4m),
down 0.5% from the corresponding period in 2016, and underlying
profit before tax of GBP15.1m, down from last year's GBP20.5m.
Reported profit before tax for the year was GBP13.8m (2016:
GBP19.3m). Earnings per share decreased 31.1% to 13.1p (2016:
19.0p).
In a difficult market, which declined by an estimated 9.0%
overall, the Group continued to gain market share (as measured by
FENSA installation numbers), which was 10.7% at the year end (2016:
10.2%).
Market Contraction
Market conditions at the start of 2017 were relatively stable,
with FENSA data showing that the overall market in Q1 2017
experienced a relatively modest volume decline. However, the market
contraction accelerated thereafter, reflecting declining consumer
confidence, with volume declining 10.2% for the remainder of the
year. The current outlook for the market for large household
discretionary purchases remains challenging and the Board expects
market conditions to continue to be challenging in 2018.
We responded to these challenging market conditions through
deployment of market leading consumer finance, although the
increased cost has impacted gross margins. We continue to evolve
our product range and will be offering both new build and
refurbishment conservatory propositions throughout the course of
2018. We have continued to invest in technology and our digital
lead generation performance continues to be strong although we have
had to absorb significant cost inflation which has impacted
margins.
Factory Expansion
We completed our new factory extension at Wombwell, South
Yorkshire, on time and on budget. This modern facility is fully
operational and delivering the anticipated manufacturing
productivity gains.
Balance Sheet and Final Dividend
During 2017, we had capital expenditure of GBP4.7m, following
the GBP5.9m in 2016, and this major programme, which primarily
relates to our new manufacturing facilities, is substantially
complete. We expect our capex to reduce in 2018 in line with
historic norms, when our major investment will be in technology and
digital transformation to modernise our customer experience and
enhance operational efficiency.
Our business continues to be highly cash generative with 2017
cash conversion (the ratio of net cash inflow from operating
activities before taxation to underlying EBITDA) at 87% (2016:
98%). Our balance sheet is strong with GBP11.0m net cash at 31
December 2017, slightly lower than we expected due to a delay in
receipts from our consumer finance provider.
The Board recommends, subject to approval at the Annual General
Meeting to be held on 17 May 2018, a final dividend of 7.5p per
share payable on 9 July to ordinary shareholders registered on 15
June 2018. Together with our interim dividend of 3.75p per share
which has already been paid, this takes the total proposed ordinary
distributions to 11.25p per share, representing reduced cover of
circa 1.2 times.
Directorate Change
After 10 years with the Company, Mike Robinson will step down as
CFO and from the Board during May 2018 to pursue other business
opportunities. On behalf of the Board, I would like to thank Mike
for his contribution to the development of the Group over the last
10 years.
The Board will appoint Rob Neale to succeed Mike as CFO. Rob is
currently Head of Leisure Travel Finance at Jet2.com and
Jet2holidays, divisions of Dart Group plc. He will join the Group
when a departure date from his current employer has been
agreed.
Looking Ahead
The beginning of 2018 has been difficult with a continuing
deterioration in the market resulting from declining consumer
confidence. We estimate the overall market to be approximately 10%
lower than the comparable period in 2017, reflecting the
continuation of the trend seen for the final three quarters of
2017. As announced in our previous Trading Update on 28 February
2018, this has been exacerbated by the activities of an aggressive
new market entrant in an already competitive landscape which has
impacted the Group in certain areas of its operations, primarily in
relation to our Canvass operations although not exclusively so. As
a result of the deteriorating market conditions and the activities
of the aggressive new competitor, the Group's order intake in 2018
to date has been weak and our market share is under pressure.
Whilst Canvass has been a declining part of our revenue for some
time, it remains an important and significant part of our
operations. We have responded to this by accelerating the
modernisation of our Sales and Canvass operations and by selective
recruitment to strengthen our operations. We expect the benefits of
this response to take effect in H2 2018.
We are well invested in our manufacturing facilities and are
focused on enhancing our operations, particularly through the
effective deployment and utilisation of technology. Although 2018
is likely to be a year of significant challenge for all market
participants, with our leading market position we are determined to
participate strongly in a smaller more competitive marketplace.
Finally, I would like to thank our colleagues for their hard
work and resilience.
RS Halbert
Chairman
22 March 2018
CEO Statement
During 2017 the market became increasingly challenging and
continued to deteriorate as a result of declining consumer
confidence. As a result, the Group's financial performance was
impacted. Despite the disappointing financial result our people
demonstrated continued hard work, dedication and commitment and I
would like to formally express my thanks to them all.
Business Review
In 2017, Safestyle's market share increased for the thirteenth
consecutive year to 10.7% (from 10.2% in 2016) further
consolidating our sector leading position (Source: FENSA). During
the period we carried out over 59,500 installations (down 4.8% on
2016) consisting of over 265,700 window and door frames (down 7.9%
on 2016). Despite the challenging market conditions we were able to
increase our average frame sales price by 7.6% to GBP608 and our
average installed order value by 4.2% from GBP3,103 to GBP3,232,
demonstrating the quality of our product and service. The increased
average frame sales price and installed average order value largely
compensated for the reduced volumes and resulted in revenue of
GBP158.6m (2016: GBP159.4m).
Underlying profit before tax was GBP15.1m (see note 5), down
GBP5.4m on 2016. This was primarily due to increases in door
canvass and digital lead generation costs, increased finance
subsidy costs and raw material price increases as a result of
sterling weakness and commodity price inflation.
For the first time, orders generated from our digital activities
and direct response channels exceeded those from other sources and
accounted for 47% of all business in 2017 compared to 41% in 2016.
Our intention is to build on this foundation and continue to invest
in our technology and digital activities. Lead generation from our
traditional door canvassing remains an important part of the
marketing mix and we commenced a restructuring of this function
during the fourth quarter of 2017 with the intention of creating a
smaller, more efficient and more cost effective operation. In 2017,
the proportion of orders from door canvass reduced from 45% to 39%
of total orders. We plan to improve the cost effectiveness and
productivity of both our digital marketing and door canvass
operations during 2018 as we aim to reduce our average lead
generation costs whilst increasing orders.
Health and Safety
We take the wellbeing of our people extremely seriously, and
Safestyle has comprehensive Health and Safety procedures in place
which we regularly review, and which we strive to continuously
improve. We are particularly sensitive to the risks of working at
height, which we have to do on around a third of our 60,000 annual
installations. We manage these risks through a number of documented
and approved processes, and as a result we have maintained a very
good safety record over many years. Exceptionally, during 2017
however, Safestyle had two incidents involving installations at
height which led to reportable injuries.
The Health & Safety Executive ("HSE") has carried out
investigations into both of these cases, with our fullest
co-operation. Whilst it continues to investigate one of the
incidents, the HSE has advised the Company that it intends to
prosecute Safestyle in relation to the other accident. We expect
that in due course we may be fined, although the precise quantum of
such a fine would depend on a number of factors including the level
of culpability, the harm category and what mitigating factors may
be taken into account. We will provide a further update in due
course. Further information is available in note 11 to the
accounts.
Manufacturing Expansion Plan Completed
During 2017, we completed the investment in our new factory and
manufacturing equipment to plan and budget. We have seen the
benefits of this investment in the form of improved quality,
reduced waste and increased labour efficiency in the factory.
Training Academy
As part of our plans to develop our people and further
strengthen our competitive position for the long term, the Group
plans to establish a training academy in Barnsley. This will be one
of the principle uses of the vacated former glass manufacturing
factory and, having completed the design phase, we have submitted a
planning application for approval. We are already utilising some of
the space for an enhanced post consumer waste facility to deliver
improved revenue from recycled material. Further detail will be
provided on the planned training academy during the course of 2018.
The intention of the training academy is to help develop our people
to reinforce our market leading customer service proposition.
Modern Working Practices
We monitor developments in working practices carefully. We
currently have approximately 750 employees and have access to the
services of approximately 1,300 self-employed people, primarily in
the areas of Sales and Canvass, Survey and Installation, in keeping
with window industry custom and practice.
We welcome the Independent Review of Employment Practices in the
Modern Economy led by Matthew Taylor and look forward to
clarification of the various employment statuses being provided. We
respect the rights of self determination of our self-employed
people and will continue to manage this important area of our
business.
Outlook
The start to 2018 has been difficult across the sector and our
order intake has been below management expectations, as previously
announced. Market conditions remain challenging, given the current
economic uncertainties and the increased competitive
environment.
During 2018 we will continue to invest in our digital
transformation project which will have the benefits of further
reducing our costs and increasing our sales and operational
effectiveness.
2018 will be a year of transition and we have a strong financial
position from which to continue to invest in operational
improvements so that by the end of the year we will have a leaner,
fitter and more cost effective business.
S.J. Birmingham FCA
Chief Executive Officer
22 March 2018
Financial Review
Revenue
Revenue for the period was GBP158.6 million against GBP159.4
million for the same period last year, representing a decline of
0.5%. Average unit prices increased by 7.6% in the year from GBP565
to GBP608. This follows a price list increase implemented at the
start of 2017 to recover additional material costs incurred as a
result of sterling weakness. It also reflects a change in product
mix with growth in premium products including bi-fold and composite
doors, coloured frames and conservatories.
The volume of frames installed in 2017 was 265,716, a decrease
of 7.9% over the previous year (2016: 288,460). Average order value
grew by 4.2% from GBP3,103 (inc VAT) in 2016 to GBP3,232 in
2017.
Lead mix continued the trend we have seen in recent years with
sales from digital increasing by 13.1% in the year.
Gross margin
Gross margin for 2017 was 32.4%, below the previous year's level
of 34.9%. We increased our price list on 1 January 2017 to recover
the additional material costs incurred following the EU Referendum
but further increases in PVCu profile and a shift in product mix
towards more premium products that we currently do not manufacture
has negatively impacted margins.
Further margin pressure has been felt from cost inflation in
both digital and door canvass lead generation and an increased take
up of our consumer finance offer has led to higher finance
subsidies being incurred.
Other operating expenses
Other operating expenses in 2017 were GBP37.6 million (2016:
GBP36.4 million), an increase of 3.3%. The 2017 expenses include
GBP0.8 million of non-recurring restructuring costs while the costs
in 2016 included one-off Employer National Insurance costs of
GBP0.9 million which were incurred as a result of the exercise LTIP
options granted when the Company completed its IPO in 2013.
The majority of the increase in expenses was depreciation which
was GBP0.6 million higher following the major investment in the
factory expansion. This project was completed on-time and
on-budget.
Profit and EPS
Profit before tax decreased by 28.5% from GBP19.3 million in
2016 to GBP13.8 million in 2017. Underlying PBT (see note 5) before
share based payments and non-recurring costs was GBP15.1 million
for the period (2016: GBP20.5 million), representing a decrease of
26.3%.
The effective tax rate for 2017 was 21.6% compared to 19.5% in
2016. The 2016 tax rate benefitted from an adjustment to the prior
year's tax.
Reported basic earnings per share for the period were 13.1p
compared to 19.0p for the same period last year. The basis for the
calculation is detailed in note 7 to the accounts.
Cash
The cash balance at 31 December 2017 was GBP11.0 million,
slightly lower than we expected due to a delay in receipts from our
consumer finance provider. This was a reduction of GBP2.5 million
in the period and was after paying total dividends of GBP9.3
million (2016: GBP14.4 million). The 2016 dividend payment included
a special dividend of GBP5.6 million.
Operating cashflow in the year was GBP11.7 million which was
GBP5.5 million lower than the previous year. This primarily
reflects the lower profitability in 2017 but was also impacted by
an increase in working capital of GBP1.3 million. This was largely
due to a reduction in trade creditors. The 2016 balance included a
large stage payment to the contractor responsible for the factory
extension which was subsequently paid in January 2017.
Capital expenditure in the period was GBP4.7 million (2016:
GBP5.9 million). The factory expansion, including the new glass
furnace, accounted for GBP2.7 million of this year's
investment.
Dividends
The Board is proposing a final dividend of 7.5p per share,
subject to the approval of shareholders at the Annual General
Meeting on 17 May 2018. The dividend will be paid on 9 July 2018 to
shareholders on the register at close of business on 15 June
2018.
Mike Robinson
Chief Financial Officer
22 March 2018
Consolidated statement of comprehensive income for the year
ended 31 December 2017
`
Restated
2017 2016
Note GBP000 GBP000
Revenue 158,552 159,435
Cost of sales (107,133) (103,826)
---------- ----------
Gross profit 51,419 55,609
Other operating expenses (37,630) (36,362)
---------- ----------
Operating profit 13,789 19,247
EBITDA before non-recurring costs,
share based payments, depreciation
and amortisation 16,770 21,602
Non-recurring costs 2 (830) -
Equity settled share based payments
charges 6 (421) (1,187)
Depreciation and amortisation (1,730) (1,168)
Operating profit 13,789 19,247
---------------------------------------- -------- ---------- ----------
Finance income 35 98
Finance costs (10) (11)
---------- ----------
Profit for the year 13,814 19,334
Taxation 8 (2,986) (3,778)
---------- ----------
Profit after taxation 10,828 15,556
Other comprehensive income - -
---------- ----------
Total comprehensive income for
the period attributable to equity
shareholders 10,828 15,556
========== ==========
Earnings Per Share
Basic (pence per share) 7 13.1p 19.0p
Diluted (pence per share) 13.0p 18.9p
All operations were continuing throughout all periods.
Consolidated statement of financial position as at 31 December
2017
2017 2016
Note GBP000 GBP000
Assets
Intangible assets - Trademarks 504 504
Intangible assets - Goodwill 20,758 20,758
Intangible assets - Software 786 415
Property, plant and equipment 14,975 12,389
Deferred tax asset 28 180
Non-current assets 37,051 34,246
-------------------- ---------
Inventories 2,032 2,176
Trade and other receivables 4,559 4,560
Cash and cash equivalents 10,975 13,459
Current assets 17,566 20,195
-------------------- ---------
Total assets 54,617 54,441
==================== =========
Equity
Called up share capital 9 828 828
Share premium account 81,845 81,979
Profit and loss account 24,712 22,052
Common control transaction reserve (66,527) (66,527)
Total equity 40,858 38,332
-------------------- ---------
Liabilities
Trade and other payables 10,864 11,983
Financial liabilities - 70
Corporation tax liabilities 776 1,599
Deferred tax liability 90 61
Provision for liabilities and
charges 599 701
Current liabilities 12,329 14,414
-------------------- ---------
Provision for liabilities and
charges 1,430 1,695
Non-current liabilities 1,430 1,695
-------------------- ---------
Total liabilities 13,759 16,109
==================== =========
Total equity and liabilities 54,617 54,441
==================== =========
Consolidated statement of changes in equity for the year ended
31 December 2017
Share Share Profit Common Total
capital premium and loss control equity
account transaction
reserve
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
January 2016 803 79,440 24,278 (66,527) 37,994
Total
comprehensive
income
for the year 15,556 15,556
Transactions
with owners
recorded
directly in
equity:
Issue of shares 25 2,539 (2,564) - -
Equity settled
share based
payment
transactions - - 240 - 240
Deferred tax
asset taken to
reserves - - (1,091) - (1,091)
Dividends - - (14,367) - (14,367)
-------------------- -------------------- -------------------- -------------------- --------------------
Balance at 31
December 2016 828 81,979 22,052 (66,527) 38,332
Total
comprehensive
income
for the year 10,828 10,828
Transactions
with owners
recorded
directly in
equity:
Issue of shares
(see note
9) 2 256 - - 258
Buy back of
shares (see
note
9) (2) (390) - - (392)
Equity settled
share based
payment
transactions - - 421 - 421
Corporation tax
relief taken
to reserves - - 747 - 747
Dividends (see
note 4) - - (9,336) - (9,336)
Balance at 31
December 2017 828 81,845 24,712 (66,527) 40,858
-------------------- -------------------- -------------------- -------------------- --------------------
Consolidated statement of cash flows for the year ended 31
December 2017
2017 2016
GBP000 GBP000
Cash flows from operating activities
Profit for the year 10,828 15,556
Adjustments for:
Depreciation of plant, property and
equipment 1,489 954
Amortisation of intangible fixed assets 241 214
Finance income (35) (98)
Finance expense 10 11
Loss on sale of plant, property and
equipment - 7
Equity settled share based payments 421 240
Tax expense 2,986 3,778
---------------------- ----------------------
15,940 20,662
Decrease/(increase) in inventories 144 (676)
Decrease/(Increase) in trade and other
receivables 1 (702)
Increase/(decrease) in trade and other
payables (1,120) 1,824
Increase/(decrease) in provisions (367) 26
---------------------- ----------------------
(1,342) 472
Hire purchase interest paid (10) (11)
(10) (11)
Taxation paid (2,880) (3,893)
Net cash from operating activities 11,708 17,230
---------------------- ----------------------
Cash flows from investing activities
Acquisition of property, plant and
equipment (4,075) (5,901)
Interest received 35 98
Proceeds from issue of property, plant
and equipment - 42
Acquisition of intangible fixed assets (612) (20)
Net cash outflow from investing activities (4,652) (5,781)
Cash flows from financing activities
Proceeds from the issue of ordinary
shares 258 -
Purchase and cancellation of ordinary
shares (392) -
Payment of hire purchase and finance
leases (70) (108)
Dividends paid (9,336) (14,367)
Net cash outflow from financing activities (9,540) (14,475)
Net decrease in cash and cash equivalents (2,484) (3,026)
Cash and cash equivalents at start
of year 13,459 16,485
Cash and cash equivalents at end of
year 10,975 13,459
====================== ======================
Notes to the financial statements
1 Statement of compliance
Whilst the financial information included in this Preliminary
Announcement has been prepared on the basis of the requirements of
International Financial Reporting Standards (IFRSs) in issue, as
adopted by the European Union, this announcement does not itself
contain sufficient information to comply with IFRS.
The Group expects to publish full Consolidated Financial
Statements in March 2018. The financial information set out in this
Preliminary Announcement does not constitute the Group's
Consolidated Financial Statements for the years ended 31 December
2017or 2016, but is derived from those Financial Statements.
Statutory Financial Statements for 2017 will be delivered to the
registrar of companies with the Jersey Financial Services
Commission (JFSC), following the Company's Annual General Meeting.
The auditor, KPMG LLP, has reported on the 2017 Financial
Statements. Their report was unqualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and did not contain
statements under Section 113B (3) or (6) of the Companies (Jersey)
Law 1991.
Safestyle UK plc is a public listed company incorporated in
Jersey. The company's shares are traded on AIM. The company is
required under AIM rule 19 to provide shareholders with audited
consolidated financial statements. The registered office address of
the Safestyle UK plc is 47 Esplanade, St Helier, Jersey JE1
0BD.
The company is not required to present parent company
information.
Basis of preparation
The Group's financial statements for the year ended 31 December
2017 ("financial statements") have been prepared on a going concern
basis under the historical cost convention and are in accordance
with International Financial Reporting Standards (IFRSs) as adopted
by the EU and the International Financial Reporting Standards
Interpretations Committee interpretations issued by the
International Accounting Standards Board ("IASB") that are
effective or issued and early adopted as at the time of preparing
these financial statements.
Safestyle UK plc was incorporated on 8 November 2013. On 3
December 2013 Safestyle UK plc acquired Style Group Holdings
through a share for share exchange. This was accounted for as a
common control transaction. The result of this is that the
financial statements of Style Group Holdings have been included in
the group consolidated financial statement of Safestyle UK plc at
their book value at the IFRS transition date of 1 January 2010 with
the assumption that the Group was in existence for all the periods
presented. The excess of the cost at the time of acquisition over
its book value has been recorded as a common control transaction
reserve.
The accounting policies set out below have unless otherwise
stated, been applied consistently to all periods presented in these
financial statements.
The preparation of financial statements requires Management to
exercise its judgement in the process of applying accounting
policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to these financial statements are disclosed in note
4.
(a) New and amended standards adopted by the Group
The Group has adopted the following new standards and amendments
for the first time. Unless otherwise stated, they have not had a
material impact on the financial statements.
-- Recognition of Deferred Tax assets for Unrealised Losses - Amendments to IAS 12
-- Annual Improvements to IFRSs - 2014-2016 Cycle
-- Disclosure Initiative - Amendments to IAS 7
(b) New standards, amendments and interpretations issued but not
effective and not early adopted
At the date of approval of these financial statements, the
following standards, amendments and interpretations which have not
been applied in these financial statements were in issue but not
yet effective (and in some cases have not yet been adopted by the
EU):
-- IFRS 9 Financial Instruments (effective 1 January 2018)
-- IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)
-- Recognition of Deferred Tax Assets for Unrealised Losses -
Amendments to IAS 12 (not yet endorsed)
-- Clarifications to IFRS 15 Revenue from Contracts with Customers
-- Classification and Measurement of Share-based Payment
Transactions - Amendments to IFRS 2 (not yet endorsed)
-- IFRS 16 Leases (effective 1 January 2019)
-- Effective date of IFRS 15 - amendment to IFRS15.
-- Amendments to IFRS 9 Financial Instruments (not yet endorsed)
The Group has investigated the effects of the implementation of
IFRS 9 'Financial Instruments' and have assessed that the
introduction of the standard is unlikely to have a material effect
on the results of the Group. The standard will be implemented for
the interim results for the 30 June 2018 and comparisons will be
restated to reflect those changes from previous years.
The Group is satisfied that their current treatment of Revenue
complies broadly with the remit of IFRS 15 'Revenue from contracts
with customers'. Revenue is currently recognised when a service is
delivered and when the contract is completed in accordance with the
policy in note 2. Work is continuing to assess whether a proportion
of the contract revenue should be recognised upon manufacture of
goods, prior to installation under the performance obligations of
the contract. Goods supplied are bespoke to the contract and these
are manufactured, finished and delivered for installation on a
'just in time' basis. Considered together with the immaterial
nature of finished goods in inventory, the Group feels that any
changes to the accounting required to meet this standard are
unlikely to be material to the financial results of the Group. The
standard will be implemented for the interim results for the 30
June 2018 and comparisons will be restated to reflect those changes
on previous years.
The Group has completed an initial impact assessment of the
effect of IFRS 16 on the financial position of the Group. Given the
annual value of operating lease costs, the change in accounting
will have a material impact in the financial statements for the
year ending 31 December 2019. Based on the analysis of leases held
at 31 December 2017, this is expected to result in operating leases
of GBP9.2m and an asset of GBP10.2m being recognised in the
comparative balance sheet at 31 December 2018. This is subject to
revision depending on changes in leases during 2018. The standard
will be implemented for the interim results for the 30 June 2019
and comparisons will be restated to reflect those changes on
previous years.
Basis of consolidation
Subsidiaries are entities that the Company has power over,
exposure or rights to variable returns and an ability to use its
power to affect those returns. In assessing control, potential
voting rights that are currently exercisable or convertible are
taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date control ceases.
Intragroup transactions and balances are eliminated on
consolidation.
Responsibility Statement
The Statement of Directors' Responsibilities is made in respect
of the full Annual Report and Accounts not the extracts from the
financial statements required to be set out in this
Announcement.
The Directors confirm that to the best of our knowledge:
The Group Consolidated Financial Statements, contained in the
2017 Annual Report and Financial Statements prepared in accordance
with IFRS as adopted by the EU, give a true and fair view of the
assets, liabilities, financial position and loss of the Group;
and
The Strategic Report contained in the 2017 Annual Report and
Financial Statements includes a fair review of the development and
performance of the business and the position of the Group, together
with a description of the principal risks and uncertainties that it
faces.
Cautionary Statement
This Report contains certain forward looking statements with
respect to the financial condition, results, operations and
business of Safestyle UK plc. These statements and forecasts
involve risk and uncertainty because they relate to events and
depend upon circumstances that will occur in the future. There are
a number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these
forward looking statements and forecasts. Nothing in this Report
should be construed as a profit forecast.
2 Summary of significant accounting policies
Revenue recognition
Revenue is recognised at the fair value of the consideration
received or receivable for the sale of goods and services in the
ordinary course of business and is shown net of Value Added Tax.
The Group primarily earns revenues from the sale, design,
manufacture and installation of domestic double-glazed replacement
windows and doors. Product sales revenues are recognised once the
goods have been installed. Survey fees are recognised at the point
at which they become non-refundable. The Group received no
commissions for introducing finance products to customers in 2016,
only paying subsidies which are recognised as a cost of sale.
Revenue from maintenance is recognised on completion of the work
carried out.
A review of accounting policies in the run up to the adoption of
IFRS 15 has led to the revenue from sales where the customer takes
out a corresponding finance product to be shown net of the
commission charges incurred in those sales. Previously the revenue
was presented gross with the commission charges in cost of sales.
Revenue and cost of sales for the year ended 31 December 2016 have
been restated for consistency. The effect of this is to reduce
revenue in the prior period by GBP3,681k and to reduce cost of
sales by the same amount. There is no effect on the gross profit,
operating profit or Earnings per Share for the Group. Gross margin
as a percentage of revenue has increased in the prior period from
34.1% to 34.8%.
Non-recurring costs
The current year includes GBP830k of non-recurring costs shown
in the statement of comprehensive income. Of this GBP580k relates
to restructuring costs, being primarily redundancy costs.
Operational costs of GBP184k relate to the transition to the new
manufacturing facility and a further GBP66k relates other one-off
costs.
It is expected that restructuring costs will continue to be
incurred throughout the next financial year as the process of
digitalisation continues.
3 Accounting estimates and judgements
Details of the Group's significant accounting judgements and
critical accounting estimates are set out in these financial
statements and include:
Recoverability of trade receivables
The assessment of whether trade receivables are recoverable
requires judgement. An allowance for impairment is made where there
is an identified loss event which, based on previous experience, is
evidence of a reduction in the recoverability of the cash
flows.
Warranty provisions
The Group gives guarantees against all its products, which in
the majority of cases covers a period of 10 years. The level of
provision required to cover the expected future costs of rectifying
faults and the future rate of product failure arising within the
guarantee period requires judgement.
4 Dividends
The aggregate amount of dividends
paid comprises: 2017 2016
GBP000 GBP000
Final dividend paid of GBP0.075 (2016:
GBP0.075) per ordinary share 6,224 5,631
Special dividend (2016: GBP0.075
per ordinary share) - 5,631
Interim dividend paid of GBP0.0375
(2016: GBP0.0375) per ordinary share 3,112 3,105
--------------------
9,336 14,367
==================== =======
5 Reconciliation of PBT, EBITDA and Underlying EBITDA
2017 2016
GBP000 GBP000
Profit before tax 13,814 19,334
add back
Non-recurring costs 830 -
Equity settled share based
payments charges 421 1,187
Underlying profit before tax 15,065 20,521
------- -------
Profit before tax 13,814 19,334
add back
Finance Income (35) (98)
Finance costs 10 11
Depreciation and amortisation 1,730 1,168
EBITDA 15,519 20,415
------- -------
add back
Non-recurring costs 830 -
Equity settled share based
payments charges 421 1,187
Underlying EBITDA 16,770 21,602
------- -------
6 Equity settled share based payments charges
2017 2016
GBP000 GBP000
Equity settled
- LTIP 351 153
Equity settled
- SAYE 70 87
Employers national insurance on issue
of LTIP with associated charges - 947
421 1,187
------- -------
7 Earnings per share
2017 2016
Basic earnings per ordinary share
(pence) 13.1 19.0
Diluted earnings per ordinary
share (pence) 13.0 18.9
a) Basic earnings per share
The calculation of basic earnings per share has been based on
the following profit attributable to ordinary shareholders and
weighted-average number of shares outstanding.
i) Profit attributable to ordinary
shareholders (basic)
2017 2016
GBP000 GBP000
Profit attributable to ordinary
shareholders 10,828 15,556
=============== ========
ii) Weighted-average number of
ordinary shares (basic)
No of shares No of
shares
'000 '000
In issue during the year 82,883 82,006
=============== ========
b) Diluted earnings per share
The calculation of diluted earnings per share has been based
on the following profit attributable to ordinary shareholders
and weighted-average number of ordinary shares outstanding after
adjustment for the effects of all dilutive potential ordinary
shares.
i) Profit attributable to ordinary
shareholders (diluted)
2017 2016
GBP000 GBP000
Profit attributable to ordinary
shareholders 10,828 15,556
=============== ========
ii) Weighted-average number of
ordinary shares (diluted)
No of shares No of
shares
'000 '000
Weighted-average number of ordinary
shares (basic) 82,883 82,006
Effect of conversion of share
options and warrants 396 341
83,279 82,347
=============== ========
The average market value of the Company's shares for the purpose
of calculating the dilutive effect of share options was based
on quoted market prices for the period during which the options
were outstanding.
8 Taxation
2017 2016
GBP000 GBP000
Recognised in the statement of
comprehensive income
Current tax
Current tax on income for the
period 2,805 3,958
Adjustments in respect of prior
periods - (211)
Total current tax 2,805 3,747
-------------------- --------------------
Deferred tax
Origination and reversal of timing
differences 180 22
Effect of change in tax rate (11) 9
Adjustments in respect of prior 12 -
periods
Total deferred tax (see notes
15 and 22) 181 31
-------------------- --------------------
Total tax expense 2,986 3,778
-------------------- --------------------
The current year tax charge is
split into the following:
Tax charge 2,986 3,778
Total tax expense 2,986 3,778
-------------------- --------------------
Reconciliation of effective tax
rate
2017 2016
Current tax reconciliation GBP000 GBP000
Profit for the year 10,828 15,556
Total tax expense 2,986 3,778
Profit excluding tax 13,814 19,334
-------------------- --------------------
Expected tax charge based on the
standard rate of corporation tax
in the UK of 19.25% (2016: 20.00%) 2,659 3,867
Effects of:
Expenses not deductible for tax
purposes 326 113
Adjustments to tax charge in respect
of prior periods 12 (211)
Effect of change in tax rate (11) 9
Total tax expense 2,986 3,778
-------------------- --------------------
A reduction in the UK corporation tax rate from 21% to 20%
(effective from 1 April 2015) was substantively enacted on 2 July
2013. Further reductions to 19% (effective from 1 April 2017) and
to 18% (effective 1 April 2020) were substantively enacted on 26
October 2015, and an additional reduction to 17% (effective 1 April
2020) was substantively enacted on 6 September 2017. This will
reduce the Group's future current tax charge accordingly. The
deferred tax asset at 31 December 2017 has been calculated based on
these rates.
9 Share capital
2017 2016
GBP000 GBP000
Authorised
77,777,777 Ordinary Shares @ 1p each 778 778
97,223 Ordinary Shares @ 1p each on 17 July
2015 1 1
2,367,143 Ordinary Shares @ 1p each on 22
October 2015 24 24
2,564,427 Ordinary Shares @ 1p each on 22
April 2016 25 25
177,513 Ordinary Shares @ 1p each on 02 May 2 -
2017
2,201 Ordinary Shares @ 1p each on 09 May - -
2017
3,302 Ordinary Shares @ 1p each on 01 June - -
2017
4,128 Ordinary Shares @ 1p each on 01 June - -
2017
90,000 Ordinary shares @ 1p each cancelled (1) -
on 03 October 2017
90,000 Ordinary shares @ 1p each cancelled (1) -
on 04 October 2017
15,000 Ordinary shares @ 1p each cancelled - -
on 05 October 2017
10,182 Ordinary Shares @ 1p each on 20 November - -
2017
828 828
==================== ====================
Allotted, issued and fully paid
77,777,777 Ordinary Shares @ 1p each 778 778
97,223 Ordinary Shares @ 1p each on 17 July
2015 1 1
2,367,143 Ordinary Shares @ 1p each on 22
October 2015 24 24
2,564,427 Ordinary Shares @ 1p each on 22
April 2016 25 25
177,513 Ordinary Shares @ 1p each on 02 May 2 -
2017
2,201 Ordinary Shares @ 1p each on 09 May - -
2017
3,302 Ordinary Shares @ 1p each on 01 June - -
2017
4,128 Ordinary Shares @ 1p each on 01 June - -
2017
90,000 Ordinary shares @ 1p each cancelled (1) -
on 03 October 2017
90,000 Ordinary shares @ 1p each cancelled (1) -
on 04 October 2017
15,000 Ordinary shares @ 1p each cancelled - -
on 05 October 2017
10,182 Ordinary Shares @ 1p each on 20 November - -
2017
828 828
==================== ====================
During the year 197,236 ordinary shares of GBP0.01 each were
issued relating to the SAYE 2013 LTIP scheme at an exercise price
of GBP1.308 per share, settled in cash. GBP1,972 was credited to
share capital and GBP256,012 was credited to the share premium
account. The scheme is now closed and no further shares will be
issued from the scheme. In October 2017 the company purchased and
cancelled 195,000 shares in a share buyback scheme for a purchase
price of GBP2.00 per share. GBP1,950 and GBP388,050 was debited to
the share capital and share premium accounts respectively. Costs
incurred in the purchase of shares of GBP1,953 were also debited
from the share premium accounts.
10 Share based payments
At 31 December 2016 the Group had the following share based
payment arrangements:
LTIPS
On 10 April 2017, a further 348,210 options were granted ("LTIP
2017"). The LTIP 2015, 2016 and 2017 schemes require a combination
of specific performance based criteria and remaining an employee
for a minimum period.
The numbers of share options in existence during the year were
as follows:
2017 2016
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
price price
------------------ ---------- ---------- ------------ ----------
Outstanding at
start of period 1,030,134 GBP2.18 4,581,976 GBP1.10
Granted during
the year 348,210 - 448,533 GBP2.68
Issued in the
year - - (2,564,427) GBP1.00
Cancelled in the
year - - (1,421,683) GBP1.00
Lapsed in the
year (470,985) GBP1.86 (14,265) GBP1.79
Outstanding at
end of period 907,359 GBP1.51 1,030,134 GBP2.18
Exercisable at
end of period - - - -
--------------------- ---------- ---------- ------------ ----------
Options are valued using the Black-Schools option pricing model.
The following information is relevant in the determination of the
fair value of the options granted during the period.
LTIP 2017 LTIP 2016 LTIP 2015
Grant date 10/04/2017 29/04/2016 01/04/2015
Vesting date 10/04/2020 29/04/2019 01/04/2018
Lapsing date 10/04/2027 01/04/2026 01/04/2025
Risk free interest
rate 0.15% 1.22% 1.28%
Expected volatility 33.60% 36.93% 43.13%
Expected option
life (in years) 6.50 6.50 6.50
Weighted average share price after GBP3.04 GBP2.67 GBP1.80
adjusting for PV of dividends
Weighted average GBP0.00 GBP2.68 GBP1.79
exercise price
Weighted average fair value
of options granted 256.00p 65.79p 44.78p
Dividend Yield 5.71% 3.60% 5.20%
Remaining contractual
life 9.78 8.76 7.76
At the grant date there was limited share price history for the
company on which to calculate volatility. Volatility was therefore
estimated using both Safestyle and companies classified in the
'Home Improvement Retailers' subsector on the London Stock
Exchange.
SAYE
On 1 April 2017 the company launched a new share save (SAYE)
scheme ("SAYE 2017") in addition to the existing schemes ("SAYE
2015 and "SAYE 2016") for employees. The SAYE 2013 vested within
the year with 197,236 shares being issued at an issue price of
130.8 pence per share. The scheme has now closed and no further
shares will be issued.
All schemes allow employees to acquire a certain number of
shares at a discount of 20% of the share price prior to the
invitation to join the scheme, using amounts saved under a 'Save As
You Earn' savings contract.
The numbers of share options in existence during the year were
as follows:
2017 2016
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
price price
------------------ -------------------- ---------- -------------------- ----------
Outstanding at
start of period 423,382 GBP1.49 452,460 GBP1.37
Granted during
the year 128,205 GBP2.40 87,485 GBP2.25
Issued in the
year (197,236) GBP1.31 - -
Lapsed during
the period (150,226) GBP1.68 (116,563) GBP1.57
Outstanding at
end of period 204,125 GBP2.10 423,382 GBP1.49
Exercisable at
end of period - - - -
--------------------- -------------------- ---------- -------------------- ----------
Options are valued using the Black-Scholes option pricing model.
The following information is relevant in the determination of the
fair value of the options granted during the year.
SAYE 2017 SAYE 2016 SAYE 2015
Grant date 24/04/2017 01/04/2016 01/04/2015
Vesting date 01/06/2020 01/05/2019 01/05/2018
Lapsing date 01/12/2020 01/11/2019 01/11/2018
Risk free interest
rate 0.21% 0.56% 0.76%
Expected volatility 34.20% 32.88% 33.54%
Expected option
life (in years) 3.35 3.35 3.35
Weighted average share price after GBP3.14 GBP2.81 GBP1.80
adjusting for PV of dividends
Weighted average GBP2.51 GBP2.25 GBP1.43
exercise price
Weighted average fair value
of options granted 69.00p 71.93p 41.52p
Dividend Yield 5.53% 3.40% 5.20%
Remaining contractual
life 3.42 2.34 1.34
At the grant date there was limited share price history for the
company on which to calculate volatility. Volatility was therefore
estimated using both Safestyle and companies classified in the
'Home Improvement Retailers' subsector on the London Stock
Exchange.
The total share-based expense comprises:
2017 2016
GBP000 GBP000
Equity settled
- LTIP 351 153
Equity settled
- SAYE 70 87
421 240
------- -------
11 Contingent liability
During the year there were two incidents during installations
which led to reportable injuries. The Health & Safety Executive
("HSE") has carried out investigations into both of these cases.
Whilst it continues to investigate, the HSE has advised the Group,
subsequent to the year end, that it intends to prosecute Safestyle
in relation to one of the incidents, in which a contractor suffered
a knee injury. The Group has taken legal advice and it is expected
that a fine will be imposed. The range of the potential fine is
believed to be GBP550k to GBP2.9m. This range may be reduced as the
matter is progressed and the precise quantum depends on a number of
factors including the level of culpability, the harm category and
what mitigating factors may be taken into account, such as full
cooperation with the HSE's investigation and the company's good
health and safety record. Consequently management has not
recognised a provision in these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAFDFAAKPEAF
(END) Dow Jones Newswires
March 22, 2018 03:01 ET (07:01 GMT)
Safestyle Uk (LSE:SFE)
Historical Stock Chart
From May 2024 to Jun 2024
Safestyle Uk (LSE:SFE)
Historical Stock Chart
From Jun 2023 to Jun 2024