TIDMSRAD
RNS Number : 1336J
Stelrad Group PLC
14 August 2023
Stelrad Group plc - interim results for the six months ended 30
June 2023
Strategy continuing to deliver with outlook for the full year
unchanged
Stelrad Group plc ("Stelrad" or "the Group" or "the Company",
LSE: SRAD), a leading specialist manufacturer and distributor of
steel panel radiators in the UK, Europe and Turkey, today announces
its unaudited interim results for the six months ended 30 June
2023.
Results summary*
Six months Six months Increase/
ended 30 ended 30 (decrease)
June 2023 June 2022 %
Adjusted results
Revenue (pre-IAS 29), GBPm
** 157.0 147.8 6.2
Adjusted operating profit,
GBPm ** 14.0 19.0 (26.3)
Adjusted operating profit
margin, % ** 8.9 12.9 (31.0)
Adjusted profit after tax,
GBPm ** 8.1 13.9 (41.9)
Adjusted earnings per share,
pence ** 6.36 10.95 (41.9)
Statutory results
Statutory revenue, GBPm 157.0 150.1 4.6
Statutory operating profit,
GBPm 13.8 11.9 16.0
Statutory profit after tax,
GBPm 8.0 0.7 1,105.8
Statutory earnings per share,
pence 6.27 0.52 1,105.8
Free cash flow, GBPm 3.4 (3.6) 194.4
Net debt (excluding lease
liabilities), GBPm 70.4 47.5 48.2
Dividend per share, pence 2.92 2.92 -
*As a result of inflation in Turkey exceeding 100% over a
three-year period, the Group was required to adopt IAS 29 in
respect of its Turkish subsidiary in the financial statements for
the six months ended 30 June 2022. On 1 January 2023, the
functional currency of the Turkish business was changed from
Turkish Lira to Euros and, as a result, IAS 29 is no longer being
applied after this date.
**Adjusted figures are stated before exceptional items, the
impact of IAS 29 (until 31 December 2022), amortisation of customer
relationships, foreign exchange differences (until 31 December
2022) and tax thereon where applicable. See note 9 for a
reconciliation of adjusted profit after tax. See note 5 for a
reconciliation of adjusted operating profit. See the finance and
business review for a reconciliation of free cash flow.
Financial and operational highlights
-- Record first half revenue of GBP157.0 million. The
integration of DL Radiators' activities enabled the Group to
deliver 6.2% revenue growth, although like-for-like revenues were
12.7% lower than prior year, against very strong first half
comparatives in 2022, combined with the impact of high inflation
and rising interest rates, supressing both new construction and
renovation activities:
- UK & Ireland: revenue (pre-IAS 29) -0.7% (-1.0% organic), adjusted operating profit -6.5%.
- Europe: revenue (pre-IAS 29) +20.3% (-22.1% organic), adjusted operating profit -34.7%.
- Turkey & International: revenue (pre-IAS 29) -23.5%
(-29.8% organic), adjusted operating profit -65.0%.
-- Group contribution per radiator (pre-IAS 29) increased by
10.0%, driven by dynamic pricing and cost management.
-- Volume mix of higher margin, premium steel panel radiators up slightly during the period.
-- Adjusted operating profit performance adversely impacted by
the anticipated volume decline versus strong H1 22 comparative and
increased depreciation charges, partially offset by pro-active
margin management and cost reduction initiatives.
-- Strong cash flow performance driven by proactive working
capital management, despite seasonal high point.
-- Leverage at 30 June 2023 was 1.76x (December 2022: 1.62x),
based on net debt before lease liabilities. Cash balances of
GBP20.6 million (December 2022: GBP22.6 million) and undrawn
available facilities of GBP9.3 million (December 2022: GBP10.1
million) provides the Group with financial flexibility.
-- Longer-term tailwinds of decarbonised, energy efficient
heating systems continue to underpin Stelrad's confidence in the
future. Launch of new electric range in the UK in second half
2023.
-- Recommended interim dividend of 2.92 pence per share (2022
interim dividend: 2.92p), to be paid on 27 October 2023, reflecting
the Board's confidence in the Group's prospects and balance
sheet.
-- Outlook for FY23 adjusted operating profit unchanged. [1]
Commenting on the Group's performance, Trevor Harvey, Chief
Executive Officer, said:
"Despite challenging macroeconomic conditions across a number of
countries, Stelrad's leading positions mean that the Group remains
well placed to outperform the market and deliver on its full year
expectations.
"Our focus remains on our key objectives of growing market
share, improving product mix, optimising routes to market and
positioning effectively for decarbonisation. Following a pivotal
first year as a PLC in 2022, I am pleased that, despite the notable
headwinds facing the wider industry, we have been able to deliver
on our plans for the first half of 2023 and remain on course to
achieve our expectations for the full year.
"The resilience of our business model, alongside our experience
of navigating previous market downturns, means that the Group is
well positioned to capitalise once markets improve. Regardless of
the near term headwinds facing the wider sector, the increasing
need for decarbonised, energy efficient heating systems remains
unchanged and underpins our confidence in our ability to drive
long-term shareholder value."
Analyst Conference Call
Trevor Harvey (CEO) and George Letham (CFO) will host an analyst
presentation at 9am GMT today, 14 August 2023, to talk through the
Group's operational and financial performance.
Please advise whether you and / or a colleague would like to
attend to Powerscourt, either by phone on +44 (0) 20 7250 1446 or
by email to stelrad@powerscourt-group.com for dial in details.
For further information:
Stelrad Group plc
Trevor Harvey, Chief Executive
Officer
George Letham, Chief Financial
Officer +44 (0)191 261 3301
Investec Bank plc (Sole Corporate
Broker)
Bruce Garrow
Ben Griffiths +44 (0)20 7597 5970
Powerscourt (PR Advisor) stelrad@powerscourt-group.com
James White +44 (0)7855 432 699
Genevieve Ryan
Notes to Editors
Stelrad Group plc is a leading specialist radiator manufacturer,
selling an extensive range of hydronic, hybrid, dual fuel and
electrical heat emitters to more than 500 customers in over 40
countries. These include standard, premium and low surface
temperature (LST) steel panel radiators, towel warmers, decorative
steel tubular, steel multicolumn and aluminium radiators.
Following the acquisition of DL Radiators in July 2022, the
Group has five core brands: Stelrad, Henrad, Termo Teknik, DL
Radiators and Hudevad. In the countries reported by BRG Building
Solutions in 2023 to date, Stelrad moved into a market leadership
position, with 18.5% share by volume of the combined UK, European
and Turkish steel panel radiator market. The Group is now market
leader in six countries - the UK, Ireland, France, the Netherlands,
Belgium and Denmark, with a top 3 position in a further five
territories.
Stelrad is headquartered in Newcastle upon Tyne in the UK and in
2022 employed 1,500+ people, with manufacturing and distribution
facilities in Çorlu (Turkey), Mexborough (UK), Moimacco (Italy) and
Nuth (Netherlands), with further commercial and distribution
operations in Kolding (Denmark) and Krakow (Poland).
The Group's origins date back to the 1930s and Stelrad enjoys
long established commercial relationships with many of its
customers, having served each of its top five current customers for
over twenty years.
Further information can be found at:
https://stelradplc.com/.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
Despite challenging macroeconomic conditions across a number of
markets, Stelrad remains well-positioned to deliver on expectations
for the full year.
The integration of DL Radiators' activities enabled the Group to
deliver 6.2% revenue growth in the first half of the year, rising
from GBP147.8 million in 2022 to GBP157.0 million in 2023.
Like-for-like revenues were 12.7% lower than prior year, against
strong first half comparatives in 2022 combined with the impact of
high inflation and rising interest rates, supressing both new
construction and renovation activities.
Group contribution per radiator, a key performance indicator for
the business, increased by 10.0%, offsetting a 3.2% year-on-year
sales volume decline (15.7% like-for-like decline) versus very
strong first half comparatives in 2022.
Overall, volumes have declined in all territories, resulting in
a 2023 first half adjusted operating profit of GBP14.0 million, a
GBP5.0 million reduction relative to the same period in 2022.
Nevertheless, Stelrad's market positioning, focused strategy and
management experience mean that the Group remains confident in its
ability to take further market share in the near term, despite
market headwinds, while the integration of DL Radiators remains on
track. Stelrad is now European market leader in steel panel
radiators, with number one positions in six markets.
The Group remains confident that it is well positioned to
capitalise once markets improve while, longer term, the increasing
need for decarbonised, energy efficient heating systems remains a
key driver in Stelrad's long-term growth plans.
Results and performance for the period
In the first half of 2023, relative to its competitors,
Stelrad's strong UK share position has been advantageous, with
volume, revenue and adjusted operating profit impacted less in this
territory than in mainland European and other international
markets.
Revenue in the UK & Ireland decreased by 0.7% to GBP70.1
million, whilst adjusted operating profit reduced by 6.5% to
GBP11.5 million. In Europe, revenue increased by 20.3% to GBP76.5
million, benefitting from the acquisition of DL Radiators. Adjusted
operating profit decreased by 34.7% to GBP4.9 million, driven by a
reduction in like-for-like sales volumes across Stelrad's principal
European markets. In Stelrad's Turkey & International markets,
revenue reduced by 23.5% to GBP10.4 million, mainly due to
significantly lower sales volumes to China, also resulting in a
65.0% fall in adjusted operating profit, to GBP0.7 million.
Strategic priorities
To fulfil our purpose of helping to heat homes sustainably, we
continue to pursue the commercial and operational strategies
developed to achieve our four key strategic objectives: growing
market share, improving product mix, optimising routes to market
and positioning effectively for decarbonisation.
The acquisition and integration of DL Radiators is well aligned
with all four of these objectives, in particular extending our
electric technologies. Following the acquisition, Stelrad has moved
into the number three position in the German steel panel radiator
market and has increased share in higher added-value multicolumn
steel, aluminium and towel warmer radiator markets, driving product
mix improvement.
With access to the well-established and complementary De'Longhi
brand, a wider range of both retail and trade channels to market
are now available to Stelrad. Through providing our customers with
a wider range of heat emitter solutions in both hydronic and
electric technologies, the acquisition has also positioned the
Group more effectively for decarbonisation, with the launch of a
range of electric products into the UK market anticipated during
the second half of 2023.
Sustainability
Stelrad Group remains fully committed to high standards of
corporate responsibility, sustainability and employee engagement.
We believe that our long-term success depends on proactively
addressing the sustainability challenges that we face. In 2022, we
developed our Fit for the Future sustainability framework, focused
on the material issues for Stelrad Group and its stakeholders.
Centred around our core purpose, helping to heat homes
sustainably, it reflects the significant role we can play in the
transition to a zero carbon heating industry, through driving
better environmental performance, enabling our exceptional
workforce and by conducting business responsibly, underpinned by
strong governance, exceptional safety standards and effective
oversight of supply chain management.
Interim dividend
Based on the Group's financial results in the first half of
2023, the Board recommends an interim dividend of 2.92 pence per
share. The interim dividend will be paid on 27 October 2023 to
shareholders on the register on 13 October 2023.
Outlook
The Group's outlook for the full year remains unchanged with the
Group remaining confident in its long-term growth plans.
For the second year in succession, economic conditions in our
end markets remain extremely challenging, with the combined impact
of high levels of inflation and rising interest rates constraining
consumer confidence and disposable income.
However, Stelrad's strong, long-lasting customer relationships,
combined with the Group's flexible, low-cost manufacturing
capabilities, market-leading product availability and customer
service, mean that the Group is better placed than its competitors
to trade through periods of wider market uncertainty.
The Group has also adapted effectively to the current financial
climate through proactive margin management and cost reduction
activities, and has also benefitted from a favourable geographic
mix, with a particularly strong UK position. Encouragingly, volume
mix of premium steel panel radiators, a Group key performance
indicator, has shown growth in the first half of 2023.
Integration of DL Radiators is proceeding to plan and is fully
aligned with our key strategic objectives, with the introduction of
Stelrad's first UK range of electrical heat emitters later in the
year.
The continued resilience of our business model, alongside our
experience of navigating previous market downturns, means that the
Group will be well positioned to capitalise once markets improve.
Regardless of the near term headwinds facing the wider sector, the
increasing need for decarbonised, energy efficient heating systems
remains unchanged and underpins our confidence in our ability to
drive long-term shareholder value.
Trevor Harvey
Chief Executive Officer
14 August 2023
FINANCE AND BUSINESS REVIEW
Group overview
The following table summarises the Group's results from
operations for the six months ended 30 June 2023 and 30 June
2022.
Six months Six months Increase/ Increase/
ended 30 ended 30 (decrease) (decrease)
June 2023 June 2022
GBPm GBPm GBPm %
Revenue 157.0 150.1 6.9 4.6
----------- ----------- ------------ ------------
Revenue (pre-IAS 29) 157.0 147.8 9.2 6.2
----------- ----------- ------------ ------------
Adjusted operating
profit(1) 14.0 19.0 (5.0) (26.3)
Exceptional items (0.1) - (0.1) n/a
Amortisation of customer
relationships (0.1) - (0.1) n/a
Foreign exchange differences - (3.0) 3.0 n/a
Impact of IAS 29 - (4.1) 4.1 n/a
Operating profit 13.8 11.9 1.9 16.0
Net finance costs (3.5) (1.8) (1.7) (94.4)
Monetary losses - net
(IAS 29) - (5.4) 5.4 n/a
----------- ----------- ------------ ------------
Profit before tax 10.3 4.7 5.6 119.1
Income tax expense (2.3) (4.0) 1.7 42.5
----------- ----------- ------------ ------------
Profit for the period 8.0 0.7 7.3 1,105.8
----------- ----------- ------------ ------------
Earnings per share
(p) 6.27 0.52 5.75 1,105.8
----------- ----------- ------------ ------------
Adjusted profit for
the period(1) 8.1 13.9 (5.8) (41.9)
----------- ----------- ------------ ------------
Adjusted earnings per
share (p)(1) 6.36 10.95 (4.59) (41.9)
----------- ----------- ------------ ------------
Dividend per share
(p) 2.92 2.92
----------- ----------- ------------ ------------
(1) Adjusted figures are stated before exceptional items, the
impact of IAS 29 (until 31 December 2022), amortisation of customer
relationships, foreign exchange differences (until 31 December
2022) and tax thereon where applicable.
Financial overview
Business performance was negatively impacted by a reduction in
demand during the first half of 2023 compared to the same period in
2022. Renovation activity across the majority of European countries
remained weak throughout the period, driven by a challenging
macroeconomic environment related to high inflation and interest
rates. The impact of volume decline varied by operating segment
with the UK & Ireland being more robust than Europe and Turkey
& International. Steel and energy costs remain high relative to
historical benchmarks but have been decreasing in recent
months.
Revenue for the six months ended 30 June 2023 was GBP157.0
million, an increase of GBP9.2 million, or 6.2%, on the six months
ended 30 June 2022 (2022: GBP147.8 million (pre-IAS29)), with the
inclusion of DL Radiators since August 2022. Higher selling prices
partially offset a decline in like-for-like sales volumes. Higher
selling prices primarily represent the full year impact of 2022
price increases which were applied to recover steel and other
inflationary cost increases. Revenue (pre-IAS 29) fell by 12.7% on
a like-for-like basis.
Adjusted operating profit for the period was GBP14.0 million, a
decrease of GBP5.0 million, or 26.3%, compared to the same period
last year (2022: GBP19.0 million). The reduction in operating
profit was mainly the result of a reduction in sales volumes year
on year leading to a reduction in EBITDA of GBP2.8 million.
Additionally, depreciation increased by GBP2.2 million in the
period - mainly a legacy of the IAS 29 revaluation of Turkish fixed
assets which crystalised in the opening balance sheet and a
depreciation charge for DL Radiators (2022: GBPnil). The impact of
lower volumes has been partially offset by o perational
improvements mainly relating to increased efficiencies at plants,
fully utilising the flexibility of our manufacturing footprint.
Statutory operating profit for the period was GBP13.8 million
(2022: GBP11.9 million), after deducting exceptional items of
GBP0.1m (2022: GBPnil) and the amortisation of customer
relationships GBP0.1m (2022: GBPnil). Statutory operating profit in
the first half of 2022 also included the non-cash impact of IAS 29
of GBP4.1 million and the impact of foreign exchange losses of
GBP3.0 million.
Adjusted profit after tax for the period decreased by GBP5.8
million to GBP8.1 million (2022: GBP13.9 million). Statutory profit
for the period increased by GBP7.3 million to GBP8.0 million (2022:
GBP0.7 million) due to the impact of IAS 29 in the prior year.
Adjusted earnings per share was 6.36 pence (2022: 10.95 pence). The
statutory earnings per share was 6.27 pence (2022: 0.52 pence),
with the 2022 statutory earnings per share being impacted by IAS
29.
At 30 June 2023 the Group had cash of GBP20.6 million (December
2022: GBP22.6 million) and undrawn available facilities of GBP9.3
million (December 2022: GBP10.1 million), with net debt before
lease liabilities of GBP70.4 million (December 2022: GBP68.4
million). Working capital at 30 June reflects a seasonal high point
prior to the heating season with the lowest level of working
capital historically experienced in December. The Group therefore
expects a reduction in net debt by the end of the financial
year.
IAS 29
As a result of inflation in Turkey exceeding 100% over a
three-year period, the Group was required to adopt IAS 29 in
respect of its Turkish subsidiary for the first time in the
financial statements for the six months ended 30 June 2022. The
impact of the adoption of IAS 29 in the six months ended 30 June
2022 is explained in more detail in note 16 of the consolidated
interim financial statements.
On 1 January 2023, the functional currency of the Turkish
business was changed from Turkish Lira to Euros and, as a result,
IAS 29 is no longer being applied after this date.
Revenue by geographical market
The table below sets out the Group's revenue by geographical
market.
Revenue* by geographical Six months Six months Increase Increase
market ended 30 ended 30 / (decrease) / (decrease)
June 2023 June 2022
GBPm GBPm GBPm %
UK & Ireland 70.1 70.6 (0.5) (0.7)
Europe 76.5 63.6 12.9 20.3
Turkey & International 10.4 13.6 (3.2) (23.5)
----------- --------------
Total 157.0 147.8 9.2 6.2
----------- ----------- -------------- --------------
* 2022 figures are stated pre-IAS 29
UK & Ireland
The Group's revenue in the UK & Ireland for the period was
GBP70.1 million (2022: GBP70.6 million (pre-IAS 29)), a decrease of
GBP0.5 million, or 0.7%. This was principally a result of a
decrease in sales volumes partially offset by the impact of selling
price increases implemented to mitigate the impact of inflationary
costs.
Europe
The Group's revenue in Europe for the period was GBP76.5 million
(2022: GBP63.6 million (pre-IAS 29)), an increase of GBP12.9
million, or 20.3%, supported by the acquisition of DL Radiators and
the impact of selling price increases implemented to mitigate the
impact of inflationary costs, offset by a decrease in like-for-like
sales volumes. Excluding the acquisition of DL Radiators, the
Group's revenue in Europe for the period was GBP49.6 million. Our
European markets have been most affected by the weak demand
experienced in the period, giving rise to a significant reduction
in link-for-like sales.
Turkey & International
The Group's revenue in Turkey & International for the period
was GBP10.4 million (2022: GBP13.6 million (pre-IAS 29)), a
decrease of GBP3.2 million, or 23.5%. This was principally a result
of significantly lower sales volumes to China.
Adjusted operating profit by geographical market
The table below sets out the Group's adjusted operating profit
by geographical market.
Adjusted operating Six months Six months Increase/ Increase/
profit by geographical ended 30 ended 30 (decrease) (decrease)
market June 2023 June 2022
GBPm GBPm GBPm %
UK & Ireland 11.5 12.3 (0.8) (6.5)
Europe 4.9 7.5 (2.6) (34.7)
Turkey & International 0.7 2.0 (1.3) (65.0)
Central costs (3.1) (2.8) (0.3) (10.7)
----------- ------------ ------------
Total 14.0 19.0 (5.0) (26.3)
----------- ----------- ------------ ------------
UK & Ireland
The Group's adjusted operating profit in the UK & Ireland
for the period was GBP11.5 million (2022: GBP12.3 million), a
decrease of GBP0.8 million, or 6.5%. This was principally as a
result of lower sales volumes, partially offset by proactive margin
management leading to increased contribution per radiator.
Europe
The Group's adjusted operating profit in Europe for the period
was GBP4.9 million (2022: GBP7.5 million), a decrease of GBP2.6
million, or 34.7%. Sales volumes have increased in Europe due to
the acquisition of DL Radiators, though the incremental volumes are
at lower margin. Like-for-like sales volumes have fallen
significantly due to a weak macroeconomic environment which has
reduced operating profit, partially compensated for by proactive
margin management leading to increased like-for-like contribution
per radiator.
Turkey & International
The Group's adjusted operating profit in Turkey &
International for the period was GBP0.7 million (2022: GBP2.0
million), a decrease of GBP1.3 million, or 65.0%. This was
principally as a result of lower sales volumes and higher post-IAS
29 depreciation.
Central costs
Central costs for the period were GBP3.1 million (2022: GBP2.8
million), an increase of GBP0.3 million, or 10.7% partially as a
result of inflationary pressures.
Exceptional items
During the period exceptional costs of GBP0.1 million were
incurred (2022: GBPnil). The exceptional items in the six months
ended 30 June 2023 are the final costs associated with the 2022
acquisition of DL Radiators.
Finance costs
The Group's finance costs for the period were GBP3.5 million
(2022: GBP1.8 million). The increase of GBP1.7 million is due to an
increase in interest rates (blended 6%) during the first half of
2023 in addition to a higher quantum of debt drawn following the
acquisition of DL Radiators.
Income tax expense
The Group's income tax expense for the period was GBP2.3 million
(2022: GBP4.0 million), a decrease of GBP1.7 million. The 2022
charge was increased by GBP1.3m due to the impact of IAS 29. The
2023 tax charge has benefitted from a deferred tax credit
associated with higher tax asset values allowed by the Turkish
government due to hyperinflation, partially offset by withholding
tax charges associated with the repatriation of cash from
Turkey.
Earnings per share and adjusted earnings per share
Profit attributable to shareholders increased by GBP7.3 million
to GBP8.0 million (2022: GBP0.7m) and earnings per share was 6.27
pence (2022: 0.52 pence). The weighted average number of shares was
127.4 million (2022: 127.4 million). Profit attributable to
shareholders before exceptional items, amortisation of customer
relationships, foreign exchange differences (until 31 December
2022), the impact of IAS 29 (until 31 December 2022) and tax
thereon decreased by GBP5.8 million to GBP8.1 million (2022:
GBP13.9 million) and consequently adjusted earnings per share was
6.36 pence (2022: 10.95 pence).
Dividends
The Group is committed to delivering returns for its
shareholders. It adopted a progressive dividend policy at IPO
targeting an initial pay-out of approximately 40% of adjusted
earnings, with capital allocation focused on reinvestment for
growth. The Group intends to split dividend payments approximately
33% and 67% between the Group's interim and final dividend payments
respectively, across the fiscal year.
The Group paid its final dividend of 4.72 pence per share in May
2023, resulting in a total dividend for 2022 of 7.64 pence per
share.
The Group intends to pay an interim dividend of 2.92 pence per
share on 27 October 2023, maintaining the 2022 dividend payment
despite lower earnings due to short term trading headwinds. This
reflects the board's prudent view on the current commercial and
strategic position of the business, confidence in the Group's
financial position and cash generation, and the intention to
support shareholder returns through the cycle.
Cash flows
The following table summarises the Group's cash flow for the six
months ended 30 June 2023 and 30 June 2022.
Six months Six months Increase/
ended 30 June ended 30 June (decrease)
2023 2022
GBPm GBPm GBPm
EBITDA(1) 19.7 22.5 (2.8)
Exceptional items (0.1) - (0.1)
Gain on disposal of
property, plant and
equipment - (0.2) 0.2
Share-based payment
charge 0.3 0.1 0.2
Working capital (adjusted
for foreign exchange
2022) (4.9) (18.1) 13.2
Net capital expenditure (4.5) (4.3) (0.2)
--------------- --------------- ------------
Cash flow from operations 10.5 - 10.5
Income tax paid (4.1) (2.2) (1.9)
Net interest paid (3.0) (1.4) (1.6)
--------------- --------------- ------------
Free cash flow 3.4 (3.6) 7.0
--------------- --------------- ------------
(1) EBITDA is profit before interest, taxation, depreciation,
amortisation and exceptional items. In 2022, EBITDA was also stated
before foreign exchange differences and the impact of IAS 29.
Six months Six months Increase/
ended 30 June ended 30 June (decrease)
2023 2022
Cash flow from operations
(GBPm) 10.5 - 10.5
Adjusted operating profit
(GBPm) 14.0 19.0 (5.0)
Cash flow from operations
conversion (%) * 75.2 (0.1)
*Cash flow from operations conversion is the ratio of cash flow
from operations to adjusted operating profit
The Group's free cash inflow for the period was GBP3.4 million
(2022: outflow GBP3.6 million), an increase of GBP7.0 million. This
reflects an improvement in cash flow from operations offset by
higher income tax and interest payments.
The Group's cash inflow from operations for the period was
GBP10.5 million (2022: GBPnil), an increase of GBP10.5 million.
This was principally as a result of working capital management to
mitigate the historical seasonal pattern. Adjusted operating profit
for the period was GBP14.0 million (2022: GBP19.0 million), a
decrease of GBP5.0 million. Cash flow from operations conversion
for the period was 75.2% (2022: -0.1%), mainly due to the proactive
working capital management in the period.
Capital expenditures
The Group's capital expenditures mainly relate to investment in
operating plant and equipment. Key capital expenditure in the
period ended 30 June 2023 related to the final installation of a
new steel panel radiator line at the Group's facilities in Italy.
Capital expenditure for the remainder of 2023 will be in line with
expectations.
Net debt
At 30 June 2023, statutory net debt (including lease
liabilities) of GBP80.9 million (December 2022: GBP78.4 million)
comprises GBP91.0 million (December 2022: GBP91.0 million) drawn
down against the multicurrency facility and GBP10.5 million
(December 2022: GBP10.0 million) lease liabilities net of GBP20.6
million (December 2022: GBP22.6 million) cash.
30 June 31 December
2023 2022
GBPm GBPm
Revolving credit facility
- GBP 56.4 55.3
Revolving credit facility
- EUR 10.3 10.6
Term loan 24.3 25.1
Cash (20.6) (22.6)
-------- ------------
Net debt before lease
liabilities 70.4 68.4
Lease liabilities 10.5 10.0
-------- ------------
Net debt 80.9 78.4
-------- ------------
Going concern
After reviewing the Group's current liquidity, net debt,
financial forecasts and stress testing of potential risks, the
Board confirms there are no material uncertainties which impact the
Group's ability to continue as a going concern for the period to 31
December 2024 and therefore these condensed consolidated interim
financial statements have been prepared on a going concern
basis.
George Letham
Chief Financial Officer
14 August 2023
FORWARD-LOOKING STATEMENTS
This document may contain forward-looking statements which are
made in good faith and are based on current expectations or
beliefs, as well as assumptions about future events. You can
sometimes, but not always, identify these statements by the use of
a date in the future or such words as "will", "anticipate",
"estimate", "expect", "project", "intend", "plan", "should", "may",
"assume" and other similar words. By their nature, forward-looking
statements are inherently predictive and speculative and involve
risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. You should not place
undue reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to factors that
could cause our actual results to differ materially from those
expressed or implied by these statements. The Company undertakes no
obligation to update any forward-looking statements contained in
this document, whether as a result of new information, future
events or otherwise.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that these condensed consolidated interim
financial statements have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
that the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The directors of Stelrad Group plc are listed in the Annual
Report and Accounts for the year ended 31 December 2022.
For and on behalf of the Board
Trevor Harvey George Letham
Chief Executive Officer Chief Financial Officer
14 August 2023 14 August 2023
Stelrad Group plc. Registered number 13670010
Independent review report to Stelrad Group plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Stelrad Group plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the interim results of Stelrad Group plc for the 6 month period
ended 30 June 2023 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed consolidated interim balance sheet as at 30 June 2023;
-- the condensed consolidated interim income statement and
condensed consolidated interim statement of comprehensive income
for the period then ended;
-- the Condensed consolidated interim statement of cash flows for the period then ended;
-- the Condensed consolidated interim statement of changes in
equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
of Stelrad Group plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results, including the interim financial statements,
is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. In
preparing the interim results, including the interim financial
statements, the directors are responsible for assessing the group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Newcastle upon Tyne
14 August 2023
Stelrad Group plc
Condensed consolidated interim income statement
for the six months ended 30 June 2023
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022 (audited)
(not audited)
(not audited)
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 5 157,043 150,110 316,315
Cost of sales (excluding exceptional
items) (113,711) (109,823) (235,194)
Exceptional items 5 - - (1,054)
-------------------------------------- ------ ---------------- --- --------------- --- ----------------
Cost of sales (113,711) (109,823) (236,248)
Gross profit 43,332 40,287 80,067
Selling and distribution expenses (21,301) (18,974) (40,800)
-------------------------------------- ------ ---------------- --- --------------- --- ----------------
Administrative expenses (excluding
exceptional items) (8,463) (6,685) (12,811)
Exceptional items 5 (81) - (755)
-------------------------------------- ------ ---------------- --- --------------- --- ----------------
Administrative expenses (8,544) (6,685) (13,566)
Other operating income 6 1,231 205 373
Other operating expenses 7 (919) (2,988) (3,446)
Operating profit 5 13,799 11,845 22,628
Finance income 41 31 50
Finance costs (3,579) (1,761) (4,573)
Monetary losses - net 16 - (5,420) (7,860)
Profit before tax 10,261 4,695 10,245
Income tax expense 8 (2,273) (4,030) (5,936)
Profit for the period 7,988 665 4,309
---------------- --------------- ----------------
Notes
Earnings per share
Basic 9 6.27p 0.52p 3.38p
Diluted 9 6.27p 0.52p 3.38p
Adjusted earnings per share
Basic 9 6.36p 10.95p 19.11p
Diluted 9 6.36p 10.93p 19.11p
Stelrad Group plc
Condensed consolidated interim statement of comprehensive income
for the six months ended 30 June 2023
Six months Six months Year ended
ended 30 ended 30
June 2023 June 2022
(not audited)
(not audited) 31 December
2022 (audited)
Notes GBP'000 GBP'000 GBP'000
Profit for the period 7,988 665 4,309
Other comprehensive income/(expense)
Other comprehensive income/(expense)
that may be reclassified to profit
or loss in subsequent periods:
Net gain on monetary items forming
part of net investment in foreign
operations and qualifying hedges
of net investments in foreign
operations 873 1,362 1,691
Income tax effect 8 (205) (340) (631)
Exchange differences on translation
of foreign operations (3,351) (4,575) (5,941)
Net other comprehensive expense
that may be reclassified to profit
or loss in subsequent periods (2,683) (3,553) (4,881)
Other comprehensive expense not
to be reclassified to profit or
loss in subsequent periods:
Remeasurement losses on defined
benefit plans (716) (840) (1,932)
Income tax effect 8 143 185 423
---------------- --------------- -----------------
Net other comprehensive expense
not to be reclassified to profit
or loss in subsequent periods (573) (655) (1,509)
Other comprehensive expense for
the period, net of tax (3,256) (4,208) (6,390)
Total comprehensive income/(expense)
for the period, net of tax attributable
to owners of the parent 4,732 (3,543) (2,081)
---------------- --------------- -----------------
Stelrad Group plc (Registered Number 13670010)
Condensed consolidated interim balance sheet
as at 30 June 2023
30 June 30 June 31 December
2023 2022 2022 (audited)
(not audited) (not audited)
Notes GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property , p l an t and equipmen
t 88,682 69,139 91,604
Intangible assets 5,157 - 3,855
Trade and other receivables 306 9 317
Deferred tax assets 4,945 2,399 5,397
---------------- ---------------- ----------------
99,090 71,547 101,173
---------------- ---------------- ----------------
Current assets
I nventor i es 68,895 65,452 77,851
Trade and other re cei vab l
es 59,352 49,198 60,497
Income tax receiva ble 518 12 235
Cash and cash equivalents 20,563 13,488 22,641
---------------- ---------------- ----------------
149,328 128,150 161,224
---------------- ---------------- ----------------
Total assets 248,418 199,697 262,397
---------------- ---------------- ----------------
Equity and liabilities
Equity
Share cap it a l 127 127 127
Sh a r e premium - - -
Merger reserve (114,469) (114,469) (114,469)
Retained earnings 229,553 222,667 227,849
Foreign currency reserve (64,741) (60,730) (62,058)
---------------- ---------------- ----------------
Total equity 50,470 47,595 51,449
---------------- ---------------- ----------------
Non-current liabilities
I n t erest -b earing l oans
and borro wi ngs 12 99,242 67,109 98,513
Deferred tax liabilities 214 171 2,611
Provis ion s 1,877 262 1,799
Net em pl oyee defined bene
fit lia b ilitie s 14 4,034 2,520 4,542
105,367 70,062 107,465
---------------- ---------------- ----------------
Current liabilities
Trade and other payab l es 88,013 78,596 99,214
Interes t- bear i ng loans and
borrowings 12 1,458 1,921 1,520
Financial liability 12 419 - -
Income tax paya ble 2,287 1,427 1,829
Provisions 404 96 920
---------------- ---------------- ----------------
92,581 82,040 103,483
---------------- ---------------- ----------------
Total liabilities 197,948 152,102 210,948
---------------- ---------------- ----------------
Total equity and liabilities 248,418 199,697 262,397
---------------- ---------------- ----------------
The financial statements on pages 16 to 34 were approved by the
Board of Directors on 14 August 2023 and signed on its behalf
by:
George Letham
Chief Financial Officer
Stelrad Group plc
Condensed consolidated interim statement of changes in
equity
for the six months ended 30 June 2023
Attributable to the owners of the parent
Issued Share Merger Retained Foreign Total
share premium reserve earnings currency
capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2021
(audited) 127,353 13,391 (114,469) 57,814 (57,177) 26,912
IAS 29 adjustment (note
16) - - - 8,327 - 8,327
---------- --------- ---------- ---------- ---------- --------------
At 31 December 2021
(restated) 127,353 13,391 (114,469) 66,141 (57,177) 35,239
Profit for the year - - - 4,309 - 4,309
Other comprehensive
expense for the year - - - (1,509) (4,881) (6,390)
Total comprehensive
income/(expense) - - - 2,800 (4,881) (2,081)
Capital reduction (127,226) (13,391) - 140,617 - -
IAS 29 adjustment to
retained earnings in
the year - - - 22,982 - 22,982
Share-based payment
charge - - - 250 - 250
Dividends paid (note
10) - - - (4,941) - (4,941)
At 31 December 2022
(audited) 127 - (114,469) 227,849 (62,058) 51,449
Profit for the period - - - 7,988 - 7,988
Other comprehensive
expense for the period - - - (573) (2,683) (3,256)
Total comprehensive
income/(expense) - - - 7,415 (2,683) 4,732
Share-based payment
charge - - - 300 - 300
Dividends paid (note
10) - - - (6,011) - (6,011)
At 30 June 2023 (not
audited) 127 - (114,469) 229,553 (64,741) 50,470
---------- --------- ---------- ---------- ---------- --------------
Attributable to the owners of the parent
Issued Share Merger Retained Foreign Total
share premium reserve earnings currency
capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2021
(audited) 127,353 13,391 (114,469) 57,814 (57,177) 26,912
IAS 29 Adjustment (note
16) - - - 8,327 - 8,327
---------- --------- ---------- ---------- ---------- --------------
At 31 December 2021
(restated) 127,353 13,391 (114,469) 66,141 (57,177) 35,239
Profit for the period - - - 665 - 665
Other comprehensive
expense for the period - - - (655) (3,553) (4,208)
Total comprehensive
income/(expense) - - - 10 (3,553) (3,543)
Capital reduction (127,226) (13,391) - 140,617 - -
IAS 29 Adjustment to
retained earnings in
the period (note 16) - - - 17,072 - 17,072
Share-based payment
charge - - - 50 - 50
Dividends paid (note
10) - - - (1,223) - (1,223)
At 30 June 2022 (not
audited) 127 - (114,469) 222,667 (60,730) 47,595
---------- --------- ---------- ---------- ---------- --------------
Stelrad Group plc
Condensed consolidated interim statement of cash flows
for the six months ended 30 June 2023
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022
(not audited) (not audited)
(audited)
GBP'000 GBP'000 GBP'000
Operating activities
Profit before tax 10,261 4,695 10,245
Adjustments to reconcile profit before
tax to net cash flows:
Depreciation of property, plant and
equipment 5,785 4,236 9,700
Amortisation of intangible assets 71 - 163
Gain on disposal of property, plant
and equipment (11) (205) (220)
Monetary loss IAS 29 - 5,420 7,860
Monetary loss IAS 29 income statement
element - 3,029 3,530
Share-based payment charge 300 50 250
Finance income (41) (31) (50)
Finance costs 3,579 1,761 4,573
Working capital adjustments:
(Increase) / decrease in trade and
other receivables (821) (3,972) 1,632
Decrease / (increase) in inventories 6,877 (7,489) 5,831
Decrease in trade and other payables (9,687) (3,659) (11,528)
(Decrease) / increase in provisions (427) 57 (1,297)
Decrease in other pension provisions (5) (12) (23)
Difference between pension charge and
cash contributions (1,263) 17 (319)
Financial derivatives 427 - -
--------------- --------------- -------------
15,045 3,897 30,347
Income tax paid (4,083) (2,203) (3,801)
Interest received 41 31 50
Net cash flows from operating activities 11,003 1,725 26,596
--------------- --------------- -------------
Investing activities
Proceeds from sale of property, plant,
equipment and intangible assets 72 209 316
Purchase of property, plant and equipment (3,329) (3,597) (9,671)
Purchase of intangible assets - - (164)
Business combination of subsidiaries,
net of cash acquired - - (20,484)
Net cash flows used in investing activities (3,257) (3,388) (30,003)
--------------- --------------- -------------
Financing activities
Transaction costs related to refinancing - (111) (429)
Proceeds from external borrowings 1,100 4,500 34,122
Repayment of external borrowings - - (1,250)
Repayment of borrowings acquired with
subsidiary - - (10,746)
Principal elements of lease payments (1,236) (899) (2,049)
Interest paid (3,058) (1,409) (3,269)
Dividends paid (6,011) (1,223) (4,941)
Net cash flows (used in) / generated
from financing activities (9,205) 858 11,438
--------------- --------------- -------------
Net (decrease) / increase in cash and
cash equivalents (1,459) (805) 8,031
Net foreign exchange difference (619) (1,270) (953)
Cash and cash equivalents at start
of period 22,641 15,563 15,563
Cash and cash equivalents at end of
period 20,563 13,488 22,641
--------------- --------------- -------------
Stelrad Group plc
Notes to the condensed consolidated interim financial
statements
for the six months ended 30 June 2023
1 Corporate information
Stelrad Group plc is a public limited company that is
incorporated, domiciled and has its registered office in England
and Wales.
2 Basis of preparation
The condensed consolidated interim financial statements for the
half-year reporting period ended 30 June 2023 have been prepared in
accordance with the UK-adopted International Accounting Standard
34, 'Interim Financial Reporting' and the disclosure guidance and
transparency rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim financial statements do not include all of the notes
of the type normally included in annual financial statements.
Accordingly, this report is to be read in conjunction with the
Annual Report and Accounts for the year ended 31 December 2022,
which has been prepared in accordance with UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006, and any public announcements made by Stelrad
Group plc during the interim reporting period. The condensed
consolidated interim financial statements have been prepared using
the same accounting policies and methods of computation used to
prepare the Group's 2022 Annual Report and Accounts as described on
pages 98 to 108 of that report, which can be found on the Group's
website at www.stelradplc.com , and the adoption of new standards
and interpretations, noted below.
The condensed consolidated interim financial statements have not
been prepared using any new accounting policies in the six months
ended 30 June 2023.
The 2022 annual consolidated financial statements of the Group
were prepared in accordance with UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006 and the disclosure guidance and transparency
rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The financial statements for the six months ended 30 June 2023
and the comparative financial statements for the six months ended
30 June 2022 have not been audited. However, the financial
statements for the six months ended 30 June 2023 and the six months
ended 30 June 2022 have been reviewed by the auditor,
PricewaterhouseCoopers LLP. The comparative financial statements
for the year ended 31 December 2022 have been extracted from the
2022 Annual Report and Accounts. The financial statements contained
in this interim report do not constitute statutory accounts as
defined in section 434 of the Companies Act 2006 and do not reflect
all of the information contained in the Group's 2022 Annual Report
and Accounts. The statutory accounts for the year ended 31 December
2022, which were approved by the Board of Directors on 13 March
2023 and have been filed with the Registrar of Companies, received
an unqualified audit report which did not draw attention to any
matters by way of emphasis and did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
Functional currency
There has been one significant change in the six months ended 30
June 2023 that affects the interim financial statements: On 1
January 2023, the functional currency of the Turkish business was
changed from Turkish Lira to Euros and, as a result, IAS 29 is no
longer being applied after this date.
The Group determined that the functional currency of its Turkish
business has changed following the increased production
capabilities at the Turkish factory arising from the installation
of two new manufacturing lines in the second half of 2022. The new
lines are intended to predominantly serve the European and UK
export markets which has given rise to a change in the currency
profile and therefore functional currency of the business. The
Turkish business predominantly holds excess cash balances in
Euros.
Going concern
In preparing these financial statements on the going concern
basis, the directors have considered the Group's current and future
prospects and its availability of cash resources and financing and
the Group's financial position.
The Group meets its day-to-day working capital requirements
through a bank loan facility which is in place up to November 2024.
At the period-end date the Group had drawn down GBP91.0 million of
a GBP100 million revolving credit facility. The remainder of the
facility and significant cash balances of GBP20.6 million are
available to enable day-to-day working capital requirements to be
met.
As part of their period-end review, management has performed a
detailed going concern review, based on severe but plausible
conditions, looking at the group's liquidity and banking covenant
compliance, examining expected future performance. The Board have
also reviewed the risks and uncertainties facing the business.
Based on the output of these going concern reviews, management have
concluded that the Group will be able to continue to operate within
its existing facilities and as such the financial statements have
been prepared on a going concern basis.
New standards and interpretations applied in the period
Several amendments and interpretations apply for the first time
in 2023, but do not have a material impact on the consolidated
financial statements of the Group. These include:
-- IFRS 17 Insurance Contracts
-- Definition of Accounting Estimates - Amendments to IAS 8
-- Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendment to IAS 12
-- International Tax Reform - Pillar Two Model Rules - Amendment to IAS 12
New standards and interpretations not applied
The International Accounting Standards Board has issued the
following standards and interpretations with an effective date
after the date of these financial statements:
International Accounting Standards (IAS/IFRSs) Effective
date
(period beginning
on or after)
Classification of Liabilities as Current or Non-current 1 January
- Amendments to IAS 1 2024
Lease liability in a Sale and Leaseback - Amendments 1 January
to IFRS 16 2024
Non-current liabilities with Covenants - Amendments to 1 January
IAS 1 2024
Supplier Finance Arrangements - Amendments to IAS 7 and 1 January
IFRS 7 2024
It is anticipated that adoption of these standards and
interpretations will not have a material impact on the Group's
financial statements.
The Group has not early adopted any standards, interpretations
or amendments that have been issued but are not yet effective.
3 Significant accounting judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the accompanying disclosures, and the disclosure
of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected
in future periods.
Judgements
In the process of applying the Group's accounting policies,
management has made judgements which would have a significant
effect on the amounts recognised in the consolidated financial
statements.
Business combinations
In July 2022, the Group acquired DL Radiators SpA, an Italian
manufacturer of heat emitters, for EUR28.3m.
As a result, an exercise was undertaken to measure the fair
value of assets and liabilities acquired as part of the business
combination. This included ascertaining a fair value for all
inventory acquired as part of the business combination. Management
exercised judgement in determining whether any additional
intangible assets, such as customer relationships, should be
identified and the valuation assigned to these. Management engaged
with experts in order to assist with the valuation of certain
tangible and intangible assets, including customer relationships.
The opening acquisition balance sheet was finalised in the period
with the changes from the initial assessment outlined in note
11.
Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, which have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial statements
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
Rebates
A proportion of rebates is paid to the end consumers of goods
sold. Uncertainties exist over provisions made as, until claims are
made by end consumers, the Group cannot be certain which consumers
have purchased which products. Due to this uncertainty it is
therefore judgemental what contractual rates, if any, will apply to
goods sold.
Significant management judgement is required in order to assess
the provision required at the balance sheet date. Management is
able to utilise market information and historical/current data and
trends in order to make an appropriate provision.
A reasonably possible change in the estimates surrounding
rebates would not result in a material impact to the financial
statements.
4 Principal risks
The Board has undertaken a review of the principal risks
affecting the Group for the six months ended 30 June 2023. The
Board considers that the principal risks, as discussed in the 'Risk
management' section on pages 49 to 54 of the Group Annual Report
and Accounts for the year ended 31 December 2022 (available on the
Group's website www.stelradplc.com), remain relevant.
5 Segmental information
IFRS 8 Operating Segments requires operating segments to be
determined by the Group's internal reporting to the Chief Operating
Decision Maker ("CODM"). The CODM has been determined to be the
Chief Executive Officer and Chief Financial Officer, who receive
information on the Group's revenue channels in key geographical
regions based on the Group's management and internal reporting
structure. The CODM assesses the performance of geographical
segments based on a measure of revenue and adjusted operating
profit.
Adjusted operating profit is earnings before interest, tax,
amortisation of customer relationships, exceptional items, the
impact of IAS 29 (until 31 December 2022) and foreign exchange
differences (until 31 December 2022).
IAS 29 was applied in the six months ended 30 June 2022 and the
year ended 31 December 2022. The impact of IAS 29 has been removed
in arriving at revenue (pre-IAS 29) and adjusted operating profit,
as management believe that the pre-IAS 29 results give a more
meaningful presentation of the Group's underlying performance.
On 1 January 2023, the functional currency of the Turkish
business was changed from Turkish Lira to Euros and, as a result,
IAS 29 is no longer being applied after this date. Also, after this
date, the impact of foreign exchange differences is no longer
adjusted for in arriving at adjusted operating profit.
Revenue by geographical market Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022 (audited)
(not audited) (not audited)
GBP'000 GBP'000 GBP'000
UK & Ireland 70,106 70,588 138,874
Europe 76,494 63,652 147,909
Turkey & International 10,443 13,576 25,335
Revenue (pre-IAS 29) 157,043 147,816 312,118
Impact of IAS 29 - 2,294 4,197
Total revenue 157,043 150,110 316,315
--------------- --------------- ----------------
Adjusted operating profit by geographical Six months Six months Year ended
market ended 30 ended 30 31 December
June 2023 June 2022 2022
(not audited) (not audited)
(audited)
GBP'000 GBP'000 GBP'000
UK & Ireland 11,470 12,311 22,716
Europe 4,926 7,486 13,877
Turkey & International 666 2,004 2,055
Central costs (3,111) (2,848) (4,668)
Adjusted operating profit 13,951 18,953 33,980
Exceptional items (81) - (1,809)
Amortisation of customer relationships (71) - (57)
Foreign exchange differences (until
31 December 2022) - (2,985) (3,446)
Impact of IAS 29 - (4,123) (6,040)
Operating profit 13,799 11,845 22,628
--------------- --------------- -------------
Non-current operating assets Six months Six months Year ended
ended 30 ended 30
June 2023 June 2022
(not audited) (not audited)
31 December
2022
(audited)
GBP'000 GBP'000 GBP'000
UK 18,618 19,610 18,823
The Netherlands 21,452 22,939 22,757
Turkey 25,961 25,181 26,854
Italy 22,293 - 22,686
Other 1,133 1,409 1,239
Total 89,457 69,139 92,359
--------------- --------------- --------------
The exceptional items in the period ended 30 June 2023 are the
final costs associated with the 2022 acquisition. In the year ended
31 December 2022 the exceptional items within administrative
expenses relate to redundancy costs and acquisition costs and the
exceptional item within cost of sales relates to the reversal of
the IFRS 3 fair value uplift on finished goods and work in
progress.
The revenue information above is based on the locations of the
customers. All revenue arises from the sale of goods.
No customers have revenues in excess of 10% of revenue (six
months ended 30 June 2022: one; year ended 31 December 2022:
none).
6 Other operating income
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022 (audited)
(not audited) (not audited)
GBP'000 GBP'000 GBP'000
Net gain on disposal of property,
plant and equipment 11 205 220
Foreign currency gains 1,060 - -
Sundry other income 160 - 153
1,231 205 373
--------------- --------------- ----------------
7 Other operating expenses
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022 (audited)
(not audited) (not audited)
GBP'000 GBP'000 GBP'000
Foreign currency losses - 2,985 3,446
Net losses on forward derivative 919 - -
contracts
Sundry other expenses - 3 -
919 2,988 3,446
--------------- --------------- ----------------
8 Income tax expense
The major components of income tax expense are as follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022 (audited)
(not audited) (not audited)
GBP'000 GBP'000 GBP'000
Consolidated income statement
Current income tax:
Current income tax charge 3,932 2,305 4,090
Adjustments in respect of current
income tax charge of previous period 177 (255) (290)
Deferred tax:
Relating to origination and reversal
of temporary differences (1,664) 2,299 2,802
Relating to change in tax rates (172) (319) (666)
Income tax expense reported in the
income statement 2,273 4,030 5,936
--------------- --------------- ----------------
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022 (audited)
(not audited) (not audited)
GBP'000 GBP'000 GBP'000
Consolidated statement of comprehensive
income
Tax related to items recognised in
other comprehensive income/(expense)
during the period:
Deferred tax on actuarial loss (143) (185) (423)
Current tax on monetary items forming
part of net investment and on hedges
of net investment 205 340 631
Income tax expensed to other comprehensive
income/(expense) 62 155 208
--------------- --------------- ----------------
The taxation charge has been calculated by applying the
Directors' best estimate of the annual effective tax rate to the
profit for the period.
Changes in the corporate income tax rate
The UK corporation tax rate rose to 25% from 1 April 2023.
9 Earnings per share
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022 (audited)
(not audited) (not audited)
GBP'000 GBP'000 GBP'000
Net profit for the period attributable
to owners of the parent 7,988 665 4,309
Exceptional items 81 - 1,809
Amortisation of customer relationships 71 - 57
Foreign exchange differences - 2,985 3,446
Impact of IAS 29 - 9,610 13,906
Tax on exceptional items, IAS
29, amortisation and foreign
exchange differences (39) 680 806
Adjusted net profit for the period
attributable to owners of the
parent 8,101 13,940 24,333
--------------- --------------- ----------------
IAS 29 was applied in the six months ended 30 June 2022 and the
year ended 31 December 2022. The impact of IAS 29 has been removed
in arriving at adjusted net profit, as management believe that the
pre-IAS 29 results give a more meaningful presentation of the
Group's underlying performance.
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022 (audited)
(not audited) (not audited)
Basic weighted average number
of shares in issue 127,352,555 127,352,555 127,352,555
Effect of dilutive potential - 201,503 -
ordinary shares
--------------- --------------- ----------------
Diluted weighted average number
of shares in issue 127,352,555 127,554,058 127,352,555
--------------- --------------- ----------------
Earnings per share
Basic earnings per share (pence
per share) 6.27 0.52 3.38
Diluted earnings per share (pence
per share) 6.27 0.52 3.38
--------------- --------------- ----------------
Adjusted earnings per share
Basic earnings per share (pence
per share) 6.36 10.95 19.11
Diluted earnings per share (pence
per share) 6.36 10.93 19.11
--------------- --------------- ----------------
10 Dividends paid and proposed
Six months Six months Year ended
ended 30 ended 30
June 2023 June 2022
(not audited) (not audited)
31 December
2022
(audited)
GBP'000 GBP'000 GBP'000
Declared and paid during the
period
Equity dividend on ordinary shares:
Final dividend for 2022: 4.72p
per share (2021: 0.96p per share) 6,011 1,223 1,223
Interim dividend for 2022: 2.92p
per share (2021: nil) - - 3,718
6,011 1,223 4,941
--------------- --------------- --------------
Six months Six months Year ended
ended 30 ended 30
June 2023 June 2022
(not audited) (not audited)
31 December
2022
(audited)
GBP'000 GBP'000 GBP'000
Dividend proposed (not recognised
as a liability)
Equity dividend on ordinary shares:
Final dividend for 2022: 4.72p
per share (2021: 0.96p per share) - - 6,011
Interim dividend for 2023: 2.92p
per share (2022: 2.92p per share) 3,719 3,719 -
--------------- --------------- --------------
11 Business combinations
On 13 July 2022, Stelrad Radiator Holdings Limited, a wholly
owned subsidiary of the Group, acquired 100% of DL Radiators SpA, a
radiator manufacturer incorporated in Italy. The total
consideration paid was EUR28,346,000.
The fair value of the net assets acquired were as follows:
Book Provisional Fair value Final Fair value
value fair value at 31 December fair value at 30 June
adjustment 2022 adjustment 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Intangible assets 713 1,761 2,474 - 2,474
Property, plant &
equipment 11,054 6,474 17,528 - 17,528
Inventory 24,499 1,034 25,533 (398) 25,135
Trade & other receivables 17,837 - 17,837 (952) 16,885
Trade & other payables (28,403) - (28,403) - (28,403)
Deferred taxation 1,853 (1,538) 315 - 315
Current taxation (49) - (49) - (49)
Cash & cash equivalents 3,490 - 3,490 - 3,490
Provisions (3,580) - (3,580) (131) (3,711)
Pension liabilities (1,033) - (1,033) - (1,033)
Loans & other borrowings (11,360) - (11,360) - (11,360)
Total identifiable
net assets 15,021 7,731 22,752 (1,481) 21,271
--------- ------------ ---------------- ------------ ------------
Goodwill on the business
combination 1,222 2,703
---------------- ------------
Discharged by:
Cash consideration 23,974 23,974
---------------- ------------
During the period ending 30 June 2023, the provisional fair
values of the identifiable net assets were revisited with the fair
value reduced by GBP1,481,000 which increased the goodwill value to
GBP2,703,000. Goodwill of GBP2,703,000 reflects certain intangibles
that cannot be individually separated and reliably measured due to
their nature. These items include the value of expected synergies
arising from the business combination and the experience and skill
of the acquired workforce. The fair value of the customer
relationships was identified and included in intangible assets.
The gross amount of trade and other receivables is GBP18,681,000
in both the provisional and final fair values. All of the trade and
other receivables are expected to be collected in full, other than
those that have been provided for.
Transaction costs relating to professional fees associated with
the business combination in the six months ended 30 June 2023 were
GBP81,000 (31 December 2022: GBP251,000) and have been
expensed.
DL Radiators generated revenue of GBP31,541,000 and a loss for
the year of GBP405,000 (adjusted profit for the year of GBP485,000)
in the period from acquisition to 31 December 2022 which are
included in the consolidated statement of comprehensive income for
this reporting period. If the combination had taken place at 1
January 2022, the Group's revenue would have been GBP40,588,000
higher and the profit for the year from continuing operations would
have been GBP1,296,000 lower than reported.
12 Financial liabilities
a) Financial liabilities - other - not interest bearing
30 June 31 December
2023 (unaudited) 2022 (audited)
GBP'000 GBP'000
Liabilities
Financial instruments at fair value through profit
or loss
Derivatives not designated as hedges - foreign 419 -
exchange forward contracts
------------------ ----------------
Total instruments at fair value through profit 419 -
or loss
Current 419 -
Non-current - -
Financial instruments through profit or loss reflect the
positive change in fair value of those foreign exchange forward
contracts that are not designated in hedge relationships, but are,
nevertheless, intended to reduce the level of foreign currency risk
for expected sales and purchases.
b) Financial liabilities - interest-bearing loans and borrowings
Effective interest Maturity 30 June 31 December
rate 2023 (not 2022 (audited)
audited)
% GBP'000 GBP'000
Current interest-bearing loans and borrowings
Lease liabilities 1,458 1,520
1,458 1,520
----------- ----------------
Non-current interest-bearing loans and borrowings
Lease liabilities 9,037 8,516
Revolving credit facility
- GBP SONIA + 2.25% 9 Nov 2024 56,350 55,250
Revolving credit facility
- Euro Euribor + 2.25% 9 Nov 2024 10,298 10,647
Term loan Euribor + 2.25% 9 Nov 2024 24,325 25,150
Unamortised loan costs (768) (1,050)
99,242 98,513
----------- ----------------
Total interest-bearing loans and borrowings 100,700 100,033
----------- ----------------
On 10 November 2021, the Group refinanced its external debt as
part of the IPO and entered into an GBP80 million revolving credit
facility ("RCF") jointly financed by National Westminster Bank plc
and Barclays PLC, which was first drawn on 10 November 2021.
On 8 July 2022, the GBP80 million revolving credit facility was
increased by GBP20 million by means of an accordion option. The
facility consists of a GBP76.027 million revolving credit facility
and a EUR28.346 million term loan facility.
The RCF and term loan facilities are secured on the assets of
certain subsidiaries within the Group.
13 Contingent liabilities
Termo Teknik Ticaret ve Sanayi A.S. has issued letters of
guarantee and letters of credit to its steel suppliers amounting to
$21,669,000 (31 December 2022: $22,685,000) and $9,791,000 (31
December 2022: $11,175,000) respectively. Termo Teknik Ticaret ve
Sanayi A.S. has also issued letters of guarantee denominated in
Turkish Lira totalling TL14,970,000 (31 December 2022:
TL13,220,000).
As part of the GBP100 million revolving credit facility, entered
into in November 2021, and continuing following the amendment to
the facility agreement outlined in note 12, the Group is party to a
cross-collateral agreement secured on specific assets of certain
Group companies. No liability is expected to arise from the
agreement.
Under an unlimited multilateral guarantee, the Company, in
common with certain fellow subsidiary undertakings in the UK, has
jointly and severally guaranteed the obligations falling due under
the Company's net overdraft facilities. No liability is expected to
arise from this arrangement.
14 Pensions and other post-employment plans
30 June 31 December
2023 (not 2022
audited)
(audited)
GBP'000 GBP'000
Net employee defined benefit
liability
Turkish scheme 3,101 3,546
Italian scheme 886 944
Other retirement obligations
- non-IAS 19 47 52
4,034 4,542
----------- -------------
Turkish scheme
In Turkey there is an obligation to provide lump sum termination
payments to certain employees; this represents 30 days' pay
(subject to a cap imposed by the Turkish Government) for each year
of service. The IAS 19 valuation gives a liability of GBP3,101,000
(31 December 2022: GBP3,546,000). There are no assets held in this
plan (31 December 2022: nil).
Italian scheme
The Italian pension scheme, the Trattamento di Fine Rapporto, is
a deferred compensation scheme established by Italian law.
Employers are required to provide a benefit to employees when, for
any reason, their employment is terminated. The IAS 19 valuation
gives a net liability of GBP886,000 (31 December 2022:
GBP944,000).
UK scheme
The UK has one defined contribution pension scheme.
There were no outstanding contributions (31 December 2022:
GBPnil) due to the scheme at the balance sheet date.
Other overseas retirement obligations
The Group operates a number of defined contribution pension
schemes in its overseas entities and also has certain other
retirement obligations.
IAS 19 accounting - Turkish and Italian schemes
Amounts recognised in the balance sheet
Italian Turkish Italian Turkish
scheme scheme scheme scheme
30 June 30 June 31 December 31 December
2023 (not 2023 (not 2022 (audited) 2022 (audited)
audited) audited)
GBP'000 GBP'000 GBP'000 GBP'000
Defined benefit obligation 886 3,101 944 3,546
Net pension liability 886 3,101 944 3,546
----------- ----------- ---------------- ----------------
Principal actuarial assumptions
Italian Turkish Italian Turkish
scheme scheme scheme scheme
30 June 30 June 31 December 31 December
2023 (not 2023 (not 2022 (audited) 2022 (audited)
audited) audited)
Discount rate (per
annum) 3.70% 10.60% 3.70% 10.60%
Future salary increases
(per annum) n/a 10.10% n/a 10.10%
Quantitative sensitivity analysis
30 June 2023 (not 30 June 2023 (not
audited) audited)
Discount rate Future salary increases
(per annum) (per annum)
+1% -1% +1% -1%
GBP'000 GBP'000 GBP'000 GBP'000
(Decrease)/increase in
defined benefit obligation
- Turkish scheme (203) 239 238 (205)
The sensitivity analysis above has been determined based on a
method that extrapolates the impact on the net defined benefit
obligation as a result of reasonable changes in key assumptions at
the end of the reporting period.
15 Related party disclosures
There are no related party transactions or changes since the
last year end that could have a material effect on the Group's
financial position or performance for the period.
16 IAS 29 Financial reporting in hyperinflationary economies
The Turkish economy was designated as hyperinflationary from 1
April 2022. As a result, application of IAS 29 'Financial Reporting
in Hyperinflationary Economies' has been applied to all Stelrad
Group plc entities whose functional currency is the Turkish Lira.
IAS 29 requires that adjustments are applicable from the start of
the relevant entity's reporting period. For Stelrad Group plc that
is from 1 January 2022. The application of IAS 29 includes:
-- Adjustment of historical cost non-monetary assets and
liabilities for the change in purchasing power caused by inflation
from the date of initial recognition to the balance sheet date;
-- Adjustment of the income statement for inflation during the reporting period;
-- The income statement is translated at the period end foreign
exchange rate instead of an average rate; and
-- Adjustment of the income statement to reflect the impact of
inflation and exchange rate movement on holding monetary assets and
liabilities in local currency.
IAS 29 was applied to the results of the Group's Turkish
subsidiary in the six months ended 30 June 2022 and the year ended
31 December 2022. On 1 January 2023, the functional currency of the
Turkish business was changed from Turkish Lira to Euros and, as a
result, IAS 29 is no longer being applied after this date.
Reconciliation of opening equity at 1 January 2022
The differences between the closing equity of the prior year at
31 December 2021 and the opening equity of the current year at 1
January 2022 have been recognised as an IAS 29 adjustment in the
consolidated statement of changes in equity.
GBP'000
Retained earnings at 31 December
2021 57,814
IAS 29 adjustment 8,327
Retained earnings at 31 December
2021 (restated) 66,141
--------
The IAS 29 adjustment at 1 January 2022 is made up as
follows:
At 1 January
2022
GBP'000
Property, plant and equipment 9,395
Inventories 1,183
Prepayments 33
Deferred tax liability (2,284)
IAS 29 adjustment 8,327
-------------
Statement of changes in equity the six months ended 30 June
2022
The impact of the restatement of the opening reserves of
entities whose functional currency is the Turkish Lira was
GBP17,072k, this is credited to the statement of changes in equity
in the period and subsequently reversed through the "monetary
losses - net" line in the income statement.
Six months
ended 30 June
2022
(not audited)
GBP'000
Retained earnings credit 17,072
----------------
Monetary losses - net for the six months ended 30 June 2022
The monetary loss for the six months ended 30 June 2022 is made
up as follows:
Six months
ended 30 June
2022
(not audited)
GBP'000
Retained earnings (17,072)
Property , p l an t and equipmen
t 7,982
Inventories 497
Prepayments 31
Income statement 3,142
Monetary losses - net (5,420)
----------------
[1] Average analyst adjusted operating profit consensus is
currently GBP28.5 million.
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END
IR BLGDICBBDGXB
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