IMMEDIATE RELEASE

Tuesday 5 September 2023

THE ALUMASC GROUP PLC

("ALUMASC")

FULL YEAR RESULTS ANNOUNCEMENT

RESILIENT PERFORMANCE; DELIVERY OF STRATEGIC PRIORITIES

Alumasc (ALU.L), the premium sustainable building products, systems and solutions Group, announces results for the year ended 30 June 2023.

Commenting on the results reported today, Paul Hooper, Chief Executive, said:

"We are delighted to report these full year results which demonstrate the Group's resilience and benefits of our diversified portfolio of innovative, sustainable building products, against a challenging market backdrop and a comparative which included significant overseas project sales.

"The management team has focused on execution of our growth strategy. Strong organic growth was delivered in our Housebuilding Products and Building Envelope divisions. Inorganic growth is also being pursued with the proposed acquisition of ARP Group (subject to CMA approval). ARP will complement Alumasc's business model, broadening our product range in the Water Management division and augmenting our routes to market. We are excited at the prospect of this transaction bringing attractive scaling opportunities for both businesses.

"As we enter FY24, we anticipate that short-term market conditions will remain challenging, but are confident that we have undertaken the right actions to manage these, while positioning the Group well for when markets normalise."

Financial Highlights: Resilient performance against challenging market backdrop

§ Group revenues from continuing operations maintained at £89.1m (FY22: £89.4m)

§ Group underlying* profit before tax from continuing operations £11.2m (FY22: £12.7m)

§  Delays in new Chek Lap Kok project impacted performance; shipments commenced in July 2023

§ Strong cashflow performance; net debt reduced to £2.8m (FY22: £4.7m)

§ Progressive dividend policy reflects Board's confidence in outlook

§  Final dividend 6.9p (FY22: 6.65p) per share

§  Total dividend 10.3p (FY22: 10.0p) per share

Delivery of strategic priorities

§ Innovative, sustainable building products, with excellent customer service and experienced teams

§ Continued focus on operational margin enhancements, with well invested operations and significant capacity headroom, including further investments in efficiency and capability

§ Increased sales presence across new geographies to accelerate future export sales growth

§ Post year end acquisition of ARP Group ('ARP'), a manufacturer of specialist metal rainwater and architectural aluminium goods, for a maximum consideration of £10.0m on a cash and debt free basis

§  Expected to be immediately accretive to underlying earnings and will be funded from existing cash and debt facilities

§  Following completion, Alumasc's balance sheet will remain strong, with June 2023 pro-forma net debt representing approximately 0.75x EBITDA

§  Acquisition remains conditional upon clearance by the UK Competition and Markets Authority, anticipated during the Autumn

Divisional performance

§ Housebuilding Products

§  Outstanding performance with 19% increase in revenue to £14.7m (FY22: £12.4m), 44% increase in underlying** operating profit to £3.5m (FY22: £2.4m)

§  Continuation of market-leading customer service and new product launches into adjacent channels

§ Water Management

§  Revenue £39.8m (FY22: £47.6m), underlying** operating profit £5.8m (£8.8m); significant contribution from overseas projects in comparative

§  New Chek Lap Kok airport project delayed into FY24, deliveries commenced in July 2023

§ Building Envelope

§  Solid performance from continuing operations; 18% revenue growth to £34.6m (FY22: £29.4m) and underlying** operating profit of £4.1m (FY22: £3.6m)

§  Further market share gains assisted by new products and new sales hires

Outlook

§ Healthy order book; year started in line with management's expectations

§ Water Management expected to see positive impact from delayed Chek Lap Kok contract and contribution from ARP acquisition

§ Diversified businesses, innovative products and demand for sustainable building products provide resilience

§ The Board anticipate short-term market conditions will remain challenging, but are confident the Group has taken the right actions to manage these, while the Group remains well positioned to benefit when markets normalise.

* a reconciliation of underlying to statutory profit before tax is provided in note 5.

** see Divisional Review below for a reconciliation of underlying to statutory operating profit.

Enquiries:

The Alumasc Group plc                          +44 (0)1536 383844

Paul Hooper (Chief Executive)               

Simon Dray (Group Finance Director)    

Peel Hunt (Broker)                                 +44 (0)207 418 8831

Mike Bell

Ed Allsopp             

finnCap (NOMAD)                 +44 (0)207 220 0561

Julian Blunt             

Camarco (Financial PR)                        alumasc@camarco.co.uk

Ginny Pulbrook                                       +44 (0)203 757 4992

Rosie Driscoll                                         

Notes to Editors:

1      Alumasc is a UK-based supplier of premium sustainable building products, systems and solutions. Almost 80% of Group sales are driven by building regulations and specifications (architects and structural engineers) because of the performance characteristics offered.

2      The Group has three business segments with strong positions and brands in their individual markets. The three segments are: Water Management; Building Envelope; and Housebuilding Products.

Strategic Report

Chair's Statement

I am pleased to report that Alumasc delivered a robust performance despite challenges for building products from rising interest rates, persistent inflation, labour shortages, political upheaval and weaker market confidence.

Performance

The Group has once again shown its resilience and the benefits of its diversified portfolio. Against a backdrop of challenging market conditions, Group revenues from continuing operations were maintained at around £89 million and underlying profit before tax of £11.2 million delivered in accordance with market expectations. There was some dilution to operating margins from increased investment in capability as well as lower volumes in our Water Management division, which should recover in 2024. Our operating cash flow of £12.2 million (2022: £7.8 million) enabled us to reduce our net bank debt by around £2 million during the year, after payments for capex, dividends and the Levolux business sold in the year.

Our Strategy of organic growth with synergistic M&A

We remain focused on accelerating growth and I am delighted that our Building Envelope and House Building Products divisions grew their revenues by 18% and 19% respectively. Our Water Management division's revenues declined by 16%, reflecting significant export orders in 2022 and the deferment of a new Chek Lap Kok airport project into 2024. Deliveries under this project commenced in July 2023.

In line with our strategic objectives, we acquired post year end (subject to regulatory clearance) ARP into our Water Management division. We believe that the business will enable us to deliver further growth and synergistic benefits, and it is expected to be immediately accretive to underlying earnings.

ESG

Around 80% of our products deliver environmental benefits in the built environment, especially through for example water and energy management. As the move towards a greener economy accelerates, our businesses are focused and well placed to support our customers to deliver on their sustainability needs.

We are also focused on making a tangible difference to the communities in which we operate and to our people, as well as maintaining high standards of governance.

Pension scheme

As previously reported, our annual defined benefit pension scheme contributions have been reduced to £1.2 million (previously £2.3 million), reflecting an agreement with the trustees until 2025. Along with many other schemes, Alumasc's defined benefit pension scheme felt the effects of the financial markets turmoil following the September 2022 mini-budget. The pension scheme deficit was £4.3 million at 30 June 2023 (2022: £2.1 million). The Company continues to work constructively with the Trustees to enable the scheme to have a low dependency on the Company in the medium term.

Dividends

The Company remains committed to its progressive dividend policy. The interim dividend of 3.4p per share paid in April 2023 will be followed by a final dividend of 6.9p per share, if approved by the shareholders, payable in November 2023. This will be a total dividend per share of 10.3p per share (2022: 10.0p per share)

Outlook and Alumasc's People

While markets remain uncertain, Alumasc's strategy remains focused on organic and inorganic growth in sustainable building products. This places us well to capitalise on the many opportunities in our industry from environmental change. We continue to invest in people, product development and capacity to encourage our divisions to grow market share and enter adjacent product categories.

Our people, including colleagues joining us from ARP, whom we are delighted to welcome, are critical to delivering our strategy. They have once again shown admirable resilience and agility and, on behalf of our other stakeholders, the Board and I thank them for their ongoing hard work and commitment.

Vijay Thakrar

Chair

5 September 2023

Chief Executive's Review

Financial Highlights and Overview

*A reconciliation of underlying to statutory profit before tax is provided in note 5

Overview of performance

Group sales for the 12 months ending 30 June 2023 were £89.1 million, close to the prior year sales of £89.4 million.  Group sales in the UK were strong, increasing by £8.4 million (11%) which was a reasonable achievement against a backdrop of a declining market, particularly for the UK housebuilding sector, which has seen the negative impact of inflation driving higher interest rates and lower demand for mortgages.

As previously reported, against a comparative which included significant sales to overseas projects, Gatic Covers experienced delays in the launch of its new £7 million project to Chek Lap Kok project in Hong Kong, which were scheduled for Q4.  There was also a slowdown in activity in the Middle East, believed to be as a result of the focus on the FIFA World Cup. This led to a decline in Water Management export sales. We are pleased to report that shipments for the new Chek Lap Kok project have commenced in quarter one of the new financial year.

Raw material prices were broadly stable over the year, but general inflation remained high and further cost increases were recovered through price rises.

Despite the above challenges and a general slowdown in construction activity the Group achieved its profit forecast and came in at the analysts' consensus for the year.

The divisional star performers of the year were Housebuilding Products (sales +£2.3 million (+19%) and underlying operating profit +£1.1 million (+44%)) and Building Envelope (sales +£5.2 million (+18%) and underlying operating profit +£0.5 million (+14%)).

Divisional review                                                                   

(a)     Water Management

Revenue: £39.8 million (2021/22: £47.6 million)

Underlying operating profit*: £5.8 million (2021/22: £8.8 million)

Underlying operating margin*: 14.5% (2021/22: 18.4%)

Operating profit: £5.6 million (2021/22: £8.7 million)

* Prior to restructuring costs of £0.1 million (2021/22: £nil) and brand amortisation charges of £0.1 million (2021/22: £0.1 million)

Following two successive years of record performance, and a doubling of its profit over three years, the Water Management Division fell back due to the delays of several significant export projects, including at Chek Lap Kok Airport in Hong Kong, which delivered £6.6 million sales in the prior period.  The delayed new circa £7.0 million Chek Lap Kok project is now underway, with shipments commencing in quarter one of our 2024 financial year.

UK sales remained strong and despite the challenging marketplace managed to move slightly ahead of the prior year.  Several large projects for Gatic Slotdrain and Access Covers were delivered and another good performance was achieved by the Architectural Aluminium business, Skyline, which also benefitted from the successful introduction of a number of new products.  Of note was also the second half year launch of the new patented Slotdrain E, designed to require much less concrete during installation while allowing faster installation. The first successful installation took place at the historic and large business jet facility at Farnborough Airport, and we anticipate strong demand for this new product.

Rainclear, which has a certain reliance on self-build projects, had a slower performance than the prior period due to pressure on household income. However, it was successful in mitigating some of this shortfall through work with regional housebuilders plus the launches of its new canopy, veranda and skylight ranges, all which are showing early promise. 

The Water Management Division commences the new financial year with an order book over twice the size of a year ago.

We should take the opportunity here to welcome, subject to The Competition Markets Authority's approval, our new colleagues from The ARP Group, a business with which we exchanged contracts on 24 July 2023.

(b)     Building Envelope

Revenue: £34.6 million (2021/22: £29.4 million)

Underlying operating profit*: £4.1 million (2021/22: £3.6 million)

Underlying operating margin*: 11.8% (2021/22: 12.2%)

Operating Profit: £4.1 million (2021/22: £3.1 million)

1              * Prior to restructuring costs of £nil (2021/22: £0.5 million)

The Building Envelope Division had a strong revenue growth (+18%) in the year under review driven by pro-active management including the hiring of very experienced and effective sales managers.  It has increased market share also aided by new product launches including a very successful flat to pitched roof system along with the successful promotion of its CO₂ reducing product, Olivine.

A good level of Academy work was won.  Some reasonably significant cost increases were passed on through sales prices.  The Roofing business continues to focus on high-end specification offers supported by the highest standards, and a customer service level which delivers low carbon systems combined with safety in installation, all supported by long term warranties. 

Long standing relationships with key clients, developers and contractors, along with the increasing influence in large scale projects (£1.0m+) is benefitting the Division.  Work is ongoing to broaden and to continually improve the environmental performance of the product range.

(c)     Housebuilding Products

Revenue: £14.7 million (2021/22: £12.4 million)

Underlying operating profit*: £3.5 million (2021/22: £2.4 million)

Underlying operating margin*: 23.9% (2021/22: 19.7%)

Operating profit: £3.3 million (2021/22: £2.4 million)

* Prior to restructuring costs of £0.2 million (2021/22: £nil)

Timloc, our Housebuilding Products business, had an outstanding year, growing its revenue 19% and its underlying operating profit by 44%.  This was achieved by the continuation of its industry-leading next day delivery service and the continued growth of its new products, which in 2022/23 accounted for approximately 25% of its revenue. This included the launch of the Inventive Tile Vent range which has taken a significant market share during the year.  This highlights Timloc's ability to identify commercial opportunities to launch innovative products and demonstrate its position as an efficient manufacturer, supported by a brand, endorsed by its reputation for outstanding service (100% OTIF in the year).  The Inventive Tile Vents have also taken Timloc into a new distributor channel of specialist roofing merchants.

Despite the challenges of a weakening housing market and cost increases, which were largely recovered, the Housebuilding Products Division managed to deliver a strong operating margin of 24%.  Improved efficiencies, outstanding next day service and rigorous cost controls contributed significantly, along with additional manufacturing throughput and continued investment in automation.

Timloc's continued focus on sustainability, including being the first UK building products manufacturer to become carbon neutral, leaves it well positioned to support the housebuilders' drive to build carbon zero homes.  During the year, Timloc was the first of our businesses to fully comply with the Group's move to electric vehicles.

Further investments are planned in operational capacity (including automation), external sales representation and new product development capabilities to support continued growth.

Strategic Overview

The Group continued to progress its long-term growth strategy.

Accelerating sales growth by:

-       Servicing markets with long term structural growth drivers. Demand for our products is underpinned by building regulations and legislation;

-       Preserving and growing market share with market-leading customer service and leveraging cross-selling opportunities across our businesses;

-       New product development to grow share and access adjacent markets; and

-       Geographical sales expansion.

Driving margin improvement by:

-       Maintaining agile and flexible production capacity; and

-       Simplifying and streamlining our businesses and reducing fixed overheads.

Championing sustainable business products:

-       Creating durable, low maintenance products which reduce the whole-life energy and financial cost of buildings.

-       Addressing some of the environmental challenges facing the construction industry: building decarbonisation, water management and occupant wellbeing/urban biodiversity; and

-       Embracing the circular economy by using recycled and recyclable materials.

Investing in value-enhancing opportunities, using our strong balance sheet and operating cash generation:

-       Organic growth through improving operational capability, R&D/NPD, sales and marketing resource; and

-       Inorganic growth through bolt-on acquisitions in current or adjacent markets.

Alumasc is in a very strong position to benefit from the move towards sustainable construction and green buildings, both in terms of its portfolio of products and in its championing of the circular economy. Many internal initiatives have also been taken to act in an environmentally sustainable manner, including the sourcing of electricity from renewable sources for 100% of the Group's supply. The Group's Net Zero planning is underway, supported by a Group policy to move to electric vehicles and make our operations as carbon efficient as possible.

Outlook

Alumasc's cost savings programme, liquidity management, strong balance sheet and improved commercial positioning underpin a business that is well positioned to benefit from the long-term growth drivers in its markets. Alumasc's primary aim is to manage the long-term sustainability of the business and to focus on its key strategic objectives, growing revenues faster than the UK construction market and being a supplier of sustainable building products.

Notwithstanding uncertainty over the short-term macro-economic outlook, a robust platform is now in place which provides the Board with confidence for another strong year, which has started in line with management's expectations.

G Paul Hooper

Chief Executive

5 September 2023

Financial Review

Performance from continuing operations

The Group produced a resilient performance against a challenging UK construction sector backdrop. Group revenue was £89.1 million (2021/22: £89.4 million), broadly in line with a strong comparative which included a £6.6 million contribution from significant export contracts. Call-offs expected in the year for the new circa £7 million Chek Lap Kok airport project were delayed, but commenced in 2023/24.

Gross margin was 36.7% (2021/22: 37.3%). While raw material prices stabilised over the year, general inflation remained high and the Group continued to recover cost increases through selling prices where they could not be mitigated or avoided.

Underlying operating expenses of £20.6 million (2021/22: £20.1 million) reflect wage inflation and investments made in sales and marketing capabilities, and are presented net of a £0.8 million (2021/22: £nil) research and development credit, against qualifying expenditure of £4.1 million (2021/22: £3.9 million).

Underlying operating profit was £12.1 million (2021/22: £13.3 million), representing a return on sales of 13.6% (2021/22: 14.9%).

Net finance costs were £0.9 million (2021/22: £0.6 million), the increase driven by higher interest rates in the year.

Underlying profit before tax was £11.2 million (2021/22: £12.7 million) and, after £0.7 million (2021/22: £0.7 million) of non-underlying charges, statutory profit before tax was £10.5 million (2021/22: £12.0 million).

Non-underlying items

The Board uses underlying profit and earnings as an alternative performance measure, to track and assess the Group's trading performance. This measure excludes certain non-underlying items, which include brand amortisation, pension scheme finance costs, acquisition expenses, and other items which are significant and one-off in nature. The non-underlying items in the current and prior financial year were:

-                               Amortisation of acquired brands of £0.1 million (2021/22: £0.1 million). This is a non-cash charge arising from the application of accounting standards, to write off the estimated value of brands associated with acquired businesses over their anticipated useful life.

-                               Restructuring and legal costs of £0.3 million (2021/22: £0.5 million), mainly representing one-off professional fees incurred to resolve a commercial dispute and, in the prior year, in exiting the Group's roofing installation business.

-                               Acquisition costs of £0.2 million (2021/22: £nil) which are professional fees incurred in the Group's acquisition activities, primarily in relation to the acquisition of ARP Group announced on 25 July 2023.

-                               IAS 19 net pension scheme finance costs of £0.1 million (2021/22: £0.1 million). These non-cash charges relate to the Group's legacy defined benefit pension scheme, and are calculated by actuaries to reflect the notional financing cost of the Group's pension deficit.

Taxation

The Group's underlying effective tax rate on continuing operations was 20.0% (2021/22: 19.4%), compared to the UK corporation tax average rate for the year of 20.5% (2021/22: 19.0%).  The tax rate varies in line with the UK rate and the balance of available reliefs, non-taxable income and expenses. The Group's underlying effective tax rate for 2023/24 is expected to be around 25.5%.

The Group's effective tax rate on statutory profit from continuing operations was 24.9% (2021/22: 20.6%). A reconciliation of this rate to the average UK corporation tax rate is included in note 8.

Earnings per share

Basic earnings per share from continuing operations was 23.3p (2021/22: 26.8p), and underlying earnings per share from continuing operations was 25.0p (2021/22: 28.6p).

Dividends

The Board have recommended to shareholders a final dividend of 6.9 pence per share (2021/22: 6.65 pence), which will absorb an estimated £2.5m of shareholders' funds. This has not been accrued in these accounts as it was proposed after the end of the financial year. Subject to shareholder approval at the Annual General Meeting on 26 October 2023, it will be paid on 3 November 2023 to members on the share register on 29 September 2023.

Together with the interim dividend of 3.40 pence (2021/22: 3.35 pence) paid to shareholders on 6 April 2023, this will bring the total distribution for the year to 10.3 pence per share (2021/22: 10.0 pence), which is covered 2.4 times (2021/22: 2.9 times) by underlying earnings per share from continuing operations.

Discontinued Operations

The Group sold its Levolux business on 26 August 2022, and its trading results up to the date of disposal have been reported within discontinued operations in the current and prior year. Proceeds from the sale were £1, and further contingent consideration is unlikely to be paid. The prior year results include a charge of £14.9 million to write down the carrying value of Levolux's net held for sale assets to £1. A further £1.7 million loss on disposal was recorded in the current year, representing cash held by Levolux at the date of disposal, other related write-downs and transaction costs.

Cash Flows and Net Debt

Underlying operating cash flow from continuing operations

The Group's underlying operating cashflow from continuing operations was £14.2 million (2021/22: £11.2 million), representing 117% (2021/22: 84%) of underlying operating profit, reflecting the partial unwind of investments in inventory made in the prior year, to maintain customer service during a period of supply chain disruption. Further reductions in working capital are expected over 2023/24 as inventory holdings continue to reduce. Average trade working capital as a percentage of revenue for the year was 19.1% (2021/22: 18.1%).

Movement in net bank debt

Cash generated from continuing operating activities was £4.4 million higher than the prior year at £12.2 million, largely due to the increase in underlying operating cash flows and the £1.0 million reduction in pension deficit funding, following the lower schedule of contributions agreed with the trustees. Cash outflows in respect of non-underlying items were £0.4 million (2021/22: £0.8 million).

Capital expenditure was £2.7 million (2021/22: £2.6 million), representing 101% of depreciation (2021/22: 104%). The main investments were capacity and efficiency investments at the Housebuilding Products site in Howden, and in process automation in the Water Management division. The Board see further opportunities to invest in organic growth across the Group, and expect capital expenditure to remain at or above the level of depreciation over the medium term.

Interest payments were £0.8 million (2021/22: £0.6 million) and tax payments £0.5 million (2021/22: £1.6 million).

After lease principal repayments of £0.8 million (2021/22: £0.7 million), own share purchases to fulfil the vesting of employee share options of £0.1 million (2021/22: £0.5 million), and dividend payments of £3.6 million (2021/22: £3.4 million), the reduction in net bank debt before discontinued operations was £3.6 million (2021/22: £1.5 million increase in debt).

The cash outflow in respect of discontinued operations was £1.7 million (2021/22: £2.3 million), leading to a reduction in net bank debt for the year of £1.9 million (2021/22: £3.8 million increase).

Net Debt

Net bank debt at June 2023, on which the Group's banking covenants are based, was £2.8 million (June 2022: £4.7 million). Total net debt, including lease liabilities, was £8.1 million (2021/22: £9.8 million).

Financial Position

Group net assets at 30 June 2023 were £25.7 million (2021/22: £25.7 million).

Pensions

The Group accounts for its defined benefit pension retirement obligations in accordance with IAS 19 Employee Benefits, based on the market value of scheme assets and a valuation of scheme liabilities using a discount rate based on AA corporate bond yields at year end. Mortality and inflation assumptions have been aligned to updated actuarial information. The IAS 19 defined pension scheme deficit at 30 June 2023, before deferred taxes, was £4.3 million (June 2022: £2.1 million). Lower valuations led to scheme assets decreasing in the year, by £15.8 million, to £71.5 million. Scheme liabilities decreased by £13.6 million to £75.8 million, due to an increase in the discount rate.

The contribution rate is agreed with the trustees based on actuarial valuations rather than the IAS 19 deficit. Following the triennial review in March 2022, the Group agreed to reduce annual contributions from £2.3 million to £1.2 million from 1 October 2022. These payments are designed to enable the scheme to reach a position of low dependency (where the scheme is expected to be able to meet its future liabilities using prudent investment assumptions and without further Group support) over a reasonable timescale.

Banking facilities and covenants

The Group maintains facilities with its banking partners to ensure the availability of sufficient liquidity to meet the Group's operational and strategic needs, at optimal cost. The Group projects facility utilisation and compliance with the associated covenants during its short-term forecasting, annual budgeting and strategic planning exercises, to ensure adequate headroom is maintained, taking into account the Group's expected performance and investment plans.

At 30 June 2023, the Group's banking facilities comprised:

-                               An unsecured committed £25.0 million revolving credit facility, which expires in August 2025 with two single year extension options to August 2026 and 2027. In July 2023 the Group exercised the first of these options, to extend the facility expiry to August 2026;

-                               An uncommitted £20.0 million accordion facility, which would allow the Group to increase its revolving credit facility to £45.0 million if exercised and approved; and

-                               Overdraft facilities, repayable on demand, of £4.0 million.

The covenants associated with these facilities are set out below, together with the reported figures at 30 June 2023 and 2022:

                                                                         Covenant                30 June 2023                30 June 2022

Net debt: EBITDA                                                     <2.5                                 0.2                                 0.4

Interest cover                                                            >3.5                               18.9                               31.7

Return on investment

The Group defines its invested capital as shareholders' funds, including historic goodwill but excluding net bank debt, pension deficit (net of tax) and lease liabilities. The Group's post tax return on invested capital (underlying operating profit from continuing operations after tax, divided by invested capital) was 26.1% (2021/22: 29.8%); lower than the prior year due to the lower operating profit and higher tax rate; but still substantially higher than the Group's weighted average cost of capital, which the Group estimates to be 11%.

Capital structure and capital allocation

The Group aims to deliver strong and sustainable financial returns well in excess of its cost of capital. It achieves this by investing the capital provided by its cash-generative operations and its strong balance sheet in a disciplined manner consistent with its long-term strategy, while maintaining debt at a prudent level. The Board's allocation priorities are:

-                               Investment in organic growth, principally through capital expenditure and investment in organisational capabilities, particularly in research and development, manufacturing capacity and efficiency, and sales and marketing resources.

-                               Providing regular returns to shareholders through a progressive dividend policy, which aims to increase dividends broadly in line with underlying earnings, while maintaining a prudent level of cover.

-                               Investment in inorganic growth, identifying bolt-on acquisition targets in current or adjacent markets which complement the Group's existing business and deliver synergies.

The Group's solid financial platform has allowed it to continue to invest in opportunities to build resilience and generate sustainable growth. The acquisition of ARP Group, announced on 25 July 2023 and subject to CMA approval, is consistent with the Group's inorganic growth strategy and disciplined approach to capital allocation, and is expected to be immediately accretive to underlying earnings while further enhancing the Group's prospects over the medium term.

Going concern

As detailed in note 1, in assessing the Group's ability to continue as a going concern, the Board has considered medium-term forecasts based on the Group's approved budget and three-year plan including stress test scenarios based on 10% and 20% reductions in revenue.

Under the stress test scenarios, there remained adequate headroom under the Group's banking facilities and no breach of banking facilities over the period to September 2024. The Board also took note of the Group's ability to reduce its cost base and/or conserve cash facilities if necessary.

A reverse stress test scenario, that would lead to a breach of the Group's banking covenants, was also modelled. The Board consider the risk of such a scenario to be remote, and the Board would take immediate mitigating actions were it to arise.

Having taken into account the scenario models above, and in light of the remaining headroom against banking covenants and total facilities under the various scenarios, the Board consider that the Group has adequate resources to continue trading for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Simon Dray

Group Finance Director

5 September 2023

PRINCIPAL RISKS AND UNCERTAINTIES

consolidated STATEMENT of comprehensive income

For the year ended 30 June 2023

Reconciliations of underlying to statutory profit and earnings per share are provided in notes 5 and 10 respectively.

consolidated statement of financial position

At 30 June 2023

*The financial position at 30 June 2022 has been restated to separately present the gross held for sale assets and liabilities of the Levolux business. See note 1.

The financial statements were approved by the Board of Directors and authorised for issue on 5 September 2023

Paul Hooper                                                           Simon Dray                            
Director                                                                   Director                                  

5 September 2023    Company number 1767387