TIDMHEAD
RNS Number : 5559R
Headlam Group PLC
09 March 2021
9 March 2021
Headlam Group plc
('Headlam', the 'Company' or the 'Group')
Final Results
Strong and sustained recovery in H2 2020
Headlam Group plc (LSE: HEAD), Europe's leading floorcoverings
distributor, today announces its final results for the year ended
31 December 2020.
2020 Overview
Financials
-- Total revenue only 15.3% below 2019 at GBP609.2 million (2019:
GBP719.2 million), a strong recovery from the 30.6% below
in the first-half
-- Underlying(1) profit before tax of GBP15.9 million (2019:
GBP39.5 million), representing a strong reversal of the first-half
underlying(1) loss before tax of GBP1.2 million
-- Statutory loss before tax of GBP17.1 million (2019: GBP35.2
million profit), reflecting a significant level of non-underlying
items, the vast majority having arisen as a direct consequence
of COVID-19 and being non-cash in nature
-- Highly cash generative during the year despite the initial
impact of COVID-19, with an increase in cash of GBP27.0 million
(2019: GBP10.2 million decrease) and in part reflects the
actions taken to preserve Balance Sheet strength
-- Average net debt(2) for the year of GBP8.6 million (2019:
GBP3.3 million), a material reduction on the first-half average
net debt(2) of GBP35.3 million
-- Net funds position (excluding lease liabilities) of GBP51.6
million as at 31 December 2020 (2019: GBP27.0 million), which
included the benefit of GBP12.0 million of deferred VAT payable
by 31 March 2021
-- Net funds as at 31 December 2020 after the impact of IFRS
16 'Leases' of GBP8.3 million (2019: GBP17.6 million net
debt)
Operational
-- Following the extensive temporary closures during the second-quarter
due to COVID-19, operations remained open throughout the
second-half with strong recovery in demand
-- Many mitigating actions put in place against the impact of
COVID-19, including the acceleration of certain projects
under the Operational Improvement Programme ('OIP')
-- Opening of new regional distribution centre in Ipswich improving
service to customers throughout the South East of England,
and enabling commencement of network consolidation activities
-- Accelerated OIP now anticipated to generate a net benefit
in excess of GBP4 million in 2021, rising to in excess of
GBP8 million in 2022
2021 Activity
-- Two new key projects under the OIP being launched, and which
will help more quickly realise revenue benefits and cost
base improvements
-- Trading in January and February 2021, typically the quietest
trading months, soft given lockdowns and non-essential retail
businesses being closed. The busier months ahead to benefit
from easing of restrictions, reopening of retail businesses,
and the OIP improving performance and revenue growth opportunities
-- Environmental, Social and Governance ('ESG') Strategy being
published in May 2021, with a Capital Markets Day to be held
in July 2021 to provide more detail on ESG Strategy and the
OIP
-- Resumption of dividend payments, with a nominal ordinary
dividend of 2 pence per share to be paid in May 2021 reflecting
the Board's confidence in the future prospects for the business
Steve Wilson, Chief Executive, said:
"The Company's financial performance in 2020 was pleasing given
the backdrop created by COVID-19, and demonstrated the resilience
of the business. Much was achieved operationally despite the
disruption caused, and the Company has entered 2021 a stronger
business as a result of ongoing mitigating actions against the
impact of COVID-19 and an accelerated Operational Improvement
Programme which is giving rise to meaningful benefits."
A video of the Company's final results presentation is available
to view here: http://bit.ly/HEAD_FY20_results
The presentation, and video, is also available on the Company's
website: www.headlam.com
(1) Underlying is before non-underlying items, which includes
amortisation of acquired intangible assets, impairment of goodwill,
acquisition related fees, movements in deferred and contingent
consideration, finance costs on deferred and contingent
consideration, business restructuring costs, and non-recurring
pension costs in relation to guaranteed minimum pension
equalisation.
(2) Average net debt is calculated by aggregating the net debt
position, excluding the impact of IFRS 16 'Leases', for each
business day and dividing by the total number of business days.
Enquiries:
Headlam Group plc Tel: 01675 433 000
Steve Wilson, Chief Executive Email: headlamgroup@headlam.com
Chris Payne, Chief Financial
Officer
Catherine Miles, Director of
Communications
Investec Bank plc (Corporate Tel: 020 7597 5970
Broker)
David Flin / Alex Wright
Panmure Gordon (UK) Limited Tel: 020 7886 2500
(Corporate Broker)
Erik Anderson / Dominic Morley
/ Ailsa MacMaster
Alma PR (Financial PR) Tel: 020 3405 0205
Susie Hudson / Harriet Jackson headlam@almapr.co.uk
/ Faye Calow
Notes for Editors:
Headlam is Europe's leading floorcoverings distributor,
providing the channel between suppliers and trade
customers of floorcoverings.
Headlam works with suppliers across the globe manufacturing a
diverse range of floorcovering products, and provides them with a
cost efficient and effective route to market for their products
into the highly fragmented customer base. Alongside
long-established processing and distribution expertise, suppliers
benefit from Headlam's marketing and customer servicing into the
most extensive customer base.
To maximise customer reach, Headlam operates 67 businesses
across the UK and Continental Europe (France, the Netherlands and
Switzerland). Each business operates under its own trade brand and
utilises individual sales teams while being supported by the
Company's network and centralised resources.
The Company's customer base covers both the residential and
commercial sectors, with the principal customer groups being
independent retailers and smaller flooring contractors alongside
other groups such as larger retailers, housebuilders, specifiers,
and local authorities.
Headlam is focused on providing customers with a market-leading
service through:
-- the broadest product offering;
-- unrivalled product knowledge and tailored solutions;
-- sales team and marketing support;
-- e-commerce support;
-- 'just-in-time' nationwide delivery and collection service; and
-- other support including the provision of credit.
Chairman's Statement
2020 was a challenging year, but one in which the Company took
important steps to make itself more successful. Following the
significant impact of COVID-19 on trading in Q2 2020, when the vast
majority of the Company's operations were temporarily closed, the
second-half was characterised by a strong and sustained recovery.
This demonstrated the resilience of our business, the commitment
and tenacity of our people, and our ability to support customers
during a difficult period.
The swift decisions and actions taken by the Company enabled the
safety and protection of our people, and preserved the financial
stability of the business during a critical period. The focus on
supporting the wellbeing of our people has never been more
important, with a COVID-19 Secure workplace, improved
communications, an assistance programme, and the provision of an
enhanced form of the UK Government's Coronavirus Job Retention
Scheme having all contributed to supporting our people during the
period.
A positive arising from a hugely difficult year, is that the
Board believes the Company has entered 2021 a stronger business.
Ongoing mitigating actions against the impact of COVID-19,
including a more centralised approach to the management of costs;
accelerated projects under the Operational Improvement Programme
('OIP'); and improved levels of stakeholder engagement will more
effectively support the future success of the Company.
Since its instigation, the OIP has necessitated considerable
planning and engagement with our people. This process has been
vital to ensuring its effective implementation, the limiting of
risk, and maximising the upside of the opportunities. With the
considerable work undertaken in recent years and during 2020,
despite the operational disruption caused by the impact of
COVID-19, the Company has a clear roadmap to achieving the
associated operational and financial improvements, with the
ambition of achieving a 7.5% UK operating margin run-rate during
2023.
The implementation of the OIP increases the sustainability of
the Company by improving the relevance of the business model as
well as revenue growth opportunities. Sustainability will be
further enhanced through the introduction of a concerted ESG
(Environmental, Social and Governance) Strategy during 2021. This
Strategy, to be published in May 2021 at the same time as the
Company's Annual General Meeting, will detail the Company's
approach to addressing its significant ESG-related opportunities
and risks, with associated KPIs to measure performance going
forward. The Company intends to provide detail on its ESG Strategy
and the OIP, including the newly introduced projects for 2021, as
detailed in the Chief Executive's Review, at a Capital Markets Day
to be held in July 2021 at its new regional distribution centre in
Ipswich. If circumstances do not permit physical attendance, the
Company will provide a virtual presentation.
COVID-19 underscored the necessity of maintaining a strong
balance sheet throughout the economic cycle, and following
consultation the Board articulated this within its Capital
Allocation Priorities which were detailed in the January 2021
Pre-Close Trading Update announcement. Based upon a prioritised low
average net debt(2) position, the Company is focused on growth
investment and returns to shareholders. Ordinary dividends were
suspended following the emergence of COVID-19 because of the
unknown duration of the pandemic, and impact on demand and cash
flow. However, with the strong recovery in trading during the
second-half of 2020, and the Board's confidence in the future
prospects for the business, the Board has elected to resume the
payment of dividends with a nominal ordinary dividend of 2 pence
per share to be paid in May 2021. The Board is committed to
providing dividend income for shareholders, with an interim
dividend in respect of 2021 currently anticipated to be made, and a
return to dividend payments based on earnings is anticipated next
year.
As announced in December 2020, Alison Littley will be stepping
down from the Board as a Non-Executive Director on 31 March 2021,
and we wish to thank her for her valuable contribution, including
her oversight and development of the Company's Remuneration Policy
in her role as Chair of the Remuneration Committee. To bring
further skills on to the Board, and increase oversight of the
Company's strategic and corporate aims, the Board has announced its
intention to appoint two new Non-Executive Directors during 2021,
with the independent search process progressing well.
The Board would finally, and most importantly, like to thank and
recognise the huge commitment and resilience our people have shown
throughout 2020 and into 2021, and the support and understanding of
all our stakeholders. Difficult decisions had to be made during
2020, but the Company is stronger for it with a clear ambition, and
is now in a position to more positively impact all its stakeholders
going forward.
Philip Lawrence
Non-Executive Chairman
9 March 2021
Chief Executive's Review
2020 Financial Performance
The Group's revenue profile during 2020 can be categorised into
three parts. The first-quarter of the year evidenced consistency,
being broadly in-line with the equivalent prior year period. The
second-quarter was significantly impacted by the emergence of the
COVID-19 pandemic, as detailed below, and the second-half was then
characterised by a strong and sustained recovery to comparable 2019
levels.
As a consequence, first-half revenue was down materially on the
same period in the prior year, being 30.6% below. However, the
recovered performance in the second-half led to total revenue for
the year being only 15.3% below 2019 at GBP609.2 million (2019:
GBP719.2 million).
This pleasing performance, given the backdrop created by
COVID-19, was principally due to:
-- following the extensive closures during the second-quarter,
the Company's UK operations remaining open throughout the
second-half of the year and during lockdown periods;
-- the responses and mitigating actions put in place, as described below; and
-- an exceptional performance from the UK residential sector in
the second-half despite ongoing restrictions and lockdown
periods.
UK revenue was down 17.3% on the year at GBP504.7 million, with
the second-half residential performance not able to fully recover
its shortfall in the first-half, and the commercial sector being
materially down for the whole year, albeit with an improvement in
the second-half. On the Continent, revenue for the collective four
businesses was down only 4.1% on the year at GBP104.5 million with
robust performances in Switzerland and the Netherlands helping to
offset weakness in France, which was subject to lockdown measures
similar to the UK. Further detail on revenue and segmental
performance is given in the Financial Review.
Total underlying(1) profit before tax for the year was GBP15.9
million (2019: GBP39.5 million), representing a strong reversal
from the GBP1.2 million underlying(1) loss before tax reported in
the first-half. The Company has reported a statutory loss before
tax of GBP17.1 million for the year (2019: GBP35.2 million profit).
As highlighted in the September 2020 interim results announcement,
this reflects a significant level of non-underlying items during
the year, with the vast majority having arisen as a direct
consequence of the impact of COVID-19 and being non-cash in nature.
These items are fully detailed in the Financial Review.
Impact of COVID-19 and Mitigating Actions
As previously detailed in the interim results announcement,
below is a summary of the timeline of events, responses, and
mitigating actions taken as a consequence of COVID-19:
-- The vast majority of the Company ' s UK operations
temporarily closed on 24 March 2020 following the UK Government
guidance issued. The Company then took a demand-led and phased
approach to the reopening of its UK operations while becoming
COVID-19 Secure, which was fully implemented in June 2020. By the
end of the first-half, the Company was operating on a largely
normalised basis.
-- Overheads were reduced and managed to materially lower levels
following the impact of COVID-19. Strict centralised controls were
put in place to ensure operating costs were aligned with the
recovering revenue profile; product purchasing was limited to
specific projects or orders; and non-essential operational and
capital spend was deferred.
-- Certain projects forming part of the Operational Improvement
Programme ('OIP') were accelerated to help more quickly realise
revenue benefits and cost base improvements, and mitigate against
potential COVID-19 related reduction in demand going forward.
-- Other continuing actions include: COVID-19 Secure strictly
adhered to, enabling continuation of operations; more centralised
approach to managing overheads and operating costs; improved
contingency plans; new infrastructure in place, including to
support increased working-from-home; improvements to the trade
counter network to support increased 'click and collect' activity;
and product purchasing in-line with customer demand.
Strategy
Whilst COVID-19 has caused many disruptions and changes to
operating practices, some temporary and others perhaps becoming the
new normal, it has demonstrated the validity of the Company's
strategic aims and the associated developments to the business
model. These strategic aims are centred around improvement, and
increasing the success and sustainability of the business
through:
-- broadening and growing in the industry;
-- improving operational and financial performance; and
-- investing in the business, people, and the customer service proposition.
A key enabler of the strategic aims is the OIP, with its
progress described in detail below. Many of the projects also
support the anticipated and accelerated changes brought about by
COVID-19, including ongoing changes to customers ordering and
interaction preferences, and the increased importance of
communication and culture.
Employee Wellbeing and Support
Throughout the period, the safety and protection of employees,
customers and necessary visitors to sites has remained the
Company's absolute priority. Alongside being COVID-19 Secure, the
Company has issued a COVID-19 Secure Pack detailing all the
guidance for employees to follow as well as the support available,
and this continues to be updated as necessary and used in
conjunction with employee briefings and ongoing site audits.
Furthermore, employees are now working from home where they are
able to do so, and investment has been made in infrastructure to
support the increased need for home-working.
In addition to protection and safety, the Company increased and
improved its internal communications during the year. This was
already being instigated following recommendations arising from a
Culture Capture exercise undertaken before the impact of COVID-19,
but was accelerated following its emergence. An important component
of these improved communications is the 'MyHub' engagement portal
which is being launched during March 2021, and provides dedicated
communications, support, and recognition for employees, and,
importantly, features a specific 'wellbeing' section.
Operational Improvement Programme ('OIP')
The primary projects of focus during 2020 under the OIP
were:
-- Transport Integration focused around more effective delivery fleet utilisation;
-- Network Consolidation with the enabler being the opening of
the new regional distribution centre in Ipswich;
-- Increased E-commerce Capabilities to better support customers; and
-- An enhanced Trade Counter Proposition to capture more revenue opportunity.
Against the backdrop of COVID-19, the Company took the
opportunity to accelerate the roll-out of the Transport Integration
project which centres around the elimination of duplicated delivery
routes by different Company businesses, and enables an enhancement
to customer service, improved operating and financial performance,
and reduction in environmental impact through fewer vehicles needed
to service individual areas. By the beginning of November 2020, the
project had been successfully implemented over approximately 25% of
the Company's UK deliveries, and the roll-out will continue as
planned in 2021 aligned with the network consolidation activity
detailed below. Full national roll-out is on-track to be complete
by early Q4 2021.
The new regional distribution centre in Ipswich opened in July
2020 after a COVID-19 related delay to the commissioning of plant
and equipment. In September 2020, the Company was able to commence
the employee engagement and operational activities relating to the
planned consolidation of businesses and parts of the Company's
network into the centre during 2020 and the first-half of 2021. The
consolidation which is enabling a simplification of the network,
delivery of meaningful overhead and operating cost efficiencies,
and improved service to customers throughout the South East of
England is progressing to plan. Seven sites and / or businesses
have already been consolidated into Ipswich, with the remaining one
on-track to be complete by 30 June 2021.
Together, the Network Consolidation and Transport Integration
projects detailed above are expected to generate net cost savings
in excess of GBP4 million per annum from 2022.
Enhancing e-commerce capabilities was a focus in the year, and
many of the improvements made have additionally helped support
customers more effectively against the backdrop of COVID-19. One
key activity was the relaunch of the B2B websites with improved
functionality, making it easier for customers to place and track
orders, and additionally advise on availability with their
customers. Since their launch, there has been a material increase
in the usage of the B2B websites and the number of orders being
placed on-line. There was also ongoing development of e-commerce
infrastructure to better support larger retailers who typically
require more systems integration, and increased digitalisation of
processes across the business including paperless invoicing.
The Company has an established trade counter network of 53 UK
sites, which have been particularly beneficial since the impact of
COVID-19 and able to support the increased need and preference for
'click and collect'. During 2020, the Company finalised its plans
to enhance the existing trade counter network and both develop and
expand the national footprint, thereby allowing it to capture more
revenue opportunity and reduce delivery costs through increased
collections. The 'blueprint' format, established following customer
insight work, will broaden the offering to all trade customers with
flooring needs, and supports the Company's strategic aim of
broadening its customer base. By the end of 2021, it is anticipated
that there will be 10 sites in the new 'blueprint' . With an
accelerating roll-out of the proposition from 2022, a national
network of up to 90 sites is currently envisaged by 2025.
Following extensive planning, two new key projects are now being
launched this year. These alongside the other ongoing projects will
help more quickly realise revenue benefits and cost base
improvements, and increase the mitigation against potential
reduction in demand due to the ongoing impact and consequences of
COVID-19.
The first project centres around Buying, and incorporates a more
strategic group-level approach to product purchasing and ranging,
and an increased partnership approach with suppliers. This will
increase the benefit to both the Company and the supplier through
improving supply chain efficiencies, including in the areas of
production scheduling, buying and deliveries. The Company has
already commenced joint business plans with suppliers and
product-specific tender processes, which will be rolled-out.
Alongside other benefits, these will reduce the number of SKUs and
create warehouse capacity.
The second key project is Customer Focus, and follows from the
outputs of the customer insight and segmentation work undertaken in
2020, with the resulting work-streams covering:
-- Sales Force Effectiveness;
-- Tailored Service Propositions to specific customer groups
which will broaden the customer base; and
-- Key Account Management of larger retailers and other
customers such as housebuilders and contractors.
Collectively they will improve the customer service proposition,
maximise revenue growth opportunities, and enable the Company's
customer-facing activities to become more efficient and
effective.
After all restructuring and delivery costs, and applying prudent
revenue growth expectations given the COVID-19 backdrop, the OIP as
a whole is anticipated to generate a net benefit in excess of GBP4
million in 2021, rising to over GBP8 million in 2022, with the
ambition of achieving a 7.5% UK operating margin run-rate during
2023 (unless exceptional or unforeseen circumstances prevail).
The Company has also commenced consultation on restructuring
proposals this month to more effectively align overall headcount
with the trading volumes experienced outside of the busier trading
months when less resource is required to support operations.
Dividend
As detailed in the Chairman's Statement, given the recovered
performance in the second-half of the year, the preservation of
balance sheet strength supported by the mitigating actions, and
confidence in future prospects underpinned by the OIP, the Company
will be paying a nominal ordinary dividend of 2 pence per share in
May 2021. Details of the payment, alongside the payment timetable
for future dividends, are given in the Financial Review.
Brexit and Purchasing
Pleasingly, and as a result of its preparatory work, the Company
has continued to experience very limited disruption to product flow
to-date from the EU following Brexit, and has continued to purchase
product in-line with customer demand. Currently product purchases
from suppliers in the EU account for approximately 57% of total
purchases, UK 33%, and the rest of the world 10% (based on actual
purchase prices from suppliers), with the Company having accounts
with over 180 suppliers.
Environmental, Social and Governance ('ESG')
The Company has and is continuing to effectively address many
key ESG issues, however, the publication of the ESG Strategy Report
in May 2021 will allow an improved focus on, and measurement of,
the Company's progress in addressing its significant ESG-related
risks and opportunities. A Materiality Assessment, prepared in
conjunction with a specialist ESG consultancy and following
engagement with representatives from internal and external
stakeholder groups, will be published in the forthcoming 2020
Annual Report and Accounts. Following on from the ESG Report's
publication, the Company will provide an update on progress on a
bi-annual basis.
Current Trading
January and February are always typically the Company's quietest
trading months. Given lockdowns and non-essential retail businesses
being closed across the majority of the Company's operations during
January and February 2021, trading was soft in those two months.
The Company is looking forward to the busier months with the
benefit of lockdown restrictions easing, retail businesses
re-opening, and the OIP improving performance and revenue growth
opportunities.
Principal Risks and Uncertainties
During the year the Board carried out a robust assessment of the
emerging and principal risks facing the Company, including those
that would threaten its business model, future performance,
solvency or liquidity. The events of the year, including COVID-19
which significantly impacted the Company's operations, marketplace
and people, has resulted in one new Principal Risk and updates to
the Board's assessment of the level of risk for certain of the
Principal Risks detailed within the 2019 Annual Report and
Accounts. No Principal Risk from the 2019 Annual Reports and
Accounts has been deleted.
The new Principal Risk, and those Principal Risks where the
assessment of the level of risk has been updated, are as
follows:
-- Market demand - increased risk, due to the global economic
downturn and recessionary environments caused by COVID-19, and
which is likely to have an impact on market demand for an unknown
duration
-- IT resilience and cyber security - increased risk, due to
COVID-19 highlighting some resourcing capacity restraints and lack
of flexibility of the existing IT infrastructure
-- Health and safety - increased risk, due to COVID-19
introducing a considerable new risk to keeping people healthy and
safe in the workplace
-- Supply chain (incorporating Brexit) - decreased risk, because
while Brexit has increased administration, tariffs and the
likelihood of extended supply chain timelines which may affect the
Company's ability to service customers in a timely manner, as
reported above the Company has experienced very limited disruption
to product flow to-date from the EU following Brexit
-- Change and decision making - new risk, due to the impact of
COVID-19 requiring the Company to make a number of material
decisions in a limited timeframe, and during the year certain
projects under the OIP were accelerated increasing the level of
change and decision making in the organisation
Accordingly, the 2020 Annual Report and Accounts will report
Principal Risks, including the mitigating actions taken against
them, under the following headings (not given in order of
significance): Market demand; Competitor risk; IT resilience and
cyber security; People; Health and safety; Supply chain
(incorporating Brexit); Legislation and regulation; Environmental;
and Change and decision making.
Statement of Directors' Responsibilities in respect of the
financial statements
The 2020 Annual Report and Accounts which will be issued in
March 2021, contains a responsibility statement in compliance with
DTR 4.1.12 of the Listing Rules which sets out that as at the date
of approval of this final results announcement and 2020 Annual
Report and Accounts on 9 March 2021, the Board of Directors confirm
to the best of their knowledge:
-- The Group and unconsolidated Company financial statements,
prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group and Company, and
the undertakings included in the consolidation taken as a whole;
and
-- the performance review contained in the final results
announcement and Annual Report and Accounts includes a fair review
of the development and performance of the business and the position
of the Group and the undertakings including the consolidation taken
as a whole, together with a description of the principal risks and
uncertainties they face.
Steve Wilson
Chief Executive
9 March 2021
Financial Review
Revenue
As detailed in the Chief Executive's Review, total revenue was
down 15.3% at GBP609.2 million, with the UK down 17.3% and
Continental Europe down 4.1% at GBP504.7 million and GBP104.5
million respectively, and the UK accounting for 82.8% of total
revenue in the year (2019: 84.8%).
Within the UK revenue performance, the residential sector
declined by 10.8% and the commercial sector by 29.5%. However, this
overall year performance masks the fact that the second-half
represented a material improvement on the first-half in both
sectors, with second-half UK residential revenue up 9.3% and
commercial revenue down 20.9% compared with the second-half of
2019. In the year, the residential sector accounted for an
increased 70.2% of UK revenue (2019: 65.1%).
Continental Europe performed markedly better than the UK owing
to less overall COVID-19 related restrictions. While commercial
sector revenue declined by 9.4%, residential sector revenue was
flat on the previous year and accounted for 58.4% of total
Continental European revenue (2019: 56.0%).
As a consequence of the above performances, the residential
sector accounted for a much increased 68.2% of total revenue in the
year (2019: 63.7%).
GBPM % GBPM %
--------------------------------------- ------- ------ ------- -------
Revenue for the year ended 31 December
2019
UK 610.2 84.8
Continental Europe 109.0 15.2
--------------------------------------- ------- ------ ------- -------
719.2 100.0
--------------------------------------- ------- ------ ------- -------
Incremental items during the 12-month
period to 31 December 2020
UK:
Like-for-like(3) (115.5) (18.9)
Changes in working days 4.0 0.6
Acquisitions 6.0 1.0
--------------------------------------- ------- ------ ------- -------
(105.5) (17.3)
--------------------------------------- ------- ------ ------- -------
Continental Europe:
Like-for-like(3) (7.5) (6.9)
Changes in working days 0.5 0.5
Translation effect 2.5 2.3
--------------------------------------- ------- ------ ------- -------
(4.5) (4.1)
--------------------------------------- ------- ------ ------- -------
Total movement (110.0) (15.3)
Revenue for the year ended 31 December
2020
UK 504.7 82.8
Continental Europe 104.5 17.2
--------------------------------------- ------- ------ ------- -------
609.2 100.0
--------------------------------------- ------- ------ ------- -------
(3) Like-for-like revenue is calculated based on constant
currency from activities and businesses that made a full
contribution in both the 2020 and 2019 periods, and is adjusted for
any variances in working days.
Gross Margin
Gross margin reduced by 90 basis points in the year from 31.9%
to 31.0%. Purchasing was deliberately limited following the impact
of COVID-19, and the reduction in purchases in the year led to
lower rebates being achieved through the tiered rebate agreements,
which was not wholly offset by the benefit of the shift in product
mix towards the higher margin residential sector.
Expenses
Underlying(1) distribution costs and administrative expenses
totalled GBP171.0 million in the year (2019: GBP187.2 million), a
reduction of GBP16.2 million on the prior year, which was supported
by the Company's swift actions to temporarily close operations in
the second-quarter and manage variable costs to materially lower
levels. The reduction is net of grants totalling GBP11.0 million
claimed under governmental job retention schemes but this is
partially offset by a GBP5.5 million increase in the provision for
bad and doubtful debts.
The reduction in expenses could have been greater but for the
Company paying its furloughed UK workforce an enhanced form of the
Government's Job Retention Scheme ('Scheme') during the year. A
total of 93% of the Company's UK workforce were initially
furloughed following the March 2020 closures, and employees were
subsequently brought back into the business as soon as demand and
re-opening in a COVID-19 safe manner would allow. By mid-July 2020,
less than 10% of the workforce were still furloughed, with the last
few employees leaving the Scheme in October 2020.
Underlying(1) distribution costs and administrative expenses
expressed as a proportion of revenue were 28.1% (2019: 26.0%).
Whilst variable costs were reduced significantly in the year, a
high proportion of the cost base is fixed, particularly within
administrative expenses. The relative proportions of underlying(1)
distribution costs and administrative expenses as a percentage of
total underlying(1) expenses were 70.9% and 29.1%, respectively
(2019: 72.5% and 27.5%).
As noted above, the Company provided for bad and doubtful debts
at a higher rate as a result of the perceived higher risk given the
economic environment, particularly with respect to the oldest debts
being held. The resulting charge equates to 1.1% of total revenue
in the year (2019: 0.2%), although cash collections exceeded
expectations following the impact of COVID-19.
Costs were incurred in the year in support of the OIP, mostly in
relation to the Network Consolidation and Transport Integration
projects which together are expected to generate net cost savings
in excess of GBP4 million per annum from 2022.
Non-underlying items
As indicated within the interim results announcement, there was
a significant level of non-underlying items in the year.
Non-underlying items before tax totalled GBP33.0 million during the
year (2019: GBP4.3 million) and primarily relate to goodwill
impairment charges, non-cash in nature, and which occurred as a
direct consequence of the impact of COVID-19 on both current and
forecast trading. The below table details the individual
non-underlying items:
(1) Underlying is before non-underlying items, which includes
amortisation of acquired intangible assets, impairment of goodwill,
acquisition related fees, movements in deferred and contingent
consideration, finance costs on deferred and contingent
consideration, business restructuring costs, and non-recurring
pension costs in relation to guaranteed minimum pension
equalisation. Total distribution costs and administrative expenses
for the year ended 31 December 2020 were GBP203.6 million (2019:
GBP191.1 million).
2020 2019
GBPM GBPM
-------------------------------------------------------- ----- -----
Non-underlying items
Goodwill impairment 28.0 2.1
Amortisation of intangibles 1.6 1.4
Movements and finance costs for deferred and contingent
consideration - 0.1
Non-underlying non-cash items 29.6 3.6
-------------------------------------------------------- ----- -----
Acquisitions related fees 0.7 0.7
Business restructuring costs 2.4 -
GMP equalisation 0.3 -
Non-underlying cash items 3.4 0.7
-------------------------------------------------------- ----- -----
Non-underlying items before tax 33.0 4.3
-------------------------------------------------------- ----- -----
GBP20.9 million of the total GBP28.0 million goodwill impairment
is in relation to Domus, and represents a full write-down of the
remaining residual goodwill following its acquisition in 2017.
Domus' reliance on larger scale projects with long-lead times,
predominately in the London area, causes its financial performance
to be highly sensitive to prolonged recessionary market backdrops
which result in delays and cancellations to projects, and means the
recovery cycle can take longer. As previously announced, a
restructuring was undertaken at Domus in 2020 to more align its
cost base to its revenue profile.
GBP1.9 million of the total GBP2.4 million business
restructuring costs relate directly to the Network Consolidation
activity under the OIP, with GBP0.2 million relating to the
Transport Integration project also under the OIP.
Operating Profit and Profit Before Tax
The Company has reported an underlying(1) operating profit of
GBP17.9 million (2019: GBP42.2 million) and, in-line with the
guidance given within the January 2021 Pre-close Trading Update
announcement, the Company has reported an underlying(1) profit
before tax of GBP15.9 million (2019: GBP39.5 million). After
including the non-underlying items above, this gives a statutory
operating loss of GBP15.0 million (2019: GBP38.3 million profit)
and a statutory loss before tax of GBP17.1 million (2019: GBP35.2
million profit).
Underlying Non-underlying Total
GBPM GBPM GBPM
--------------------------------------------- ---------- -------------- ---------
Operating profit 2019 42.2 (3.9) 38.3
Gross margin movement in 2020: (40.5) - (40.5)
Expense changes
Volume 4.1 - 4.1
Furlough grants 11.0 - 11.0
Bad debt provision (5.5) - (5.5)
People costs (including bonuses) 5.5 - 5.5
Effect of acquisitions (1.4) - (1.4)
Other 2.5 (29.0) (26.5)
Total decrease (24.3) (29.0) (53.3)
--------------------------------------------- ---------- -------------- ---------
Operating profit/(loss) 2020 17.9 (32.9) (15.0)
--------------------------------------------- ---------- -------------- ---------
Tax
The underlying(1) effective tax rate for 2020 was 24.5% (2019:
17.4%) which is higher than the headline rate of corporation tax in
the UK of 19.0%. The difference is largely due to the impact of the
change in UK rate applied to the net deferred tax liability from
17% in 2019 to 19% in the current year, following the reversal of
the previously enacted rate reduction by the UK Government.
The Company is committed to being fully compliant with the
relevant tax laws and compliance obligations regarding the filing
of tax returns, payment and collection of tax. The Company
maintains an open relationship with HM Revenue & Customs and
currently operates within a level of tax compliance risk that is
rated as 'low'.
Dividend
The declared nominal ordinary dividend of 2 pence per share will
be payable on 31 May 2021 to shareholders on the register as at 7
May 2021, and equates to a cash outflow of GBP1.7 million.
As referenced in the January 2021 Pre-close Trading Update, the
Company has also taken the opportunity to accelerate its dividend
payment timetable so that final and interim dividends are paid to
shareholders in a shorter timescale, namely:
Ordinary Dividend Declared / Proposed Approval Payable
-------------------- ------------------- ------------------- --------
Final (in respect March AGM by shareholders May
of 12 months ended in May
31 December)
-------------------- ------------------- ------------------- --------
Interim (in respect
of six months ended
30 June) September Board in August November
-------------------- ------------------- ------------------- --------
Capital Expenditure and Investments
Total capital expenditure in the year was GBP15.4 million (2019:
GBP18.3 million), with the main component being spend of GBP9.7
million on the new Ipswich regional distribution centre (2019:
GBP15.5 million), which was completed just under budget at a total
of GBP25.7 million. Depreciation on the Ipswich centre commenced in
August 2020.
Cash Flows and Banking Facilities
During the year, the Company was highly cash generative despite
the initial impact of COVID-19, with an increase in cash of GBP27.0
million (2019: GBP10.2 million decrease) which in part reflects the
actions taken to preserve Balance Sheet strength.
2020 2019
GBPM GBPM
----------------------------------------------- ------ ------
Cash flows from operating activities
EBITDA 37.0 62.5
Change in inventories 15.3 (0.6)
Change in receivables 23.2 (4.7)
Change in payables (4.8) (2.0)
Share-based payments and profit on sale of PPE - 0.7
Cash generated from the operations 70.7 55.9
Interest and Tax (8.2) (10.8)
Capital investment (15.0) (15.8)
Lease payments (15.7) (14.9)
Dividends (6.3) (20.9)
Other 1.5 (3.7)
Net cash flows 27.0 (10.2)
----------------------------------------------- ------ ------
Working capital movements generated a cash inflow of GBP33.7
million (2019: GBP7.3 million outflow), largely due to deferred VAT
and a reduction in product purchasing. In-line with the focus on
cash management, the Company limited product purchasing to specific
projects or orders from March 2020 through to June 2020, leading to
lower stock levels, and prioritised utilising its existing
inventory to satisfy demand. This led to a reduction in the
inventory position from GBP132.4 million as at 31 December 2019 to
GBP119.7 million as at 30 June 2020, with the benefits of a
reduction in duplications and slow-moving stock across the network,
and increased warehousing capacity for fast-moving products. From
July 2020 the Company elevated its purchasing levels in-line with
demand and ended the year with inventory of GBP118.5 million. There
was an overall cash inflow for 2020 from a decrease in inventories
of GBP15.3 million, inclusive of the one acquisition in the year
and exchange rate movements.
Cash collections exceeded expectations, resulting in a GBP23.2
million cash inflow from trade and other receivables for 2020,
partially offset by a GBP4.8 million cash outflow from a reduction
in trade and other payables.
As shown in the table above, the other main drivers of cash flow
movements during the year were interest and tax, capital investment
and lease payments. The cash outflow in respect of dividends
relates to the 2019 interim dividend which was paid in January
2020. The proposed 2019 final dividend of 17.45 pence was suspended
following the impact of COVID-19, and would have totalled GBP14.6
million payable in July 2020.
As at 31 December 2020, the Company had a net funds position
(excluding lease liabilities) of GBP51.6 million (2019: GBP27.0
million), which included the benefit of GBP12.0 million of deferred
VAT, payable by 31 March 2021.
At Foreign At
1 January Non-cash exchange 31 December
2020 Items Cash flows movements 2020
GBPM GBPM GBPM GBPM GBPM
-------------------------- ---------- ---------- ---------- ---------- ------------
Cash at bank and in hand 33.4 - 27.0 0.4 60.8
Debt due within one year (0.2) - (1.8) - (2.0)
Debt due after one year (6.2) - (0.6) (0.4) (7.2)
-------------------------- ---------- ---------- ---------- ---------- ------------
Net funds excluding lease
liabilities 27.0 - 24.6 - 51.6
-------------------------- ---------- ---------- ---------- ---------- ------------
Lease liabilities (44.6) (14.3) 15.7 (0.1) (43.3)
-------------------------- ---------- ---------- ---------- ---------- ------------
Net (debt)/funds (17.6) (14.3) 40.3 (0.1) 8.3
-------------------------- ---------- ---------- ---------- ---------- ------------
Reflecting the strong cash flow from operations upon the return
to more normalised operations in the second-half, average net debt
(2) for the year was GBP8.6 million (2019: GBP3.3 million), a
material reduction on the first-half average net debt (2) of
GBP35.3 million.
As at 31 December 2020, the Company had total banking facilities
available of GBP110.3 million, of which GBP102.8 million was
undrawn.
During the year, the Company agreed revised covenant tests with
its two principal UK banks, Barclays Bank PLC and HSBC Bank Plc, on
the existing facilities which run to 30 April 2023, for both the 30
June 2020 and 31 December 2020 period-ends. The revised covenant
tests for 31 December 2020 were positive annual underlying(1)
EBITDA and maximum net debt of GBP45.0 million, both of which were
complied with. The original leverage and interest cover covenants,
agreed in August 2019, were reverted to from 1 January 2021.
Viability and Going Concern
Updated principal risks and uncertainties, to those published in
the 2019 Annual Report and Accounts, will be contained in the
forthcoming 2020 Annual Report and Accounts. As detailed in the
Chief Executive's Review, the events of the year resulted in one
new Principal Risk and updates to the Board's assessment of the
level of risk for certain of the Principal Risks detailed within
the 2019 Annual Report and Accounts.
The Board reviewed the Company's resilience to the principal
risks and uncertainties by considering stress testing forecasts
through adverse scenarios including (A) a reduction in market
demand whilst there is ongoing inflationary fixed cost pressure;
and (B) an economic crisis similar to that experienced in 2008,
both modelled over a three-year period from 1 January 2021. The
testing indicated that the Company would be able to operate within
its current facilities and meet its financial covenants in both
scenarios.
A further, less likely, more severe scenario was also
considered, where the Company experiences a reduction in revenue,
behind plan by 16% in 2021. In this scenario, the Company would be
able to operate within its current facilities and meet its
financial covenants. However, should the reduction in revenue be
greater than this, the Board would need to take significant
mitigating actions to remain within its banking covenants.
Mitigating actions, which are within the management's control,
include a reduction in the cost base to better align it with market
demand and revenue performance. These actions are not included in
any of the scenarios modelled. As at 31 December 2020, the Company
had a net funds position excluding lease liabilities of GBP51.6
million and had total banking facilities available of GBP110.3
million, of which GBP102.8 million was undrawn.
The Board was, therefore, comfortable that the Company would
maintain resilience in the event such scenarios occurred and
concluded that there was a reasonable expectation that the Company
would continue to operate and meet its liabilities over a
three-year period.
Based on the results from these scenarios, and having considered
the available mitigating actions, the Board can have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the three-year
period of this assessment. In particular, the Board believes there
are reasonable grounds for stating that the Company has adequate
resources to continue in operational existence for a period no
shorter than twelve months from the date of this Financial Review,
and it is appropriate to adopt the going concern basis in preparing
the Company's Financial Statements.
Chris Payne
Chief Financial Officer
9 March 2021
Consolidated Income Statement
For the year ended 31 December 2020
Non-underlying Non-underlying
Underlying (Note 2) Total Underlying (Note 2) Total
2020 2020 2020 2019 2019 2019
Note GBPM GBPM GBPM GBPM GBPM GBPM
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Revenue 1 609.2 - 609.2 719.2 - 719.2
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Cost of sales (420.3) - (420.3) (489.8) - (489.8)
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Gross profit 188.9 - 188.9 229.4 - 229.4
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Distribution costs (121.3) - (121.3) (135.7) - (135.7)
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Administrative expenses (49.7) (32.9) (82.6) (51.5) (3.9) (55.4)
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Operating profit/(loss) 1 17.9 (32.9) (15.0) 42.2 (3.9) 38.3
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Finance income 0.8 - 0.8 0.8 - 0.8
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Finance expenses (2.8) (0.1) (2.9) (3.5) (0.4) (3.9)
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Net finance costs (2.0) (0.1) (2.1) (2.7) (0.4) (3.1)
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) before
tax 15.9 (33.0) (17.1) 39.5 (4.3) 35.2
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Taxation 4 (3.9) 0.7 (3.2) (6.9) 0.3 (6.6)
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) for
the year attributable
to the equity shareholders 12.0 (32.3) (20.3) 32.6 (4.0) 28.6
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Earnings/(loss)
per share
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Basic 5 14.3p (24.2)p 38.8p 34.0p
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Diluted* 5 14.2p (24.2)p 38.6p 33.8p
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Ordinary dividend
per share
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Interim dividend
for the financial
year 6 - 7.55p
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
Dividend declared 6 2.00p -
---------------------------- ---- ---------- -------------- ------- ---------- -------------- -------
All Group operations during the financial years were continuing
operations.
*For the year ended 31 December 2020, diluted earnings/(loss)
per share are reported the same as basic earnings/(loss) per share,
as a result of the earnings being negative so the impact of them is
anti-dilutive.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019
GBPM GBPM
-------------------------------------------------- ------ -----
(Loss)/profit for the year attributable to the
equity shareholders (20.3) 28.6
--------------------------------------------------- ------ -----
Other comprehensive income/(expense)
-------------------------------------------------- ------ -----
Items that will never be reclassified to profit
or loss
-------------------------------------------------- ------ -----
Remeasurement of defined benefit plans (0.3) 0.9
--------------------------------------------------- ------ -----
Related tax 0.1 (0.2)
--------------------------------------------------- ------ -----
(0.2) 0.7
-------------------------------------------------- ------ -----
Items that are or may be reclassified to profit
or loss
-------------------------------------------------- ------ -----
Foreign exchange translation differences arising
on translation of overseas operations 0.9 (0.5)
--------------------------------------------------- ------ -----
0.9 (0.5)
-------------------------------------------------- ------ -----
Other comprehensive income for the year 0.7 0.2
--------------------------------------------------- ------ -----
Total comprehensive (expense)/income attributable
to the equity shareholders for the year (19.6) 28.8
--------------------------------------------------- ------ -----
Statement of Financial Position
At 31 December 2020
2020 2019
Note GBPM GBPM
-------------------------------------- ---- ------- -------
Assets
-------------------------------------- ---- ------- -------
Non-current assets
-------------------------------------- ---- ------- -------
Property, plant and equipment 122.9 114.6
-------------------------------------- ---- ------- -------
Right of use assets 42.1 43.9
-------------------------------------- ---- ------- -------
Intangible assets 21.1 48.5
-------------------------------------- ---- ------- -------
Deferred tax assets - 0.7
-------------------------------------- ---- ------- -------
186.1 207.7
-------------------------------------- ---- ------- -------
Current assets
-------------------------------------- ---- ------- -------
Inventories 118.5 132.4
-------------------------------------- ---- ------- -------
Trade and other receivables 101.6 123.7
-------------------------------------- ---- ------- -------
Cash and cash equivalents 60.8 33.4
-------------------------------------- ---- ------- -------
280.9 289.5
-------------------------------------- ---- ------- -------
Non-current assets classified as
held for sale 0.4 -
-------------------------------------- ---- ------- -------
281.3 289.5
-------------------------------------- ---- ------- -------
Total assets 1 467.4 497.2
-------------------------------------- ---- ------- -------
Liabilities
-------------------------------------- ---- ------- -------
Current liabilities
-------------------------------------- ---- ------- -------
Other interest-bearing loans and
borrowings (2.0) (0.2)
-------------------------------------- ---- ------- -------
Lease liabilities (12.5) (13.9)
-------------------------------------- ---- ------- -------
Trade and other payables (178.4) (181.9)
-------------------------------------- ---- ------- -------
Income tax payable (0.2) (5.0)
-------------------------------------- ---- ------- -------
(193.1) (201.0)
-------------------------------------- ---- ------- -------
Non-current liabilities
-------------------------------------- ---- ------- -------
Other interest-bearing loans and
borrowings (7.2) (6.2)
-------------------------------------- ---- ------- -------
Lease liabilities (30.8) (30.7)
-------------------------------------- ---- ------- -------
Provisions (2.1) (2.3)
-------------------------------------- ---- ------- -------
Deferred tax liabilities (8.7) (7.6)
-------------------------------------- ---- ------- -------
Employee benefits (5.5) (4.3)
-------------------------------------- ---- ------- -------
(54.3) (51.1)
-------------------------------------- ---- ------- -------
Total liabilities 1 (247.4) (252.1)
-------------------------------------- ---- ------- -------
Net assets 220.0 245.1
-------------------------------------- ---- ------- -------
Equity attributable to equity holders
of the parent
-------------------------------------- ---- ------- -------
Share capital 4.3 4.3
-------------------------------------- ---- ------- -------
Share premium 53.5 53.5
-------------------------------------- ---- ------- -------
Other reserves 3.4 1.3
-------------------------------------- ---- ------- -------
Retained earnings 158.8 186.0
-------------------------------------- ---- ------- -------
Total equity 220.0 245.1
-------------------------------------- ---- ------- -------
Statement of Changes in Equity
For the year ended 31 December 2020
Capital
Share Share redemption Special Translation Treasury Retained Total
capital premium reserve reserve reserve reserve earnings equity
GBPM GBPM GBPM GBPM GBPM GBPM GBPM GBPM
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Balance at 1 January 2019 4.3 53.5 0.1 - 7.4 (7.4) 177.1 235.0
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Profit for the year attributable
to the equity shareholders - - - - - - 28.6 28.6
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Other comprehensive income - - - - (0.5) - 0.7 0.2
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Total comprehensive
(expense)/income
for the year - - - - (0.5) - 29.3 28.8
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Transactions with equity
shareholders, recorded
directly in equity
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Share-based payments - - - - - - 0.8 0.8
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Share options exercised
by employees - - - - - 1.3 (0.5) 0.8
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Ordinary shares issued - - - 0.5 - - - 0.5
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Effect of movement on foreign
exchange on current taxation - - - - (0.1) - - (0.1)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Deferred tax on share options - - - - - - 0.2 0.2
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Dividends to equity holders - - - - - - (20.9) (20.9)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Total contributions by
and distributions to equity
shareholders - - - 0.5 (0.1) 1.3 (20.4) (18.7)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Balance at 31 December
2019 4.3 53.5 0.1 0.5 6.8 (6.1) 186.0 245.1
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Balance at 1 January 2020 4.3 53.5 0.1 0.5 6.8 (6.1) 186.0 245.1
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
(Loss)/profit for the year
attributable to the equity
shareholders - - - - - - (20.3) (20.3)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Other comprehensive
income/(expense) - - - - 0.9 - (0.2) 0.7
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Total comprehensive
income/(expense)
for the year - - - - 0.9 - (20.5) (19.6)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Transactions with equity
shareholders, recorded
directly in equity
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Share-based payments - - - - - - (0.1) (0.1)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Share options exercised
by employees - - - - - 0.2 (0.1) 0.1
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Ordinary shares issued - - - 1.0 - - - 1.0
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Deferred tax on share options - - - - - - (0.2) (0.2)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Dividends to equity holders - - - - - - (6.3) (6.3)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Total contributions by
and distributions to equity
shareholders - - - 1.0 - 0.2 (6.7) (5.5)
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Balance at 31 December
2020 4.3 53.5 0.1 1.5 7.7 (5.9) 158.8 220.0
-------------------------------- -------- -------- ----------- -------- ----------- -------- --------- -------
Cash Flow Statement
For the year ended 31 December 2020
Restated**
2020 2019
GBPM GBPM
----------------------------------------------------- ---------- ------
Cash flows from operating activities
----------------------------------------------------- ---------- ------
(Loss)/profit before tax for the year (17.1) 35.2
------------------------------------------------------ ---------- ------
Adjustments for:
----------------------------------------------------- ---------- ------
Depreciation of property, plant and equipment,
amortisation and impairment 35.8 8.9
------------------------------------------------------ ---------- ------
Depreciation of right-of-use asset 16.2 15.3
------------------------------------------------------ ---------- ------
Finance income (0.8) (0.8)
------------------------------------------------------ ---------- ------
Finance expense 2.9 3.9
------------------------------------------------------ ---------- ------
Loss/(profit) on sale of property, plant and
equipment 0.1 (0.1)
------------------------------------------------------ ---------- ------
Share-based payments (0.1) 0.8
------------------------------------------------------ ---------- ------
Operating cash flows before changes in working
capital and other payables 37.0 63.2
------------------------------------------------------ ---------- ------
Change in inventories 15.3 (0.6)
------------------------------------------------------ ---------- ------
Change in trade and other receivables 23.2 (4.7)
------------------------------------------------------ ---------- ------
Change in trade and other payables (4.8) (2.0)
------------------------------------------------------ ---------- ------
Cash generated from the operations* 70.7 55.9
------------------------------------------------------ ---------- ------
Interest paid (2.7) (3.4)
------------------------------------------------------ ---------- ------
Interest received 0.8 0.9
------------------------------------------------------ ---------- ------
Tax paid (6.3) (8.3)
------------------------------------------------------ ---------- ------
Net cash flow from operating activities 62.5 45.1
------------------------------------------------------ ---------- ------
Cash flows from investing activities
----------------------------------------------------- ---------- ------
Proceeds from sale of property, plant and equipment 0.1 0.1
------------------------------------------------------ ---------- ------
Acquisition of subsidiaries, net of cash acquired (1.0) (4.4)
------------------------------------------------------ ---------- ------
Repayment of acquired borrowings on acquisition (0.2) -
------------------------------------------------------ ---------- ------
Acquisition of property, plant and equipment (15.0) (15.8)
------------------------------------------------------ ---------- ------
Net cash flow from investing activities (16.1) (20.1)
------------------------------------------------------ ---------- ------
Cash flows from financing activities
----------------------------------------------------- ---------- ------
Proceeds from the issue of treasury shares 0.2 0.8
------------------------------------------------------ ---------- ------
Drawdown of borrowings 50.9 45.0
------------------------------------------------------ ---------- ------
Repayment of borrowings (48.5) (45.2)
------------------------------------------------------ ---------- ------
Principal elements of lease payments (15.7) (14.9)
------------------------------------------------------ ---------- ------
Dividends paid (6.3) (20.9)
------------------------------------------------------ ---------- ------
Net cash flow from financing activities (19.4) (35.2)
------------------------------------------------------ ---------- ------
Net increase/(decrease) in cash and cash equivalents 27.0 (10.2)
------------------------------------------------------ ---------- ------
Cash and cash equivalents at 1 January 33.4 43.8
------------------------------------------------------ ---------- ------
Effect of exchange rate fluctuations on cash
held 0.4 (0.2)
------------------------------------------------------ ---------- ------
Cash and cash equivalents at 31 December 60.8 33.4
------------------------------------------------------ ---------- ------
*Cash generated from the Group operations for the year ended 31
December 2020, includes an amount of GBP11.0 million cash received
under governmental job retention schemes in the UK and France.
** Cash flow restated to present interest paid and interest
received both within net cashflow from operating activities.
Notes to the Financial Statements
1 Segment reporting
As at 31 December 2020, the Group had 63 operating segments in
the UK and four operating segments in Continental Europe. Each
segment represents an individual trading operation, and each
operation is wholly aligned to the sales, marketing, supply and
distribution of floorcovering products. The operating results of
each operation are regularly reviewed by the Chief Operating
Decision Maker, which is deemed to be the Chief Executive. Discrete
financial information is available for each segment and used by the
Chief Executive to assess performance and decide on resource
allocation.
The operating segments have been aggregated to the extent that
they have similar economic characteristics. The key economic
indicators considered by management in assessing whether operating
segments have similar economic characteristics are the products
supplied, the type and class of customer, method of sale and
distribution and the regulatory environment in which they
operate.
As each operating segment is a trading operation wholly aligned
to the sales, marketing, supply and distribution of floorcovering
products, management considers all segments have similar economic
characteristics except for the regulatory environment in which they
operate, which is determined by the country in which the operating
segment resides.
The Group's internal management structure and financial
reporting systems differentiate the operating segments on the basis
of the differing economic characteristics in the UK and Continental
Europe and accordingly present these as two separate reportable
segments. This distinction is embedded in the construction of
operating reports reviewed by the Chief Executive, the Board and
the executive management team and forms the basis for the
presentation of operating segment information given below.
UK Continental Europe Total
--------------------------------------------- ------------- -------------------- ----------------
2020 2019 2020 2019 2020 2019
GBPM GBPM GBPM GBPM GBPM GBPM
---------------------------------------- --------- ------- ----------- ------- ------- ---------
Revenue
---------------------------------------- --------- ------- ----------- ------- ------- ---------
External revenues 504.7 610.2 104.5 109.0 609.2 719.2
---------------------------------------- --------- ------- ----------- ------- ------- ---------
Reportable segment underlying operating
profit 15.5 41.3 2.1 3.5 17.6 44.8
---------------------------------------- --------- ------- ----------- ------- ------- ---------
Reportable segment assets 296.5 329.1 47.8 47.2 344.3 376.3
---------------------------------------- --------- ------- ----------- ------- ------- ---------
Reportable segment liabilities (200.9) (205.5) (31.3) (29.1) (232.2) (234.6)
---------------------------------------- --------- ------- ----------- ------- ------- ---------
During the year there were no inter-segment revenues for the
reportable segments (2019: GBPnil) .
Reconciliations of reportable segment profit, assets and
liabilities and other material items:
2020 2019
GBPM GBPM
---------------------------------------------------------- ------ -----
Profit for the year
---------------------------------------------------------- ------ -----
Total underlying operating profit for reportable segments 17.6 44.8
---------------------------------------------------------- ------ -----
Non-underlying items (32.9) (3.9)
---------------------------------------------------------- ------ -----
Unallocated income/(expense) 0.3 (2.6)
---------------------------------------------------------- ------ -----
Operating (loss)/profit (15.0) 38.3
---------------------------------------------------------- ------ -----
Finance income 0.8 0.8
---------------------------------------------------------- ------ -----
Finance expense (2.9) (3.9)
---------------------------------------------------------- ------ -----
(Loss)/profit before taxation (17.1) 35.2
---------------------------------------------------------- ------ -----
Taxation (3.2) (6.6)
---------------------------------------------------------- ------ -----
(Loss)profit for the year (20.3) 28.6
---------------------------------------------------------- ------ -----
2020 2019
GBPM GBPM
-------------------------------------------------- ------- -------
Assets
-------------------------------------------------- ------- -------
Total assets for reportable segments 344.3 376.3
-------------------------------------------------- ------- -------
Unallocated assets:
-------------------------------------------------- ------- -------
Properties, plant and equipment 105.4 102.1
-------------------------------------------------- ------- -------
Right of use assets 0.7 0.6
-------------------------------------------------- ------- -------
Deferred tax assets - 0.7
-------------------------------------------------- ------- -------
Non-current assets classified as held for sale 0.4 -
-------------------------------------------------- ------- -------
Cash and cash equivalents 16.6 17.5
-------------------------------------------------- ------- -------
Total assets 467.4 497.2
-------------------------------------------------- ------- -------
Liabilities
-------------------------------------------------- ------- -------
Total liabilities for reportable segments (232.2) (234.6)
-------------------------------------------------- ------- -------
Unallocated liabilities:
-------------------------------------------------- ------- -------
Lease liabilities (0.8) (0.6)
-------------------------------------------------- ------- -------
Employee benefits (5.5) (4.3)
-------------------------------------------------- ------- -------
Income tax payable (0.2) (5.0)
-------------------------------------------------- ------- -------
Deferred tax liabilities (8.7) (7.6)
-------------------------------------------------- ------- -------
Total liabilities (247.4) (252.1)
-------------------------------------------------- ------- -------
Continental Reportable Consolidated
UK Europe segment total Unallocated total
GBPM GBPM GBPM GBPM GBPM
---------------------------------------- ----- ----------- -------------- ----------- ------------
Other material items 2020
---------------------------------------- ----- ----------- -------------- ----------- ------------
Capital expenditure 9.1 0.7 9.8 5.6 15.4
---------------------------------------- ----- ----------- -------------- ----------- ------------
Impairment of goodwill 23.4 4.6 28.0 - 28.0
---------------------------------------- ----- ----------- -------------- ----------- ------------
Depreciation 2.8 0.7 3.5 2.7 6.2
---------------------------------------- ----- ----------- -------------- ----------- ------------
Depreciation of right of use assets 14.0 2.1 16.1 0.1 16.2
---------------------------------------- ----- ----------- -------------- ----------- ------------
Non-underlying items (excluding finance
expenses and impairments) 4.8 0.1 4.9 - 4.9
---------------------------------------- ----- ----------- -------------- ----------- ------------
Other material items 2019
---------------------------------------- ----- ----------- -------------- ----------- ------------
Capital expenditure 2.0 0.8 2.8 15.5 18.3
---------------------------------------- ----- ----------- -------------- ----------- ------------
Impairment of goodwill* 2.1 - 2.1 - 2.1
---------------------------------------- ----- ----------- -------------- ----------- ------------
Depreciation 2.2 0.7 2.9 2.4 5.3
---------------------------------------- ----- ----------- -------------- ----------- ------------
Depreciation of right of use assets 13.1 2.0 15.1 0.1 15.2
---------------------------------------- ----- ----------- -------------- ----------- ------------
Non-underlying items (excluding finance
expenses and impairments) 1.7 0.1 1.8 - 1.8
---------------------------------------- ----- ----------- -------------- ----------- ------------
*Prior year figures updated to reflect correct allocation
between segments
In the UK the Group's freehold properties are held within
Headlam Group plc and a rent is charged to the operating segments
for the period of use. Therefore, the operating reports reviewed by
the Chief Executive show all the UK properties as unallocated and
the operating segments report a segment result that includes a
property rent. This is reflected in the above disclosure.
Each segment is a continuing operation.
The Chief Executive, the Board and the senior executive
management team have access to information that provides details on
revenue by principal product group for the two reportable segments,
as set out in the following table:
Revenue by principal product group and geographic origin is
summarised below:
UK Continental Europe Total
------------ ------------ -------------------- ------------
2020 2019 2020 2019 2020 2019
GBPM GBPM GBPM GBPM GBPM GBPM
------------ ----- ----- --------- --------- ----- -----
Revenue
------------ ----- ----- --------- --------- ----- -----
Residential 354.3 397.0 61.0 61.0 415.3 458.0
------------ ----- ----- --------- --------- ----- -----
Commercial 150.4 213.2 43.5 48.0 193.9 261.2
------------ ----- ----- --------- --------- ----- -----
504.7 610.2 104.5 109.0 609.2 719.2
------------ ----- ----- --------- --------- ----- -----
2 Non-underlying items
In order to illustrate the underlying trading performance of the
Group, presentation has been made of performance measures excluding
those items which it is considered would distort the comparability
of the Group's results. These non-underlying items are defined as
those items that, by virtue of their nature, size or expected
frequency, warrant separate additional disclosure in the financial
statements in order to fully understand the underlying performance
of the Group.
Non-underlying items of GBP33.0 million (2019: GBP4.3 million)
relate to the following:
2020 2019
GBPM GBPM
------------------------------------------------------- ----- -----
Impairment of goodwill (note 3) 28.0 2.1
------------------------------------------------------- ----- -----
Amortisation of acquired intangibles 1.6 1.4
------------------------------------------------------- ----- -----
Acquisitions related fees 0.7 0.7
------------------------------------------------------- ----- -----
Movements in deferred and contingent consideration (0.1) (0.3)
------------------------------------------------------- ----- -----
Finance costs on deferred and contingent consideration 0.1 0.4
------------------------------------------------------- ----- -----
Business restructuring 2.4 -
------------------------------------------------------- ----- -----
GMP Equalisation 0.3 -
------------------------------------------------------- ----- -----
33.0 4.3
------------------------------------------------------- ----- -----
The related tax on these costs is GBP0.7 million (2019: GBP0.3
million).
3 Impairment tests for cash-generating units containing goodwill
('CGU')
Goodwill is attributed to the businesses identified below for
the purpose of testing impairment. These businesses are the lowest
level at which goodwill is monitored and represent operating
segments.
The aggregate carrying amounts of goodwill allocated to each CGU
are as follows:
Reported 2020 2019
segment GBPM GBPM
----------------------------------- ------------ ----- -----
Joseph, Hamilton & Seaton UK 4.4 4.4
----------------------------------- ------------ ----- -----
Crucial Trading UK 1.4 1.4
----------------------------------- ------------ ----- -----
Continental
Belcolor AG Europe - 3.3
----------------------------------- ------------ ----- -----
Domus Group of Companies Limited UK - 20.9
----------------------------------- ------------ ----- -----
Mitchell Carpets Limited UK - 0.3
----------------------------------- ------------ ----- -----
McMillan Flooring UK 0.1 0.1
----------------------------------- ------------ ----- -----
CECO (Flooring) Limited UK 1.2 2.2
----------------------------------- ------------ ----- -----
Continental
Dersimo BV Europe - 1.3
----------------------------------- ------------ ----- -----
Ashmount Flooring Supplies Limited UK 0.4 0.4
----------------------------------- ------------ ----- -----
Rackhams Limited UK - 0.4
----------------------------------- ------------ ----- -----
Telenzo UK 0.3 0.3
----------------------------------- ------------ ----- -----
Other UK 1.0 1.4
----------------------------------- ------------ ----- -----
8.8 36.4
------------------------------------------------ ----- -----
Impairment
Each year, or whenever events or a change in the economic
environment or performance indicates a risk of impairment, the
Group reviews the value of goodwill balances allocated to its
cash-generating units.
An impairment test is a comparison of the carrying value of the
assets of a business or CGU to their recoverable amount. The
recoverable amount represents the higher of the CGU's fair value
less the cost to sell and value in use. Where the recoverable
amount is less than the carrying value, an impairment results.
During the year ended 31 December 2020, all goodwill was tested
for impairment, which resulted in an impairment charge on goodwill
attributable to the Domus Group of Companies Limited CGU ("Domus")
of GBP20.9 million (2019: GBP2.1 million), Belcolor AG GBP3.3
million, Dersimo BV GBP1.3 million, CECO (Flooring) Limited GBP1.0
million, Rackhams Limited GBP0.4 million, Mitchell Carpets Limited
GBP0.3 million, Supertex Limited of GBP0.4 million and other GBP0.4
million.
GBP20.9 million of the total GBP28.0 million goodwill impairment
is in relation to Domus, and represents a full write-down of the
remaining residual goodwill following its acquisition in 2017.
Domus' reliance on larger scale projects with long-lead times,
predominately in the London area, causes its financial performance
to be highly sensitive to prolonged recessionary market backdrops
which result in delays and cancellations to projects, and means the
recovery cycle can take longer.
Value in use was determined by discounting the future cash flows
generated from the continuing use of the CGU on a basis consistent
with 2019, and applying the following key assumptions.
Key assumptions
Cash flows were projected based on actual operating results, the
approved 2021 business plan and management's assessment of planned
performance in the period to 2025. For the purpose of impairment
testing the cash flows were assumed to grow into perpetuity at a
rate of 2.0% beyond 2025.
The main assumptions within the operating cash flows used for
2021 include the achievement of future sales volumes and prices for
all key product lines, control of purchase prices, achievement of
budgeted operating costs and no significant adverse foreign
exchange rate movements. These assumptions have been reviewed in
light of the current economic environment.
The Directors have estimated the discount rate by reference to
an industry average weighted average cost of capital. This has been
adjusted to include an appropriate risk factor to reflect current
economic circumstances and the risk profile of the CGUs. A pre-tax
weighted average cost of capital of 11.7% (2019: 10.5%) has been
used for impairment testing for the UK, Netherlands 12.0% (2019:
11.5%) and Switzerland 10.3% (2019: 11.5%) to reflect the differing
risk profiles of these segments.
The CGUs in the UK, excluding Domus have similar characteristics
and risk profiles, and therefore a single discount rate has been
applied to each UK CGU. The CGUs in Continental Europe operate
under a different regulatory environment and this is therefore
reflected in the risk factor used to determine the discount rates
in the UK and Continental Europe. Domus has different
characteristics to the rest of the CGUs in the UK and therefore a
pre-tax discount rate of 12.6% (2019: 11.4%) has been deemed more
appropriate.
Sensitivity analysis
The Group has applied sensitivities to assess whether any
reasonable possible changes in these key assumptions could cause a
further impairment that would be material to these Consolidated
Financial Statements. The sensitivity analysis did not identify any
risk of material misstatement with the exception of the four CGUs
below for which there was limited headroom.
The Directors performed sensitivity analysis on the estimated
recoverable amounts focusing on a reasonably possible change in the
key assumptions within the first five years of:
i) sales growth in the cash flow forecasts;
ii) gross margin; and
iii) the pre-tax discount rate used to convert the cash flow forecasts to present values.
The table below shows the sensitivities for certain CGU's and
the impact of changes in key assumptions:
Reduction in
headroom
------------- ------------- --------------
Original Sales growth Gross margin Discount rate
headroom* decrease 1% decrease 1% increase 1%
----------------- ----------- ------------- ------------- --------------
GBPM GBPM GBPM GBPM
----------------- ----------- ------------- ------------- --------------
Domus Group
of Companies
Limited 2.0 2.7 1.9 1.0
----------------- ----------- ------------- ------------- --------------
Belcolor AG - 3.8 3.4 0.7
----------------- ----------- ------------- ------------- --------------
CECO (Flooring)
Limited - 0.4 0.4 0.2
----------------- ----------- ------------- ------------- --------------
Dersimo BV (0.2) (0.9) (1.1) (0.2)
----------------- ----------- ------------- ------------- --------------
*Following the impairments already incurred to date.
4 Taxation
Recognised in the income statement
2020 2019
GBPM GBPM
-------------------------------------------------- ----- -----
Current tax expense:
-------------------------------------------------- ----- -----
Current year 2.7 7.9
-------------------------------------------------- ----- -----
Adjustments for prior years (0.9) (0.7)
-------------------------------------------------- ----- -----
1.8 7.2
-------------------------------------------------- ----- -----
Deferred tax expense:
-------------------------------------------------- ----- -----
Origination and reversal of temporary differences 0.1 (0.7)
-------------------------------------------------- ----- -----
Effect of change in UK tax rates 0.9 -
-------------------------------------------------- ----- -----
Adjustments for prior years 0.4 0.1
-------------------------------------------------- ----- -----
1.4 (0.6)
-------------------------------------------------- ----- -----
Total tax in income statement 3.2 6.6
-------------------------------------------------- ----- -----
2020 2019
GBPM GBPM
--------------------------------------------------- ----- -----
Tax relating to items credited/(charged) to equity
--------------------------------------------------- ----- -----
Current tax on:
--------------------------------------------------- ----- -----
Income and expenses recognised directly in equity - (0.1)
--------------------------------------------------- ----- -----
Translation reserve - 0.1
--------------------------------------------------- ----- -----
- -
--------------------------------------------------- ----- -----
Deferred tax on:
--------------------------------------------------- ----- -----
Share options 0.2 (0.3)
--------------------------------------------------- ----- -----
Income and expenses recognised directly in equity - -
--------------------------------------------------- ----- -----
Deferred tax on other comprehensive income:
--------------------------------------------------- ----- -----
Defined benefit plans (0.1) 0.2
--------------------------------------------------- ----- -----
0.1 -
--------------------------------------------------- ----- -----
Total tax reported directly in reserves 0.1 (0.1)
--------------------------------------------------- ----- -----
Factors that may affect future current and total tax charges
The UK headline corporation tax rate for the year was 19.0%
(2019: 19.0%). The 2016 Finance Bill enacted provisions to reduce
the main rate of UK corporation tax to 17.0% from 1 April 2020.
However, in the March 2020 Budget it was announced that the
reduction in the UK rate to 17.0% would not occur and the
Corporation Tax Rate would be held at 19.0%. The closing deferred
tax balance in respect of UK entities has therefore been calculated
at 19.0% (2019: 17.0%).
In addition, an increase in the Dutch corporation tax rate to
25.0% (2019: 20.5%) was enacted in December 2020 which has also
been taken into account in the calculation of the related deferred
tax balance.
Reconciliation of effective tax rate
2020 2019
--------------------------------------------- -------------- ------------
% GBPM % GBPM
--------------------------------------------- ------ ------ ----- -----
Profit before tax (17.1) 35.2
--------------------------------------------- ------ ------ ----- -----
Tax using the UK corporation tax rate 19.0 (3.2) 19.0 6.7
--------------------------------------------- ------ ------ ----- -----
Effect of change in UK tax rate (5.3) 0.9 - -
--------------------------------------------- ------ ------ ----- -----
Effect of change in overseas tax rate - - 0.1 0.1
--------------------------------------------- ------ ------ ----- -----
Recognition of tax losses - - (1.6) (0.6)
--------------------------------------------- ------ ------ ----- -----
Non-deductible expenses / non-taxable
income (2.9) 0.5 1.9 0.7
--------------------------------------------- ------ ------ ----- -----
Non-deductible non-underlying costs (31.0) 5.3 1.1 0.4
--------------------------------------------- ------ ------ ----- -----
Effect of tax rates in foreign jurisdictions 0.1 (0.1) (0.2) (0.1)
--------------------------------------------- ------ ------ ----- -----
Impact of losses not recognised (1.7) 0.3 - -
--------------------------------------------- ------ ------ ----- -----
Adjustments in respect of prior years 2.9 (0.5) (1.5) (0.6)
--------------------------------------------- ------ ------ ----- -----
Total tax in income statement (18.7) 3.2 18.8 6.6
--------------------------------------------- ------ ------ ----- -----
Add back tax on non-underlying items 0.7 0.3
--------------------------------------------- ------ ------ ----- -----
Total tax charge excluding non-underlying
items 3.9 6.9
--------------------------------------------- ------ ------ ----- -----
Profit before non-underlying items 15.9 39.5
--------------------------------------------- ------ ------ ----- -----
Adjusted effective tax rate excluding
non-underlying items 24.5% 17.4%
--------------------------------------------- ------ ------ ----- -----
5 Earnings per share
2020 2019
GBPM GBPM
----------------------------------------------------- ------ -----
Earnings
----------------------------------------------------- ------ -----
Earnings for underlying basic and underlying diluted
earnings per share 12.0 32.6
----------------------------------------------------- ------ -----
(Loss)/earnings for basic and diluted earnings per
share (20.3) 28.6
----------------------------------------------------- ------ -----
2020 2019
---------------------------------------------------------- ---------- ----------
Number of shares
---------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for the
purposes of basic earnings per share 84,228,880 83,971,792
---------------------------------------------------------- ---------- ----------
Effect of diluted potential ordinary shares:
---------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares at 31 December 84,228,880 83,971,792
---------------------------------------------------------- ---------- ----------
Dilutive effect of share options 543,732 536,952
---------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 84,772,612 84,508,744
---------------------------------------------------------- ---------- ----------
(Loss)/earnings per share
---------------------------------------------------------- ---------- ----------
Basic (24.2)p 34.0p
---------------------------------------------------------- ---------- ----------
Diluted* (24.2)p 33.8p
---------------------------------------------------------- ---------- ----------
Underlying basic 14.3p 38.8p
---------------------------------------------------------- ---------- ----------
Underlying diluted 14.2p 38.6p
---------------------------------------------------------- ---------- ----------
*For the year ended 31 December 2020, diluted earnings/(loss)
per share are reported the same as basic earnings/(loss) per share,
as a result of the earnings being negative so the impact of them is
anti-dilutive.
At 31 December 2020, the Company held 1,211,073 shares
(2019:1,260,396) in relation to treasury stock and shares held in
trust for satisfying options and awards under employee share
schemes. These shares have been disclosed in the treasury reserve
and are excluded from the calculation of earnings per share.
6 Dividends
2020 2019
GBPM GBPM
------------------------------------------------------- ----- -----
Interim dividend for 2019 of 7.55p paid 2 January 2020 6.3 -
------------------------------------------------------- ----- -----
Interim dividend for 2018 of 7.55p paid 2 January 2019 - 6.3
------------------------------------------------------- ----- -----
Final dividend for 2018 of 17.45p paid 1 July 2019 - 14.6
------------------------------------------------------- ----- -----
6.3 20.9
------------------------------------------------------- ----- -----
The final proposed dividend for 2019 of 17.45p per share was
suspended by the Board prior to being authorised by shareholders at
the Annual General Meeting in May 2020 in order to preserve the
strength of the statement of financial position due to the
uncertainty surrounding COVID-19. The final proposed dividend for
2018 of 17.45p per share was authorised by shareholders at the
Annual General Meeting on 24 May 2019 and paid on 1 July 2019.
The Board of Directors have declared a dividend of a nominal
amount of 2.00p per share which will be paid on 31 May 2021.
The total value of dividends proposed or declared but not
recognised at 31 December 2020 is GBP1.7 million (2019: GBP6.3
million).
7 Acquisitions
On 1 March 2020, a subsidiary company of Headlam Group plc
entered into an agreement to acquire Supertex Furnishing Limited
('Supertex'). Supertex operates from a warehouse and offices in
Leyland, Lancashire, supplying domestic flooring (carpet, vinyl and
accessories) to the retail flooring trade. Supertex distributes
cut-length orders from stock throughout the North West on a next
day delivery service.
The acquisition enlarges Headlam's residential sector activities
in the North West, a competitive region of the UK. Supertex will
continue to be operated under its own brand and operate from the
Group's existing premises in Stockport creating operating
efficiencies, with a trade counter remaining in Leyland to service
the local area.
The acquired business contributed revenue of GBP1.5 million and
an operating loss of GBP0.4 million to the group for the year ended
31 December 2020. Profitability for Supertex was effected by the
COVID-19 pandemic and the lockdown of the branch during 2020. If
the acquisition had occurred on 1 January 2020, pro-forma revenue
would have increased to GBP609.5 million and underlying operating
profit would have decreased to GBP17.8 million for the year ended
31 December 2020.
Details of the acquisition are provisional and are shown
below:
Acquiree's Fair value Acquisition
book value adjustments amounts
GBPM GBPM GBPM
----------------------------------------------------- ----------- ------------ -----------
Acquiree's provisional net assets at the acquisition
date:
----------------------------------------------------- ----------- ------------ -----------
Intangible assets - 0.7 0.7
----------------------------------------------------- ----------- ------------ -----------
Property, plant and equipment 0.2 - 0.2
----------------------------------------------------- ----------- ------------ -----------
Inventories 0.4 - 0.4
----------------------------------------------------- ----------- ------------ -----------
Trade and other receivables 0.4 - 0.4
----------------------------------------------------- ----------- ------------ -----------
Trade and other payables (0.5) - (0.5)
----------------------------------------------------- ----------- ------------ -----------
Deferred tax (0.2) (0.1) (0.3)
----------------------------------------------------- ----------- ------------ -----------
Debt (0.2) - (0.2)
----------------------------------------------------- ----------- ------------ -----------
Net identifiable assets and liabilities 0.1 0.6 0.7
----------------------------------------------------- ----------- ------------ -----------
Goodwill on acquisition 0.4 0.4
----------------------------------------------------- ----------- ------------ -----------
Consideration 1.1
----------------------------------------------------- ----------- ------------ -----------
Satisfied by:
----------------------------------------------------- ----------- ------------ -----------
Cash 1.0
----------------------------------------------------- ----------- ------------ -----------
Deferred consideration 0.1
----------------------------------------------------- ----------- ------------ -----------
1.1
----------------------------------------------------- ----------- ------------ -----------
Analysis of cash flows:
----------------------------------------------------- ----------- ------------ -----------
On completion 1.0
----------------------------------------------------- ----------- ------------ -----------
Professional fees of GBP0.1 million were incurred in relation to
acquisition activity and have been expensed to the income statement
within administration expenses.
The book value of receivables given in the table above
represents the gross contracted amounts receivable. At the
acquisition date, the entire book value of receivables was expected
to be collected.
Goodwill of GBP0.4 million arose on the Supertex acquisition.
There were also intangible assets on acquisition of GBP0.7 million
which were attributed to brand names and customer relationships.
During the year GBP0.2 million of intangibles have been amortised
to the income statement on this acquisition.
The residual goodwill reflected the significant benefit the
acquisition would have on the Group by bringing further geographic
coverage and providing an additional avenue for growth. Due to the
emergence of the COVID-19 pandemic since the acquisition date,
these benefits have been significantly impaired and following a
review and sensitivity analysis the goodwill was impaired by the
full amount of GBP0.4 million.
Prior year acquisitions
In the prior year the Group acquired all the trade and assets of
Edel Telenzo Carpets Ltd. ('Telenzo'). Telenzo is the UK
distribution company for Edel Carpets, a modern carpet producer
from Genemuiden, in the Netherlands.
The fair values of the assets and liabilities acquired have been
reconsidered as part of the hindsight period, but no adjustment was
considered necessary.
Deferred and contingent consideration
The acquisition of Domus Group of Companies Limited was financed
by initial cash consideration of GBP24.2 million paid on completion
and satisfied from the Group's existing cash and debt facilities; a
deferred consideration of GBP3.3 million, payable in cash and
Ordinary shares of 5 pence each in the capital of the Company
('Ordinary Shares'), of which GBP1.6 million was payable on 7
December 2019 and GBP1.7 million was payable on 7 December 2020;
and a further maximum contingent consideration of GBP2.7 million,
payable in cash based on Domus achieving certain EBITDA targets
over the three-year period ending 31 December 2020.
The deferred and contingent consideration were discounted back
and reported at present value at the date of the acquisition.
Management have written down the contingent consideration each year
based on their assessment of the probability of it being paid. On 7
December 2020 there was no contingent consideration payable but
deferred consideration of GBP1.7 million was paid.
8 Subsequent events
Management have given due consideration to any events occurring
in the period from the reporting date to the date these Financial
Statements were authorised for issue and have concluded that there
are no material adjusting or non-adjusting events to be disclosed
in these Financial Statements with the exception of the
following:
In the UK budget on 3 March 2021 the Chancellor announced that
the UK headline corporation tax rate would increase from 19% to 25%
from 1 April 2023. This is anticipated to be substantively enacted
during 2021. As a result, the UK deferred tax balances will likely
be restated to 25% in the 2021 group accounts, resulting in an
increase in the net deferred tax liability of approximately GBP2.6
million.
The impact of COVID-19 following the year end, and mitigating
actions in place, are fully detailed in the Chief Executive's
Review and Financial Review.
9 Additional information
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2020
or 2019 but is derived from those accounts. Statutory accounts for
2019 have been delivered to the registrar of companies, and those
for 2020 will be delivered in due course. The auditors have
reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report, and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
The Company anticipates that the Company's statutory accounts
will be issued during March 2021 and will be displayed on the
Company's website at www.headlam.com during March 2021. Copies of
the statutory accounts will also be available from the Company's
registered office at Headlam Group plc, PO Box 1, Gorsey Lane,
Coleshill, Birmingham, B46 1LW.
This final results announcement for the year ended 31 December
2020 was approved by the Board on 9 March 2021.
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END
FR JPMLTMTAMBAB
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March 09, 2021 02:00 ET (07:00 GMT)
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