2020 Financial Highlights
- Trading EBITDA is defined as underlying operating profit before depreciation and central corporate costs
- Adjusted operating profit is defined as operating profit before exceptional items, amortisation of intangible assets and notional pension administration charges
- Trading ROCE is defined as LTM underlying profit before central corporate costs divided by LTM average trading net assets
- Operating cash conversion is defined as operating cash flow (which excludes lease payments) divided by adjusted operating profit
The Group has faced challenging and unprecedented conditions during 2020 due to COVID-19, particularly in its main UK market.
In the UK and Ireland, our operations were effectively closed from late March to mid-May by the first COVID-19 lockdown but experienced a strong recovery in the second half of the year as consumers chose to spend money on home improvements that might have otherwise been spent on holidays or other restricted activities. Revenues from our UK businesses were £74.4m, which represented a 12% reduction from 2019 but was set against the backdrop of an estimated market contraction of c.14% as a result of the COVID-19 pandemic. In Ireland our revenues declined 7% to €16.6m, also as a result of COVID-19 market contraction.
Whilst our Northern European markets were broadly flat, following less severe lockdown restrictions, we achieved year-on-year revenue growth of 8%, at constant exchange rates, due to the successful launch of new products.
Trading EBITDA of £9.6m was just £0.2m behind Last Year and Adjusted Operating Profit grew £0.8m to £5.1m. This robust profit performance was achieved despite an estimated £4.4m adverse profit impact of the COVID-19 market contraction. A wide-ranging cost cutting exercise across the Group, including the cancellation of annual pay awards and the management profit share scheme plus salary sacrifices at a Director and senior management level, generated cost savings of £3.5m. In addition, the Group availed itself of the government funding available in each relevant jurisdiction receiving £1.8m in total.
The Group remained cash positive throughout the year and grew funds from £12.8m at the end of 2019 to £20.3m, due mainly to the profit generated in the year and a significant reduction in year-on-year working capital of £4.6m.
Subsequent to the year end, the Group completed an extension of its major committed bank facility. At the year end, the facility was a £30.0m global asset-based funding agreement with Wells Fargo Capital Finance (UK) Limited which was due to expire on 31 December 2021. The Facility limit has since been reduced to £15.0m to reflect the ongoing strength of the Group’s cash position and now runs until 30 June 2025.
The Group’s shareholders’ funds increased from £41.4m in 2019 to £43.4m due to profit for the year of £2.4m and a £0.4m gain on translation of foreign operations, partly offset by £0.5m net losses on foreign exchange hedges and net pension losses of £0.3m (both net of deferred tax) due to adverse movements in actuarial assumptions.
Despite national lockdown status in both the UK and Ireland, the Group has made a strong start to 2021. High levels of demand from UK customers in late 2020 has continued from both architectural and fenestration customers.
Whilst the UK Government has published a road map to gradually ease lockdown restrictions during the Spring, the Group is cautious about market demand in the second half of 2021. Job losses that are likely to follow the end of Coronavirus Job Retention Scheme, and the ongoing impact of COVID-19 throughout 2021 may dampen consumer confidence resulting in lower spending in the Repair, Maintenance and Improvement (RMI) sectors of the UK and Irish economies.
Nonetheless, management teams across the Group remain committed to grow the business in 2021 and have a clear focus to grow sales and earnings by:
- Pushing ahead with new products and business initiatives;
- Continuing to innovate in products and services;
- Defending margins;
- Keeping costs under control; and
- Maximising cash flow through the efficient management of working capital.
2020 Adjusted Operating Profit Bridge (£m)
2020 Cash Movement (£m)