TIDMECEL
RNS Number : 6148K
Eurocell plc
03 September 2021
3 September 2021
EUROCELL PLC (Symbol: ECEL)
HALF YEAR REPORT FOR THE SIX MONTHSED 30 JUNE 2021
Strong first half, a further increase in full year expectations
and reinstating dividend payments
Eurocell plc is a market leading, vertically integrated UK
manufacturer, distributor and recycler of innovative window, door
and roofline PVC building products
H1 2021 H1 2020 Change H1 2019 Change
Key financial performance measures
Revenue (GBP million) 168.1 93.6 80% 136.3 23%
Gross margin % 50.2% 46.8% 340bps 51.1% (90)bps
Profit/(loss) before tax (GBP million) 14.2 (16.5) n/a 10.4 37%
Basic earnings/(losses) per share
(pence) 9.9 (11.1) n/a 8.7 14%
Adjusted profit/(loss) before tax
(GBP million) (1) 14.2 (8.6) n/a 10.4 37%
Adjusted basic earnings/(losses)
per share (pence) (1) 9.9 (5.0) n/a 8.7 14%
Capital investment (GBP million) 7.3 4.6 2.7 8.8 (1.5)
Net debt (GBP million) (2) 52.3 75.6 23.3 69.3 17.0
Net (cash)/debt, pre-IFRS 16 (GBP
million) (2) (1.3) 23.5 24.8 36.7 38.0
Interim dividend per share (pence) 3.2 - n/a 3.2 level
-------- -------- ------- -------- --------
For the purposes of this report, where appropriate we have
compared financial and operating performance to 2020 and 2019, with
the latter a more meaningful comparator given the disruption in
2020 due to the COVID-19 pandemic.
Financial headlines
-- Continued successful deployment of commercial strategies,
with sales up 23% vs H1 2019, including:
- Profiles up 19%: good contribution from trade fabricators
(substantially focused on the RMI(3) market) and new build
fabricators, as well as a very strong performance from Vista
doors
- Building Plastics up 27%: excellent performance across full
range of own-manufactured products and traded goods
- c.5% from selling price increases and a surcharge implemented
to mitigate raw material price inflation
-- Surcharge successfully recovering higher raw material costs,
but dilutive to gross margin percentage
-- Profit before tax up 37% vs H1 2019, driven by higher sales
volumes and the impact of operational gearing
-- Capex of GBP7.3 million includes c.GBP2 million to expand extrusion capacity
-- Strong balance sheet and liquidity, with pre-IFRS 16 net cash
of GBP1.3 million (H1 2020: net debt of GBP23.5 million)
-- Interim dividend reinstated at 3.2 pence per share (GBP3.6
million), payable on 8 October 2021
Operational headlines
-- Strong on sustainability as the leading UK-based recycler of PVC windows
- Further improvement in proportion of recycled material used to 28% (full year 2020: 25%)
- Commitment to substantial further progress on sustainability,
with KPIs published covering the circular economy (including
recycling), emissions and energy management, and social targets
-- Fit-out of new state-of-the-art warehouse now complete - key
to increasing capacity and delivering anticipated improvements in
operating efficiencies
-- 4 new branches opened in H1, with a further 8 planned for H2
(of which 4 are new larger format).
Mark Kelly, Chief Executive of Eurocell plc said:
"We entered 2021 well placed to take advantage of the continued
recovery in our markets and we have delivered strong financial
results for H1.
"A very good sales performance has been underpinned by the
success of our commercial strategies and high levels of demand in
the RMI(3) market. We believe we are also continuing to take market
share.
"Although high demand has put sector supply chains under
pressure, to date we have secured most of the raw materials we
require, and we are mitigating cost inflation with selling price
increases, a surcharge and through our market-leading recycling
plants. As a result, we are very pleased to report strong profit
growth for the first half and to confirm a return to dividend
payments.
"Trading performance in July and August has continued to be
robust. With the industry close to capacity and lead times growing,
we are becoming more confident that these market conditions will
continue for the foreseeable future. Reflecting these factors, and
notwithstanding very tight supply chains, labour and transport
availability, the Board is now again raising its expectations for
the full year."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Notes
(1) Adjusted measures are stated before non-underlying items(4) and the related tax effect.
(2) Net debt is cash and cash equivalents less bank overdrafts,
borrowings and lease liabilities. Pre-IFRS 16 net debt excludes
lease liabilities.
(3) RMI is repair, maintenance and improvement.
(4) Non-underlying items for H1 2020 of GBP7.9 million includes
a goodwill impairment charge of GBP5.8 million, trade receivable
impairment charges of GBP0.8 million, right-of use asset impairment
charges of GBP0.5 million and warehouse dual-running costs of
GBP0.8 million. There were no non-underlying items in 2021 and
2019.
Analyst presentation
There will be an audiocast presentation for analysts and
investors at 9am today.
To register for the audiocast, please contact Teneo on
eurocell@teneo.com .
Following the presentation, a recording of the audiocast will be
made available on the Group's website:
https://investors.eurocell.co.uk/investors/
CHIEF EXECUTIVE'S REVIEW
INTRODUCTION
Our results in 2020 reflected the major impact of COVID-19 on
the first half, which led to the closure of the business between
the end of March and middle of May, followed by a good recovery in
H2, when the Repair, Maintenance and Improvement ('RMI') market was
better than we had first anticipated and our operating performance
was good. We therefore entered 2021 well placed to take advantage
of the continued strength in our markets.
So far in 2021, the RMI market has remained very robust. House
building activity has also been increasing, supported by high
levels of mortgage approvals. Our products have continued to
resonate well with customers seeking, possibly as a result of the
pandemic, to improve their homes and create more usable space, both
inside and outside of their properties. Conservatories, warm roofs,
fencing and decking have all been particularly strong, alongside
new products such as garden rooms. Current demand appears
undiminished, and with the industry close to capacity and lead
times growing, we are becoming more confident that these market
conditions will continue for the foreseeable future.
We have experienced significant raw material cost increases this
year, due to a combination of strong demand and supply chain
pressures in our sector. However, we have been able to mitigate
successfully most of this cost inflation through a combination of
selling price increases, a surcharge and through our market-leading
recycling plants.
As a result, we are very pleased to report strong financial
performance and profit growth for the first half.
Fit-out of our new state-of-the-art warehouse is now complete.
We expect customer service levels to improve further as the new
plant, systems and processes are embedded. As well as being central
to increasing capacity, this facility is key to delivering
anticipated improvements in operating efficiencies.
FINANCIAL RESULTS
For the purposes of this half year report, where appropriate we
have compared financial and operating performance to 2020 and 2019,
with the latter a more meaningful comparator given the disruption
in 2020 due to COVID-19.
Sales for H1 were GBP168.1 million, 80% higher than H1 2020 and
23% up on H1 2019. Profit before tax for H1 was GBP14.2 million,
compared to GBP10.4 million in H1 2019, up 37% driven by higher
sales volumes and the impact of operational gearing.
Financial performance in 2020 was affected significantly by the
first UK COVID-19 lockdown. As a result, in H1 2020 the adjusted
loss before tax was GBP8.6 million and the reported loss before tax
was GBP16.5 million.
Further information on our financial performance is included in
the Divisional and Chief Financial Officer's Reviews.
STRATEGY
Strategic priorities
Our overall strategic objective remains to deliver sustainable
growth in shareholder value by increasing sales and profits above
our market growth rates. We have seven strategic priorities to help
us achieve this objective:
-- Grow market share in Profiles
-- Expand the branch network
-- Increase the use of recycled materials
-- Deliver sustained operational excellence
-- Develop innovative new products
-- Explore potential bolt-on acquisition opportunities
-- Develop a sector-leading digital proposition
We have made good progress with our strategic priorities in H1,
with the key aspects described throughout this report.
Sustainability strategy and KPIs
Earlier this year we announced the intention to develop our
sustainability strategy for the whole business.
Our objective is to continue to improve the sustainability of
the Group. We have defined a suite of environmental and social
targets and KPIs against which to measure our progress, which are
set out in the following table.
Central to our environmental targets, which cover both the
circular economy as well as emissions and energy management, is
reducing the carbon footprint of the business and our products. Our
social objectives are broad and cover areas such as health &
safety, diversity and education. In addition to the matters covered
by these KPIs, we are progressing similar work on related topics
such as transport emissions, employee well-being and community
engagement. Our objectives align well with several relevant UN
Sustainable Development Goals, as well the UK's transition towards
a net zero carbon economy. We intend to report our progress against
these KPIs on an annual basis.
KPI 2020 Base Target
Environmental - circular economy
Recycled material used % used 25% 1% increase per
in production year
------------------------------- ------------------------------- ----------------- -----------------------
CO(2) saved by recycling Tonnes saved 36kt Year-on-year increase
operation
------------------------------- ------------------------------- ----------------- -----------------------
Waste recycled % recycled 79% Year-on-year increase
------------------------------- ------------------------------- ----------------- -----------------------
Environmental - emissions and
energy management
Greenhouse gas (GHG) emissions GHG intensity ratio 70t CO(2) / GBPm 5% reduction by
sales 2025
------------------------------- ------------------------------- ----------------- -----------------------
Energy consumption Energy use intensity 267 MWh / GBPm 5% reduction by
ratio sales 2025
------------------------------- ------------------------------- ----------------- -----------------------
Renewable energy Renewable energy used 19% total energy 50% increase by
2025
------------------------------- ----------------- -----------------------
Social
Health & safety Lost Time Injury Rate 0.7 per 100,000 50% reduction
hours by 2025
------------------------------- ------------------------------- ----------------- -----------------------
Employee engagement & Labour turnover 21% Year-on-year reduction
recruitment
------------------------------- ------------------------------- ----------------- -----------------------
Employee satisfaction Annual survey response 60% and 78% Year-on-year increase
rate and overall satisfaction
level
------------------------------- ------------------------------- ----------------- -----------------------
Diversity Female employees 13% Year-on-year increase
------------------------------- ------------------------------- ----------------- -----------------------
Remuneration National Living Wage All employees All employees
(NLW) at or above NLW above NLW by
2023
------------------------------- ------------------------------- ----------------- -----------------------
Education Apprenticeships / 32 20% increase by
Kickstarters 2025
------------------------------- ----------------- -----------------------
Recycling
Our KPIs recognise the breadth of the sustainability, or
Environmental, Social and Governance ('ESG') agenda. Increasing our
use of recycled PVC compound in the manufacture of co-extruded
rigid profiles has and will always be at the heart of
sustainability for Eurocell.
Expanding recycling improves product and business
sustainability, with less plastic going to landfill. Closed-loop
recycling (where windows being replaced are recycled into the new
product) is attractive to decision makers such as local authorities
and architects, which helps us develop tight specifications for our
products. Recycling also increases our profits, because the cost of
recycled compound is typically lower through the cycle than the
price of virgin material, and it reduces our exposure to volatile
commodity prices. This is particularly important at the moment,
with the price of virgin resin reaching historic high levels in
2021.
We have been investing to increase our recycling capability
through the expansion of our two market-leading recycling plants
and by investment in new co-extrusion tooling, which allows a
greater proportion of recycled material to be used in our
products.
We have become the leading UK-based recycler of PVC windows. As
well as keeping pace with increased demand, we have continued to
improve the proportion of recycled material consumed in our primary
extrusion operations. Usage increased from 9% of materials consumed
(or 4.1k tonnes) in 2015 to 25% of consumption (or 12.4k tonnes) in
2020. In doing so, in 2020 we saved the equivalent of c.3 million
window frames from landfill and estimate that overall our recycling
operation saved approximately 36k tonnes of carbon in the year
compared to the use of virgin PVC (equivalent to the annual CO(2)
output of over 6,000 UK homes).
We have made further progress in H1 2021, with usage increasing
to 28% of materials consumed (or 8.5k tonnes), compared to 26% (or
4.7k tonnes) in H1 2020 and 22% (or 6.4k tonnes) in H1 2019. In
addition, substantially all scrap generated in extrusion is
recycled back into our production processes, further reducing waste
sent to landfill.
OPERATIONAL PERFORMANCE
Health & safety
The safety and well-being of our employees and contractors is
our first operational priority and we continue to maintain a good
safety performance, with safe working practices for COVID-19
operating well across the business.
Our Lost Time Injury Rate ('LTIR') was 0.7 in H1 2021, compared
to 0.7 and 0.9 for the whole of 2020 and 2019 respectively. There
were no major injuries and 8 minor injuries reported under the
Reporting of Injuries, Diseases and Dangerous Occurrences
Regulations 2013 (RIDDOR) in the period (full year 2020 and 2019:
19 and 17 minor injuries respectively).
Production
In the first half of 2021 we manufactured approximately 28.5k
tonnes of rigid and foam PVC profiles, 72% higher than H1 2020 and
7% above H1 2019. This reflects the sales for each period, as well
as, in 2019, higher production to increase stock holding at our
branches and to mitigate the possibility of raw material supply
interruption due to Brexit. Overall Equipment Effectiveness ('OEE',
a measure which takes into account machine availability,
performance and yield) was 73% in H1 2021, (full year 2020 and
2019: 75% and 73% respectively), with the latter part of H1 2021
impacted by labour availability (see below).
Raw material supply chain, labour and transport
Strong demand in our markets has put sector supply chains under
pressure, and this shows no sign of abating. We are experiencing
tighter supply and an inflationary environment, with prices of
certain raw materials, particularly PVC resin, rising significantly
in 2021.
To date we have secured most of the raw materials we require,
and we are mitigating cost inflation with selling price increases
and a surcharge adjusted monthly in response to price changes.
Higher resin costs are also partially offset by our market-leading
recycling plants. As described above, these plants supplied a
record 28% of our raw material consumption in the first half, which
drives a substantial cost saving of c.GBP4 million compared to the
cost of virgin material.
Availability of the incremental operational labour we need to
service strong demand is very tight. We have also experienced an
elevated level of absence since June, due to employees being
required to self-isolate. In addition, in the light of a
well-publicised shortage of HGV drivers in the UK, our outsourced
transport provider has faced challenges providing the required
number of vehicles to service higher than expected sales.
PROFILES DIVISION REVIEW
Profiles strategy
In 2018 we became the leading supplier of rigid PVC profile to
the UK market, with a share of c.15%. We continue to consolidate
our position and believe we now have a share of around 18%. Our
strategic objective is to increase this to >20% over the next
few years.
There is a compelling case for larger trade fabricators to
switch to Eurocell. This includes a strong product range and
continued product development e.g. better aesthetics (such as flush
windows), a more contemporary look to roofing and door products and
improved environmental characteristics. In addition, the benefits
of pull-through profile and hardware specifications and increasing
opportunities to supply our branches, all delivered via improving
service, remain attractive to prospective fabricator accounts.
In the Profiles division, new build represents approximately
one-third of sales. Expanding our share of the new build market has
been a key driver of recent growth, driven by sales of cavity
closures where we are the clear market leader, and we believe
favourable market dynamics are set to continue. We have strong
relationships with large and medium-sized housebuilders, maintained
by our specification and technical teams. Building regulations for
windows are becoming increasingly complicated and our technical
teams are working with our larger customers to enable them to
conform to the regulations, including development of new product
applications to meet changing requirements. In addition, with a
focus on sustainability, we believe our use of recycled material is
becoming increasingly attractive to housebuilders.
In the commercial sector, energy efficiency and lower cost
underpin a strong case for the benefits of using PVC profile over
aluminium, particularly in sub-sectors such as private rentals,
build-to-rent, purpose-built student accommodation, education and
local authority refurbishment - all habitual users of
aluminium.
Profiles summary income statement
H1 2021 H1 2020 Change H1 2019 Change
GBPm GBPm % GBPm %
------------------------------------ ------- ------- ------ ------- ------
Third-party revenue 68.5 36.4 88 57.6 19
Inter-segmental revenue 35.9 19.0 89 28.2 27
------------------------------------ ------- ------- ------ ------- ------
Total revenue 104.4 55.4 88 85.8 22
------------------------------------ ------- ------- ------ ------- ------
Operating profit/(loss) 11.6 (10.1) n/a 10.2 14
------------------------------------ ------- ------- ------ ------- ------
Adjusted operating profit/(loss)(1) 11.6 (2.3) n/a 10.2 14
------------------------------------ ------- ------- ------ ------- ------
(1) Before non-underlying items (see alternative performance measures).
Third-party revenue for H1 was GBP68.5 million, 88% higher than
H1 2020 and 19% up on H1 2019. We have seen good contributions from
trade fabricators, who are substantially focused on the RMI market,
and a very strong performance from Vista doors. New build has also
enjoyed good sales, with increasing housing market activity
supported by continued high levels of mortgage approvals and
demand.
During the last four years we have added c.75 new accounts, and
our prospect pipeline remains good.
Adjusted operating profit for H1 was GBP11.6 million, up GBP1.4
million on H1 2019 as a result of increased sales volumes and the
impact of operational gearing. The adjusted operating loss in H1
2020 of GBP2.3 million reflects the impact of the first UK COVID-19
lockdown and is stated net of support received under the
Coronavirus Job Retention Scheme (GBP3.4 million), partly offset by
an increase to the IFRS 9 impairment charge (bad debts) in respect
of certain fabricator customers (GBP1.6 million).
BUILDING PLASTICS DIVISION REVIEW
Building Plastics strategy
Our strategic objective for Building Plastics is to achieve
world class operations from 270-300 sites. The growth will come
mostly from independent operators, who currently have more than 80%
market share.
Our goal is to be recognised as first for service for the
tradesperson, seamlessly connecting the customer shopping journey
from online through to the branches, with clear data-driven
customer engagement plans (including targeting lapsed customers)
and through the development of a sector-leading digital
platform.
In terms of products, we intend to create the market leading
proposition, including a redesigned best in class conservatory
offering, and to exploit a significant market opportunity to extend
our outdoor living product range, including decking, fencing and
garden rooms.
In the existing estate, we are now testing an improved format
for standard size branches, which better showcases the breadth of
our range. We will also continue to identify opportunities for
large format stores, with an expanded trade counter and
showroom-style displays designed to engage customers and drive
big-ticket purchases, such as windows and doors. This follows
successful trials of this format in 2019/20.
We also continue to test an opportunity to develop and implement
a sector-leading consumer online windows and doors proposition,
using the branch network to provide infrastructure where needed
(e.g. delivery point for installers). We began a trial in the North
West in H2 2020 and will provide an update on our progress at the
end of this year. This proposition aligns well with our commercial
strategy of continuing to create pull-through demand for our
products.
Building Plastics summary income statement
H1 2021 H1 2020 Change H1 2019 Change
GBPm GBPm % GBPm %
Third-party revenue 99.6 57.2 74 78.7 27
Inter-segmental revenue 0.7 0.5 40 0.7 -
Total revenue 100.3 57.7 74 79.4 26
------------------------ ------- ------- ------ ------- ------
Operating profit/(loss) 6.1 (4.0) n/a 3.4 79
Third-party revenue for H1 was GBP99.6 million, 74% higher than
H1 2020 and 27% up on H1 2019, equivalent to like-for-like sales
growth of 23% on 2019, representing a strong performance across our
full range of own-manufactured products and traded goods.
Like-for-like excludes acquisitions and new branches opened in
2019/20/21.
We opened 4 new standard format branches in the first half, and
we plan to open a further 8 new sites in H2, 4 of which are the new
larger format. We are also making good progress reducing the time
taken to reach break-even in new stores. At 30 June 2021, w e had a
total of 212 branches providing national coverage across the UK,
which offers a significant competitive advantage. Branches opened
in 2019/20/21 added GBP2.4 million to sales in H1 2021.
Operating profit for H1 was GBP6.1 million, compared to GBP3.4
million in H1 2019, driven by strong sales and good cost control.
The operating loss in H1 2020 of GBP4.0 million reflects the impact
of the first UK COVID-19 lockdown and is stated net of support
received under the Coronavirus Job Retention Scheme (GBP2.9
million) and retail grants / business rates relief (GBP1.0
million), offset by an increase to the IFRS 9 impairment charge
(bad debts) to reflect higher risk in the Building Plastics
receivables book (GBP1.3 million).
OUTLOOK
We entered 2021 well placed to take advantage of the continued
recovery in our markets and we have delivered strong financial
results for H1.
A very good sales performance has been underpinned by the
success of our commercial strategies and high levels of demand in
the RMI market. We believe we are also continuing to take market
share.
Although high demand has put sector supply chains under
pressure, to date we have secured most of the raw materials we
require, and we are mitigating cost inflation with selling price
increases, a surcharge and through our market-leading recycling
plants. As a result, we are very pleased to report strong profit
growth for the first half and to confirm a return to dividend
payments.
Trading performance in July and August has continued to be
robust. With the industry close to capacity and lead times growing,
we are becoming more confident that these market conditions will
continue for the foreseeable future. Reflecting these factors, and
notwithstanding very tight supply chains, labour and transport
availability, the Board is now again raising its expectations for
the full year.
Mark Kelly
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
H1 2021 H1 2020 H1 2019
GBPm GBPm GBPm
------------------------------------------------------ ------- ------- -------
Revenue 168.1 93.6 136.3
Gross profit 84.4 43.8 69.7
Gross margin % 50.2% 46.8% 51.1%
Overheads (58.3) (38.4) (49.8)
IFRS 9 impairments 0.5 (2.9) -
------------------------------------------------------ ------- ------- -------
Adjusted(1) EBITDA 26.6 2.5 19.9
Depreciation and amortisation (11.3) (9.9) (8.6)
------------------------------------------------------ ------- ------- -------
Adjusted(1) operating profit/(loss) 15.3 (7.4) 11.3
Finance costs (1.1) (1.2) (0.9)
------------------------------------------------------ ------- ------- -------
Adjusted(1) profit/(loss) before tax 14.2 (8.6) 10.4
Tax (3.2) 3.3 (1.7)
Adjusted(1) profit/(loss) after tax 11.0 (5.3) 8.7
Adjusted(1) basic earnings/(losses) per share (pence) 9.9 (5.0) 8.7
------------------------------------------------------ ------- ------- -------
Non-underlying items - (7.9) -
Tax on non-underlying items - 1.5 -
------------------------------------------------------ ------- ------- -------
Reported profit/(loss) before tax 14.2 (16.5) 10.4
Reported profit/(loss) after tax 11.0 (11.7) 8.7
Total basic earnings/(losses) per share (pence) 9.9 (11.1) 8.7
------------------------------------------------------ ------- ------- -------
(1) See alternative performance measures.
INTRODUCTION
Our financial performance in 2020 reflected the major impact of
COVID-19 on the first half, when the business reported a loss for
the period. However, the decisive actions taken at the outset of
the pandemic secured our financial position, underpinning a good
recovery and financial performance in H2 2020. Subsequently, our
continued focus on mitigating inflation, controlling costs,
preserving cash and improving liquidity, have allowed the business
to capitalise on the continued recovery in the RMI market and
report strong financial results for H1 2021.
REVENUE
Revenue for H1 was GBP168.1 million, 80% higher than H1 2020
(GBP93.6 million) and 23% up on H1 2019 (GBP136.3 million). This is
equivalent to like-for-like sales growth of 21% compared to 2019,
representing a strong performance right across the business.
Like-for-like excludes acquisitions and new branches opened in
2019/20/21.
Sales growth compared to 2019 includes approximately 5% from
selling price increases implemented during February and a surcharge
levied progressively from April, to mitigate raw material price
inflation (see below).
GROSS MARGIN
Our gross margin was 50.2% in H1, up from 46.8% in H1 2020,
reflecting increased production volumes and therefore a better
recovery of direct costs.
Gross margin reduced from 51.1% in H1 2019 due to the impact of
raw material cost increases. We are experiencing an inflationary
environment, with prices for certain raw materials, particularly
PVC resin increasing significantly in 2021. We are mitigating
higher costs with selling price increases, a surcharge adjusted
monthly in response to price changes and through our market-leading
recycling plants. The surcharge has successfully recovered most of
the higher material costs, and is therefore broadly neutral to
profit, but it is dilutive to the margin percentage.
DISTRIBUTION AND ADMINISTRATIVE EXPENSES (OVERHEADS)
Underlying overheads for H1 were GBP 58.3 million, 52% higher
than H1 2020 (GBP38.4 million) and 17% up on H1 2019 (GBP49.8
million), reflecting higher production and sales volumes.
Overheads in H1 2020 include COVID-related UK Government support
of GBP7.3 million, comprising receipts under the Job Retention
Scheme of GBP6.3 million, retail grants of GBP0.7 million and
retail rates relief of GBP0.3 million. Overheads in H1 2021 include
retail rates relief of GBP1.0 million.
IFRS 9 IMPAIRMENTS
The first COVID-19 lockdown had a significant impact on our
customers, with several finding it difficult to bring their
accounts into terms. We assessed the level of credit risk to have
increased materially as a direct impact of COVID. As a result, IFRS
9 impairment charges of GBP2.9 million were reflected in the
underlying income statement in H1 2020.
Subsequently, cash receipts have been good and the ageing
profile in our ledgers has improved, and consequently an IFRS 9
credit of GBP0.5 million has been recorded in H1 2021.
DEPRECIATION AND AMORTISATION (D&A)
D&A for H1 was GBP 11.3 million, compared to an underlying
charge of GBP9.9 million in H1 2020 (reported: GBP10.4 million) and
GBP8.6 million in H1 2019.
ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are used alongside statutory
measures to facilitate a better understanding of financial
performance and comparison with prior periods, and in order to
provide audited financial information against which the Group's
bank covenants, which are all measured on a pre-IFRS 16 basis, can
be assessed.
Adjusted EBITDA, adjusted operating profit and adjusted profit
before tax all exclude non-underlying items. Adjusted profit after
tax and adjusted earnings per share exclude non-underlying items
and the related tax effect.
Pre-IFRS 16 EBITDA is stated inclusive of operating lease
rentals under IAS 17 Leases. Pre-IFRS 16 net debt is defined as
total borrowings and lease liabilities less cash and cash
equivalents, excluding the impact of IFRS 16 Leases.
We classify some material items of income and expense as
non-underlying when the nature and infrequency merit separate
presentation. Alongside statutory measures, this facilitates a
better understanding of financial performance and comparison with
prior periods.
NON-UNDERLYING ITEMS
No non-underlying items were recognised in H1 2021 and H1
2019.
Non-underlying items for H1 2020 of GBP7.9 million includes a
non-cash goodwill impairment charge of GBP5.8 million, a trade
receivable impairment charge of GBP0.8 million, a right-of use
asset impairment charge of GBP0.5 million and warehouse
dual-running costs of GBP0.8 million.
FINANCE COSTS AND TAXATION
Finance costs for H1 were GBP 1.1 million (H1 2020: GBP1.2
million).
A tax charge of GBP3.2 million was recognised for H1 (H1 2020:
tax credit of GBP4.8 million). The effective tax rate on the profit
before tax for H1 2021 of 22% is higher than the standard
corporation tax rate of 19% for the period due to the impact of the
change in the standard rate that will take effect in 2023 on the
measurement of deferred taxes, offset by the benefit of Patent Box
relief. The effective tax credit rate on the loss before tax of H1
2020 of 29% was greater than the standard rate of 19%, due to the
benefit of Patent Box relief.
PROFIT/(LOSS) BEFORE TAX AND EARNINGS/(LOSSES) PER SHARE
Adjusted and reported profit before tax for H1 was GBP14.2
million, compared to an adjusted loss before tax of GBP8.6 million
in H1 2020 and an adjusted and reported profit before tax of
GBP10.4 million in H1 2019. Improved profits compared to 2019
reflect higher volumes and the impact of operational gearing. The
reported loss before tax for H1 2020 was GBP16.5 million.
Adjusted and reported basic earnings per share for H1 were 9.9
pence (H1 2020: adjusted losses per share of 5.0 pence; reported
basic losses per share 11.1 pence and H1 2019: adjusted and
reported basic earnings per share 8.7 pence). Diluted earnings per
share for H1 2021 were 9.8 pence. For H1 2020 losses per share,
share options are not considered to have a dilutive effect.
DIVIDS
On 2 September 2021, the Board approved an interim dividend for
the six months ended 30 June 2021 of 3.2 pence per share (GBP3.6
million). No dividends were paid in respect of 2020. The interim
dividend for 2019 was 3.2 pence per share (GBP3.2 million).
The interim dividend will be paid on 8 October 2021 to
shareholders on the register at the close of business at 17
September 2021 and shares will be marked ex-dividend on 16
September 2021. We will now revert to a dividend cover target of 2x
through the cycle, with approximately one-third of the total paid
as an interim.
CAPITAL EXPITURE
Capital expenditure for H1 2021 was GBP7.3 million (H1 2020:
GBP4.6 million). 2021 includes c.GBP1 million for the new warehouse
and c.GBP2 million to expand extrusion capacity across a number of
key product lines. Other capital expenditure in the period of
c.GBP4 million includes recycling, new / refurbished branches, IT
and maintenance capex.
CASH FLOW
Net cash generated from operating activities was GBP 24.2
million for the period, compared to GBP4.8 million in H1 2020.
This includes a net outflow from working capital for H1 2021 of
GBP 0.9 million, comprised of an increase in stocks (GBP3.1
million), an increase in trade and other receivables (GBP9.6
million) and an increase in trade and other payables (GBP11.8
million). This compares to a net inflow from working capital of
GBP4.8 million in H1 2020. It also includes net tax paid of GBP1.9
million (H1 2020: GBP1.9 million). Higher stocks, receivables and
payables reflect our strong trading performance and
seasonality.
Other items include payments for capital investments of GBP7.3
million (H1 2020: GBP4.9 million) and financing costs of GBP0.3
million (H1 2020: GBP0.5 million).
No dividends were paid in either period.
The principal elements of lease payments of GBP5.0 million (H1
2020: GBP5.3 million) are presented within cash flows arising from
financing activities. The finance elements of lease payments were
GBP0.6 million (H1 2020: GBP0.7 million).
NET DEBT
Net cash on a pre-IFRS 16 basis at 30 June 2021 was GBP1.3
million (30 June 2020: net debt GBP23.5 million, 31 December 2020:
net debt GBP9.9 million). Reported net debt on a post-IFRS 16 basis
at 30 June 2021 was GBP52.3 million (30 June 2020: GBP75.6 million,
31 December 2020: GBP58.3 million).
BANK FACILITIES
We have an unsecured Revolving Credit Facility ('RCF') of GBP75
million which matures in 2023. In 2020 we converted the facility
into a Sustainable RCF, where modest adjustments to the margin will
be applied based on our achievement against annual recycling
targets. We were pleased to meet our target for 2020, and plan to
invest the interest saved in sustainability-related
initiatives.
We operate comfortably within the terms of the facility and in
compliance with our financial covenants, which are measured on a
pre-IFRS 16 basis.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group are set
out in the 2020 Annual Report (pages 58-62). These risks remain
unchanged and are as follows:
-- Macroeconomic conditions
-- Cyber security
-- Regulatory risks, including health & safety
-- Raw material supply
-- Raw material and traded goods prices
-- Customer credit risk
-- Sustainability
-- Manufacturing capacity constraints
-- Warehousing and distribution capacity constraints
-- Unplanned plant downtime
-- Ability to attract and retain key personnel and highly skilled individuals
-- Shortages or increased costs of appropriately skilled labour
-- Failure to develop new products
-- Competitor activity
-- Failure to identify, complete and integrate acquisitions
-- Digital and IT systems development
Michael Scott
Chief Financial Officer
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF
YEAR REPORT
We confirm that to the best of the Directors' knowledge:
-- The condensed set of financial statements has been prepared
in accordance with UK-adopted International Accounting Standard 34
and;
-- The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last Annual Report that could do so.
By Order of the Board
Mark Kelly Michael Scott
Chief Executive Officer Chief Financial Officer
2 September 2021 2 September 2021
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2021
Six months ended Six months ended Year ended
30 June 2021 30 June 2020 31 December 2020
(Unaudited) (Unaudited) (Audited)
(1) (1) (1)
Underlying Non-underlying Total Underlying Non-underlying Total Underlying Non-underlying Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 5 168.1 - 168.1 93.6 - 93.6 257.9 - 257.9
Cost of sales (83.7) - (83.7) (49.8) - (49.8) (130.5) - (130.5)
Gross profit 84.4 - 84.4 43.8 - 43.8 127.4 - 127.4
Distribution costs (10.6) - (10.6) (6.5) - (6.5) (15.8) - (15.8)
Administrative
expenses (59.0) - (59.0) (41.8) (1.3) (43.1) (97.6) (3.8) (101.4)
Impairment of
goodwill(2) - - - - (5.8) (5.8) - (5.8) (5.8)
IFRS 9
impairments(2) 0.5 - 0.5 (2.9) (0.8) (3.7) (3.7) - (3.7)
Operating
profit/(loss) 5 15.3 - 15.3 (7.4) (7.9) (15.3) 10.3 (9.6) 0.7
Finance expense (1.1) - (1.1) (1.2) - (1.2) (1.8) (0.4) (2.2)
Profit/(loss)
before tax 14.2 - 14.2 (8.6) (7.9) (16.5) 8.5 (10.0) (1.5)
Taxation 7 (3.2) - (3.2) 3.3 1.5 4.8 (1.5) 0.8 (0.7)
Profit/(loss) for
the
period and total
comprehensive
income 11.0 - 11.0 (5.3) (6.4) (11.7) 7.0 (9.2) (2.2)
------------------- ----- ----------- --------------- ------- ----------- --------------- -------- ----------- --------------- --------
Basic
earnings/(losses)
per share 8 9.9p 9.9p (5.0)p (11.1)p 6.5p (2.0)p
Diluted
earnings/(losses)
per share 8 9.8p 9.8p (5.0)p (11.1)p 6.5p (2.0)p
------------------- ----- ----------- --------------- ------- ----------- --------------- -------- ----------- --------------- --------
(1) Non-underlying items are detailed in Note 6.
(2) The impairment of goodwill and IFRS 9 impairments have been
disclosed on the face of the Consolidated Statement of
Comprehensive Income due to the material nature of the charges.
CONDENSED COnsolidated Statement of Financial Position
As at 30 June 2021
30 June 2021 30 June 2020 31 December 2020
(Unaudited) (Unaudited) (Audited)
Note GBPm GBPm GBPm
------------------------------------------------------ ---- ------------ ------------ ----------------
Assets
Non-current assets
Property, plant and equipment 9 54.0 45.4 50.8
Right-of-use assets 9 50.9 50.1 47.0
Intangible assets 9 19.0 20.4 19.9
Total non-current assets 123.9 115.9 117.7
------------------------------------------------------ ---- ------------ ------------ ----------------
Current assets
Inventories 41.2 33.9 38.1
Trade and other receivables 47.9 32.6 38.5
Corporation tax 0.1 4.5 -
Cash and cash equivalents 7.9 2.9 7.1
Total current assets 97.1 73.9 83.7
------------------------------------------------------ ---- ------------ ------------ ----------------
Total assets 221.0 189.8 201.4
------------------------------------------------------ ---- ------------ ------------ ----------------
Liabilities
Current liabilities
Trade and other payables (54.8) (31.4) (42.8)
Lease liabilities (9.9) (9.4) (8.9)
Bank overdrafts - - (4.5)
Provisions (0.5) (0.6) (0.8)
Corporation tax - - (0.7)
Total current liabilities (65.2) (41.4) (57.7)
------------------------------------------------------ ---- ------------ ------------ ----------------
Non-current liabilities
Borrowings (6.6) (26.4) (12.5)
Trade and other payables (0.3) (0.1) (0.3)
Lease liabilities (43.7) (42.7) (39.5)
Provisions (0.6) (0.6) (0.7)
Deferred tax (5.6) (2.1) (3.5)
Total non-current liabilities (56.8) (71.9) (56.5)
------------------------------------------------------ ---- ------------ ------------ ----------------
Total liabilities (122.0) (113.3) (114.2)
------------------------------------------------------ ---- ------------ ------------ ----------------
Net assets 99.0 76.5 87.2
------------------------------------------------------ ---- ------------ ------------ ----------------
Equity attributable to equity holders of the Parent
Share capital 0.1 0.1 0.1
Share premium account 21.5 20.0 21.1
Share-based payment reserve 1.0 0.6 0.5
Retained earnings 76.4 55.8 65.5
Total equity 99.0 76.5 87.2
------------------------------------------------------ ---- ------------ ------------ ----------------
CONDENSED Consolidated Cash Flow Statement
For the period ended 30 June 2021
Six months ended 30 June Six months ended 30 June Year
2021 2020 ended 31 December 2020
(Unaudited) (Unaudited) (Audited)
Note GBPm GBPm GBPm
---------------------------- ---- --------------------------- ---------------------------- -----------------------
Cash generated from
operations 11 26.1 6.7 33.9
Income taxes paid (1.9) (1.9) (1.0)
Net cash generated from
operating activities 24.2 4.8 32.9
Investing activities
Purchase of property, plant
and equipment (7.0) (4.9) (13.8)
Purchase of intangible
assets (0.3) - (0.2)
Net cash used in investing
activities (7.3) (4.9) (14.0)
Financing activities
Proceeds from issue of
ordinary share capital 0.3 17.6 19.2
Costs relating to the
issuance of new shares - - (0.5)
Repayment of bank borrowings (6.0) (13.0) (27.2)
Principal elements of lease
payments (5.0) (5.3) (10.7)
Finance elements of lease
payments (0.6) (0.7) (1.3)
Finance expense paid (0.3) (0.5) (0.7)
Net cash used in financing
activities (11.6) (1.9) (21.2)
Net increase/(decrease) in
cash and cash equivalents 5.3 (2.0) (2.3)
---------------------------- ---- --------------------------- ---------------------------- -----------------------
Cash and cash equivalents at
beginning of period 2.6 4.9 4.9
Cash and cash equivalents at
end of period 7.9 2.9 2.6
---------------------------- ---- --------------------------- ---------------------------- -----------------------
CONDENSED Consolidated Statement of Changes in Equity
Share Share-based
For the six months ended
30 June 2021 (Unaudited) Share premium payment Retained Total
capital account reserve earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------- ------- ------- ----------- -------- ------
Balance at 1 January 2021 0.1 21.1 0.5 65.5 87.2
Comprehensive income for the period
Profit for the period - - - 11.0 11.0
Total comprehensive income for the period - - - 11.0 11.0
Contributions by and distributions to owners
Share capital issued - - - - -
Share-based payments - - 0.7 - 0.7
Exercise of share options - 0.4 (0.2) (0.1) 0.1
Total transactions with owners recognised directly in equity - 0.4 0.5 (0.1) 0.8
------------------------------------------------------------- ------- ------- ----------- -------- ------
Balance at 30 June 2021 0.1 21.5 1.0 76.4 99.0
------------------------------------------------------------- ------- ------- ----------- -------- ------
Share Share-based
For the six months ended
30 June 2020 (Unaudited) Share premium payment Retained Total
capital account reserve earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------- ------- ------- ----------- -------- ------
Balance at 1 January 2020 0.1 2.4 0.9 67.1 70.5
Comprehensive expense for the period
Loss for the period - - - (11.7) (11.7)
Total comprehensive expense for the period - - - (11.7) (11.7)
Contributions by and distributions to owners
Share capital issued - 17.1 - - 17.1
Exercise of share options - 0.5 (0.4) 0.4 0.5
Deferred tax on share-based payments - - 0.1 - 0.1
Total transactions with owners recognised directly in equity - 17.6 (0.3) 0.4 17.7
------------------------------------------------------------- ------- ------- ----------- -------- ------
Balance at 30 June 2020 0.1 20.0 0.6 55.8 76.5
------------------------------------------------------------- ------- ------- ----------- -------- ------
Share Share-based
For the year ended
31 December 2020 (Audited) Share premium payment Retained Total
capital account reserve earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------- ------- ------- ----------- -------- ------
Balance at 1 January 2020 0.1 2.4 0.9 67.1 70.5
Comprehensive expense for the year
Loss for the year - - - (2.2) (2.2)
Total comprehensive expense for the year - - - (2.2) (2.2)
Contributions by and distributions to owners
Share capital issued - 17.1 - - 17.1
Exercise of share options - 1.6 (0.6) 0.6 1.6
Share-based payments - - 0.3 - 0.3
Deferred tax on share-based payments - - (0.1) - (0.1)
Total transactions with owners recognised directly in equity - 18.7 (0.4) 0.6 18.9
------------------------------------------------------------- ------- ------- ----------- -------- ------
Balance at 31 December 2020 0.1 21.1 0.5 65.5 87.2
------------------------------------------------------------- ------- ------- ----------- -------- ------
1 GENERAL INFORMATION AND BASIS OF PREPARATION
Eurocell plc (the 'Company') and its subsidiaries (together the
'Group') is a publicly listed company incorporated and domiciled in
the United Kingdom. The registered office is Eurocell Head Office
and Distribution Centre, High View Road, South Normanton, Alfreton,
Derbyshire, DE55 2DT.
The Group is principally engaged in the extrusion of PVC window
and building products to the new and replacement window market and
the sale of building materials across the UK.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
international accounting standards, with future changes being
subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK-adopted international accounting standards in
its consolidated financial statements on 1 January 2021. There were
no changes in accounting policies arising from the transition, and
therefore no impact on recognition, measurement or disclosure in
the periods reported.
The half year report for the six months ended 30 June 2021
reflects the results of the Company and its subsidiaries. It has
been prepared in accordance with UK-adopted IAS 34 Interim
Financial Reporting and the Disclosure and Transparency rules of
the United Kingdom's Financial Conduct Authority, and includes the
condensed consolidated interim financial statements (the 'interim
financial statements').
The interim financial statements do not constitute statutory
accounts as defined in Section 434 of the Companies Act 2006. They
do not include all the information required for full financial
statements and should be read in conjunction with the 2020 Annual
Report, which was prepared in accordance with IFRS in conformity
with the requirements of the Companies Act 2006 and IFRS adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
The comparative figures for the year ended 31 December 2020 have
been extracted from the Group's audited financial statements for
that year. Those financial statements are included in the 2020
Annual Report and have been delivered to the Registrar of
Companies. The auditor's report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their audit report,
and (iii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006.
The interim financial statements are unaudited, but have been
reviewed by the auditors in accordance with the Auditing Practices
Board guidance on Review of Interim Financial Information.
The half year report was approved by the Board of Directors on 2
September 2021.
2 GOING CONCERN
The interim financial statements have been prepared on a going
concern basis.
The Group funds its activities through a GBP75 million Revolving
Credit Facility, provided by Barclays and HSBC, which matures in
December 2023. The facility includes two key financial covenants,
which are tested at 30 June and 31 December on a pre-IFRS 16 basis.
These are that net debt should not exceed 3 times adjusted EBITDA
(Leverage), and that adjusted EBITDA should be at least 4 times the
interest charge on the debt (Interest Cover).
At 30 June 2021 the Group has complied with all of its
covenants, and it expects to do so for the next measurement period,
being 31 December 2021, and going forward.
In assessing going concern, the Directors have considered
financial projections for the period to December 2023, which is
consistent with the Board's strategic planning horizons and
reflects a period of at least 12 months from the date of approval
of these interim financial statements. These forecasts have been
compiled based on the best estimates of our commercial and
operational teams. The various scenarios take into consideration a
wide range of severe but plausible downside risk factors, such as a
sustained period of lower sales and severe cost price inflation
that cannot be recovered in the form of price increases. In all
scenarios tested, the Group operates with significant headroom on
its RCF facility and remains compliant with its covenants.
After reviewing the Group's projected financial performance and
financing arrangements, the Directors consider that the Group has
adequate resources to continue operating and that it is therefore
appropriate to continue to adopt the going concern basis in
preparing this half year report.
3 ACCOUNTING POLICIES AND ESTIMATES
The interim financial statements have been prepared in
accordance with the accounting policies and presentation that were
applied in the Group's audited financial statements for the year
ended 31 December 2020.
The following new standards, amendments or interpretations have
been adopted by the Group, with no material impact:
-- Amendments to IFRS 16 - COVID-19-related Rent Concessions; and
-- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 -
Interest Rate Benchmark Reform, Phase 2.
In regard to interest rate reform, the Group has agreed with the
lenders of its Revolving Credit Facility to transition from the
current reference rate (LIBOR) to SONIA before the end of 2021. As
there are historical differences between the two rates, a fixed
credit-adjustment spread has been agreed, which aligns very closely
the future reference rate with current LIBOR rates. The Group
expects there to be no material impact on the future interest
charge as a result of this change.
IAS 12 Income Taxes (effective from 1 January 2023) is not
expected to have a material impact on the Group's future financial
statements.
The Group does not intend to adopt any standard, revision or
amendment before the required implementation date.
Critical accounting estimates and judgements
The preparation of the interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expenses. The
significant judgements, estimates and assumptions relevant to the
preparation of the interim financial statements are consistent with
those described on pages 127 to 129 of the 2020 Annual Report.
4 FINANCIAL INSTRUMENTS
The Group is exposed to financial risks through its use of the
following financial instruments:
-- Trade and other receivables;
-- Cash and cash equivalents;
-- Trade and other payables;
-- Bank overdrafts;
-- Floating-rate bank loans; and
-- Lease liabilities
The relevant financial risks are: credit risk, market risk,
foreign exchange risk and liquidity risk.
The Group estimates that the fair value of these financial
assets and liabilities is approximate to their carrying amount.
Further information in relation to the Group's exposure to
financial risks is included on pages 129 to 132 of the 2020 Annual
Report.
5 SEGMENTAL INFORMATION
The Group organises itself into a number of operating segments
that offer different products and services. They are managed
separately because each business requires different technology and
marketing strategies. Internal reporting provided to the chief
operating decision-maker, which has been identified as the
executive management team including the Chief Executive Officer and
the Chief Financial Officer, reflects this structure.
The Group has aggregated its operating segments into three
reported segments, as these business units have similar products,
production processes, types of customer, methods of distribution,
regulatory environments and economic characteristics:
-- Profiles - extrusion and sale of PVC window and building
products to the new and replacement window market across the UK.
This segment includes Vista Panels, S&S Plastics and Eurocell
Recycle North.
-- Building Plastics - sale of building plastic materials across
the UK. This segment includes Security
Hardware, Kent Building Plastics and Trimseal.
-- Corporate - represents costs relating to the ultimate parent
company and includes amortisation in
respect of acquired intangible assets.
Inter-segmental sales, which are eliminated on consolidation,
are transacted on an arm's-length basis and relate to manufactured
products distributed by the Building Plastics division.
Six months ended 30 June 2021 (Unaudited) Building
Profiles Plastics Corporate Total
GBPm GBPm GBPm GBPm
---------------------------------------------- -------- -------- --------- ------
Revenue
Total revenue 104.4 100.3 - 204.7
Inter-segmental revenue (35.9) (0.7) - (36.6)
Total revenue from external customers 68.5 99.6 - 168.1
---------------------------------------------- -------- -------- --------- ------
Adjusted EBITDA 16.9 9.5 0.2 26.6
Amortisation of intangible assets - - (1.2) (1.2)
Depreciation of property, plant and equipment (3.0) (0.5) (0.3) (3.8)
Depreciation of right-of-use assets (2.3) (2.9) (1.1) (6.3)
Operating profit/(loss) 11.6 6.1 (2.4) 15.3
---------------------------------------------- -------- -------- --------- ------
Finance expense (1.1)
Profit before tax 14.2
---------------------------------------------- -------- -------- --------- ------
Six months ended 30 June 2020 (Unaudited) Building
Profiles Plastics Corporate Total
GBPm GBPm GBPm GBPm
---------------------------------------------- -------- -------- --------- ------
Revenue
Total revenue 55.4 57.7 - 113.1
Inter-segmental revenue (19.0) (0.5) - (19.5)
Total revenue from external customers 36.4 57.2 - 93.6
---------------------------------------------- -------- -------- --------- ------
Adjusted EBITDA (1) 1.9 (0.6) 1.2 2.5
Amortisation of intangible assets - - (0.8) (0.8)
Depreciation of property, plant and equipment (2.5) (0.5) (0.4) (3.4)
Depreciation of right-of-use assets (1.7) (2.9) (1.1) (5.7)
Adjusted operating loss (2.3) (4.0) (1.1) (7.4)
---------------------------------------------- -------- -------- --------- ------
Impairment of goodwill (5.8) - - (5.8)
Non-underlying operating expenses (2.0) - (0.1) (2.1)
Operating loss (10.1) (4.0) (1.2) (15.3)
---------------------------------------------- -------- -------- --------- ------
Finance expense (1.2)
Loss before tax (16.5)
---------------------------------------------- -------- -------- --------- ------
(1) Included within adjusted EBITDA are IFRS 9 impairment and
bad debt charges of GBP2.9 million (Profiles GBP1.6 million;
Building Plastics GBP1.3 million).
Year ended 31 December 2020 (Audited) Profiles Building Plastics Corporate Total
GBPm GBPm GBPm GBPm
---------------------------------------------- -------- ----------------- --------- ------
Revenue
Total revenue 156.1 159.5 - 315.6
Inter-segmental revenue (56.4) (1.3) - (57.7)
Total revenue from external customers 99.7 158.2 - 257.9
---------------------------------------------- -------- ----------------- --------- ------
Adjusted EBITDA(2) 16.5 12.7 0.6 29.8
Amortisation of intangible assets - - (1.6) (1.6)
Depreciation of property, plant and equipment (5.1) (1.1) (0.6) (6.8)
Depreciation of right-of-use assets (3.5) (7.6) - (11.1)
Adjusted operating profit 7.9 4.0 (1.6) 10.3
---------------------------------------------- -------- ----------------- --------- ------
Impairment of goodwill (5.8) - - (5.8)
Non-underlying operating expenses (3.1) (0.6) (0.1) (3.8)
Operating (loss)/profit (1.0) 3.4 (1.7) 0.7
Finance expense (2.2)
Loss before tax (1.5)
---------------------------------------------- -------- ----------------- --------- ------
(2) Included within adjusted EBITDA are IFRS 9 impairment and
bad debt charges of GBP3.7 million (Profiles GBP1.7 million;
Building Plastics GBP2.0 million).
Building
As at 30 June 2021 (Unaudited) Profiles Plastics Corporate Total
GBPm GBPm GBPm GBPm
------------------------------- -------- -------- --------- -------
Segment assets 133.8 74.1 13.1 221.0
Segment liabilities (61.3) (40.4) (8.1) (109.8)
Borrowings (6.6)
Deferred tax (5.6)
Total liabilities (122.0)
------------------------------- -------- -------- --------- -------
Total net assets 99.0
------------------------------- -------- -------- --------- -------
As at 30 June 2020 (Unaudited) Building
Profiles Plastics Corporate Total
GBPm GBPm GBPm GBPm
------------------------------- -------- -------- --------- -------
Segment assets 107.2 66.5 16.1 189.8
Segment liabilities (47.9) (34.3) (2.6) (84.8)
Borrowings (26.4)
Deferred tax (2.1)
Total liabilities (113.3)
------------------------------- -------- -------- --------- -------
Total net assets 76.5
------------------------------- -------- -------- --------- -------
As at 31 December 2020 (Audited) Building
Profiles Plastics Corporate Total
GBPm GBPm GBPm GBPm
--------------------------------- -------- --------- --------- -------
Segment assets 110.9 59.6 30.9 201.4
Segment liabilities (57.6) (32.9) (7.0) (97.5)
Borrowings (12.5)
Corporation tax (0.7)
Deferred tax (3.5)
Total liabilities (114.2)
--------------------------------- -------- --------- --------- -------
Total net assets 87.2
--------------------------------- -------- --------- --------- -------
Six months ended Six months ended Year ended
30 June 2021 30 June 2020 31 December 2020
(Unaudited) (Unaudited) (Audited)
Revenue Non-current assets Revenue Non-current assets Revenue Non-current assets
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- -------- ------------------- -------- ------------------- -------- -------------------
United Kingdom 167.5 123.9 93.1 115.9 256.3 117.7
Republic of Ireland 0.6 - 0.5 - 1.6 -
Total 168.1 123.9 93.6 115.9 257.9 117.7
--------------------- -------- ------------------- -------- ------------------- -------- -------------------
As at 30 June 2021 the Group employed 2,035 people in the UK,
and 8 people in the Republic of Ireland.
6 NON-UNDERLYING ITEMS
There are no non-underlying items included in the Condensed
Consolidated Statement of Comprehensive Income in 2021.
The following non-underlying items were recorded in 2020:
Six months ended Year ended
30 June 2020 31 December 2020
GBPm GBPm
---------------------------------- ---------------- ------------------
Impairment of goodwill 5.8 5.8
Impairment of right-of-use assets 0.5 0.9
Impairment of trade receivables 0.8 -
Warehouse dual-running costs 0.8 2.3
Restructuring costs - 0.6
Non-underlying operating expenses 7.9 9.6
Finance expense - 0.4
Total non-underlying expenses 7.9 10.0
Tax on non-underlying expenses (1.5) (0.8)
Impact on profit after tax 6.4 9.2
---------------------------------- ---------------- ------------------
Goodwill impairment charge
The goodwill in respect of Eurocell Recycle North ('ERN',
formerly Ecoplas) was impaired in full in 2020, leading to a
non-underlying charge of GBP5.8m. This charge arose as a result of
lower projected short-term cash flows than previously expected,
reflecting the impact of COVID-19 on selling prices, customer
demand and production volumes (and therefore profitability) of the
ERN Cash Generating Unit.
Right-of-use assets impairment charge
Right-of-use assets impairment charges were made in respect of a
small number of loss-making branches and a number of leased assets
no longer required following transition to the new warehouse. In
total, right-of-use asset impairment charges amounted to GBP0.9
million in 2020.
Warehouse dual-running costs
In January 2020 the Group entered into a lease arrangement for a
new warehouse and head office facility close to its primary
manufacturing operations. The warehouse was fitted-out during the
year, and was brought into active service in early 2021. Certain
costs incurred during the fit-out process in 2020, such as IFRS 16
lease charges (including the related IFRS 16 finance expense),
rates and other property-related costs were classified as
non-underlying, as the warehouse was not operational in 2020, and
therefore not contributing to the underlying performance of the
business in that period.
Restructuring costs
Restructuring costs in 2020 relate to redundancies, with 35
roles impacted at a one-off cost of GBP0.6 million in the second
half of 2020. These costs were classified as non-underlying as they
related to roles that no longer exist within the organisation and
therefore would not re-occur in future reporting periods.
7 TAXATION
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
--------------------------------------- ------------ ------------ ------------
Current tax
Current tax on profit/(loss) for the
period 1.1 (4.4) (0.1)
Adjustments in respect of prior years - - -
Total current tax expense/(credit) 1.1 (4.4) (0.1)
--------------------------------------- ------------ ------------ ------------
Deferred tax
Origination and reversal of temporary
differences 1.1 (0.4) 0.5
Adjustment in respect of change in
rates 1.0 - 0.1
Adjustment in respect of prior years - - 0.2
Total deferred tax 2.1 (0.4) 0.8
--------------------------------------- ------------ ------------ ------------
Total tax expense/(credit) 3.2 (4.8) 0.7
--------------------------------------- ------------ ------------ ------------
The reasons for the difference between the actual tax charge for
the period and the standard rate of corporation tax in the United
Kingdom applied to profits for the period are as follows:
Six months Six months Year
ended Ended ended
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
---------------------------------------------------------------------------- ------------ ------------ ------------
Profit/(loss) before tax 14.2 (16.5) (1.5)
Expected tax expense/(credit) based on the standard rate of corporation tax
in the UK of 19%
(2020: 19%) 2.7 (3.1) (0.3)
Expenses not deductible for tax purposes (0.2) (1.1) 0.4
Impairment of goodwill not deductible for tax purposes - - 1.1
Patent Box claim (0.3) (0.4) (0.7)
Adjustments to tax charge in respect of prior years - - 0.2
Tax on share-based payments recognised in equity - (0.1) (0.1)
Adjustment in respect of change in rates 1.0 (0.1) 0.1
Total tax expense/(credit) 3.2 (4.8) 0.7
---------------------------------------------------------------------------- ------------ ------------ ------------
Changes in tax rates and factors affecting the future tax
charge
An increase in the mainstream rate of UK corporation tax from
19% to 25% from April 2023 was enacted during 2021. Consequently,
deferred taxes at the period end have been re-measured using the
higher rate and reflected in the interim financial statements.
In calculating the half year tax charge, the expected effective
tax rate for the full year has been applied to the half year
underlying profit, with the exception of the remeasurement of
deferred tax liabilities, which has been applied in full.
Tax included in Other Comprehensive Income
The tax credit arising on share-based payments within Other
Comprehensive Income is GBPnil (H1 2020: GBPnil; FY 2020:
GBP110,000).
Based on the current investment plans of the Group, and assuming
the rates of capital allowances on capital expenditure continue
into the future, there is little prospect of any significant part
of the deferred tax liability becoming payable over the next three
years.
8 EARNINGS/(LOSSES) PER SHARE
Basic earnings/(losses) per share is calculated by dividing the
net profit/(loss) for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the period. Diluted earnings per share is
calculated by adjusting the earnings and number of shares for the
effects of dilutive options. In the event that a loss is recorded
for the period, share options are not considered to have a dilutive
effect.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
---------------------------------------------------------------- ------------ ------------ ------------
Total profit/(loss) attributable to ordinary shareholders 11.0 (11.7) (2.2)
Underlying profit/(loss) attributable to ordinary shareholders 11.0 (5.3) 7.0
Number Number Number
---------------------------------------------------------------- ------------ ------------ ------------
Weighted average number of shares- basic 111,538,140 105,431,314 108,218,827
Weighted average number of shares- diluted 112,057,161 105,431,314 108,218,827
---------------------------------------------------------------- ------------ ------------ ------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
Pence Pence Pence
------------------------------------------------ ------------ ------------ ------------
Basic earnings/(losses) per share 9.9 (11.1) (2.0)
Underlying basic earnings/(losses) per share 9.9 (5.0) 6.5
Diluted earnings/(losses) per share 9.8 (11.1) (2.0)
Underlying diluted earnings/(losses) per share 9.8 (5.0) 6.5
------------------------------------------------ ------------ ------------ ------------
9 NON-CURRENT ASSETS (Unaudited)
Property, plant and equipment Right-of-use assets Intangible assets
GBPm GBPm GBPm
----------------------------------- ------------------------------ -------------------- ------------------
At 31 December 2020 50.8 47.0 19.9
Additions 7.0 10.5 0.3
Impairment of right-of-use assets - (0.1) -
Disposals - (0.2) -
Depreciation and amortisation (3.8) (6.3) (1.2)
At 30 June 2021 54.0 50.9 19.0
----------------------------------- ------------------------------ -------------------- ------------------
10 DIVIDENDS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
-------------------------------------------- ------------ ------------ ------------
Dividends proposed
Interim dividend for H1 2021 3.2p per share 3.6 - -
3.6 - -
-------------------------------------------- ------------ ------------ ------------
No dividends have been paid to date in 2021, and none were paid
in 2020.
11 RECONCILIATION OF PROFIT/(LOSS) AFTER TAX TO CASH GENERATED
FROM OPERATIONS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
---------------------------------------------------- ------------ ------------ ------------
Profit/(loss) after tax 11.0 (11.7) (2.2)
Taxation 3.2 (4.8) 0.7
Finance expense 1.1 1.2 2.2
Operating profit/(loss) 15.3 (15.3) 0.7
Adjustments for:
Depreciation of property, plant and equipment 3.8 3.4 6.8
Depreciation of right-of-use assets 6.3 6.2 12.4
Amortisation of intangible assets 1.2 0.8 1.6
Impairment of goodwill - 5.8 5.8
Impairment of right-of-use assets 0.1 0.5 0.9
Share-based payments 0.7 - 0.3
(Increase)/decrease in inventories (3.1) 3.4 (0.8)
(Increase)/decrease in trade and other receivables (9.6) 8.6 2.4
Increase/(decrease) in trade and other payables 11.8 (7.2) 3.1
(Decrease)/increase in provisions (0.4) 0.5 0.7
Cash generated from operations 26.1 6.7 33.9
---------------------------------------------------- ------------ ------------ ------------
12 RELATED PARTY TRANSACTIONS
The remuneration of Executive and Non-executive Directors is
disclosed in the 2020 Annual Report.
Transactions with key management personnel
Kellmann Recruitment Limited is controlled by T Kelly, a close
family member of M Kelly who is a Director of Eurocell plc. The
following amounts were paid to Kellman Recruitment for services
provided during the period:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
----------------------------------------------------- ------------ ------------ ------------
Kellmann Recruitment Limited - recruitment services 60 25 48
----------------------------------------------------- ------------ ------------ ------------
Amounts outstanding at the period end were GBP23,000 (H1 2020:
GBPnil; 31 December 2020: GBP3,000).
13 CAPITAL COMMITMENTS
The Group is committed to a further c.GBP5 million of capital
investment in 2021.
14 EVENTS AFTER THE BALANCE SHEET DATE
The Directors are not aware of any material events that have
occurred after 30 June 2021 which would require disclosure under
IAS 10.
Independent Review Report to Eurocell plc
Report on the Condensed Consolidated Interim Financial
Statements
Our conclusion
We have reviewed Eurocell plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
Half Year Report of Eurocell plc for the 6 month period ended 30
June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- The condensed consolidated statement of financial position as at 30 June 2021;
-- The condensed consolidated statement of comprehensive income for the period then ended;
-- The condensed consolidated cash flow statement for the period then ended;
-- The condensed consolidated statement of changes in equity for the period then ended; and
-- The explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Report of Eurocell plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The Half Year Report, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Half
Year Report in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Report based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
2 September 2021
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END
IR UPUUWBUPGPUP
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September 03, 2021 02:00 ET (06:00 GMT)
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