TIDMVIC
RNS Number : 1922U
Victorian Plumbing Group PLC
22 November 2023
Victorian Plumbing Group PLC
Full year results for the year ended 30 september 2023
Increased revenue, continued market share gains and strong
growth in profits
Victorian Plumbing Group plc ("Victorian Plumbing", the
"Group"), the UK's leading bathroom retailer(1) , announces its
audited full year results for the year ended 30 September 2023
("2023"), highlighting the significant progress made against its
strategic priorities.
2023 2022 Change
---------------------------------------- ---------- ---------- --------
Revenue GBP285.1m GBP269.4m 6%
Gross profit(2) GBP134.6m GBP121.0m 11%
Gross profit margin(3) 47% 45% 2ppts
Adjusted EBITDA(4) GBP23.8m GBP19.5m 22%
Adjusted EBITDA margin(5) 8% 7% 1ppt
Operating profit GBP15.3m GBP12.1m 26%
Adjusted PBT(6) GBP20.3m GBP15.7m 29%
Operating cash conversion(7) 68% 73% (5ppts)
Net cash GBP46.4m GBP45.5m 2%
Adjusted diluted earnings per share(8) 4.7p 3.8p 24%
Ordinary full year dividend per share 1.40p 1.10p 27%
---------------------------------------- ---------- ---------- --------
Financial highlights
-- Revenue up 6% on last year to GBP285.1 million (2022: GBP269.4 million).
o Order volume grew by 6% to 932,000 and average order value
("AOV")(9) remained flat in the same period.
-- Gross profit up 11% on last year at GBP134.6 million (2022: GBP121.0 million).
o Gross profit margin increased in H2 2023 to 49% (H1 2023:
46%), with 2023 full year gross profit margin of 47% (2022:
45%).
o Profitability has improved year-on-year, driven by product mix
shifting towards Victorian Plumbing own brand ranges as well as by
reduced shipping costs and favourable foreign exchange
movements.
-- Adjusted EBITDA of GBP23.8 million up on last year by 22%
(2022: GBP19.5 million) with adjusted EBITDA margin progression,
from 7% last year to 8% in 2023.
-- Operating profit of GBP15.3 million up on last year by 26% (2022: GBP12.1 million).
-- Adjusted PBT of GBP20.3 million up on last year by 29% (2022:
GBP15.7 million) with adjusted PBT margin(10) progression, from 6%
last year to 7% in 2023.
-- Robust, debt-free balance sheet with closing net cash
position of GBP46.4 million (2022: GBP45.5 million).
-- Free cash flow(11) of GBP16.1 million (2022: GBP14.3 million)
and operating cash conversion of 68% (2022: 73%).
-- Proposed final ordinary dividend of 0.95p, giving a total
ordinary dividend of 1.40p for the year (2022: 1.10p) while
maintaining a robust balance sheet with a strong net cash position
as we invest in the business.
Operational and strategic highlights
-- Retained our position as the UK's number one bathroom
retailer, testament to the strength of our brand, our extensive
range and availability.
-- Marketing spend as a percentage of revenue reduced from 28.3%
last year to 27.8% and brand awareness score(17) improved to 64%
(2022: 60%) following the launch of our new creative 'Boss Your
Bathroom' concept in December 2022.
o Launched a three-year partnership with Bolton Wanderers
Football Club as their title and front of shirt sponsor from the
2023/24 season.
-- Further progress in our strategic growth areas of 'trade' and 'expansion categories':
o Trade revenue grew 13% to GBP59.5 million (2022: GBP52.8
million), representing 21% of total revenue (2022: 20%). Our
Victorian Plumbing app, designed with both trade and consumer in
mind, was released successfully in October 2023 and should drive
further engagement.
o Tiles and lighting revenue grew by 35% to GBP7.3 million
(2022: GBP5.4 million) and the upcoming increase in warehouse space
will facilitate further growth in these, and other, expansion
categories.
-- Investment in our technology platform to drive future growth:
o Successful website re-platforming completed in December 2022,
enabling our expansion categories to be more prominent on the
website and improving search functionality using bespoke developed
AI technology.
-- The lease on our new 544,000 square feet purpose-built
distribution centre in Leyland, Lancashire, achieved legal
completion in October 2023. The warehouse development remains on
time and within budget, with the expectation that the new
distribution centre will be operational on schedule in 2024.
-- Trustpilot rating(12) of 'Excellent' maintaining a
sector-leading average score of 4.5 out of 5.0 (2022: 4.5).
Board change
-- On 1 April 2023, Daniel Barton replaced Paul Meehan as the Group's Chief Financial Officer.
Current trading and outlook
-- Albeit early in the year and against a volatile consumer
backdrop, t he Group has had a positive start to the current year
with continued revenue growth and gross profit margin progression
versus the comparative period last year.
-- The opening of our new distribution centre in 2024 will
remove space constraints, unlock growth potential and create
efficiency; all of which will support the delivery of the
medium-term outlook.
-- We continue to focus on our long-term goals and are making
good progress across our strategic growth areas. Underpinned by our
market share gains in recent years, we are confident in the future
growth prospects of the Group.
Mark Radcliffe, Founder and Chief Executive Officer of Victorian
Plumbing, said:
"We have further strengthened our position in the market and
maintained our position as the number one UK bathroom retailer.
"This has been a year of continued delivery of our growth plans.
Our clearly defined strategy and unique business model have
resulted in increased order volumes and resilient average order
values, with customers continuing to appreciate the choice of great
value products that we offer across our ranges.
"As a highly cash generative business with a strong balance
sheet, we continue to invest in the business - across people,
technology and infrastructure. Our new purpose-built 544,000 square
feet distribution centre, once operational, will enable further
growth in the core bathroom category, as well as unlocking further
strategic category expansion. We are confident that Victorian
Plumbing's profitable growth strategy will continue to deliver
long-term value to all stakeholders. "
Analyst presentation
A presentation for analysts will be held at 09:00am GMT,
Wednesday 22 November 2023. If you wish to attend, please contact
FTI Consulting via VictorianPlumbing@fticonsulting.com .
-S-
For further information, please contact:
Victorian Plumbing Group plc via FTI Consulting
Mark Radcliffe, Chief Executive Officer +44 20 3727 1000
Daniel Barton, Chief Financial Officer
FTI Consulting (Financial PR) +44 20 3727 1000
Alex Beagley, Eleanor Purdon, Harriet VictorianPlumbing@fticonsulting.com
Jackson, Amy Goldup
Houlihan Lokey UK Ltd (Nominated Adviser)
Sam Fuller, Tim Richardson +44 20 7484 4040
Barclays Bank PLC (Joint Broker)
Nicola Tennent, Stuart Muress +44 20 7623 2323
Deutsche Numis (Joint Broker)
Luke Bordewich, Oliver Steele +44 20 7260 1000
About Victorian Plumbing
Victorian Plumbing is the UK's leading bathroom retailer,
offering a wide range of over 34,000 products to B2C and trade
customers. Victorian Plumbing offers its customers a one-stop shop
solution for the entire bathroom with more than 130 own and third
party brands across a wide spectrum of price points.
The Group's product design and supply chain strengths are
complemented by its creative and brand-focused marketing strategy,
which predominantly focuses on online channels to drive significant
and growing traffic to its website.
Headquartered in Skelmersdale, the Group employs over 600 staff
across ten locations in Lancashire, Manchester and Birmingham.
Cautionary statement
This announcement of annual results does not constitute or form
part of and should not be construed as an invitation to underwrite,
subscribe for, or otherwise acquire or dispose of any Victorian
Plumbing Group plc (the "Company") shares or other securities in
any jurisdiction nor is it an inducement to enter into investment
activity nor should it form the basis of or be relied on in
connection with any contract or commitment or investment decision
whatsoever. It does not constitute a recommendation regarding any
securities. Past performance, including the price at which the
Company's securities have been bought or sold in the past, is no
guide to future performance and persons needing advice should
consult an independent financial advisor. This announcement may
include statements that are, or may be deemed to be,
"forward-looking statements" (including words such as "believe",
"expect", "estimate", "intend", "anticipate" and words of similar
meaning). By their nature, forward-looking statements involve risk
and uncertainty since they relate to future events and
circumstances, and actual results may, and often do, differ
materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save
as required by applicable law, the Company undertakes no obligation
to publicly revise any forward-looking statements in this
announcement, whether following any change in its expectations or
to reflect events or circumstances after the date of this
announcement.
Summary of performance
Units 2023 2022 Change
----------------------------------------------------- ---------- ---------- ----------
Income statement
------------------------------------------------------ ---------- ---------- ----------
Revenue GBPm 285.1 269.4 6%
--------------------------------------- ------------- ---------- ---------- ----------
Gross profit GBPm 134.6 121.0 11%
--------------------------------------- ------------- ---------- ---------- ----------
Gross profit margin % 47% 45% 2ppts
--------------------------------------- ------------- ---------- ---------- ----------
Adjusted EBITDA GBPm 23.8 19.5 22%
--------------------------------------- ------------- ---------- ---------- ----------
Adjusted EBITDA margin % 8% 7% 1ppt
--------------------------------------- ------------- ---------- ---------- ----------
Profit before tax GBPm 15.6 11.8 32%
--------------------------------------- ------------- ---------- ---------- ----------
Adjusted PBT GBPm 20.3 15.7 29%
--------------------------------------- ------------- ---------- ---------- ----------
Adjusted PBT margin % 7% 6% 1ppt
--------------------------------------- ------------- ---------- ---------- ----------
Earnings per share
------------------------------------------------------ ---------- ---------- ----------
Statutory diluted earnings per share pence 3.7 2.9 28%
--------------------------------------- ------------- ---------- ---------- ----------
Adjusted diluted earnings per share pence 4.7 3.8 24%
--------------------------------------- ------------- ---------- ---------- ----------
Ordinary full year dividend per share pence 1.40 1.10 27%
--------------------------------------- ------------- ---------- ---------- ----------
Cash flow
------------------------------------------------------ ---------- ---------- ----------
Free cash flow GBPm 16.1 14.3 13%
--------------------------------------- ------------- ---------- ---------- ----------
Operating cash conversion % 68% 73% (5ppts)
--------------------------------------- ------------- ---------- ---------- ----------
Net cash and cash equivalents GBPm 46.4 45.5 2%
--------------------------------------- ------------- ---------- ---------- ----------
Key performance indicators
------------------------------------------------------ ---------- ---------- ----------
Total orders(13) '000 932 880 6%
--------------------------------------- ------------- ---------- ---------- ----------
Active customers(14) '000 634 608 4%
--------------------------------------- ------------- ---------- ---------- ----------
Average order value GBP 306 306 -%
--------------------------------------- ------------- ---------- ---------- ----------
Average Trustpilot score Score / 5.0 4.5 4.5 -%
--------------------------------------- ------------- ---------- ---------- ----------
Marketing spend as a % of revenue % 27.8% 28.3% (0.5ppts)
--------------------------------------- ------------- ---------- ---------- ----------
Trade revenue as a % of total revenue % 21% 20% 1ppt
--------------------------------------- ------------- ---------- ---------- ----------
Own brand / third party revenue ratio % 78% / 22% 75% / 25% 3% / (3%)
--------------------------------------- ------------- ---------- ---------- ----------
1. Bathrooms and Bathroom Accessories UK, 2023, Mintel Group Ltd.
2. Gross profit is defined as revenue less cost of sales. Cost
of sales includes all direct costs incurred in purchasing products
for resale along with packaging, distribution and transaction costs
(which include mark to market movements on forward currency
contractual arrangements in line with the Group's treasury
policy).
3. Gross profit margin is defined as gross profit as a percentage of revenue.
4. Adjusted EBITDA is defined as operating profit before
depreciation, amortisation, exceptional items and IFRS 2
share-based payments.
5. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue.
6. Adjusted profit before tax ("PBT") is defined as adjusted
EBITDA less finance costs/(income), depreciation and
amortisation.
7. Operating cash conversion is free cash flow as a percentage of adjusted EBITDA.
8. Adjusted diluted earnings per share ("EPS") is defined as
total adjusted profit for the year divided by total issued share
capital. Total adjusted profit for the year is defined as profit
for the year before exceptional items and IFRS 2 share-based
payments and after adjusting for the tax impact of those items.
9. Average order value ("AOV") is defined as revenue divided by
total orders in the period.
CEO statement
Overview
The business has continued to deliver on its strategy to grow
profitably, achieving revenue growth of 6%. This has been supported
by continued order growth, with AOV flat as the mix of sales
shifted to our own brand range. The consumer continues to choose
Victorian Plumbing as the number one bathroom retailer ahead of the
competition as a result of our fair pricing, unrivalled high
quality product range and excellent product availability. Order
levels have returned to the highs achieved during the Covid period,
and our Trustpilot scores have remained high alongside this
continued growth.
Consumers have been switching to our own brand product range,
which retails at a higher margin comparable to third party brands,
and this has supported the continued improvement in our
profitability throughout the year. Our commitment to provide the
most extensive choice of high quality bathroom products and the
best customer experience sets us up well for the next phase of
profitable growth, irrespective of wider market conditions.
Summary of operating performance
Revenue returned to growth (6%) compared to the prior year at
GBP285.1 million (2022: GBP269.4 million) reflecting an increase in
total orders of 6% and flat AOV. Adjusted EBITDA increased by 22%
to GBP23.8 million (2022: GBP19.5 million) and adjusted EBITDA
margin increased to 8% (2022: 7%). Operating profit increased by
26% to GBP15.3 million (2022: GBP12.1 million).
The first half of the financial year saw an increase in both
order volume (6%) and AOV (3%) resulting in revenue growth of 10%.
The second half of the financial year saw order volume grow by 6%
vs. the second half of 2022 as momentum continued from the first
half, but AOV reduced by 3% in the same period due to the shift in
mix between third party and own brand products, resulting in
revenue growth of 2%.
This shift, together with continuing tailwinds from shipping and
foreign exchange rate improvement, resulted in gross margin
improvement of two percentage points to 47% (2022: 45%). Marketing
cost as a % of revenue declined from 28.3% in 2022 to 27.8% in
2023.
This financial performance demonstrates the resilience of our
business model and our competitive advantage, underpinning our
confidence in short-, medium- and long-term profitable growth.
Our strategic focus
We are able to leverage our market and brand position and our
strong balance sheet to deliver on our clear strategic objectives,
which remain unchanged and focus on three growth horizons: core
B2C, expansion categories and trade.
Our core market is retailing bathroom products and accessories
to consumers in the UK through our market leading online platform.
Consumers are continuing to shift online for the purchase of
bathroom products and accessories and there is still some way to go
before this transition reaches maturity. We are particularly well
placed to continue to gain further market share in the short term
through these structural tailwinds and by taking share from
traditional physical retailers and other online competitors.
In the medium term there is a potential further opportunity to
translate our domestic success into carefully selected
international markets.
Our second horizon focuses on expansion categories that
consumers look for when renovating the home. Given our position in
the bathroom product and accessories market, we have an exciting
opportunity to expand our reach into products that often come later
in the buying journey, such as tiles and décor, heating and
kitchens. We were pleased to see tiles and lighting revenue
significantly increase in 2023 by 35% to GBP7.3 million.
10. Adjusted PBT margin is defined as adjusted PBT as a percentage of revenue.
11. Free cash flow is cash generated from operating activities
before exceptional items and taxation less capital expenditure
(excluding assets under construction) and cash flows relating to
leases.
12. The average Trustpilot score is defined as the monthly average of all Trustpilot scores.
13. Total orders is defined as the total number of orders
dispatched to customers in the year.
14. Active customers are the number of unique customers who placed an order in the year.
Following the successful re-platforming of our website in
December 2022, we enhanced the front end in June 2023 to improve
the customer journey around our expansion categories. We have also
improved the search functionality to incorporate the latest
advances in AI technology. These website enhancements, together
with other 'UX' improvements, have resulted in improved
conversion(15) as consumers use Victorian Plumbing for everything
they need to complete their bathroom. We have also continued to
make good progress in extending the product ranges in each
expansion category, though space remains a limiting factor. The new
distribution centre, due to become operational in 2024, will remove
this constraint.
Finally, our third growth horizon focuses on the B2B opportunity
to retail bathroom products and accessories to trade customers. The
Victorian Plumbing brand has historically been mainly consumer
focused. In the year ended 30 September 2023, 21% (2022: 20%) of
our revenue came from trade accounts, compared with an estimated
50% of the market(16) . We believe we can make further meaningful
market share gains in this area by broadening our marketing
approach, such as via targeted radio advertising, expanding the
range of relevant products we offer to trade customers and in
particular by providing the best platforms tailored for trade
customers' needs. The release of the Victorian Plumbing app in
October 2023 further enhances our proposition and is well placed to
attract trade customers, alongside consumers.
Strengthening our competitive position
Over the past year, we have retained our position as the UK's
largest bathroom specialist, we have continued to strengthen our
competitive moat and we have improved the customer journey through
innovative technology improvement and category expansion.
Our investment in marketing has enhanced brand awareness and
supported customer acquisition, and consumers continue to respond
positively to the bold, distinctive, and quirky Victorian Plumbing
brand. Our three-year partnership with Bolton Wanderers Football
Club as their title and front of shirt sponsor further improves our
brand awareness, as well as positioning us as a prominent employer
in the North West.
We complement our creative offline content by investing in
increasingly targeted digital performance-based marketing. This
ongoing and relentless marketing strategy, together with a bold new
marketing campaign to 'Boss Your Bathroom', has led to a brand
awareness score of 64%(17) (2022: 60%), which is the only increase
amongst our closest competitors this year.
As an online retailer, we continue to benefit from the ongoing
structural shift in consumer buying behaviour from offline to
online. Online sales represented c.26% of total retail sales in
2023(18) , and we expect our addressable market to grow even
further in the coming years.
A one-stop shop for bathroom products and accessories
Offering customers a wide selection of products across a variety
of price points ensures that we are the true one-stop solution when
considering a bathroom-related purchase. At 30 September 2023, we
had increased the number of available products to more than 34,000
from over 130 brands, ensuring there is something available,
affordable and suitable for everyone.
Relationships that we have developed over time with well-known
third party brands enable us to complement our own brand offerings,
which are exclusively available on the Victorian Plumbing website.
We have developed over 25 own brands using our in-house product
development team, and these are increasingly popular with
customers. In the year to 30 September 2023, 78% of revenue
generated (2022: 75%) came from own brand products including
Stonehouse Studio, our new in-house designed tile range.
15. Google Analytics G4A.
16. State of the Industry (2022), Euromonitor International.
17. Internal prompted brand awareness research.
18. ONS, SCM Research.
Agile supply chain
Whilst we have not been immune to the widely reported global
supply challenges of recent years, the deep and trusted
relationships that we have built with our global suppliers over our
20 years of trading have enabled us to navigate these challenges
well and secure sufficient inventory to satisfy customer demand.
This, together with our strong balance sheet, has allowed us to be
confident when attracting consumers to site, safe in the knowledge
that we have available stock to satisfy orders.
Equally, the local experts and partners that we work with on the
ground in China ensure that we are aware of any potential issues
that may arise, giving us time to pivot to alternatives as and when
needed. This, alongside the work they do on auditing our suppliers'
factories, gives us confidence in the availability of products
together with their quality and reliability.
We have been working more closely with tile and décor
manufacturers, many of whom are based in Southern Europe, to expand
this category at margins that are closely aligned with the existing
Group margin.
Seamless customer journey
Our customers' experience with us throughout their buying
journey is of paramount importance to us. We are extremely proud
that we continue to be rated 'Excellent' by Trustpilot and have
maintained our average score in the year of 4.5 (2022: 4.5) out of
5.0.
We received a record number of reviews via Trustpilot in the
year ended 30 September 2023 and have now surpassed 200,000 reviews
in total, the highest of any specialist bathroom retailer listed.
The 'Excellent' rating we have across this volume of reviews is
testament to the work that our colleagues do, whether providing the
on-site experience for the customer, speed and efficiency of
delivery, quality of product or swift resolution of any customer
questions throughout the process.
Development of our technology platform
The systems that drive the performance of the business are
primarily bespoke platforms that we improve continually. Our
growing Technology and Infrastructure team help to facilitate this
continual development to ensure we remain best in class across
e-commerce retail platforms.
There has been significant work over the last 12 months and
beyond to completely re-platform our website to improve its
functionality and scalability, introduce a newly designed structure
to give prominence to our expansion categories, enhance our search
functionality to include AI features and introduce other
developments.
The Victorian Plumbing app, designed with both trade and
consumer in mind, was released successfully in October 2023 and
will enable our customers to browse and purchase products more
efficiently. Initial uptake of the app has been encouraging, and we
will continue to develop functionality ahead of a fuller launch in
2024.
In addition, the Development Technology team continues to
improve our existing warehouse management system alongside the
larger project to transform the warehouse operations, with the new
distribution centre in Lancashire due to be operational in 2024. By
performing this work in-house, we can control costs, improve
quality, and provide more certainty over the benefits that the
improved technology brings.
New distribution centre
We achieved legal completion on the 20-year lease to operate
from our new purpose-built 544,000 square feet distribution centre
on 4 October 2023. Whilst the investment necessitates a short
period of elevated capital expenditure, this building will enable
us to grow our core offering, expansion categories and trade
offering. A semi-automated design, together with new ways of
working and improved processes, will result in improved efficiency
in our operations which will aid the progression of our
profitability, most notably in 2025.
Entrepreneurial approach
Our entrepreneurial approach and our desire to trial new ideas
has played a key part in the success of the business to date, for
instance feeding into the designs for our technology developments,
such as the new Victorian Plumbing app.
We will continue to be entrepreneurial, knowing that this gives
us a competitive edge, whilst maintaining robust and appropriate
monitoring and reporting procedures.
ESG
Taking responsibility is one of our core values, and we are
clear that every one of us has a role to play in making a positive
difference to the environment and the communities in which we
operate.
Our ESG strategy is centred around three focus areas:
environmental sustainability, diversity and inclusion, and
governance and ethics.
We have made particular progress during the year with our people
priorities through, for example, the launch of a Charity Committee
and a programme of employee volunteering days, and the introduction
of Mental Health Champions, as well as supporting our workforce
with life and family events through the launch of enhanced employee
benefits.
We have transitioned all our electricity contracts to 100%
renewable energy and continue to work with suppliers to reduce the
levels of plastic packaging. We have also transitioned to a new
finance system, further strengthening our internal controls and
governance framework.
Whilst we have made good progress this year against all these
focus areas, we are mindful that we must retain a critical and
progressive approach across each.
Our people
As a Board, we continue to be impressed by the commitment and
capability of our people - collectively, their innovation and hard
work have been the driving force behind the growth and success
experienced by the Group over recent years. We are proud of the
values-led, principles-driven culture that is deep-rooted
throughout Victorian Plumbing, and it is this culture that
underpins our ability to adapt to change and respond positively to
challenges.
Over the last couple of years, we have placed significant
emphasis on listening to feedback from colleagues through many
different forums and have worked hard to make our benefits and
rewards package one that both attracts and retains the best talent.
We remain committed to further improving our people experience and
helping to fuel our future growth. Employee engagement targets
feature as part of the Executive management incentive targets.
We would like to thank our employees, contractors, customers,
suppliers and other stakeholders for their continued support.
Whilst we are mindful of the current macroeconomic conditions that
many of our customers are battling against, we remain confident in
our ability to continue to execute our strategic plan, underpinned
by our strong financial position, to take further market share and
consolidate our position as the UK's number one bathroom
retailer.
Board change
Daniel Barton replaced Paul Meehan as Chief Financial Officer
during the year. The Board would like to thank Paul for his
significant contribution to Victorian Plumbing since he joined the
business in 2020. Paul's work preparing the Finance function and
the wider Group for its IPO in 2021 has ensured that the business
has the necessary systems and structures in place to deliver its
growth ambitions. We wish Paul all the best in his future
endeavours.
Current trading and outlook
Albeit early in the year and against a volatile consumer
backdrop, t he Group has had a positive start to the current year
with revenue growth and gross profit margin progression versus the
comparative period last year.
The opening of our new distribution centre in 2024 will remove
space constraints, unlock growth potential and create efficiency;
all of which will support the delivery of the medium-term
outlook.
We continue to focus on our long-term goals and are making good
progress across our strategic growth areas. Underpinned by our
market share gains in recent years, we are confident in the future
growth prospects of the Group.
Financial review
Introduction
Whilst navigating continuing macroeconomic volatility in the
year, we are pleased to report a strong financial performance and
good operating cash generation in the year to 30 September
2023.
2023 2022
GBPm GBPm Change
------------------------------ ------- ------- ------
Revenue 285.1 269.4 6%
Cost of sales (150.5) (148.4) (1%)
------------------------------ ------- ------- ------
Gross profit 134.6 121.0 11%
Gross profit margin % 47% 45% 2ppts
Underlying costs (110.8) (101.5) (9%)
------------------------------ ------- ------- ------
Adjusted EBITDA 23.8 19.5 22%
Adjusted EBITDA margin % 8% 7% 1ppt
Depreciation and amortisation (3.8) (3.5) (9%)
Share-based payments (3.9) (3.9) -
Exceptional items (0.8) - n/a
------------------------------ ------- ------- ------
Operating profit 15.3 12.1 26%
Finance income/(costs) 0.3 (0.3) 200%
Profit before tax 15.6 11.8 32%
------------------------------ ------- ------- ------
Revenue
Revenue grew by 6% in 2023, from GBP269.4 million in 2022 to
GBP285.1 million. Order volume grew by 6% to 932,000 and AOV
remained flat in the same period.
Order volume growth remained consistent throughout the year and
the average number of items per basket remained stable at 3.1. The
second half saw a small decline in AOV as customers shifted away
from more expensive third party brands to our own brand product
range, which carries a higher margin.
Consumer revenue grew by 4% from GBP216.6 million in 2022 to
GBP225.6 million and represents 79% of revenue in 2023 (2022: 80%).
Trade revenue grew by 13% from GBP52.8 million in 2022 to GBP59.5
million and represents 21% of revenue (2022: 20%). A slowdown in
trade growth in the second half of the year reflected a change in
demand for trade as the post-Covid installation backlog was
fulfilled and instability in the UK political and macroeconomic
environment impacted broader spending confidence.
Revenue continued to grow at a pace in our expansion categories,
albeit from a small base given the space constraints we face until
our new distribution centre is operational in 2024. Tiles and
lighting revenue grew by 35%, from GBP5.4 million in 2022 to GBP7.3
million, delivering a gross margin that is the same as the wider
core bathroom range.
Product selection is largely driven by the consumer,
irrespective of channel, and we saw a shift away from the more
expensive third party branded products to our own brand range. The
split between own brand vs. third party brands in revenue was 78%
vs. 22% (2022: 75% vs. 25%), which was a contributing factor to AOV
holding flat. The pricing power of the Group, particularly on own
brand products, allowed us to increase prices throughout the first
half of the year, albeit at a slower rate compared to previous
years considering the challenging consumer demand dynamic. We saw
some price reductions from our largest online competitor just prior
to its administration on 29 September 2023, but this dynamic did
not materially affect our performance as our unrivalled range,
excellent availability and strong financial health delivered
sustainably for our customers.
Gross profit
We define gross profit as revenue less cost of sales. Cost of
sales includes all direct costs incurred in purchasing products for
resale along with packaging, distribution, and transaction costs
(which include mark to market movements on forward currency
contractual arrangements in line with our treasury policy).
Cost of sales increased by just 1% to GBP150.5 million (2022:
GBP148.4 million). The strength of the Group's supplier
relationships and the agility of our team ensured continued robust
sourcing processes and good product availability.
Gross profit margin increased in H2 2023 to 49% (H1 2023: 46%),
with gross profit for the year increasing by 11% to GBP134.6
million (2022: GBP121.0 million) and overall gross profit margin
increasing by two percentage points to 47% (2022: 45%). In addition
to reduced shipping costs and favourable foreign exchange rates, as
reported at the half year, the improvement in gross profit also
reflects the product mix change throughout the year. Gross margin
from own brand products increased to 53% (2022: 50%), whilst gross
margin from third party products decreased to 27% for the year
(2022: 29%). We are proud to partner with some of the industry's
leading names which, alongside our own brand offering, allows us to
provide consumers with a wide choice of price points. This dynamic
is a compelling component of our unique ungeared operating model,
protecting shareholder return and building the foundation for
future growth.
Underlying costs
Underlying costs, which we define as administrative expenses
before depreciation and amortisation, exceptional items and
share-based payments, increased by 9% to GBP110.8 million (2022:
GBP101.5 million).
2023 2022
GBPm GBPm Change
-------------------------------- ----- ----- ------
Marketing 79.2 76.2 (4%)
People costs (excl. share-based
payments) 19.6 16.0 (23%)
Property costs 6.3 5.1 (24%)
Other overheads 5.7 4.2 (36%)
-------------------------------- ----- ----- ------
Underlying costs 110.8 101.5 (9%)
-------------------------------- ----- ----- ------
Growing our brand awareness and increasing traffic to our site
remains a focus for the Group. Marketing costs increased by 4% to
GBP79.2 million (2022: GBP76.2 million). Marketing costs as a
percentage of revenue reduced from 28.3% to 27.8% reflective of our
improving brand awareness and less competitive pressure enabling us
to retain our position as the UK's largest bathroom retailer.
People costs, excluding share-based payments but including costs
relating to agency staff, increased by 23% to GBP19.6 million
(2022: GBP16.0 million) reflecting a combination of inflationary
dynamics, investments in key roles (within Development Technology,
Data Protection and HR in particular), and growth in the business
giving rise to increased FTE by 7% from 572 in 2022 to 612. Space
constraints and challenges in the recruitment market are expected
to reduce once we begin to operate in our new distribution centre,
leading to efficiencies in the medium-term.
Property costs and other overheads increased by 29% to GBP12.0
million (2022: GBP9.3 million). The majority of this increase was
as a result of the Group increasing its warehouse capacity on a
more expensive short-term basis to support the growth of the
business, together with the annualisation of plc related costs
during the previous financial year.
Operating profit and adjusted EBITDA
Significant items of income and expense that do not relate to
the trading of the Group are disclosed separately. Share-based
payment charges are an example of such items.
The table below provides a reconciliation from operating profit
to adjusted EBITDA and adjusted PBT, which are non-GAAP metrics
used by the Group to assess financial performance.
2023 2022
GBPm GBPm Change
------------------------------- ----- ----- ------
Operating profit 15.3 1 2.1 26%
Share-based payments (incl.
national insurance) 3.9 3 .9 -
Exceptional items 0.8 - n/a
------------------------------- ----- ----- ------
Adjusted operating profit (19) 20.0 1 6.0 25%
Depreciation and amortisation 3.8 3 .5 (9%)
------------------------------- ----- ----- ------
Adjusted EBITDA 23.8 1 9.5 22%
------------------------------- ----- ----- ------
Finance income/(costs) 0.3 (0.3) 200%
Depreciation and amortisation (3.8) (3.5) (9%)
------------------------------- ----- ----- ------
Adjusted PBT 20.3 15.7 29%
------------------------------- ----- ----- ------
Operating profit increased by 26% to GBP15.3 million (2022:
GBP12.1 million). Operating profit margin increased to 5% (2022:
4%). Adjusted EBITDA increased by 22% to GBP23.8 million (2022:
GBP19.5 million) and adjusted EBITDA margin increased to 8% (2022:
7%).
Share-based payments
The Group incurred share-based payment charges (including
associated national insurance ("NI")) of GBP3.9 million (2022:
GBP3.9 million). Share-based payment charges for the year included
GBP2.3 million (2022: GBP3.4 million) for schemes relating to the
Group's IPO in June 2021, along with GBP1.6 million (2022: GBP0.5
million) for ongoing schemes put in place post IPO.
Exceptional items
Total expenses incurred in the year of GBP0.8 million related to
legal and other costs associated with acquiring the new
distribution centre.
Depreciation and amortisation
Depreciation and amortisation increased by GBP0.3 million to
GBP3.8 million (2022: GBP3.5 million). The Group continues to
invest in its platform and bespoke inventory management systems,
with GBP2.6 million of internal salaries capitalised during the
2023 financial year (2022: GBP2.2 million). The increased
investment over the last two years has resulted in an increase in
the amortisation charge.
Capitalisation of property, plant and equipment, and intangible
assets for the new warehouse totalled GBP4.1 million during the
year. This related to the purchase of fixed assets and third party
costs for software development and has not yet started to
depreciate given that the asset is under construction.
Finance income/(costs)
The Group seeks to make a return on its cash balances by
investing in deposit saving bank accounts. Increasing interest
rates on a larger average cash balance compared to the previous
year have given rise to finance income of GBP0.6 million (2022:
GBPnil) which, when netted off against the non-utilisation fee for
the Group's Revolving Credit Facility with HSBC plc (the "RCF") and
lease expense, results in net finance income of GBP0.3 million
(2022: net finance cost of GBP0.3 million).
On 6 July 2023, we successfully completed an extension of the
RCF, which has total commitments of GBP10 million and a termination
date of 31 December 2025. The facility is secured by a debenture
dated 7 June 2021. Interest on the RCF is charged at SONIA plus a
margin based on the consolidated leverage of the Group. A
commitment fee of 40% of the margin applicable to the RCF is
payable quarterly in arrears on unutilised amounts of the RCF.
There is no requirement to settle all, or part, of the debt earlier
than the termination date. At 30 September 2023, the Group had not
utilised the RCF.
19. Adjusted operating profit is defined as operating profit
before exceptional items and IFRS 2 share-based payments.
Profit before tax and adjusted profit before tax
Profit before tax increased by 32% to GBP15.6 million (2022:
GBP11.8 million). Profit before tax margin increased to 5% (2022:
4%). Adjusted profit before tax increased by 29% to GBP20.3 million
(2022: GBP15.7 million). Adjusted profit before tax margin
increased to 7% (2022: 6%).
Taxation
The Group tax charge of GBP3.8 million (2022: GBP2.6 million)
represents an effective tax rate of 24% (2022: 22%) which is higher
than the standard rate of UK tax of 22% (2022: 19%) due to the tax
impact of share-based payments. Adjusted profit after tax reflects
a tax effect of GBP1.1 million (2022: GBP0.7 million) relating to
share-based payments and expenses not deductible for tax purposes.
The adjusted effective tax rate is 24% (2022: 21%).
Earnings per share
Diluted earnings per share ("EPS") from continuing operations
increased by 28% to 3.7 pence per share (2022: 2.9 pence per
share).
The adjusted diluted EPS from continuing operations increased by
24% to 4.7 pence per share (2022: 3.8 pence per share).
Assets under construction
The warehouse transformation has given rise to GBP4.1 million of
additions during the year (split as: GBP0.2 million intangibles and
GBP3.9 million property, plant and equipment) recognised as an
asset under construction given the fit-out of the new distribution
centre continues into 2024. Of these additions, GBP2.0 million were
settled in cash during the year.
Cash flow and net cash
The Group continues to achieve strong cash generation with an
increase in free cash flow of 13% to GBP16.1 million (2022: GBP14.3
million), resulting in robust operating cash conversion of 68%
(2022: 73%).
2023 2022
GBPm GBPm
-------------------------------------- ----- -----
Adjusted EBITDA 23.8 19.5
Movement in working capital (4.0) (1.2)
VAT not yet recovered on assets under
construction 0.4 -
Capital expenditure (excluding assets
under construction) (3.0) (2.9)
Repayment of lease liabilities (1.1) (1.1)
Free cash flow 16.1 14.3
-------------------------------------- ----- -----
Operating cash conversion 68% 73%
-------------------------------------- ----- -----
Changes in working capital resulted in a cash outflow of GBP4.0
million in the year, largely because of timing differences with
supplier payments. Stock value was maintained during the year as we
continued to deploy effective stock management. Given the nature of
our stock we continue to incur low levels of obsolescence and our
proprietary knowledge over two decades of trading benefits us in
low levels of returns and damages.
Capital expenditure (excluding assets under construction) of
GBP3.0 million (2022: GBP2.9 million) included GBP2.6 million of
capitalised salaries included in intangible assets relating to
development of the Group's platform and bespoke inventory
management systems (2022: GBP2.2 million).
At the year end, the Group had net cash of GBP46.4 million
(2022: GBP45.5 million).
Events after the reporting period
On 4 October 2023, the Group achieved legal completion on a new
544,000 square feet purpose-built distribution centre in Leyland,
Lancashire. In the financial year ending 30 September 2024, the
20-year lease will result in the recognition of a right-of-use
asset and corresponding IFRS 16 lease liability of c. GBP45.0
million (provisionally estimated using an incremental borrowing
rate of 6.5%).
The future payments related to this non-cancellable lease
contract are GBP2.0 million within one year, an additional GBP10.0
million within five years, and an additional GBP68.0 million
thereafter.
During the fit-out of and transition to the new distribution
centre, the Group will incur double running costs for certain
people and property related expenses. The Board estimates that the
additional non-recurring expenditure in the financial year ending
30 September 2024 will be c. GBP8.0 million.
The Group also expects to incur an additional c. GBP24.0 million
of intangible and tangible capital expenditure (non-recurring in
nature) during the financial year ending 30 September 2024 to
complete the fit-out of the new distribution centre.
On 2 November 2023, the Group entered into arrangements with the
main contractor who is overseeing the fit-out of the new
distribution centre, which committed the Group to capital
commitments of GBP13.0 million. This leaves c. GBP11.0 million of
uncommitted capital expenditure after that date.
There have been no other material events to report after the end
of the reporting period.
Dividend
Victorian Plumbing generates significant operating cashflows and
the underlying priority is to reinvest into the business and drive
further profitable growth. The Board implemented a capital
allocation policy in 2022 with an aim to maintain an adjusted
diluted EPS to dividend cover ratio of c. 3.0-3.5x. This recognises
that most growth opportunities, excepting the one-off warehouse
transformation and optimisation, do not require significant
capital, and reflect confidence in the strength, future growth
prospects and cash generation of the business. Additionally, the
Board may from time to time conclude that it has surplus cash, at
which point it will consider further returns to shareholders.
In order to distribute a total ordinary dividend for the year of
1.40 pence per share (2022: 1.10 pence per share), which would
represent growth of 27%, the Board is recommending a full year
final ordinary dividend of 0.95 pence per share (2022: 1.10 pence
per share). The proposed dividend would represent an adjusted
diluted EPS to dividend cover ratio for 2023 of 3.4x (2022:
3.5x).
The Board is not recommending a special dividend (2022: 1.70
pence per share) as it preserves cash to finance the warehouse
transformation without the need for indebtedness and to maintain
the robustness of the balance sheet.
This results in a total cash distribution to shareholders of
GBP4.6 million (GBP1.5m interim paid and GBP3.1 million final to be
paid), subject to shareholders' approval at the AGM on 27 February
2024. The final dividend will be paid on 8 March 2024 to
shareholders on the register of members at the close of business on
9 February 2024.
Mark Radcliffe Daniel Barton
Chief Executive Officer Chief Financial Officer
22 November 2023 22 November 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 SEPTEMBER 2023
2023 2022
Note GBPm GBPm
----------------------------------------------------------- ----- -------- --------
Revenue 4 285.1 269.4
Cost of sales (150.5) (148.4)
----------------------------------------------------------- ----- -------- --------
Gross profit 134.6 121.0
Administrative expenses before separately disclosed items 5 (114.6) (105.0)
Adjusted operating profit 20.0 16.0
Separately disclosed items:
Share-based payments 20 (3.9) (3.9)
Exceptional items 6 (0.8) -
Operating profit 5 15.3 12.1
Finance income/(costs) 7 0.3 (0.3)
----------------------------------------------------------- ----- -------- --------
Profit before tax 15.6 11.8
Income tax expense 8 (3.8) (2.6)
----------------------------------------------------------- ----- -------- --------
Profit for the year 11.8 9.2
----------------------------------------------------------- ----- -------- --------
Basic earnings per share (pence) 10 4.1 3.3
Diluted earnings per share (pence) 10 3.7 2.9
----------------------------------------------------------- ----- -------- --------
All amounts relate to continuing operations.
There are no items to be recognised in the statement of
comprehensive income in the current year or prior year, and hence
the Group has not presented a separate statement of other
comprehensive income.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 SEPTEMBER 2023
2023 2022
Note GBPm GBPm
-------------------------------------------------- ----- -------- --------
Assets
Non-current assets
Intangible assets 11 4.0 3.3
Property, plant and equipment 12 4.9 1.4
Right-of-use assets 13 4.3 4.5
Derivative financial instruments 0.4 0.7
Deferred tax asset - 0.1
13.6 10.0
Current assets
Inventories 34.2 33.9
Trade and other receivables 14 4.8 5.1
Cash and cash equivalents 46.4 45.5
-------------------------------------------------- ----- -------- --------
85.4 84.5
-------------------------------------------------- ----- -------- --------
Total assets 99.0 94.5
-------------------------------------------------- ----- -------- --------
Equity and liabilities
Equity attributable to the owners of the Company
Share capital 18 0.3 0.3
Share premium 11.2 11.2
Capital redemption reserve 0.1 0.1
Capital reorganisation reserve (320.6) (320.6)
Retained earnings 357.8 353.0
-------------------------------------------------- ----- -------- --------
Total equity 48.8 44.0
-------------------------------------------------- ----- -------- --------
Liabilities
Non-current liabilities
Lease liabilities 16 3.8 4.1
3.8 4.1
Current liabilities
Trade and other payables 15 38.0 37.9
Contract liabilities 5.4 7.1
Lease liabilities 16 1.0 0.9
Provisions 0.2 0.2
Corporation tax 1.8 0.3
-------------------------------------------------- ----- -------- --------
46.4 46.4
-------------------------------------------------- ----- -------- --------
Total liabilities 50.2 50.5
-------------------------------------------------- ----- -------- --------
Total equity and liabilities 99.0 94.5
-------------------------------------------------- ----- -------- --------
The financial statements were approved by the Board of Directors
on 21 November 2023 and authorised for issue.
Daniel Barton
Chief Financial Officer
Victorian Plumbing Group plc
Registered number: 13379554
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 SEPTEMBER 2023
Capital
redemption Capital Retained
Share capital Share premium reserve reorganisation earnings Total equity
GBPm GBPm GBPm reserve GBPm GBPm GBPm
----------------- -------------- -------------- ---------------- ---------------- ---------------- -------------
Balance at 1
October 2021 0.3 11.2 0.1 (320.6) 339.8 30.8
Comprehensive
income
Profit for the
year - - - - 9.2 9.2
Transactions
with owners
Employee share
schemes - value
of employee
services (note
20) - - - - 3.9 3.9
Tax impact of
employee share
schemes - - - - 0.1 0.1
Total
transactions
with owners
recognised
directly in
equity - - - - 4.0 4.0
----------------- -------------- -------------- ---------------- ---------------- ---------------- -------------
Balance at 30
September 2022 0.3 11.2 0.1 (320.6) 353.0 44.0
----------------- -------------- -------------- ---------------- ---------------- ---------------- -------------
Comprehensive
income
Profit for the
year - - - - 11.8 11.8
Transactions
with owners
Dividends paid - - - - (10.6) (10.6)
Employee share
schemes - value
of employee
services (note
20) - - - - 3.5 3.5
Tax impact of
employee share
schemes - - - - 0.1 0.1
Total
transactions
with owners
recognised
directly in
equity - - - - (7.0) (7.0)
----------------- -------------- -------------- ---------------- ---------------- ---------------- -------------
Balance at 30
September 2023 0.3 11.2 0.1 (320.6) 357.8 48.8
----------------- -------------- -------------- ---------------- ---------------- ---------------- -------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 SEPTEMBER 2023
2023 2022
Note GBPm GBPm
---------------------------------------------- ----- ------- ------
Cash flows from operating activities
Cash generated from operating activities
before exceptional items 21 19.8 18.3
Cash outflow from exceptional items (0.6) -
---------------------------------------------- ----- ------- ------
Cash generated from operating activities 19.2 18.3
Income tax paid (2.1) (1.4)
Interest received on cash deposits 0.6 -
---------------------------------------------- ----- ------- ------
Net cash generated from operating activities 17.7 16.9
Cash flows from investing activities
Purchase of intangible assets (3.0) (2.6)
Purchase of property, plant and equipment (2.0) (0.3)
Net cash used in investing activities (5.0) (2.9)
Cash flows from financing activities
Dividends paid (10.6) -
Finance arrangement fees (0.1) (0.1)
Payment of interest portion of lease
liabilities (0.2) (0.2)
Payment of principal portion of lease
liabilities (0.9) (0.9)
---------------------------------------------- ----- ------- ------
Net cash used in financing activities (11.8) (1.2)
Net increase in cash and cash equivalents 0.9 12.8
Cash and cash equivalents at the beginning
of the year 45.5 32.7
Cash and cash equivalents at the end
of the year 46.4 45.5
---------------------------------------------- ----- ------- ------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Basis of preparation
The consolidated financial statements have been prepared in
accordance with UK-adopted International Accounting Standards. The
consolidated financial statements have been prepared on the going
concern basis and on the historical cost convention modified for
the revaluation of certain financial instruments.
The financial information set out in this document does not
constitute the statutory accounts of the Group for the financial
years ended 30 September 2023 or 30 September 2022 but is derived
from the 2023 Annual Report and Financial Statements. The Annual
Report and Financial Statements for 2023 will be delivered to the
Registrar of Companies in due course. The auditors have reported on
those accounts and have given an unqualified report, which does not
contain a statement under Section 498 of the Companies Act
2006.
Going concern
The Group's ability to continue as a going concern is dependent
on maintaining adequate levels of resources to continue to operate
for the foreseeable future. When assessing the going concern of the
Group, the Directors have reviewed the year to date financial
results, as well as detailed financial forecasts for the period up
to 31 December 2024. The assumptions used in the financial
forecasts are based on the Group's historical performance and
management's extensive experience of the industry. Taking into
consideration the wider economic environment, the forecasts have
been assessed and stress tested to ensure that a robust assessment
of the Group's working capital and cash requirements has been
performed.
The Group has sufficient liquidity headroom through the forecast
period. The Directors therefore have reasonable expectation that
the Group has the financial resources to enable it to continue in
operational existence for the period to 31 December 2024.
Accordingly, the Directors conclude it is appropriate that these
consolidated financial statements be prepared on a going concern
basis.
2. Accounting policies, estimates and judgements
The accounting policies applied by the Group in these
consolidated financial statements are the same as those applied by
the Group in its consolidated financial statements as at and for
the year ended 30 September 2023 unless stated below.
Judgements in applying accounting policies and sources of
estimation uncertainty
2a) Significant judgements in applying the entity's accounting
policies
Share-based payments
Share-based payment arrangements in which the Group receives
goods or services as consideration for its own equity instruments
are accounted for as equity-settled share-based payment
transactions.
On 15 April 2020, 845 ordinary A shares were issued in VIPSO Ltd
at a price of GBP0.10 per share, which is the nominal value of the
shares. Of the 845 shares issued, 800 of the A ordinary shares were
issued to the existing shareholders by way of bonus issue so as not
to dilute their existing holding. These shares are considered
outside the scope of IFRS 2, on the basis that these shareholders
do not receive any additional value for their shares. This is
considered to be a key judgement.
2b) Significant sources of estimation uncertainty
Other share-based payments
The fair value of services received in return for share options
is calculated with reference to the fair value of the award on the
date of grant. A Black-Scholes model has been used where
appropriate to calculate the fair value and the Directors have
therefore made estimates with regard to the inputs to that model
and the period over which the share award is expected to vest (note
20).
Revenue cut-off
The Group's management information systems are configured to
recognise revenue upon dispatch of inventory from the Group's
warehouses, which may not be aligned to when control has
transferred to the customer. Management therefore performs an
assessment to capture items that have been dispatched from the
Group's warehouses but not yet delivered by the reporting date,
subsequently deferring the recognition of revenue and associated
cost of sales into the following period. This gives rise to
deferred income, which is recognised as a contract liability and
associated inventory in the consolidated statement of financial
position.
Management uses a fixed number of distributor platforms to
establish the value of revenue to defer. Where this is not possible
in good time, an estimate is made based on the last quarter's data.
The shipment delay identified in the distributors tested is
extrapolated to the remaining couriers.
2c) Other accounting judgements and sources of estimation
uncertainty
Refund liability and right of return asset
The refund liability that is recognised within the consolidated
financial statements relates to the obligation to refund some or
all of the consideration received from a customer. The liability is
measured at the amount the Group ultimately expects it will have to
return to the customer. The refund liability therefore requires
management to estimate the amount expected to be returned to
customers after the reporting date.
The refund liability and associated right of return asset are
estimated using historical rates of the level of refunds relative
to revenue.
2023 2022
------------------------------------------------- ------ ------
Revenue (GBPm) 285.1 269.4
Refund liability (GBPm) 0.9 1.0
Refund liability % average quarterly sales 1.3% 1.3%
Right of return asset (GBPm) 0.3 0.3
Right of return asset % average quarterly sales 0.4% 0.4%
------------------------------------------------- ------ ------
The impact on profit before tax of increasing the refund rate by
1% of average quarterly revenue would be a reduction of GBP0.7
million (2022: GBP0.7 million).
Warranty provision
The Group provides for the cost expected to be incurred in order
to replace damaged or faulty items that existed at the time of
sale. The provision related to these assurance-type warranties are
recognised when the product is sold. Initial recognition is based
on historical experience.
The warranty provision is estimated with reference to the
historical level of credit notes raised relative to revenue.
2023 2022
---------------------------------------------- ------ ------
Revenue for the period (GBPm) 285.1 269.4
Warranty provision (GBPm) 0.2 0.2
Warranty provision % average quarterly sales 0.3% 0.2%
---------------------------------------------- ------ ------
The impact on profit before tax of increasing the warranty
provision by 0.5% of average quarterly revenue would be a reduction
of GBP0.4 million (2022: a reduction of GBP0.3 million).
Intangible assets
Intangible assets relate to the development of the Group's
internal bespoke software solutions and comprise of both
capitalised internal salaries and third party costs. Initial
capitalisation of costs is based on management's judgement that
technological and economic feasibility is confirmed, usually when a
product development project has reached a defined milestone
according to an established project management model.
Capitalisation of salaries
The Group capitalises salary costs for product development
projects where employees have been working to enhance an asset. In
determining the amounts to be capitalised, management makes
assumptions regarding the proportion of time spent by employees on
each project.
Impairment review
The Group does not have any indefinite life intangible assets
and, given the short time periods between software releases, WIP is
minimal. Any assets held in the 'assets under construction'
category will be brought into use in the next 12 months. Due to the
nature of these assets and the efficiency gains we anticipate they
will bring, an impairment review of these assets is not deemed to
be necessary.
Inventory provision
Management has evaluated the level of inventory held and the
ageing of inventory in order to consider the need for a provision
over stock to cover either slow-moving items, obsolete items or
items which the Group may sell at lower than cost. Management do
not believe it is necessary to hold an inventory provision based on
this analysis, which is consistent with the estimate made in
previous years.
3. Segmental information
IFRS 8 'Operating Segments' requires the Group to determine its
operating segments based on information which is provided
internally. Based on the internal reporting information and
management structures within the group, it has been determined that
there is only one operating segment, being the Group, as the
information reported includes operating results at a consolidated
Group level only (the "Operating Group"). There is also considered
to be only one reporting segment, which is the Group, the results
of which are shown in the consolidated statement of comprehensive
income.
Management has determined that there is one operating and
reporting segment based on the reports reviewed by the Executive
Leadership Team ("ELT") which is the chief operating decision-maker
("CODM"). The ELT is made up of the Executive Directors and Key
Management and is responsible for the strategic decision-making of
the Group.
Adjusted EBITDA
Operating costs, comprising administrative expenses, are managed
on a Group basis. The ELT measures the overall performance of the
Operating Group by reference to Adjusted EBITDA, a non-GAAP
measure. Adjusted EBITDA is defined as EBITDA (earnings before
interest, tax, depreciation and amortisation) less exceptional
items and IFRS 2 charges in respect of share-based payments along
with associated NI.
This adjusted profit measure is applied by the ELT to understand
the earnings trends of the Operating Group and is considered an
additional, useful measure under which to assess the true operating
performance of the Operating Group.
The Directors believe that these items and adjusted measures of
performance should be separately disclosed in order to assist in
the understanding of financial performance achieved by the
Operating Group and for consistency with prior years.
2023 2022
GBPm GBPm
------------------------------------------------ ------ ------
Operating profit 15.3 12.1
Depreciation of property, plant and equipment 0.6 0.6
Depreciation of right-of-use assets 0.9 0.9
Amortisation of intangible assets 2.3 2.0
Exceptional items 0.8 -
Share-based payments (including associated NI) 3.9 3.9
------------------------------------------------- ------ ------
Adjusted EBITDA 23.8 19.5
------------------------------------------------- ------ ------
Adjusted PBT
Operating costs, comprising administrative expenses, are managed
on a Group basis. The ELT measures the overall performance of the
Operating Group by reference to adjusted profit before tax ("PBT"),
a non-GAAP measure. Adjusted PBT is defined as adjusted EBITDA less
interest, depreciation and amortisation.
This adjusted profit measure is applied by the ELT as an
alternative profitability measure, which incorporates the capital
investment and the financing structure of the Group.
2023 2022
GBPm GBPm
----------------------------------------------- ------ ------
Adjusted EBITDA 23.8 19.5
Finance income/(costs) 0.3 (0.3)
Depreciation of property, plant and equipment (0.6) (0.6)
Depreciation of right-of-use assets (0.9) (0.9)
Amortisation (2.3) (2.0)
Adjusted PBT 20.3 15.7
------------------------------------------------ ------ ------
4. Revenue
An analysis of revenue by class of business is as follows:
2023 2022
GBPm GBPm
---------- ------ ------
Online 283.6 267.7
Showroom 1.5 1.7
285.1 269.4
---------- ------ ------
All revenue arose within the United Kingdom.
5. Operating profit
Expenses by nature including exceptional items:
2023 2022
GBPm GBPm
----------------------------------------------------------------- ------ ------
Employee costs (excluding share-based payments) 18.4 15.2
Share-based payments (including associated NI) 3.9 3.9
Agency and contractor costs 1.3 0.8
Marketing costs 79.2 76.2
Property costs 6.3 5.1
Computer costs 2.5 1.6
Depreciation of property, plant and equipment (note 12) 0.6 0.6
Depreciation of right-of-use assets (note 13) 0.9 0.9
Amortisation of intangibles (note 11) 2.3 2.0
Other costs 3 .1 2.6
Exceptional items 0.8 -
----------------------------------------------------------------- ------ ------
Total administrative expenses 119.3 108.9
Share-based payments (including associated NI) (note 20) (3.9) (3.9)
Exceptional items (note 6) (0.8) -
----------------------------------------------------------------- ------ ------
Total administrative expenses before separately disclosed items 114.6 105.0
------------------------------------------------------------------ ------ ------
6. Exceptional items
2023 2022
GBPm GBPm
------------------------------- ------ ------
Warehouse transformation costs 0.8 -
------------------------------- ------ ------
Warehouse transformation costs relate to legal and other costs
associated with entering into a 20-year lease for a new 544,000
square feet, purpose-built UK distribution centre in
Lancashire.
7. Finance income/(costs)
2023 2022
GBPm GBPm
--------------------------------------------------------- ------ ------
Interest on undrawn revolving credit facility (note 17) (0.1) (0.1)
Interest expense on lease liability (0.2) (0.2)
Interest received on cash deposits 0.6 -
--------------------------------------------------------- ------ ------
Total finance income/(costs) 0.3 (0.3)
---------------------------------------------------------- ------ ------
8. Income tax expense
2023 2022
GBPm GBPm
-------------------------------------------- ------ ------
Corporation tax
Current tax on profits for the year 3.8 3.1
Adjustments in respect of previous periods (0.2) (0.3)
--------------------------------------------- ------ ------
Total current tax 3.6 2.8
--------------------------------------------- ------ ------
Deferred tax
Adjustments in respect of previous periods 0.2 (0.1)
Effect of changes in tax rates - (0.1)
--------------------------------------------- ------
Total deferred tax 0.2 (0.2)
--------------------------------------------- ------ ------
Taxation on profit 3.8 2.6
--------------------------------------------- ------ ------
Factors affecting tax charge for the year
The tax assessed for the period is higher (2022: higher) than
the standard rate of corporation tax in the UK of 22% (2022: 19%).
The differences are explained below:
2023 2022
GBPm GBPm
------------------------------------------------------------------------------------------- ------ ------
Profit on ordinary activities before tax 15.6 11.8
-------------------------------------------------------------------------------------------- ------ ------
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of
22% (2022: 19%) 3.4 2.2
Effects of:
Expenses not deductible for tax purposes 0.1 -
Share options 0.3 0.8
Adjustments to tax charge in respect of prior periods - (0.4)
-------------------------------------------------------------------------------------------- ------ ------
Total tax charge for the year 3.8 2.6
-------------------------------------------------------------------------------------------- ------ ------
Taxation on items taken directly to equity was a credit of
GBP0.1 million (2022: GBP0.1 million credit) relating to tax on
share-based payments.
9. Dividends paid and proposed
2023 2022 2023 2022
Pence per share Pence per share GBPm GBPm
----------------------------------------------------------- ----------------- ----------------- ------ ------
Final ordinary dividend recognised as distributions in the
year 1.10 - 3.6 -
Special dividend recognised as distributions in the year 1.70 - 5.5 -
Interim ordinary dividend recognised as distributions in
the year 0.45 - 1.5 -
------------------------------------------------------------ ----------------- ----------------- ------ ------
Total dividend paid in the year 10.6 -
----------------------------------------------------------- ----------------- ----------------- ------ ------
Interim ordinary dividend 0.45 - 1.5 -
Final ordinary dividend 0.95 1.10 3.1 3.5
------------------------------------------------------------ ----------------- ----------------- ------ ------
Total ordinary dividend 1.40 1.10 4.6 3.5
------------------------------------------------------------ ----------------- ----------------- ------ ------
Special dividend - 1.70 - 5.5
------------------------------------------------------------ ----------------- ----------------- ------ ------
Total dividend 1.40 2.80 4.6 9.0
------------------------------------------------------------ ----------------- ----------------- ------ ------
In order to distribute a total ordinary dividend for the year of
1.40 pence per share (2022: 1.10 pence per share), which would
represent growth of 27%, the Board is recommending a full year
final ordinary dividend of 0.95 pence per share (2022: 1.10 pence
per share). The Board is not recommending a special dividend (2022:
1.70 pence per share) as it prioritises the preservation of cash to
finance the fit-out of the warehouse transformation, without the
need for indebtedness and to maintain the robustness of the balance
sheet.
This results in a total cash distribution to shareholders of
GBP4.6 million (GBP1.5 million interim paid and GBP3.1 million
final to be paid), subject to shareholders' approval at the AGM on
27 February 2024. The dividends will be paid on 8 March 2024 to
shareholders on the register of members at the close of business on
9 February 2024.
10. Earnings per share
Basic and diluted earnings per share
Basic earnings per share ("EPS") is calculated by dividing the
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to
ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year plus the
number of incremental ordinary shares, calculated using the
treasury stock method, that would be issued on conversion of all
the dilutive potential ordinary shares into ordinary shares.
The following table reflects the income and share data used in
the EPS calculations:
Total earnings
Weighted average number of ordinary shares GBPm Pence per share
------------------------------ ------------------------------------------- --------------- ----------------
Year ended 30 September 2023
Basic EPS 284,604,317 11.8 4.1
Diluted EPS 317,483,119 11.8 3.7
Year ended 30 September 2022
Basic EPS 275,832,944 9.2 3.3
Diluted EPS 315,898,691 9.2 2.9
The number of shares in issue at the start of the year is
reconciled to the basic and diluted weighted average number of
shares below:
2023 2022
---------------------------------------------------------------- ------------ ------------
Weighted average number of shares for basic EPS 284,604,317 275,832,944
Dilutive impact of unvested shares in relation to share awards 32,878,802 40,065,747
Weighted average number of shares for diluted EPS 317,483,119 315,898,691
----------------------------------------------------------------- ------------ ------------
The average market value of the Group's shares for the purposes
of calculating the dilutive effect of share-based incentives was
based on quoted market prices for the period during which the
share-based incentives were outstanding.
Adjusted diluted earnings per share
Adjusted diluted EPS is an Alternative Performance Measure (APM)
and has been calculated using profit for the purpose of basic EPS,
adjusted for total adjusting items and the tax effect of those
items.
2023 2022
GBPm GBPm
--------------------------------------------------------------------------------------- ------------ ------------
Profit for the year 11.8 9.2
Exceptional items 0.8 -
Share-based payments 3.9 3.9
Tax effect (1.1) (0.7)
---------------------------------------------------------------------------------------- ------------ ------------
Total adjusted profit for the year 15.4 12.4
---------------------------------------------------------------------------------------- ------------ ------------
Number Number
--------------------------------------------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares for the purposes of adjusted basic earnings
per
share 284,604,317 275,832,944
Total issued share capital for the purposes of adjusted diluted earnings per share 325,227,984 325,062,985
Adjusted diluted earnings per share (pence) 4.7 3.8
---------------------------------------------------------------------------------------- ------------ ------------
The Directors and management have redefined adjusted diluted EPS
following stakeholder feedback, to aid comparability and
simplicity. The denominator used in the calculation reflects the
aggregate of shares in issue and those shares held in trust, to
represent a fully diluted EPS.
Comparison of adjusted diluted EPS under original measure vs
revised measure:
Number Number
--------------------------------------------------------------------------------------- ------------ ------------
Weighted average number of shares for the purposes of adjusted diluted earnings per
share
(original measure) 317,483,119 315,898,691
Total issued share capital for the purposes of adjusted diluted earnings per share
(revised
measure) 325,227,984 325,062,985
Adjusted diluted earnings per share, original measure (pence) 4.8 3.9
Adjusted diluted earnings per share, revised measure (pence) 4.7 3.8
---------------------------------------------------------------------------------------- ------------ ------------
11. Intangible assets
Computer software Assets under construction Total
GBPm GBPm GBPm
-------------------------- ------------------ -------------------------- ------
Cost
At 30 September 2021 7.5 - 7.5
Additions 2.6 - 2.6
--------------------------- ------------------ -------------------------- ------
At 30 September 2022 10.1 - 10.1
Additions 2.8 0.2 3.0
--------------------------- ------------------ -------------------------- ------
At 30 September 2023 12.9 0.2 13.1
--------------------------- ------------------ -------------------------- ------
Accumulated amortisation
At 30 September 2021 4.8 - 4.8
Charge for the year 2.0 - 2.0
--------------------------- ------------------ -------------------------- ------
At 30 September 2022 6.8 - 6.8
Charge for the year 2.3 - 2.3
--------------------------- ------------------ -------------------------- ------
At 30 September 2023 9.1 - 9.1
--------------------------- ------------------ -------------------------- ------
Net book value
At 30 September 2021 2.7 - 2.7
At 30 September 2022 3.3 - 3.3
At 30 September 2023 3.8 0.2 4.0
--------------------------- ------------------ -------------------------- ------
Computer software comprises both internal salaries and external
development capitalised in relation to the Group's bespoke
operational software. The Group capitalised internal salaries of
GBP2.6 million in the year ended 30 September 2023 (2022: GBP2.2
million) for development of computer software. Assets under
construction wholly represent capitalised internal salaries in
relation to the warehouse transformation project.
For the year to 30 September 2023, the amortisation charge of
GBP2.3 million (2022: GBP2.0 million) has been charged to
administrative expenses in the income statement.
12. Property, plant and equipment
Leasehold Plant and Fixtures Office
improvements machinery and fittings equipment Assets under Total
GBPm GBPm GBPm GBPm construction GBPm GBPm
------------------- ------------------- ------------------- -------------- ----------- ------------------ ------
Cost
At 30 September
2021 0.1 1.4 1.2 1.4 - 4.1
Additions - 0.1 - 0.2 - 0.3
Disposals - (0.1) (0.4) (0.1) - (0.6)
------------------- ------------------- ------------------- -------------- ----------- ------------------ ------
At 30 September
2022 0.1 1.4 0.8 1.5 - 3.8
Additions - - - 0.2 3.9 4.1
Disposals - (0.1) (0.3) (0.5) - (0.9)
------------------- ------------------- ------------------- -------------- ----------- ------------------ ------
At 30 September
2023 0.1 1.3 0.5 1.2 3.9 7.0
------------------- ------------------- ------------------- -------------- ----------- ------------------ ------
Accumulated
depreciation
At 30 September
2021 - 0.7 1.0 0.7 - 2.4
Charge for the
year - 0.2 0.1 0.3 - 0.6
Disposals - (0.1) (0.4) (0.1) - (0.6)
------------------- ------------------- ------------------- -------------- ----------- ------------------ ------
At 30 September
2022 - 0.8 0.7 0.9 - 2.4
Charge for the
year - 0.2 0.1 0.3 - 0.6
Disposals - (0.1) (0.3) (0.5) - (0.9)
------------------- ------------------- ------------------- -------------- ----------- ------------------ ------
At 30 September
2023 - 0.9 0.5 0.7 - 2.1
------------------- ------------------- ------------------- -------------- ----------- ------------------ ------
Net book value
At 30 September
2021 0.1 0.7 0.2 0.7 - 1.7
At 30 September
2022 0.1 0.6 0.1 0.6 - 1.4
At 30 September
2023 0.1 0.4 - 0.5 3.9 4.9
------------------- ------------------- ------------------- -------------- ----------- ------------------ ------
The items within 'assets under construction' wholly represent
capital expenditure in relation to the warehouse transformation
project.
13. Right-of-use assets
Right-of-use assets
GBPm
-------------------------- --------------------
Cost
At 30 September 2021 8.2
Modifications 0.1
--------------------------- --------------------
At 30 September 2022 8.3
Modifications 0.7
At 30 September 2023 9.0
--------------------------- --------------------
Accumulated depreciation
At 30 September 2021 2.9
Charge for the year 0.9
At 30 September 2022 3.8
Charge for the year 0.9
--------------------------- --------------------
At 30 September 2023 4.7
--------------------------- --------------------
Net book value
At 30 September 2021 5.3
At 30 September 2022 4.5
At 30 September 2023 4.3
--------------------------- --------------------
During the year the Group renewed the leases on two of its
properties that had expired; this represents a modification under
IFRS 16. The right-of-use asset was increased by GBP0.7 million to
reflect the value of the asset after the modification and the
corresponding lease liability increased by GBP0.7 million.
14. Trade and other receivables
2023 2022
GBPm GBPm
----------------------- ------ ------
Trade receivables 2.2 2.0
Right-of-return asset 0.3 0.3
Accrued income 0.6 1.3
Prepayments 0.9 1.5
Amounts in escrow 0.8 -
4.8 5.1
----------------------- ------ ------
The Group provides against trade receivables using the
forward-looking expected credit loss model under IFRS 9. An
impairment analysis is performed at each reporting date. Trade
receivables, accrued income, and other receivables expected credit
losses have been reviewed by management and have been determined to
have an immaterial impact on these balances. Accrued income relates
to rebates earned but not yet received.
15. Trade and other payables
2023 2022
GBPm GBPm
----------------------- ------ ------
Trade payables 23.9 26.2
Other taxation and NI 7.4 6.9
Refund liability 0.9 0.8
Other payables 1.3 1.2
Accruals 4.5 2.8
------------------------ ------ ------
38.0 37.9
----------------------- ------ ------
16. Lease liabilities
Lease liability
GBPm
---------------------- ----------------
At 30 September 2021 5.8
Modifications 0.1
Interest expense 0.2
Lease payment (1.1)
----------------------- ----------------
At 30 September 2022 5.0
Modifications 0.7
Interest expense 0.2
Lease payment (1.1)
----------------------- ----------------
At 30 September 2023 4.8
----------------------- ----------------
During the period the Group renewed the lease on two of its
properties that had expired; this represents a modification under
IFRS 16. The right-of-use asset was increased by GBP0.7 million to
reflect the value of the asset after the modification and the
corresponding lease liability increased by GBP0.7 million.
The Group had total cash outflows for leases of GBP1.1 million
(2022: GBP1.1 million). The Group had non-cash additions to
right-of-use assets and lease liabilities of GBPnil (2022:
GBPnil).
Lease liabilities as at 30 September were classified as
follows:
2023 2022
GBPm GBPm
------------- ------ ------
Current 1.0 0.9
Non-current 3.8 4.1
Total 4.8 5.0
-------------- ------ ------
17. Borrowings
2023 2022
GBPm GBPm
----------------------------------------------- ------ ------
Amounts drawn under revolving credit facility - -
Unamortised debt issue costs (0.1) (0.1)
(0.1) (0.1)
----------------------------------------------- ------ ------
On 6 July 2023, we successfully completed an extension of the
RCF, which has total commitments of GBP10.0 million and a
termination date of 31 December 2025. The facility is secured by a
debenture dated 7 June 2021. Interest on the RCF is charged at
SONIA plus a margin based on the consolidated leverage of the
Group. A commitment fee of 40% of the margin applicable to the RCF
is payable quarterly in arrears on unutilised amounts of the RCF.
There is no requirement to settle all, or part, of the debt earlier
than the termination date. At 30 September 2023, the Group had not
utilised the RCF.
Unamortised debt issue costs of GBP0.1 million (2022: GBP0.1
million) are included in prepayments (note 14).
18. Share capital
2023 2022
GBPm GBPm
--------------------------------------------------------------------------------- ------ ------
Allotted, called up and fully paid
325,227,984 ordinary shares of 0.1p (2022: 325,062,985 ordinary shares of 0.1p) 0.3 0.3
---------------------------------------------------------------------------------- ------ ------
19. Own shares held
The Employee Share Option Trust purchases shares to fund the
Share Incentive Plan. At 30 September 2023, the trust held 635,504
(2022: 635,504) ordinary shares with a book value of GBP636 (2022:
GBP636). The market value of these shares as at 30 September 2023
was GBP0.6 million (2022: GBP0.2 million).
Number of shares GBP
------------------------------------------------------------ ----------------- ----
ESOT shares reserve
Own shares held at 30 September 2023 and 30 September 2022 635,504 636
------------------------------------------------------------- ----------------- ----
20. Share-based payments
The Group operates four share plans being the Share Incentive
Plan ("SIP"), a Deferred Bonus Plan ("DBP"), a Long-Term Incentive
Plan ("LTIP") and a Sharesave scheme ("SAYE"). In addition, both
prior to and following Admission to AIM in June 2021, the Group
awarded shares to the Chairman and certain members of Key
Management which had restrictions placed against them that bring
the awards into the scope of IFRS 2. These schemes are referred to
as the Management Incentive Plan ("MIP"), A ordinary shares, and
Restricted Share Awards ("RSAs").
All share-based incentives carry a service condition. Such
conditions are not taken into account in the fair value of the
service received. The fair value of services received in return for
share-based incentives is measured by reference to the fair value
of share-based incentives granted. Monte Carlo or Black-Scholes
pricing models have been used where appropriate to calculate the
fair value of share-based incentives with market conditions.
Sensitivity analysis has been performed in assessing the fair
value of the share-based incentives. There are no changes to key
assumptions that are considered by the Directors to be reasonably
possible, which give rise to a material difference in the fair
value of the share-based incentives.
The total charge in the year was GBP3.9 million (2022: GBP3.9
million) with a Company charge of GBP1.3 million (2022: GBP1.8
million). This included associated NI at 13.8% (2022: 15.1%), which
management expects to be the prevailing rate when the awards are
exercised, and apprenticeship levy at 0.5%, based on the share
price at the reporting date.
2023 2022
GBPm GBPm
-------------------------------------------------- ------- -------
Share Incentive Plan 0.3 0.2
Restricted Share Awards 2.2 3.4
Deferred Bonus Plans 0.7 0.3
Long Term Incentive Plans 0.2 -
Sharesave schemes 0.1 -
-------------------------------------------------- -------
Total IFRS 2 charge 3.5 3.9
NI and apprenticeship levy on applicable schemes 0.4 -
-------------------------------------------------- ------- -------
Total charge 3.9 3.9
--------------------------------------------------- ------- -------
Share Incentive Plan
The Group operates a SIP scheme that was made available to all
eligible employees following Admission to AIM in June 2021. On 27
July 2021, all eligible employees were awarded free shares valued
at GBP3,600 each based on the closing share price on 26 July 2021
of GBP2.67. A total of 635,504 shares were awarded under the
scheme, subject to a three-year service period (the vesting
period).
The SIP awards have been valued using the Black-Scholes model
and the resulting share-based payments charge spread evenly over
the vesting period. The SIP shareholders are entitled to dividends
over the vesting period. No performance criteria are applied to the
vesting of SIP shares. Fair value at the grant date was measured to
be GBP2.67.
2023 2022
number number
----------------------------- --------- ----------
Outstanding at 1 October 426,974 576,732
Awarded (dividend shares) 15,084 -
Forfeited (95,021) (149,758)
------------------------------ --------- ----------
Outstanding at 30 September 347,037 426,974
------------------------------ --------- ----------
The total charge in the year, included in operating profit, in
relation to these awards was GBP0.3 million (2022: GBP0.2 million).
The Company charge for the year was GBPnil (2022: GBPnil).
A ordinary shares
On 15 April 2020 (the grant date), 845 A ordinary shares in
VIPSO Ltd, the former ultimate parent company, were issued at a
price of GBP0.10 per share which was the nominal value of the
shares. Of the 845 shares issued, 800 of the A ordinary shares were
issued to the existing shareholders by way of bonus issue so as not
to dilute their existing holding. These 800 shares are considered
outside the scope of IFRS 2, on the basis that these shareholders
do not receive any additional value for their shares.
The remaining 45 A ordinary shares were awarded to certain
members of Key Management (together the 'A ordinary shareholders').
In order to realise value from the shares awarded, a participant
must remain employed until an 'Exit' event is achieved. The equity
value on 'Exit' must also be in excess of the equity hurdle which
has been set at GBP130 million. The 'Exit' requirement is a
non-market performance vesting condition and the hurdle amount is
considered to be a market-based performance condition.
On 27 May 2021 the Group undertook a reorganisation, through
which the A ordinary shareholders exchanged their shares for an
equivalent value in Victorian Plumbing Group plc. After all of the
steps relating to the reorganisation were executed, the A ordinary
shareholders had exchanged their 45 A ordinary shares in VIPSO Ltd
for 7,222,969 ordinary shares in Victorian Plumbing Group plc. The
share-for-share exchange does not represent a modification of the
award under IFRS 2 as the value of the award, and the related
service and performance conditions, remained unchanged.
On 11 June 2021 the A ordinary shareholders entered into a deed,
which would become effective on Victorian Plumbing Group plc's
Admission to AIM, to modify the terms of the award. The performance
condition would no longer be relevant since an 'Exit' event would
have already occurred. The service condition for the A ordinary
shareholders was modified so as to restrict the number of shares
that vest on Admission.
On 22 June 2021 Victorian Plumbing Group plc was admitted to
AIM, which was an 'Exit' event under the terms of the award. On
Admission 1,059,369 shares vested. The deed agreed to by the A
ordinary shareholders took effect.
2023 2022
Number Number
------------------------------------------ ---------- ----------
Outstanding at 1 October 5,547,240 6,163,600
------------------------------------------ ---------- ----------
Vested (616,360) (616,360)
------------------------------------------ ---------- ----------
Outstanding and unvested at 30 September 4,930,880 5,547,240
------------------------------------------ ---------- ----------
The total charge in the year, included in operating profit, in
relation to these awards was GBPnil (2022: GBPnil). The Company
charge for the year was GBPnil (2022: GBPnil). The share awards
outstanding at 30 September 2023 have a weighted average remaining
vesting period of 2.1 years (2022: 2.8 years).
Management Incentive Plan
An Executive Director was awarded share options under a MIP
prior to Admission.
On 2 December 2020, VIPSO Ltd (the former ultimate parent
company of the Group) awarded eight nil cost ordinary share options
and nine nil cost A ordinary share options under the MIP. All of
the options awarded were to vest on the earlier of an 'Exit' event
or three years from the date of grant. Options would be forfeited
if the employee leaves the Group before the options vest, unless
under exceptional circumstances.
On 27 May 2021 the Group undertook a reorganisation, through
which the options granted under the MIP were converted to be
options over ordinary shares and ordinary deferred shares in
Victorian Plumbing Group plc. After all of the steps relating to
the reorganisation were executed, the participant of the MIP had
exchanged its eight ordinary shares and zero A ordinary shares in
VIPSO Ltd for 3,219,948 ordinary share options in Victorian
Plumbing Group plc. The exchange does not represent a modification
of the award under IFRS 2 as the value of the award, and the
related service and performance conditions remained unchanged.
On 11 June 2021 the MIP participant entered into a deed, which
would become effective on Victorian Plumbing Group plc's Admission
to AIM, to modify the terms of the award. All the options would
convert when the performance condition was satisfied (i.e., on
Admission) resulting in the participant being awarded ordinary
shares. However, 30% of the shares would remain restricted and
subject to a service condition (the 'restricted shares'). The
restricted shares are forfeited if the employee leaves the Group
before the vesting date, unless under exceptional
circumstances.
On 22 June 2021 Victorian Plumbing Group plc was admitted to
AIM, which was an 'Exit' event under the terms of the award. The
deed agreed to by the MIP participants took effect.
On Admission the options converted to 3,219,948 ordinary shares
and 2,253,964, or 70%, of those shares vested at an average price
of GBP2.62.
2023 2022
Number Number
------------------------------------------ ---------- ----------
Outstanding at 1 October 676,189 965,984
------------------------------------------- ---------- ----------
Vested (289,795) (289,795)
------------------------------------------- ---------- ----------
Outstanding and unvested at 30 September 386,394 676,189
------------------------------------------- ---------- ----------
The market value per ordinary share for the restricted shares
awarded under the MIP that vested in the year was GBP0.72. The
shares outstanding under the MIP at 30 September 2023 have a
weighted average remaining vesting period of 0.75 years (2022: 1.3
years).
The total charge in the year, included in operating profit, in
relation to these awards was GBPnil (2022: GBPnil). The Company
charge for the year was GBPnil (2022: GBPnil).
Restricted Share Awards
The Chairman and certain members of Key Management have been
granted RSAs. The RSAs do not have a performance condition attached
to them but the extent to which they vest depends on a service
condition being satisfied. The restricted shares are forfeited if
the employee leaves the Group before the vesting date, unless under
exceptional circumstances.
Share price Fair value
at grant Employee Vesting Risk-free Dividend Non-vesting per
date contribution period rate yield condition restricted
Grant date GBP per share (years) % % % share
------------ ------------- ------------- ------------- ------------- -------------- ------------- -------------
22/06/2021 2.62 GBP0.001 5.0 - - - 2.62
22/06/2021 2.62 GBP0.001 4.0 - - - 2.62
05/09/2022 0.41 nil 2.0 - - - 0.48
------------ ------------- ------------- ------------- ------------- -------------- ------------- -------------
The number of restricted shares outstanding at 30 September 2023
was as follows:
2023 2022
Number Number
------------------------------------------ ---------- ----------
Outstanding at 1 October 3,043,547 3,442,858
------------------------------------------- ---------- ----------
Awarded - 208,334
------------------------------------------- ---------- ----------
Forfeited - (38,168)
------------------------------------------- ---------- ----------
Vested (767,543) (569,477)
------------------------------------------- ---------- ----------
Outstanding and unvested at 30 September 2,276,004 3,043,547
------------------------------------------- ---------- ----------
The market values per ordinary share for restricted shares that
vested in the year were GBP0.72 and GBP0.82. The RSAs outstanding
at 30 September 2023 have a weighted average remaining vesting
period of 1.7 years.
The total charge in the year, included in operating profit, in
relation to these awards was GBP2.2 million (2022: GBP3.4 million).
The Company charge for the year was GBP0.9 million (2022: GBP1.8
million).
Deferred Bonus Plan
The Group operates a DBP for the ELT and certain key employees.
It is both a cash bonus plan and a discretionary employee share
plan under which a proportion of a participant's annual bonus is
deferred into an award over shares. Awards under the plan are
contingent on the satisfaction of pre-set internal targets relating
to financial and operational objectives. A nil cost option will be
granted following determination of performance against targets,
with 40% of the award vesting immediately, 30% after 1 year and 30%
after 2 years. Awards are potentially forfeitable during that
period should the employee leave employment.
During the year the Group made awards over 4,418,641 ordinary
shares under the DBP scheme, subject to the satisfaction of certain
performance criteria to be determined by the Remuneration
Committee. The fair value of the award was determined to be
GBP0.57, being the average Market Value of a Share on 1 October
2022 and 1 January 2023.
2023 2022
Number Number
----------------------------- ------------ ----------
Outstanding at 1 October 1,893,219 -
----------------------------- ------------ ----------
Options granted in the year 4,418,641 1,893,219
----------------------------- ------------ ----------
Forfeited (1,486,025) -
----------------------------- ------------ ----------
Vested (164,999) -
----------------------------- ------------ ----------
Outstanding at 30 September 4,660,836 1,893,219
----------------------------- ------------ ----------
The total charge in the period, included in operating profit, in
relation to these awards was GBP0.7 million (2022: GBP0.3 million).
The Company charge for the period was GBPnil (2022: GBPnil).
Long Term Incentive Plan
The Group operates a LTIP for the Executive Directors. The
extent to which awards vest will depend upon the satisfaction of
the Group's financial and operational performance in the financial
year of the award date.
The 2022 LTIP awards are subject to performance conditions based
on adjusted EPS (75% of award) and absolute Total Shareholder
Return ("Absolute TSR") (25% of award). Awards vest 3 years after
grant subject to EPS and Absolute TSR performance conditions, with
a two-year post-vesting holding period applying.
The 2023 LTIP awards are subject to performance conditions based
on adjusted EPS (100% of award). Awards vest 3 years after grant
subject to EPS performance conditions, with a two-year post-vesting
holding period applying.
On 22 February 2023 the Group awarded 870,168 nil cost options
under the LTIP scheme. The fair value for the EPS element of the
award at GBP0.81 was based on the share price at the grant
date.
2023 2022
Number Number
----------------------------- ---------- --------
Outstanding at 1 October 323,472 -
----------------------------- ---------- --------
Options granted in the year 870,168 323,472
----------------------------- ---------- --------
Options lapsed in the year (75,143) -
----------------------------- ---------- --------
Outstanding at 30 September 1,118,497 323,472
----------------------------- ---------- --------
The total charge in the year, included in operating profit, in
relation to these awards was GBP0.2 million (2022: GBPnil). The
Company charge for the period was GBP0.2 million (2022:
GBP30,000).
Sharesave scheme
The Group operates a SAYE scheme for all employees under which
employees are granted an option to purchase ordinary shares in the
Company at up to 20% less than the market price at invitation, in
three years' time, dependent on their entering into a contract to
make monthly contributions into a savings account over the relevant
period. Options are granted and are linked to a savings contract
with a term of three years. These funds are used to fund the option
exercise. No performance criteria are applied to the exercise of
Sharesave options. The assumptions used in the measurement of the
fair value at grant date of the Sharesave plan are as follows:
Share
price at Exercise Expected Risk-free Dividend Non-vesting
grant date price volatility Option life rate yield condition Fair value
Grant date GBP GBP % years % % % per option
------------ ----------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
30/03/2022 0.51 0.57 67 3.17 1.42 0 0 0.22
------------ ----------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
30/03/2023 0.79 0.68 69 3.17 3.52 1.39 0 0.40
------------ ----------- ----------- ----------- ------------ ----------- ----------- ------------ -----------
Expected volatility is estimated by considering the historical
3.17 year volatility of the FTSE AIM retailers.
2023 2022
Number of share options Number of share options
----------------------------- ------------------------- -------------------------
Outstanding at 1 October 443,747 -
Options granted in the year 211,539 443,747
Options lapsed in the year (121,313) -
Outstanding at 30 September 533,973 443,747
------------------------------ ------------------------- -------------------------
Exercisable at 30 September - -
------------------------------ ------------------------- -------------------------
The total charge in the year, included in operating profit, in
relation to these awards was GBP0.1 million (2022: GBP16,000). The
Company charge for the period was GBPnil (2022: GBPnil).
21. Cash generated from operating activities
2023 2022
Cash flows from operating activities GBPm GBPm
------------------------------------------------------------------- ------ ------
Profit before taxation for the financial year 15.6 11.8
Adjustments for:
Amortisation of intangible assets (note 11) 2.3 2.0
Depreciation of property, plant and equipment (note 12) 0.6 0.6
Depreciation of right-of-use assets (note 13) 0.9 0.9
Share-based payments (including NI) 3.9 3.9
Finance (income)/expense (0.3) 0.3
Exceptional items 0.8 -
------------------------------------------------------------------- ------ ------
Adjusted EBITDA 23.8 19.5
Fair value loss/(profit) on financial derivatives 0.3 (0.7)
Increase in inventories (0.3) (1.5)
Increase in receivables (0.3) (0.2)
(Decrease)/increase in payables (3.7) 1.1
Increase in provisions - 0.1
------------------------------------------------------------------- ------ ------
Cash generated from operating activities before exceptional items 19.8 18.3
------------------------------------------------------------------- ------ ------
2023 2022
Free cash flows GBPm GBPm
--------------------------------------------------------------------------------- ------ ------
Cash generated from operating activities before exceptional items 19.8 18.3
Repayment of lease liabilities (1.1) (1.1)
Purchase of intangible assets (excluding assets under construction) (2.8) (2.6)
Purchase of property, plant and equipment (excluding assets under construction) (0.2) (0.3)
VAT not yet recovered on assets under construction 0.4 -
Free cash flows 16.1 14.3
---------------------------------------------------------------------------------- ------ ------
Adjusted EBITDA 23.8 19.5
---------------------------------------------------------------------------------- ------ ------
Cash conversion 68% 73%
---------------------------------------------------------------------------------- ------ ------
VAT not yet recovered on assets under construction relates to
timing differences on warehouse transformation expenditure.
22. Events after the reporting period
a) Lease commitments
On 4 October 2023, the Group achieved legal completion on a new
544,000 square feet purpose-built distribution centre in Leyland,
Lancashire. In the financial year ending 30 September 2024, the
20-year lease will result in the recognition of a right of use
asset and corresponding IFRS 16 lease liability of c. GBP45.0
million (provisionally estimated using an incremental borrowing
rate of 6.5%).
The future payments related to this non-cancellable lease
contract are GBP2.0 million within one year, an additional GBP10.0
million within five years, and an additional GBP68.0 million
thereafter.
During the fit-out of and transition to the new distribution
centre, the Group will incur double running costs for certain
people and property related expenses. The Board estimates that the
additional non-recurring expenditure in the financial year ending
30 September 2024 will be c. GBP8.0 million.
b) Capital commitments
The Group also expects to incur an additional c. GBP24.0 million
of intangible and tangible capital expenditure (non-recurring in
nature) during the financial year ending 30 September 2024 to
complete the fit-out of the new distribution centre.
On 2 November 2023, the Group entered into arrangements with the
main contractor who is overseeing the fit-out of the new
distribution centre, which committed the Group to capital
commitments of GBP13.0 million. This leaves c. GBP11.0 million of
uncommitted capital expenditure after that date.
There have been no other material events to report after the end
of the reporting period.
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END
FR DFLFLXFLFFBB
(END) Dow Jones Newswires
November 22, 2023 02:00 ET (07:00 GMT)
Victorian Plumbing (LSE:VIC)
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Victorian Plumbing (LSE:VIC)
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