logo-loader
viewSigmaRoc

SigmaRoc PLC - Annual results for year ended 31 December 2019

RNS Number : 1156K
SigmaRoc PLC
20 April 2020
 

SigmaRoc plc / EPIC: SRC / Market: AIM / Sector: Construction & Materials

20 April 2020

 

SigmaRoc plc

('SigmaRoc' or the 'Company')

 

Audited full year results for year ended 31 December 2019 and Notice of AGM

 

SigmaRoc plc, the AIM listed buy-and-build construction materials group, is pleased to announce its audited results for the year ended 31 December 2019.

 

Financial highlights1

31 December 2019

31 December 2018

Change

Underlying revenue

£70.4m

£41.2m

+70.6%

Underlying EBITDA

£14.5m

£9.8m

+47.6%

Underlying profit before tax

£8.4m

£5.5m

+51.3%

Underlying EPS

4.20p

3.83p

+9.7%

Adjusted Leverage Ratio2

2.07x

1.63x

+27.0%

 

1 Underlying results are stated before acquisition related expenses, certain finance costs, redundancy and reorganisation costs, impairments, amortisation of acquisition intangibles and share option expense. References to an underlying profit measure throughout the Annual Report are defined on this basis.

 

2 Adjusted leverage ratio compares net debt to underlying EBITDA for the last twelve months adjusted for pre-acquisition earnings of subsidiaries acquired during the year

 

Operational highlights:

 

-     Four acquisitions during the year including CCP Building Products Limited and 40% holding in GDH (Holdings) Limited in the UK; and Carrieres du Hainaut and Stone Holdings Limited in Belgium;

-     The new ready-mix operations were opened at Ronez in Jersey in February 2019;

-     Revenue increased to £70.4 million, with underlying EBITDA increasing to £14.5 million, a growth of 47.6% year-on-year;

-     Entered into the Northern European market with the acquisition of Carrieres du Hainaut and Stone Holdings;

-     Implemented a Group-wide safety policy and saw the LTIFR reduce by 36%; and

-     The Groups operations expanded to over 30 production sites and close to 1,000 employees.

Annual General Meeting

 

SigmaRoc is also pleased to give notice that its Annual General Meeting ('AGM') will be held on 18 May 2020 at 1:00 p.m. at 56 Queen Anne Street, London, W1G 8LA. Copies of the Notice of AGM, together with the Form of Proxy and Annual Report have been posted to shareholders and are available to view on the Company's website.

 

In light of the UK government's response to the COVID-19 outbreak, which includes banning all non-essential travel and gatherings of more than two people, the Company strongly encourages all Shareholders to submit their form of proxy, rather than attend the AGM in person.

 

David Barrett, Executive Chairman, commented:

 

"I am pleased to report another strong year in 2019 where we were able to substantially grow the Group, meeting our ambitious expectations for the year. We made four acquisitions during the year, which collectively and on a pro-forma basis, add £112 million in revenue and £17 million in EBITDA annually."

 

"I am extremely proud of our continued progress and believe we are well positioned to successfully manage the challenges presented to our business by the COVID-19 pandemic."

 

 

Max Vermorken, CEO, commented:

 

"I would like to thank the great team we have at SigmaRoc for another excellent year. Through a combination of organic and acquisitive growth we increased revenue by 71% to £70.4 million, Underlying EBITDA by 48% to £14.5 million and Underlying EPS by 10% to 4.2p."

 

"As Garth moves to a Non-Executive Director role, I am extremely grateful he helped us build a business in great financial shape, with a solid asset base, potential to grow across four existing platforms and the opportunity to create new platforms for further expansion. I also thank Dom and Patrick for their contributions and am pleased that both will remain involved with the Group as advisors."

 

"Looking forward, we have the COVID-19 crisis to navigate. The Group is well prepared to confront the potential consequences of the crisis and to then continue its growth story, thanks to the resilience of its great workforce and supportive unions. I am therefore optimistic about what we can achieve in the months ahead of us this year and beyond."

 

END


Text from the 2019 Annual Report is set out below, together with detailed financial results.
 
SigmaRoc will host a meeting for invited analysts at 9.00am and private investors at 2.00pm today. Conference call dial-in details are available from the Company upon request to join the analyst or private investor meetings. A recording will also be available on request from the Company.

 

---------------------------------------------------------------------------------------------------------------------------

 

For further information, please contact:

 

SigmaRoc plc

Max Vermorken

Tel: +44 (0) 207 002 1080

Strand Hanson Limited (Nominated and Financial Adviser)

James Spinney / James Dance / Jack Botros

Tel: +44(0) 207 409 3494

Peel Hunt (Joint Broker)

Mike Bell/Ed Allsopp

Tel: +44 (0) 20 7418 8900

Liberum Capital (Joint Broker)

Neil Patel / Jamie Richards / Jonathan Wilkes-Green / William Hall

Tel: +44 (0) 203 100 2000

Rubik Communications (Financial PR adviser)

Andrea Mora / Charlotte Hollinshead

Tel: +44 (0) 207 002 1080

[email protected]

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

 

 

CHAIRMAN'S STATEMENT

 

SigmaRoc has completed a very successful 2019. Our revenue reached £70 million, our underlying EBITDA grew by 47.6%, to £14.5 million with our underlying earnings per share growing further to 4.20 pence.

 

Underlying EBITDA margins remained strong at 20.7% when taking into account the incorporation of a lower margin and higher volume business with the acquisition of CCP. Our remaining business recorded EBITDA margins of 24.6%, which is in-line with our 2018 performance.

 

As a result of these strong financial results the business was able to continue its growth by starting two new platforms in South Wales and Belgium respectively. The business now operates over 30 production sites, including 15 quarries, with over 400 million tonnes of mineral reserves and resources across the Group, with the potential to further expand each platform.

 

A year of substantial growth

 

2019 was characterised by significant growth, both organically and through acquisition. We completed a total of four acquisitions during the year, complementing our PPG Platform, substantially growing our South Wales platform and creating a new platform, in Belgium.

 

Additionally, we have invested in our existing businesses in order to expand the offering and production capacity, thereby organically growing our footprint. In 2019, we invested significantly in our ready-mix concrete offering at Ronez Jersey and expanded our production capacities at both Poundfield and CCP. We also upgraded our plant and machinery across the business to further solidify our operating base.

 

The most substantial acquisition saw our move into Belgium through the acquisitions of Carrieres du Hainaut, the leading producer of the world-famous Belgian Bluestone, as well as significant volumes of construction aggregates, and Stone Holdings, which specialises in armour rock for sea and river defence work. The potential for the business to now expand into the Benelux area is significant as we build out a quarrying platform that already includes three quarries in Belgium.

 

Safety

 

The safety and the wellbeing of our colleagues is paramount to our activity and to a well-run business. We have invested substantially to ensure that workplaces across the Group continuously improves and accidents are avoided. In November 2019, we implemented a new Group-wide safety policy to ensure uniform safety standards across the Group.

 

The impact of the policy has already been visible. Our Belgian platform recorded its longest period without incident on record, between the time of our acquisition and earlier this year. Our safety record in the other parts of the business also improved, with a net drop in LTIFR of 36% on the previous year. Total incident reporting increased across the Group, showing improved quality of information flow.

 

Governance and sustainability

 

As part of the continued transformation of the business, we have placed further emphasis on governance and sustainability. In September 2019, we announced the proposed appointment of Jacques Emsens, a renowned industrialist and expert in specialist minerals, to our Board as an independent Non-Executive Director. 

 

Immediately following the release of these Accounts, the Company intends to formally appoint Jacques Emsens to the Board, together with Simon Chisholm, who brings detailed knowledge of equity markets, fund management and market regulation. Simon qualified as a Chartered Accountant and has over 20 years of experience working in the investment arena. He is currently founder and managing director of Feros Advisers Limited and has previously worked as a fund manager investing in European equities at Singer & Friedlander, Henderson Global Investors and other large institutions. Simon will join the Board as a senior independent Non-Executive Director and will chair the Audit Committee.

 

In addition, we have created an advisory board with the aim of guiding our business through a number of exciting projects in the Benelux region. It is a privilege to have private equity investor, Count Christophe de Limburg Stirum, and former Heidelberg Benelux CEO Pascal Lesoinne, join our Benelux advisory board.

 

With these changes, we have put in place a solid supervisory body of high calibre individuals with significant experience in the industry, listed businesses and the fast-changing regulatory environment, to help us to guide the business forward. 

 

From a sustainability perspective, we also made significant progress throughout the year. A separate section of this report is dedicated to our specific efforts in this area, which include renewal programmes for our mobile and delivery fleet for lower emission vehicles, to product ranges aimed at assisting with the challenges faced by the effects of climate change, and the participation in breeding programmes for certain animal species near our sites.

 

Looking forward

 

The first important announcement at this stage is that we see our CFO, Garth Palmer, step down from the role he has held since we founded the business. Garth, who has served as our CFO on a part-time basis and is also a partner in accounting firm, Heytesbury Corporate LLP, has been an exceptional CFO to our business. Guiding us through sometimes challenging and always very intense times, his skill and dedication has been a significant contributing factor to our success to date. Garth has indicated, however, he will remain on our Board as a Non-Executive Director, for which we are extremely grateful.

 

We are also very pleased to announce our new fulltime CFO, Dean Masefield, who will also join the Board immediately following the release of these Accounts. Dean joined SigmaRoc in 2017 taking on the roles of Financial Director for the Ronez Platform and then Deputy CFO to the Group in 2019. Prior to joining SigmaRoc Dean served as Head of Finance of BNP Paribas and later Equiom Channel Islands overseeing all accounting, reporting, regulatory and systems aspects for tens of billions of USD in assets under management. Dean is a Chartered Accountant having qualified with BDO in 1997 and is presently an FCA, having qualified with the Institute of Chartered Accountants of England and Wales.

 

In order to maintain an appropriately sized Board relative to the size and stage of development of the Group, Dominic Traynor and Patrick Dolberg have both agreed to step down from their current positions as Non-Executive Directors of the Company, following completion of the Annual General Meeting to be held on 18 May 2020.

 

Dominic has been with us on this journey from the very beginning and we are extremely thankful to him for his contributions toward our success to date, which have culminated in the Group exceeding forecast annual turnover of £100 million. We are pleased that Dominic will be taking up a position on one of the subsidiary boards and will therefore remain involved with the Group in an advisory capacity.

 

Patrick has been with us since we completed the reverse takeover of Ronez in early January 2017 and has been instrumental in guiding the Group through its early growth phase, for which we are extremely grateful. Patrick is a Belgian national and formerly ran Holcim's European operations. Given our European growth aspirations we are pleased to report that Patrick will join our Benelux advisory committee and, therefore, will continue to provide guidance as we grow the Group.

 

With these Board changes we have positioned the business well for the future. With significant potential for further development. In the Benelux region, we have a well-balanced business that can capitalise on growth opportunities as and when they arise. Our position in South Wales is promising and can be expanded. Our precast group, SigmaPPG, is in great shape and fully integrated.

 

We started 2020 well with a strong first quarter, however, at the time of writing, the outbreak of the Coronavirus pandemic and its economic consequences create uncertainty. We continue to actively monitor the situation and implement required contingency plans as and when appropriate. We remain confident that we have a solid business with fantastic assets and that once the economy rebounds, we will be well positioned to resume delivering further shareholder value.

 

 

David Barrett

Executive Chairman

17 April 2020

 

 

CEO's STRATEGIC REPORT

 

2019 was a significant year for SigmaRoc. Nearly every month of the year, the business made a major step forward, whether it was through organic growth, acquisition, financial and operational improvement and/or a review of our safety, governance, reporting systems and environmental impact. As a result, where we started 2019 as a business with two platforms, we finished the year with four platforms across four regions, nearly 1,000 colleagues and ample opportunity to further expand and develop.

 

Financial performance

 

Focussing first on the financial performance of the Group, where we have delivered excellent results. Revenue increased to £70.4 million, with underlying EBITDA increasing to £14.5 million, a growth of 47.6% year-on-year. Underlying earnings per share increased to 4.20 pence. Underlying EBITDA margins continued to be strong at 20.7% when taking into account the integration of CCP, a quality business specialising in concrete blocks that typically attract a lower margin. As we further integrate and grow the Group, these margins are expected to continue to grow above 20%, assuming 2019 activity levels.

 

Our balance sheet has also continued to improve, with the refinancing of the £10 million, 6% convertible loan notes and the simultaneous extension of the Santander credit facilities from £20 million to £34 million. With the acquisition of CCP in the North West, our joint venture with G.D. Harries in South Wales and our acquisition of CDH in the Benelux, we have extended our mineral reserves and resources to over 400 million tonnes across the Group, at 15 quarries. The asset backing in the Group is therefore solid and is further complemented by land, plant and machinery at the various production sites.

 

Trading Summary

 

Throughout 2019, we have continued to press on with improvement programmes launched across the various businesses. A dedicated section in this report on our business model gives further detail of the progress made. As a result of these programmes, each business we own is performing better than it had prior to acquisition.

 

Ronez had another strong year of continued increased performance recording over £29 million in sales, biased to the first half. The markets in Jersey remained strong, while Guernsey has unfortunately not yet seen the higher volume months it witnessed five years ago. In particular, our new concrete offering in Jersey has helped solidify our position as the concrete supplier of choice, demonstrating that the investment case for the new plant was a robust one. The contracting division also did an outstanding job in both islands, delivering challenging jobs in sometimes difficult circumstances as both the weather and the structure of the sites can be tricky in the islands.

 

Our second platform, SigmaPPG, recorded a solid year all round after a slower start than expected. CCP, acquired in February 2019, showed slower trading in the initial few months of ownership, both in its block and aggregates businesses. However, the block business saw volumes increase rapidly across the year, with nightshifts being introduced for the first time to follow demand. The Aberdo quarry was restructured extensively making it an exemplary turn-around case and won the British Aggregate Association Quarry of the Year award.

 

Allen Concrete and Poundfield Products continued their strong performance with an expanded product range. After further investment to reorganise the Poundfield site as a result of increasing levels of demand, it has now captured a leading position in the UK as a supplier of choice for technically challenging bespoke precast concrete projects and retaining walls.

 

Across the second and third quarters of 2019, production levels hit record all-time highs propelling Poundfield's revenues to over £9m. Large sea defence projects were delivered in the UK, protecting the British coastlines. The retaining wall business continued to diversify its offering to include new applications of the product and selling to, for example, nuclear facilities. The flooring business grew further with its end-to-end design solution and short lead times.

 

Growth

 

While we continued to focus on performance improvements, we did not lose focus on our acquisition growth strategy. We expanded into South Wales through a joint venture partnership with G.D. Harries, a leading construction materials supplier led by Ian Harries and assisted by our MD for the region, David McClelland. The business recorded an excellent year, well ahead of its performance in 2018 with an underlying EBITDA of £3.2 million, a year-on-year growth of 24.8%.

 

In the third quarter, we commenced our expansion into Belgium, following many months of planning, initially appointing Emmanuel Maes as MD of Europe, a highly experienced former CEO of dredging and aggregates supplier, Group De Cloedt, followed by the acquisition of Stone Holdings and subsequently and more significantly, Carrieres du Hainaut.

 

Carrieres du Hainaut is globally the leading supplier of Belgian Blue Stone, a highly sought-after decorative stone with applications in infrastructure, housing and public spaces. It recorded sales of €51.4 million and an underlying EBITDA of €13.6 million in 2019. Extension projects are ongoing to extend the site to over 300 hectares. Additionally, CDH is a major producer of construction aggregates with volumes of nearly 2 million tonnes per year, one of the largest operations of its kind in Belgium. Combined, CDH has approximately 200 million tonnes of aggregate and over 27 million cubic metres of dimension stone, enough for over 100 years of production at the current rate.

 

The potential with this acquisition lies in the fact that the business offers a real platform for growth. Belgian Blue Stone remains undiscovered in many markets including the UK, yet we believe that we have the required commercial teams in place within our PPG Platform to change this. The partnership on the production of construction aggregates comes to an end in three years giving us full flexibility to consider all options to produce and even commercialise this valuable material ourselves, or in continued collaboration with a quality partner.

 

Safety

 

Major progress was made in the field of safety and the wellbeing of our colleagues. As an executive committee we designed and implemented a Group-wide safety policy in line with the highest standards in the industry. We appointed Clinton White as Safety and Estates Director and he coordinates with line managers in each business to ensure safety is an output of best practice operations. We continue to use external auditors to review our safety performance independently, to ensure we constantly improve.

 

Year-on-year the results are visible. The total number of incidents has declined while the business grew. Our Group-wide LTIFR reduced by 36%. Total reported near misses increased indicating better reporting. The culture in each platform is changing to embrace our best practice safety policy. A key example would be our Belgian platform which saw the longest period without incident on record subsequent to our take-over of the business.

 

Environment, Social and Governance (ESG)

 

Over the course of 2019 we made significant progress on all aspects of our ESG focus. A dedicated section of this report provides full details, however, some aspects we can highlight here. 

 

During the course of 2019, we started the search to extend our Board with further independent Non-Executive Directors, with a view to ensuring robust governance of the business. With the proposed appointments of industrialist, Jacques Emsens, and former fund manager and Chartered Accountant, Simon Chisholm, we will add solid experience to our Board in the management of large listed industrial groups as well as the regulatory aspects of publicly listed companies.

 

At an operational level, in May 2020, we are very pleased to be appointing Anthony Brockbank, Equity Capital Markets (ECM) partner with law firm, Fieldfisher LLP, as our General Council, on a part time basis. We consider Anthony to be amongst the most experienced ECM lawyers in the UK and he will further assure compliance with the market rules and regulations.

 

On a social and environmental front, we continued to reinforce our existing initiatives to reduce our environmental impact, protect our operational sites from pollution, care for indigenous species of wildlife and actively seek to produce products which help with the mitigation of some of the impacts of climate change. Further details on these initiatives are provided in the dedicated section further into this report.

 

Promotion of the Company for the benefit of members as a whole

 

The Director's believe they have acted in the way most likely to promote the success of the Group for the benefit of its members as a whole, as required by s712 of the Companies Act 2006. The requirements of s172 are for the Directors to:

 

·    Consider the likely consequences of any decision in the long term;

·    Act fairly between the members of the Company;

·    Maintain a reputation for high standards of business conduct;

·    Consider the interests of the Group's employees;

·    Foster the Group's relationships with suppliers, customers and others; and

·    Consider the impact of the Group's operations on the community and environment.

 

The application of the s172 requirements are demonstrated throughout this report and the Accounts as a whole, with the following examples representing some of the key decisions made in 2019 and up to the date of these Accounts:

 

·    Response to the Coronavirus pandemic: as detailed in the Coronavirus update, the Group has taken various measures to protect the wellbeing of its employees, maintain good working relationships with its customers and suppliers, and ensure the commercial viability of its business.

 

·    Continued pursuit of buy and build growth strategy: the Group has aggressively continued its buy and build growth strategy, completing four acquisitions during 2019, which expanded the SigmaPPG and South Wales platforms and created a new platform in Belgium.

 

·    Safety initiatives: safety and wellbeing of our colleagues is one of our top priorities and the Group continued to improve its health and safety standards, including adopting a Group-wide safety policy to ensure uniform safety standards across the Group.

 

Strategic approach and outlook

 

Our strategic approach is to build clusters of local and complementary businesses to deliver shareholder value from synergies, operational improvement and competitive advantage. We target assets that deliver a value proposition to customers, have a strong local market presence and hard asset backing, resulting in improved margins. We seek income streams that are diversified and supported by quality assets producing aggregates, concrete, precast and prestressed concrete and related products and services.

 

At the time of writing the outlook is complex. The underlying business is sound, filled with significant potential and the capacity to expand both organically and through acquisition. The teams are skilled and the operational structure is efficient, following several improvement initiatives. The project pipeline remains filled with exciting projects, both in terms of product development and potential acquisition targets that could strongly complement our existing footprint.

 

We started the year well with solid performance in all parts of the business. While Ronez had some inclement weather to deal with, in the shape of several storms passing through the Channel Islands, its underlying demand and project pipeline remains solid. The Benelux platform recorded robust sales in both aggregates and dimension stone, indicating a good pipeline overall.

 

Our discussions with Santander and four banks in Belgium to put in place a Group-wide credit facility, which would provide further financial flexibility to support our growth, are far advanced and we look forward to providing further updates as and when appropriate.

 

In consideration of the above, I believe it is only fitting to close this report with three facts: firstly, our business made excellent progress in 2019 and Q1 2020; secondly, as a management team we have, since early March 2020, made preparations to mitigate the impact of COVID-19 on our business through several action plans and mitigation strategies; and thirdly, the underlying business, its asset backing and strength of its senior management team position the Group well to deliver shareholder value.

 

This report was approved by the Board on 17 April 2020.

 

 

Max Vermorken

Chief Executive Officer

 

 

CORONAVIRUS UPDATE

 

Since the end of February 2020, we have been working to prepare our business for scenarios that I do not think anyone could have anticipated, namely, those brought about by the impact of the Coronavirus pandemic. Fortunately, as a team, we believe were ahead of most and found ourselves in a good position to help protect our staff and our business from the potential consequences of COVID-19. With this message, I intend to give you some insight into how we are approaching this challenge.

 

(a) Preparation and uniform approach

 

In early March 2020, it became apparent that the Coronavirus would pose a serious challenge to all of us. To prepare for this challenge, we instructed our Health and Safety Director, Clint White, and the Group MDs to immediately start coordinating our response across the entire business. A Group-wide campaign on how to prevent contracting the virus, based on scientific and Government advice, was started. At the time of writing, this has been successful, with all our operations remaining free of confirmed or probable Coronavirus cases.

 

(b) Increasing our readiness

 

As time passed, it quickly became apparent that basic hygiene rules would not be enough and that we needed to do more; we needed strict social distancing. As a business, we are fortunate in that we mostly work in the open air, on sites with plenty of space and carry out jobs that can be reconfigured to be performed alone, indicating a relatively lower risk profile.

 

However, across the Group we also have administrative offices, portacabins, breakrooms and toilets. We have made sure to ventilate these spaces well where possible, otherwise deciding to limit access or closing them completely. We have also enhanced cleaning routines and surfaces touched by staff are now cleaned more frequently. Those who could work from home were instructed to do so, in order to respect the social distancing instructions. In addition, a programme was put in place to ensure those working from home did so in the right setup and environment.

 

(c) Financial preparation

 

As a team, we also looked carefully at the possible financial implications to our business resulting from Coronavirus. I am happy to report that, at an early stage of pandemic, we developed contingency plans that prepared our business well for the possible consequences of this virus. Simulations were run to understand how long we could survive with zero revenue, how much revenue loss we could stand to remain cash positive, how much revenue could be lost before banking covenants were breached and what would need to be done to make our financial position as secure as possible.

 

The plans we developed were reassuring. Our cash balance was robust and would allow us to operate for over six months with zero revenue and without drawing any further debt. We have access to further bank facilities if required. Even more encouraging is the fact that these plans were prepared, finalised and presented to the Board well before the UK and Belgium governments announced the various financial support packages. When it became clear how such financial support could help us if required, we felt we were in an excellent position as a Group to deal with the challenges ahead.

 

(d) Brace for impact

 

As Coronavirus started to spread and Belgium, the UK and the Channel Islands started reporting a significant number of cases, the implementation of our contingency plans became the priority. Several additional steps were taken:

 

·    Daily calls: To coordinate activity across all businesses and facilitate a uniform approach across the Group, daily calls with all managers were set up to report on the situation in each business.

 

·    Continuing to operate: The next dilemma became whether to stay open or shut our sites. Government regulations in the UK and Belgium indicated our activities could continue, as long as all health recommendations were followed. In the Channel Islands the indications changed over time. As a management team, we debated the matter extensively, to conclude that if we could guarantee correct social distancing and hygiene measures, staying open where permitted was the right answer. While keeping our staff out of harm was our key focus, our second priority had to be supporting our local economies and communities by paying our bills and supplying materials required for projects such as hospitals and road infrastructure. If we could continue to operate and trade, we were not a burden to the economy, but in fact, contributing to it. This ultimately felt like the right approach.

 

As a result, the Group had to close all but essential infrastructure maintenance operations, in both Guernsey and Jersey, for a period of 14 days commencing effective from 26 March 2020 and 4 April 2020 respectively. Guernsey has remained closed up until the publication of these Accounts, however, there is an expectation of an easing of restrictions and a controlled restart of business activity during the week commencing 20 April 2020. The Jersey Government has implemented a permitting system that is progressively facilitating the reopening of accredited construction sites and small works. At the time of writing modest supplies have commenced, with an acceleration in the Group's operations expected to commence from 20 April 2020.

 

In the UK, the Group remains active across all sites, albeit at reduced volume levels, supplying product where doing so is an economically viable proposition for its customers. In this context, the Group has decided to suspend some of its production capacity and supply from stock. In Wales, G.D. Harries remains active across a number of civil engineering and road maintenance contracts, having reduced production and haulage capacity in-line with current local demand.

 

The Group's Belgian businesses also remain operational with the support of staff and unions, supplying bluestone to a reduced number of active customers. The Group's partner in the sale of aggregates from its Soignies quarry has decided to close its production entirely until further notice. However, the Group continues to supply customers from its other aggregate quarries near the town of Huy.

 

·    Consultation with unions and staff: In order to ensure our operations could continue, a dialogue with staff commenced at each production site. Those who were considered to potentially be at risk (for example those that had a pre-existing medical condition), those who had any symptoms similar to those experienced by people suffering from COVID-19, or those who were in contact with COVID-19 patients, were instructed to go home and isolate. Surveys were conducted to understand requirements to stay home with children, providing management with a good understanding of the pressures on our staff.

 

In Belgium and in Jersey, where the workforces are unionised, a dialogue was started with the unions, who in every case were proactive, supportive and understanding that, as long as staff could be kept safe, there was a local community and economy to consider, as well as the future of the business. The union representatives showed true leadership and vision during those discussions.

 

·    Face masks: A topic that followed from our staff consultations was the need for face masks. After failing to secure the required number we decided to hire a team of seamstresses and make them ourselves. 2,000 face masks have been ordered of which 1,000 have been received and distributed to members of staff. The remaining 1,000 are planned to be donated to local hospitals. Appropriate instructions were given to each staff member to ensure proper use of the masks.

 

·    Paying our bills and helping the community: The next challenge became the management of our cash in a climate where more and more customers were signalling that they would not be making timely payment of their outstanding liabilities. Daily cash monitoring and bi-weekly calls were set up between all accounting and credit control teams to ensure we managed our cash prudently. Through discussions with our customers and suppliers, we were able to continue to pay our bills and maintain our cash position without significant erosion. In the end, our mission has been to be a supportive business, helping its local communities where it could while not endangering its own liquidity position. 

 

At the time of writing, the above summary provides a detailed perspective of our position and our approach to dealing with the Coronavirus. We firmly believe that the Group is in a strong position. We have remained operational where permitted and where deemed safe, selling product, collecting cash and paying suppliers. We are supplying products to those who needed them for their activities, including hospitals and for the maintenance of roads. Wherever possible we have helped our local communities without forgetting our mandate to our shareholders.

 

To conclude this additional update, I want to make it very clear that none of the above could have been achieved without the tireless support of a phenomenal team of individuals who collectively make up the SigmaRoc group. In the face of this crisis, they remained humble, disciplined, understanding and a true team. They understood how little we could do as individuals but how much we could accomplish as a team, as a business, as a society.

 

 

Max Vermorken

CEO

SigmaRoc plc

 

 

BUSINESS REVIEW: INVEST, IMPROVE, INTEGRATE

 

Our business model

 

SigmaRoc was set up with the vision to build a competitive construction materials group, focussed on the long term benefits our industry has to offer. Our business model was conceived out of the experiences of many high level executives and entrepreneurs in the sector, allowing several important conclusions to be drawn.

 

Construction materials are a local product, consumed and produced locally, and, due to their high mass to price ratio, they tend to travel shorter distances to end customers than other commodities, such as oil or metals. This brings a particular dynamic to the sector, focussed on local and fragmented markets.

 

Our business model starts from the understanding that each local market is different, with its own particularities, competitive pressures and local history. Understanding that structure, preserving its history and local dynamics, while applying best-in-class operational and financial management, will ultimately, all things being equal, lead to a better offering, for investors, customers, employees and local communities.

 

A particular ingredient in that structure is empowering local managers and operators to take full responsibility for their business or division. Only local managers fully understand the requirements of the local market. Product innovation, customer engagement and Capex decisions are all driven by local requirements and not by a group agenda, which may or may not be adequate for what is required on the ground.

 

At a group level, we utilise this decentralised approach to focus on what we are best at; finding appealing investment opportunities, helping the acquired businesses reach a best-in-class status operationally and financially, and lock in synergies available to us through scale and expertise.

 

Implementing our strategy

 

In practice, the implementation of the vision expressed above can be achieved through three core principles:

 

We invest in businesses. This is not the same as acquiring them. We aim to keep and improve those aspects which made them worth acquiring, whether that is their independent mind-set, their entrepreneurial nature or their founder.

 

We improve the businesses we have bought by targeting those aspects which were less efficient than they could be. This can vary widely from inefficient sales efforts, poor cash management to operational difficulties.

 

Lastly, we integrate the businesses we buy into clusters where compatibility secures synergies and where scale helps to generate local buying power. We also integrate acquired businesses into the infrastructure of the Group, providing centralised technical, financial and managerial support, allowing the newly integrated business to capture efficiencies and economies of scale. 

 

Invest

·    Only in businesses with solid intrinsic value;

·    Only in businesses with the potential to be improved and grown;

·    Only in businesses which can be bought at an attractive valuation.

 

Improve

·    The operational and financial performance of the business;

·    The motivation of management to drive growth;

·    The ultimate offering to the local market and community.

 

Integrate

1.   By building platforms of compatible businesses;

2.   By unlocking those synergies which do not come at a significant cost;

3.   By recognising the value of what previous owners built.

 

 

DIRECTORS' REPORT

 

As I will be stepping down from my role as an executive Board member and Chief Financial Officer following publication of these Accounts, I would like to begin this report by thanking the Board and shareholders for the opportunities afforded to me over the better part of four years. Due to other business interests, I have occupied my role in a part time capacity, and it was always envisioned I would step aside when the time was right. Now more than ever the Group needs a fulltime CFO and we are extremely pleased to have Dean Masefield taking over. I have immensely enjoyed my time to date with SigmaRoc, am extremely proud of everything we have achieved together and look forward to continuing the journey as a Non-Executive Director.

 

I am very pleased to report a strong year financially for the Group, during which we exceeded our ambitious financial targets, while continuing to expand our business. We completed four acquisitions during the year, with CCP in January, GDH in April, Stone in September and then CDH in October.

 

In our full 2019 financial year, the Group generated revenue of £70.4 million (2018: £41.2 million) and underlying EBITDA of £14.5 million (2018: £9.8 million). The underlying profit before taxation for the Group for the year ended 31 December 2019 was £8.4 million (2017: £5.5 million).

 

The loss for the Company for the year ended 31 December 2019 before taxation amounts to £4.7 million (2018: loss £0.9 million), which includes £3.6 million of non-underlying expenses.

 

The Board monitors the activities and performance of the Group on a regular basis. The Board uses financial indicators based on budget versus actual to assess the performance of the Group. The indicators set out below will continue to be used by the Board to assess performance over the period to 31 December 2020.

 

 

2019

2018

Cash and cash equivalents

£9,867,696

£3,771,735

Revenue

£70,362,472

£41,241,673

Underlying EBITDA

£14,534,647

£9,823,080

Capital expenditure

£3,384,363

£6,670,447

 

Cash generated from operations was £2.1 million (2018: £5.5 million) with a net increase in cash of £6.1 million (2018: net decrease of £3.2 million). In October 2019, the Group raised in aggregate, £33 million in relation to the acquisition of CDH, which resulted in a net cash surplus of £5 million after paying cash consideration and associated transaction costs.

 

Revenue and underlying EBITDA is in line with expectations and management forecasts.

 

Capital expenditure relates to purchase of new plant and machinery and improvements to existing infrastructure across the Group.

 

PPA

 

BDO UK undertook the PPA exercise required under IFRS 3 to allocate a fair value to the acquired assets of CCP.

 

The PPA process resulted in a reduction of goodwill recorded on the Statement of Financial Position of the Group for CCP from £13.5 million to £7.9 million. The reduction was to transfer the value of goodwill to intangible assets for land and mineral reserves, trade name, workforce and customer relations.

 

Non-underlying items

 

The Company's loss after taxation for 2019 amounts to £4.7 million, of which £3.6 million relates to non-underlying items, while the Group's non-underlying items totaled £6.2 million for the year. These items relate to seven categories:

 

1.   £2.6 million in exclusivity, introducer, consulting, legal fees and other direct costs relating to prospective acquisitions. During the year the Group acquired four businesses, being CCP, GDH, Stone and CDH for a combined enterprise value of approximately £112 million and proforma EBITDA of approximately £17 million.

 

2.   £0.8 million legal and restructuring expenses relating to the rebranding and alignment of all subsidiaries across the Group.

 

3.   £1.2 million amortisation of acquired assets.

 

4.   £0.7 million in relation to the convertible loan note redemption premium and associated advisor fees.

 

5.   £0.5 million loss on discontinued operations at its Bury site.

 

6.   £0.2 million in share based payments relating to grants of options.

 

7.   £0.2 million in other exceptional costs which primarily relate to non-cash balance sheet adjustments.

 

Interest and tax

 

Net finance costs in the year totaled £2 million (2018: £1 million) and included £0.5 million redemption premium on the Group's convertible loan notes plus associated interest, bank finance facilities, as well as interest on finance leases (including IFRS 16 adjustments) and hire purchase agreements.

 

A tax charge of £0.5 million (2018: £0.3 million) was recognised in the year, resulting in a tax charge on profitability generated from mineral extraction in the Channel Islands and profits generated through the Group's UK and Belgium based operations.


Earnings per share

 

Basic EPS for the year was 0.92 pence (2018: 2.65 pence), adjusted for the non-underlying items mentioned above. Underlying basic EPS for the year totaled 4.20 pence (2018: 3.83 pence).

 

Statement of financial position

 

Net assets at 31 December 2019 were £102 million (2018: £54 million). Net assets are underpinned by mineral resources, land and buildings and plant and machinery assets of the Group.

 

Cash flow

 

Cash generated by operations was £2.1 million (2018: £5.5 million). The Group spent £35.9 million on acquisitions net of cash acquired and £3.4 million on capital projects. The Group raised £44 million net of fees through the issue of equity and drew down net borrowings of £1.2 million which included repayment of the £10 million convertible loan notes, £16.3 million drawdown from the Santander credit facility and £5.1 million of debt repayments in acquired subsidiaries. The net result was a cash inflow for the year of £6.1 million. Net debt at 31 December 2019 was £49.8 million (2018: £16.0 million), £32.0 million arising from the recent acquisition of CDH and is in the process of being refinanced.

 

Bank facilities

 

In 2017 the Group secured debt facilities with Santander consisting of a £2 million RCF, an £18 million term facility and a further "accordion" facility of £10 million. In December 2018 the Group received credit approval from Santander to increase the RCF to £4 million and the term facility to £30 million, bringing the total debt facilities available with Santander to £34 million (the 'Existing Debt Facilities').

 

The Group is currently in the final stages of agreeing a new club financing facility agreement with Santander and several Belgian banks for an RCF of £15 million, term facility of £45 million and an acquisition and Capex facility of £20 million (the 'Club Refinance'). Successful negotiation of the Club Refinance, which is at an advanced stage, will result in total debt facilities being made available to the Group of £80 million, with a further £40 million accordion facility on materially the same terms as the Existing Debt Facilities. As a result of the Coronavirus pandemic, it has been mutually agreed to extend the existing Belgian debt facilities to 31 December 2020 and it is expected that the Club Refinance will be formalised on or before this date.

 

The Group's Existing Debt Facilities have a maturity date of 29 August 2022 and are subject to a variable interest rate based on LIBOR plus a margin depending on EBITDA. As at 31 December 2019, total undrawn facilities available to the Group via the Existing Debt Facilities amounted to £7.7 million.

 

The Group's Existing Debt Facilities are subject to covenants which are tested monthly and certified quarterly. These covenants are: Group interest cover ratio set at a minimum of 3.5 times EBITDA; a maximum adjusted leverage ratio, which is the ratio of total net debt, including further borrowings such as the convertible loan notes, to adjusted EBITDA, of 3.25x in 2019. At 31 December 2019, the Group comfortably complied with its bank facility covenants.

 

Dividends

 

Subject to availability of distributable reserves, dividends will be paid to shareholders when the Directors believe it is appropriate and prudent to do so. The focus of the Group at this stage of its development will be on delivering capital growth for shareholders. The Directors therefore do not recommend the payment of a dividend for the year (31 December 2018: nil).

 

Principal risks and uncertainties

 

The management of the business and the execution of the Group's strategy are subject to a number of risks. The key business risks affecting the Group are set out below.

 

Risks are formally reviewed by the Board and appropriate processes are put in place to monitor and mitigate them. If more than one risk event occurs, it is possible that the overall effect of such events would compound the possible adverse effects on the Group.

 

Operational risk

 

Since the period under review, the Coronavirus pandemic has become a significant emerging risk to the global economy. Due to inherent uncertainty, the Group cannot reasonably estimate the potential impact on the Group's financial position, results of operations or cash flows in the future, however the Board continues to actively monitor the situation as more information about COVID-19 emerges and responds accordingly, taking into consideration the various contingency and mitigation plans it implemented from the early outset of the Coronavirus outbreak.

 

Reserve and resource estimates

 

The Group's reporting of reserves and resources are estimates, and so there is potential uncertainty over the amount of such reserves and resources held at the year-end. These may require revision based on future actual production. In addition, there is risk of new leases (in particular Chouet phase 2 and the West extension at St John's) not being approved and, as such, leading to revised valuation and future income streams for the operations at Ronez.

 

Dependence on key personnel

 

The Group is dependent upon its executive management team. Whilst it has entered into contractual agreements with the aim of securing the services of these personnel, the retention of their services cannot be guaranteed. The development and success of the Group depends on its ability to recruit and retain high quality and experienced staff. The loss of the service of key personnel or the inability to attract additional qualified personnel as the Group grows could have an adverse effect on future business and financial conditions.

 

Uninsured risk

 

The Group may become subject to liability for hazards that cannot be insured against or third-party claims that exceed the insurance cover. The Group may also be disrupted by a variety of risks and hazards that are beyond its control, including geological, geotechnical and seismic factors, environmental hazards, industrial accidents, occupation and health hazards and weather conditions or other acts of God.

 

Funding risk

 

The only sources of funding currently available to the Group are through the issue of additional equity capital in the Company or through debt financing. The Company's ability to raise further funds will depend on the success of the Group's activities and its investment strategy. The Group may not be successful in procuring funds on terms that are attractive and, if such funding is unavailable, the Group may be required to reduce the scope of its investment activities.

 

Financial risks

 

The Group's operations expose it to a variety of financial risks that can include market risk (including foreign currency, price and interest rate risk), credit risk, and liquidity risk. The Group has a risk management programme in place that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and the related finance costs. The Group does not use derivative financial instruments to manage interest rate costs and, as such, no hedge accounting is applied.

 

Details of the Group's financial risk management policies are set out in Note 3 to the Financial Statements.

 

Principal activity

 

The principal activity of the Company is to make investments and/or acquire businesses and assets in the construction materials sector. The principal activity of the Group is the production of high quality aggregates and supply of value-added construction materials.

 

Board composition and head office

 

The Board comprises three Executive Directors and three Non-Executive Directors. The Corporate Head Office of the Company is located in London, UK.

 

Directors & Directors' interests

 

The Directors who served during the year ended 31 December 2019 are shown below and had, at that time, the following beneficial interests in the shares of the Company:

 

 

31 December 2019

31 December 2018

 

Ordinary Shares

Options

Ordinary Shares

Options

Max Vermorken

447,511

11,807,349

210,032

4,368,188

David Barrett

2,175,640

5,638,674

760,032

1,879,513

Garth Palmer

256,186

3,326,014

114,594

488,136

Dominic Traynor

-

791,511

-

26,014

Patrick Dolberg

184,756

765,497

75,000

304,580

Tim Hall1

300,000

750,000

-

-

 

(1) Appointed on 18 April 2019

 

Further details on options can be found in Note 29 to the Financial Statements.

 

Details on the remuneration of the Director's can be found in Note 10 to the Financial Statements.

Corporate responsibility

 

Environmental

 

SigmaRoc undertakes its activities in a manner that minimises or eliminates negative environmental impacts and maximises positive impacts of an environmental nature.

 

Health and safety

 

SigmaRoc operates a comprehensive health and safety programme to ensure the wellness and security of its employees. The control and eventual elimination of all work related hazards requires a dedicated team effort involving the active participation of all employees. A comprehensive health and safety programme is the primary means for delivering best practices in health and safety management. This programme is regularly updated to incorporate employee suggestions, lessons learned from past incidents and new guidelines related to new projects, with the aim of identifying areas for further improvement of health and safety management. This results in continuous improvement of the health and safety programme. Employee involvement is regarded as fundamental in recognising and reporting unsafe conditions and avoiding events that may result in injuries and accidents.

 

Internal controls

 

The Board recognises the importance of both financial and non-financial controls and has reviewed the Group's control environment and any related shortfalls during the year. Since the Group was established, the Directors are satisfied that, given the current size and activities of the Group, adequate internal controls have been implemented. Whilst they are aware that no system can provide absolute assurance against material misstatement or loss, in light of the current activity and proposed future development of the Group, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective.

 

Going concern

 

As documented extensively in these Accounts, the impact of the COVID-19 pandemic on the Group's business, revenues and cash flow creates significant uncertainty. However, given the Group's robust balance sheet and in conjunction with forecast projections based on, what are considered to be as at the date of these Accounts, worst case scenarios, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, therefore, continue to adopt the going concern basis in preparing the Annual Report and Financial Statements. Further details on their assumptions and their conclusion thereon are included in the statement on going concern included in Note 2.3 to the Financial Statements.

 

Directors' and officers' indemnity insurance

 

The Company has made qualifying third-party indemnity provisions for the benefit of its Directors and officers. These were made during the year and remain in force at the date of this report.

 

Events after the reporting period

 

Events after the reporting period are set out in Note 38 to the Financial Statements.

 

Policy and practice on payment of creditors

 

The Group agrees terms and conditions for its business transactions with suppliers. Payment is then made in accordance with these terms, subject to the terms and conditions being met by the supplier. As at 31 December 2019, the Company had an average of 82 days (2018: 26 days) purchases outstanding in trade payables and the Group had an average of 51 days (2018: 43 days).

 

Provision of information to Auditor

 

So far as each of the Directors is aware at the time this report is approved:

 

·   there is no relevant audit information of which the Group's auditor is unaware; and

·   the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

 

Auditor

 

PKF Littlejohn LLP has signified its willingness to continue in office as auditor.

 

This report was approved by the Board on 17 April 2020 and signed on its behalf.

 

 

Garth Palmer

Chief Financial Officer

 

 

ENVIRONMENTAL INITIATIVES

 

Energy Efficiency

·    We are quadrupling the energy generated from solar panels at our Belgian business CDH from 950MWh to around 3,800MWh representing around one third of the energy consumption of the site. We expect this third photovoltaic park to be up and running in 2020.

·    We are progressing through a programme to replace all sodium-based factory lights with LED lights which consume on average around 25% of the energy consumed by their sodium based equivalent

·    We are progressing through a programme to upgrade our delivery fleet to EURO-6 engines where possible and EURO 5 in the Channel Island as imposed by axle width restrictions.

 

Recycling

·    We continue to pump over 2.5 million m3 per year of water from the quarry at Soignies, and treating the water for domestic use to serve the needs of around 30,000 households.

·    Through a partnership with UK start-up, MacRebur, we have used over 40,000 plastic bottles as a replacement for bitumen in the construction of roads.

·    We continue to monitor, improve and optimise our use of recycled materials as a replacement for polluting compounds. This includes the use of granulated blast furnace slag as a cement replacer, the reduction of steel reinforcement bars in our precast products and the reduction of water use in our concrete and ready-mix products.

·    We have started to capture rainwater from the roofs of our factories to be utilised in our production process already capturing over 5,000 litres since the start of the initiative earlier this year in 2020.

·    We are making active use of returned materials and recycle on average 3,000 tonnes of aggregates at Poundfield Products alone into new production.

 

Wildlife

·    Having won the 2018 Insurance Corporation Environmental award for Best Conservation Project, Ronez's engagement with the Birds On The Edge programme, to re-introduce the Red Billed Chough to Jersey, continued to progress positively. The number of breeding birds in the quarry grew once gain and the facilities provided by Ronez for monitoring the breeding pairs were improved further with better access for conservation staff and new nest boxes being installed.

·    We are part of the European initiative "Life in quarries" in Belgium promoting the reintroduction of wildlife near our quarrying operations

·    We have started a nesting and breeding programme near and at our precast production sites to stimulate birdlife following the success of the Ronez programme.

 

SOCIAL INITIATIVES

 

Local communities

·    Through the "Convention PFI (Plan Formation-Insertion)" and the associated certification via the "CEFOMEPI (Centre de Formation aux Métiers de la Pierre)", CDH has over the years trained over 100 young unskilled colleagues to give them the required certification to work in the ornamental stone sector. The programme is considered a success with a high retention rate of over 80%.

·    Across 2019, we have supported the Durrell Wildlife Trust initiative of creating, displaying and subsequently selling at auction life-sized gorillas sculptures, raising £1 million for the Trust and engaging a large part of the Channel Island community.

·    G.D. Harries sponsored and organised a series of fundraising and sponsoring events to support the local community including fundraising for Prostate Cymru, sponsoring the Narberth Rugby club, the Grassland Society, the Young Farmers  and the Royal Welsh Agricultural Show.

·    Since the founding of SigmaRoc we have actively engaged with universities in the UK and in the USA to interest young graduates, in particular female students, in the quarrying and construction materials sectors, which are typically dominated by men.

 

GOVERNANCE INITIATIVES

 

QCA Corporate Governance Code

·    We adhere to the QCA Corporate Governance code and its ten key principles as detailed in our Corporate Governance Report.

 

Board appointments

·    In line with the QCA Code, during 2019 reviewed our board composition to increase both its skill and its composition. Following the publication of these Accounts, Jacques Emsens, an industrialist with a long successful career serving on boards of large quoted industrial groups and investment funds, will be appointed to the Board.

·    In addition, following the publication of these Account, the board looks forward to welcoming Simon Chisholm to the Board, adding significant skill to the board in terms of knowledge of the investment community and their requirements. Simon qualified as a Chartered Accountant and will take up the role of Chairman of the Audit Committee thereby giving it the required skill.

 

General Counsel appointment

·    We were extremely pleased to be appointing Anthony Brockbank as our General Counsel on a part time basis effective from May 2020, which will greatly assist with our internal competencies in terms of corporate governance, compliance with applicable regulations and directives and general ability to handle legal matters internally. Anthony is a partner at city law firm, Fieldfisher.

 

2020 ESG INITATIVES

 

Ronez Platform

·    Gain 3rd Party accreditation for ISO 45001 Occupational Health and Safety Management Systems across the Ronez Platform and complement our ISO 14001 accreditation for Environmental management with the Guernsey ESIM Environmental Business Operations Award. This will complete a full suite of external accreditations for H&S, Quality and Environmental Management.

·    Develop a Sustainability Framework for the business that quantifies Scope 1 Carbon Dioxide emissions from Ronez's operations and quantifies the opportunities, with costs and time-frame, for offsetting these Scope 1 emissions. In addition to the 1,000 trees planted through a volunteer initiative lead by Ronez during February 2020, further targets include installation of charging points on site for electric vehicles and the installation of photo-voltaic cells on selected roofs.

·    Whilst supporting government objectives to achieve carbon neutrality by exploiting opportunities for carbon offset, Ronez's targets for 2020 will also include development of products that reduce Scope 1 emissions. A cement free concrete, which employs the addition of an activating chemical to recycled ground granulated blast furnace slag, is expected to be developed, trialled and offered to the market in pursuit of this objective.

 

PPG Platform

·    Move from the trial phase into the implementation phase of a "greener" range of products with the ultimate goal to have a cement free range of block and retaining walls.

·    Finish a programme of further enhancing the main nine ovens at our Middlewich site by replacing the ovens insulation. For many years this was poorly designed and, with the introduction of more modern bonded insulation products, we have been able to replace old and inefficient insulation with a more modern alternative, increasing insulation depth by 100mm. This has removed the need to use energy for heating during winter nights and we have also been able to cease adding an extra 10kg to 20kg of cement during winter months in order to aid curing, collectively reducing our carbon footprint and overheads.

·    Continue to work with the HR director of a recently closed plant in the area of one of our operations to find employment for c.45 of the nearly 100 staff made redundant.

 

South Wales Platform

·    Continue to improve workplace conditions for the benefit of all our employees, visitors and local community.

·    Working with local communities to further develop local liaison committees, which will highlight key opportunities for community partnership and interaction.

·    A focus on sustainability across our sites, with improvements targeted on recycling, electricity and liquid fuel utilisation, together with water management.

 

Benelux Platform

·    Phase 3 of our solar panel development plan: 3 MWh will be installed to increase solar-powered electricity to 30% of our annual usage;

·    Install electricity charging station at our on-site parking facilities to encourage the usage of electrical vehicles going forward;

·    Finalise permit for an extension zone, in cooperation with the Soignies liaison committee, in order to develop a new site that will be well integrated into its surrounding environment;

 

David Barrett

Chairman

 

17 April 2020

 

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

 



Year ended 31 December 2019

Year ended 31 December 2018



Underlying

Non-underlying (Note 11)

Total

Underlying

Non-underlying* (Note 11)

Total

Continued operations

Note

£

£

£

£

£

£









Revenue

7

70,362,472

-

70,362,472

41,241,673

-

41,241,673









Cost of sales

8

(50,924,209)

-

(50,924,209)

(29,805,080)

-

(29,805,080)









Profit from operations


19,438,263

-

19,438,263

11,436,593

-

11,436,593









Administrative expenses

8

(9,922,199)

(4,953,675)

(14,875,874)

(4,899,620)

(1,622,778)

(6,522,398)

Net finance (expense)/income

12

(1,268,122)

(695,457)

(1,963,579)

(1,047,670)

-

(1,047,670)

Other net (losses)/gains

13 14

125,843

(529,948)

(404,105)

48,308

-

48,308

Foreign Exchange


(19,641)

-

(19,641)

(16,934)

-

(16,934)









Profit before tax


8,354,144

(6,179,080)

2,175,064

5,520,677

(1,622,778)

3,897,899









Tax expense

15

(448,518)

-

(448,518)

(278,755)

-

(278,755)









Profit/(loss)


7,905,626

(6,179,080)

1,726,546

5,241,922

(1,622,778)

3,619,144









Profit/(loss) attributable to:








Owners of the parent


7,905,626

(6,179,080)

1,726,546

5,241,922

(1,622,778)

3,619,144



7,905,626

(6,179,080)

1,726,546

5,241,922

(1,622,778)

3,619,144

Basic earnings per share attributable to owners of the parent (expressed in pence per share)

31

4.20

(3.28)

0.92

3.83

(1.18)

2.65

Diluted earnings per share attributable to owners of the parent (expressed in pence per share)

31

3.78

(2.96)

0.82

3.49

(1.08)

2.41








 

 

* Non-underlying items represent acquisition related expenses, restructuring costs, certain finance costs, share option expense and amortisation of acquired intangibles. See Note 11 for more information.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

 

 



Year ended 31 December 2019

Year ended 31 December 2018


Note

£

£





Profit/(loss) for the year


1,726,546

3,619,144

Other comprehensive income:




Items that will or may be reclassified to profit or loss:




Other comprehensive income


(447,978)

-



(447,978)

-





Total comprehensive income


1,278,568

3,619,144





Total comprehensive income attributable to:




Owners of the parent


1,278,568

3,619,144

Total comprehensive income for the period


1,278,568

3,619,144

 

 

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

 



Consolidated


Company



31 December 2019

31 December 2018


31 December 2019

31 December 2018


Note

£

£


£

£

Non-current assets







Property, plant and equipment

16

78,718,333

49,972,011


71,765

4,339

Intangible assets

17

80,243,724

18,974,771


-

-

Investments in subsidiary undertakings

18

-

-


 94,370,845

55,481,505

Investment in equity-accounted associate

19

5,538,212

-


5,538,212

-

Other receivables


19,996

-


-

-



164,520,265

68,946,782


99,980,822

55,485,844

Current assets







Trade and other receivables

20

22,232,596

6,467,207


787,825

917,263

Inventories

21

11,160,574

4,844,483


-

-

Cash and cash equivalents

22

9,867,696

3,771,735


3,935,831

115,756



43,260,866

15,083,425


4,723,656

1,033,019

Total assets


207,781,131

84,030,207


104,704,478

56,518,863








Current liabilities







Trade and other payables

23

37,158,011

8,054,274


16,844,018

595,087

Current tax payable


884,871

471,531


-

-

Borrowings

24

4,461,336

74,581


24,827

-



42,504,218

8,600,386


16,868,845

595,087

Non-current liabilities







Borrowings

24

55,194,015

19,694,405


41,671

10,000,000

Deferred tax liabilities


1,098,148

974,294


-

-

Provisions

25

6,936,754

632,011


-

-



63,228,917

21,300,710


41,671

10,000,000

Total liabilities


105,733,135

29,901,096


16,910,516

10,595,087

Net assets


102,047,996

54,129,111


87,793,962

45,923,776








Equity attributable to owners of the parent







Share capital

28

2,537,393

1,367,056


2,537,393

1,367,056

Share premium

28

95,358,556

50,136,904


95,358,556

50,136,904

Share option reserve

29

531,213

352,877


531,213

352,877

Other reserves

30

913,740

1,361,718


1,361,718

1,361,718

Retained earnings


2,707,094

910,556


(11,994,918)

(7,294,779)

Total equity


102,047,996

54,129,111


87,793,962

45,923,776

 

The Company has elected to take the exemption under Section 408 of the Companies Act

2006 from presenting the Company's Income Statement and Statement of Comprehensive

Income.

 

The loss for the Company for the year ended 31 December 2019 was £4,699,471 (year

ended 31 December 2018: £924,003).

 

The Financial Statements were approved and authorised for issue by the Board of Directors on 17 April 2020 and were signed on its behalf by:

 

Garth Palmer

Chief Financial Officer

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

 



Share

capital

Share premium

Share option reserve

Other reserves

Retained earnings

Total


Note

£

£

£

£

£

£

Balance as at 1 January 2018


1,367,056

50,161,904

352,877

1,361,718

(2,708,588)

50,534,967

Profit for the year


-

-

-

-

3,619,144

3,619,144

Total comprehensive income for the period


-

-

-

-

3,619,144

3,619,144

Contributions by and distributions to owners








Issue costs

28

-

(25,000)

-

-

-

(25,000)

Total contributions by and distributions to owners


-

(25,000)

-

-

-

(25,000)

Balance as at 31 December 2018


1,367,056

50,136,904

352,877

1,361,718

910,556

54,129,111









Balance as at 1 January 2019


1,367,056

50,136,904

352,877

1,361,718

910,556

54,129,111

Profit for the year


-

-

-

-

1,726,546

1,726,546

Currency translation differences


-

-

-

(447,978)

-

(447,978)

Total comprehensive income for the period


-

-

-

(447,978)

1,726,546

1,278,568

Contributions by and distributions to owners








Issue of share capital


1,101,788

44,071,478

-

-

-

45,173,266

Issue costs

28

-

(1,531,276)

-

-

-

(1,531,276)

Share based payments


68,549

2,681,450

178,336

-

-

2,928,335

IFRS 16 Adjustments


-

-

-

-

69,992

69,992

Total contributions by and distributions to owners


1,170,337

45,221,652

178,336

-

69,992

46,640,317

Balance as at 31 December 2019


2,537,393

95,358,556

531,213

913,740

2,707,094

102,047,996

 

 

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

 



Share

capital

Share premium

Share option reserve

Other reserves

Retained earnings

Total


Note

£

£

£

£

£

£

Balance as at 1 January 2018


1,367,056

50,161,904

352,877

1,361,718

(6,370,776)

46,872,779

Profit/(Loss)


-

-

-

-

(924,003)

(924,003)

Total comprehensive income for the period


-

-

-

-

(924,003)

(924,003)

Contributions by and distributions to owners








Issue costs

28

-

(25,000)

-

-

-

(25,000)

Total contributions by and distributions to owners


-

(25,000)

-

-

-

(25,000)

Balance as at 31 December 2018


1,367,056

50,136,904

352,877

1,361,718

(7,294,779)

45,923,776









Balance as at 1 January 2019


1,367,056

50,136,904

352,877

1,361,718

(7,294,779)

45,923,776

Profit/(Loss)


-

-

-

-

(4,699,471)

(4,699,471)

Total comprehensive income for the period


-

-

-

-

(4,699,471)

(4,699,471)

Contributions by and distributions to owners








Issue of share capital


1,101,788

44,071,478

-

-

-

45,173,266

Issue costs

28

-

(1,531,276)

-

-

-

(1,531,276)

Share based payments


68,549

2,681,450

178,336

-

-

2,928,335

IFRS 16 Adjustments


-

-

-

-

(668)

(668)

Total contributions by and distributions to owners


1,170,337

45,221,652

178,336

-

(668)

46,569,657

Balance as at 31 December 2019


2,537,393

95,358,556

531,213

1,361,718

(11,994,918)

87,793,962

 

 

CASH FLOW STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 



Consolidated


Company



Year ended 31 December 2019

Year ended 31 December 2018


Year ended 31 December 2019

Year ended 31 December 2018


Note

£

£


£

£

Cash flows from operating activities







Profit/(Loss)


1,726,545

3,619,144


(4,699,471)

(924,003)

Adjustments for:







Depreciation and amortisation

16 17

6,125,957

3,560,332


19,472

5,753

Share option expense


178,336

-


178,336

-

Loss on sale of PP&E


41,438

-


-

-

Net finance costs


1,963,579

-


361,796

-

Income tax expense


448,518

-


-

-

Share of earnings from associates


(84,018)

-


-

-

Non-cash gains


(2,852,839)

-


(1,257,541)

-

(Increase)/decrease in trade and other receivables


(838,384)

(820,091)


(620,575)

(843,053)

(Increase)/decrease in inventories


490,462

(1,385,856)


-

-

(Decrease)/increase in trade and other payables


(4,522,142)

512,201


1,356,158

(1,018,240)

Increase in provisions


91,407

-


-

-

Income tax paid


(615,128)

-


-

-

Net cash flows from operating activities


2,153,731

5,485,730


(4,661,825)

(2,779,543)

Investing activities







Purchase of property, plant and equipment 

16

(3,384,363)

(6,670,447)


(32,535)

(6,237)

Sale of property, plant and equipment


48,475

-


-

-

Purchase of intangible assets


(3,611)

(7,180)


-

-

Acquisition of businesses (net of cash acquired)


(35,931,107)

(3,000,000)


(36,741,325)

-

Interest received


773

-


773

-

Net cash used in investing activities


(39,269,833)

(9,677,627)


(36,773,087)

(6,237)

Financing activities







Proceeds from share issue


45,173,266

-


45,173,266

-

Cost of share issue


(1,531,274)

(25,000)


(1,531,274)

(25,000)

Proceeds from borrowings


20,171,691

1,000,000


-

-

Cost of borrowings


(184,000)

-


-

-

Repayment of borrowings


(18,720,774)

-


(10,000,000)

-

Net loans with subsidiaries


-

-


11,655,492

2,714,713

Interest paid


(1,678,500)

-


(40,927)

-

Repayment of finance lease obligations


-

(12,426)


-

-

Net cash used in financing activities


43,230,319

962,574


45,256,557

2,689,713








Net increase/(decrease) in cash and cash equivalents


6,114,217

(3,229,323)


3,821,645

(96,067)

Cash and cash equivalents at beginning of period


3,771,735

7,001,058


115,756

211,823

Exchange losses on cash


(18,256)

-


(1,570)

-

Cash and cash equivalents and end of period

22

9,867,696

3,771,735


3,935,831

115,756

 

Major non-cash transactions

 

During the year ended 31 December 2019 there were share based payments of £2 million to the vendors of CCP Building Products Limited as part of the initial consideration, £750,000 to the vendors of Poundfield Products (Group) Limited as satisfaction of the deferred consideration, £1.2 million of additional gains on assets realised from historic business combinations and a £1.6 million gain on the sale of the Mitcham property which did not complete until February 2020.

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.    General Information

 

The principal activity of SigmaRoc plc (the 'Company') is to make investments and/or acquire projects in the construction materials sector and through its subsidiaries (together the 'Group') is the production of high-quality aggregates and supply of value-added construction materials. The Company's shares are admitted to trading on the AIM Market of the London Stock Exchange ('AIM'). The Company is incorporated and domiciled in the United Kingdom.

 

The address of its registered office is 7-9 Swallow Street, London, W1B 4DE.

 

2.    Accounting Policies

 

The principal accounting policies applied in the preparation of these Financial Statements are set out below ('Accounting Policies' or 'Policies'). These Policies have been consistently applied to all the periods presented, unless otherwise stated.

 

2.1. Basis of Preparing the Financial Statements

 

The Financial Statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and IFRIC Interpretations Committee ('IFRIC IC') as adopted by the European Union. The Financial Statements have also been prepared under the historical cost convention.

 

The Financial Statements are presented in UK Pounds Sterling rounded to the nearest pound.

 

The preparation of Financial Statements in conformity with IFRS's requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information are disclosed in Note 4.

 

a)    Changes in Accounting Policy

 

i)      New and amended standards adopted by the Group

 

As of 1 January 2019, the Group adopted, IFRS 16 Leases, which replaced IAS 17. IFRS 16 introduced a single, on-balance sheet accounting model for leases. As a result, the Group, as a lessee, is required to recognise use-of-right assets representing its right to use the underlying assets and lease liabilities representing its obligation to make lease payments.

 

The Group has applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented for 2018 has not been restated. The details of the changes in accounting policies are disclosed below.

 

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, being the present value of minimum lease payments, and subsequently at cost less any accumulated depreciation and impairment losses. The value of the lease will be remeasured when and if terms of the lease change. The Group shall apply judgement to determine the lease term for some lease contracts in which it is a lease that include renewal options.

 

The Group has applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term when applying IFRS 16 to leases previously classified as operating leases under IAS 17.

 

As a result of initially applying IFRS 16 as at 1 January 2019, there has been £8.5m impact to the balance sheet including retained earnings, and the current loss for the year ended 31 December 2019.

 

As of 1 January 2019, the Company adopted IFRS 16 Leases, IFRIC 23 Uncertainty over leases, IFRS 9 (Amendments) Prepayment features with negative compensation, IAS 19 (Amendments) Plan amendment, curtailment or settlements and IAS 28 (Amendments) Long term interests in associates and joint ventures.

 

Of the other IFRSs and IFRICs, none are expected to have a material effect on future Company Financial Information.

 

ii) New standards, amendments and interpretations in issue but not yet effective or not yet endorsed and not early adopted

 

Standards, amendments and interpretations that are not yet effective and have not been early adopted are as follows:

 

Standard  

Impact on initial application

Effective date

IFRS 3 (Amendments)

Definition of a Business

*1 January 2020

IAS 1 (Amendments)

Definition of material

 

IAS 8 (Amendments)

Definition of material

 

IFRS 17

Insurance contracts

*1 January 2021

IAS 1

Classification of Liabilities as Current or Non-Current.

1 January 2022

 

* Subject to EU endorsement

 

The Group is evaluating the impact of the new and amended standards above which are not expected to have a material impact on the Group's results or shareholders' funds

 

2.2. Basis of Consolidation

 

The Consolidated Financial Statements consolidate the Financial Statements of the Company and the accounts of all of its subsidiary undertakings for all periods presented.

 

Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

 

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

 

Acquisition-related costs are expensed as incurred unless they result from the issuance of shares, in which case they are offset against the premium on those shares within equity.

 

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

 

Investments in subsidiaries are accounted for at cost less impairment.

 

Associates are entities over which the Group has significant influence but not control over the financial and operating policies. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in reserves is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.

Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

Where considered appropriate, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All intercompany transactions and balances between Group enterprises are eliminated on consolidation.

 

CDH use Belgian GAAP rules to prepare and report their financial statements. The Group reports using IFRS standards and in order to comply with the Group's reporting standards, management of CDH processed several adjustments to ensure the financial information included at a Group level complies with IFRS. CDH will continue to prepare their company financial statements in line with the Belgian GAAP rules.

 

2.3. Going Concern

 

As described in note 38, the Group is managing the impact of the COVID-19 pandemic on its business and the uncertainty it creates. The Executive management team have prepared a range of simulated scenarios based on reductions in revenues, and from these, they believe that the Group has a sufficiently robust balance sheet to endure the Coronavirus pandemic. Further information as to the Group's plans to both prepare for and mitigate the effect of the COVID-19 outbreak is available in the Coronavirus update.

 

While the Directors believe the Group is in a strong position to endure the unforeseen consequences of the COVID-19 pandemic, it creates a material uncertainty over the Group's revenues and cash flows and therefore its ability to continue as a going concern.

 

2.4. Segment Reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

 

2.5. Foreign Currencies

 

a)    Functional and Presentation Currency

 

Items included in the Financial Statements are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The Financial Statements are presented in Pounds Sterling, rounded to the nearest pound, which is the Group's functional currency.

 

b)    Transactions and Balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement.  Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Income Statement within 'finance income or costs. All other foreign exchange gains and losses are presented in the Income Statement within 'Other net gains/(losses)'.

 

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets measured at fair value, such as equities classified as available for sale, are included in other comprehensive income.

 

c)    Group companies

 

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

·   assets and liabilities for each period end date presented are translated at the period-end closing rate;

 

·   income and expenses for each Income Statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

 

·   all resulting exchange differences are recognised in other comprehensive income.

 

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future, are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the Income Statement as part of the gain or loss on sale.

 

 

2.6. Intangible Assets

 

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred and the acquisition date fair value of any previous equity interest in the acquire over the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquire.  If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the Income Statement.

 

As reported within the CEO's strategic report, a PPA was carried out to assess the fair value of the assets acquired in CCP Building Products Limited ('CCP') as at the completion date. As a result of this exercise, goodwill in CCP decreased from £13.5 million to £7.9 million with the corresponding movement being intangible assets. The current accounting policies regarding the subsequent treatment intangible assets will apply to fair value uplift attributable to the PPA.

           

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

 

Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.

 

Other intangibles consist of an option over gravel in Poundfield and capitalised development costs for assets produced that assist in the operations of the Group and incur revenue. The option for gravel is amortised based on units of production and the development costs are amortised over the life of the asset. Impairment reviews are performed annually. Where the benefit of the intangible ceases or has been superseded, these are written off the Income Statement.

 

2.7. Property, Plant and Equipment

 

Property, plant and equipment is stated at cost, plus any purchase price allocation uplift, less accumulated depreciation and any accumulated impairment losses. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the Income Statement during the financial period in which they are incurred.

 

Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:

 

Office equipment

12.5% - 50%

Land and Buildings

0 - 2%

Plant and machinery

5% - 20%

Furniture and vehicles

7.5% - 33.3%

Construction in progress

0%

 

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

 

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

 

Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within 'Other net gains/(losses)' in the Income Statement.

           

2.8. Land, Mineral Rights and Restoration Costs

 

Land, quarry development costs, which include directly attributable construction overheads and mineral rights are recorded at cost plus any purchase price allocation uplift.  Land and quarry development are depreciated and amortised, respectively, using the units of production method, based on estimated recoverable tonnage.

 

The depletion of mineral rights and depreciation of restoration costs are expensed by reference to the quarry activity during the period and remaining estimated amounts of mineral to be recovered over the expected life of the operation.

 

2.9. Financial Assets

 

Classification

The Group's financial assets consist of loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

 

(i)    Financial Assets at Fair Value through Profit or Loss

 

Financial assets at fair value through profit or loss are financial assets held for trading.  A financial asset is classified in this category if acquired principally for the purpose of selling in the short term.  Derivatives are also categorised as held for trading unless they are designated as hedges.

 

Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. The Group holds call options to cover their exposure relative to fluctuations against the Euro. They hold call options to purchase €7,100,000 on 29 June 2020 and €4,300,000 on 30 December 2020, such call options being bought for £211,592. These were purchased on 20 December 2019 and as the value is deemed to be immaterial to the Group, hedge accounting is not required.

 

(ii)   Loans and Receivables

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents at the year-end.

 

Recognition and Measurement

Regular purchases and sales of financial assets are recognised on the trade date - the date on which the Group commits to purchasing or selling the asset.  Financial assets carried at fair value through profit or loss is initially recognised at fair value, and transaction costs are expensed in the Income Statement.  Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred, and the Group has transferred substantially all of the risks and rewards of ownership.

 

Loans and receivables are subsequently carried at amortised cost using the effective interest method.

 

Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in the Income Statement within "Other (Losses)/Gains" in the period in which they arise.

 

Impairment of Financial Assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset, or a group of financial assets, is impaired. A financial asset, or a group of financial assets, is impaired and impairment losses are incurred, only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the assets (a "loss event"), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset, or group of financial assets, that can be reliably estimated.

 

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

 

·    significant financial difficulty of the issuer or obligor;

·    a breach of contract, such as a default or delinquency in interest or principal repayments;

·    the Group, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; and

·    it becomes probable that the borrower will enter bankruptcy or another financial reorganisation.

 

The Group first assesses whether objective evidence of impairment exists.

 

The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset's original effective interest rate. The asset's carrying amount is reduced and the loss is recognised in the Income Statement.

 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the Income Statement.

 

2.10.    Inventories

 

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

 

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

 

2.11.    Trade Receivables

 

Trade receivables are amounts due from third parties in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

 

2.12.    Cash and Cash Equivalents

 

Cash and cash equivalents comprise cash at bank and in hand and are subject to an insignificant risk of changes in value.

 

2.13.    Share Capital

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

2.14.    Reserves

 

Share Premium - the reserve for shares issued above the nominal value. This also includes the cost of share issues that occurred during the year.

 

Retained Earnings - the retained earnings reserve includes all current and prior periods retained profit and losses.

 

Share Option Reserve - represents share options awarded by the Company.

 

Other Reserves comprise the following:

 

Capital Redemption Reserve - the capital redemption reserve is the amount equivalent to the nominal value of shares redeemed by the Group.

 

Foreign Currency Translation Reserve - represents the translation differences arising from translating the financial statement items from functional currency to presentational currency.

 

Deferred Shares - are shares that effectively do not have any rights or entitlements.

 

2.15.    Trade Payables

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

 

Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

2.16.    Provisions

 

The Group provides for the costs of restoring a site where a legal or constructive obligation exists. The estimated future costs for known restoration requirements are determined on a site-by-site basis and are calculated based on the present value of estimated future costs.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). The increase in provisions due to the passage of time is included in the Consolidated Statement of Profit or Loss and Comprehensive Loss.

 

2.17.    Borrowings

 

Bank and Other Borrowings

 

Interest-bearing bank loans and overdrafts and other loans are recognised initially at fair value less attributable transaction costs. All borrowings are subsequently stated at amortised cost with the difference between initial net proceeds and redemption value recognised in the Income Statement over the period to redemption on an effective interest basis.

 

2.18.    Taxation

 

Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

 

2.19.    Non-Underlying Items

 

Non-underlying items are a non IFRS measure, but the Group have disclosed these separately in the financial statements, where it is necessary to do so to provide further understanding of the financial performance of the Group.  They are items that are material, not expected to be recurring or do not relate to the ongoing operations of the Group's business and non-cash items which distort the underlying performance of the business.

 

2.20.    Revenue Recognition

 

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods or services supplied in course of ordinary business, stated net of discounts, returns and value added taxes. The Group recognises revenue in accordance with IFRS 15 at either a point in time of over time, depending on the nature of the goods or services and existence of acceptance clauses.

 

Revenue from the sale of goods is recognised when delivery has taken place and the performance obligation of delivering the goods has taken place. The performance obligation of products sold are transferred according to the specific delivery terms that have been formally agreed with the customer, generally upon delivery when the bill of lading is signed as evidence that they have accepted the product delivered to them.

 

Revenue from the provision of services is recognised as the services are rendered, in accordance with customer contractual terms.

 

2.21.    Finance Income

 

Interest income is recognised using the effective interest method.

 

2.22.    Employee Benefits - Defined Contribution Plans

 

The Group maintains defined contribution plans for which the Group pays fixed contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis and will have no legal or constructive obligation to pay further amounts. The Group's contributions to defined contribution plans are charged to the Income Statement in the period to which the contributions relate.

 

2.23.    Share Based Payments

 

The Group operates a number of equity-settled, share-based schemes, under which the entity receives services from employees or third-party suppliers as consideration for equity instruments (options and warrants) of the Group. The fair value of the third-party suppliers' services received in exchange for the grant of the options is recognised as an expense in the Statement of Comprehensive Income or charged to equity depending on the nature of the service provided. The value of the employee services received is expensed in the Income Statement and its value is determined by reference to the fair value of the options granted:

 

·    including any market performance conditions;

·    excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period); and

·    including the impact of any non-vesting conditions (for example, the requirement for employees to save).

 

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense or charge is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Income Statement or equity as appropriate, with a corresponding adjustment to a separate reserve in equity.

 

When the options are exercised, the Company issues new shares. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium when the options are exercised.

 

2.24.    Discontinued Operations

 

A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

 

·    represents a separate major line of business or geographic area of operations;

·    is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or

·    is a subsidiary acquired exclusively with a view to re-sale.

 

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. The Group operates several business units which are constantly reviewed to ensure profitability. During the year it was determined that the flagging & paving division at CCP's Bury site was loss making and therefore it was decided that the operations at this site be discontinued. For further information, refer to note 14.

 

2.25.    Leases

 

The Group leases certain plant and equipment. Leases of plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases under IFRS 16.  Finance leases are capitalised on the lease's commencement at the lower of the fair value of the leased assets and the present value of the minimum lease payments. Other leases are either small in value or cover a period of less than 12 months.

 

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in long-term borrowings. The interest element of the finance cost is charged to the Income Statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Assets obtained under finance leases are depreciated over their useful lives. The lease liabilities are shown in note 24.

 

Rent payable under operating leases on which the short term exemption has been taken, less any lease incentives received, is charged to the income statement on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.

 

IFRS 16 Adoption

On 1 January 2019, the Group adopted all of the requirements of IFRS 16 - Leases. IFRS 16 Leases was issued in January 2016 and provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.

 

At 1 January 2019 the Group had 11 leases with a lease term greater than 12 months. Consequently, the adoption of the standard resulted in £69,992 added to the opening financial statements.

 

15 new leases were adopted during the financial year as a result of the acquisition of CDH. In the Statement of Financial Position the right-of-use asset is recorded in Non-current assets and the lease liability is split between Current liabilities for the portion due within 12 months and Non-current liabilities for the remainder.

 

To determine the split between principal and interest in the lease the incremental borrowing rate of the Group was applied. This method was adopted as the Group was not able to ascertain the implied interest rate in each lease.

 

See note 24 for further detail.

 

3.    Financial Risk Management

 

3.1. Financial Risk Factors

 

The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

 

Risk management is carried out by the UK based management team under policies approved by the Board of Directors.

 

a)    Market Risk

 

The Group is exposed to market risk, primarily relating to interest rate, foreign exchange and commodity prices. The Group has not sensitised the figures for fluctuations in interest rates, foreign exchange or commodity prices as the Directors are of the opinion that these fluctuations would not have a significant impact on the Financial Statements at the present time. The Directors will continue to assess the effect of movements in market risks on the Group's financial operations and initiate suitable risk management measures where necessary.

 

b)    Credit Risk

 

Credit risk arises from cash and cash equivalents as well as exposure to customers including outstanding receivables. To manage this risk, the Group periodically assesses the financial reliability of customers and counterparties.

 

No credit limits were exceeded during the period, and management does not expect any losses from non-performance by these counterparties.

 

c)    Liquidity Risk

 

The Group's continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital or debt. The Directors are reasonably confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed.

 

 



31 December 2019



Less than 1 year

Between 1 and 2 years

Between 2 and 5 years

Over 5 years


£

£

£

£

Borrowings

4,461,336

2,782,318

52,411,697

-

Trade and other payables

27,579,511

9,578,500

-

-


32,040,847

12,360,818

52,411,697

-

 

 

3.2. Capital Risk Management

 

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, in order to enable the Group to continue its construction material investment activities, and to maintain an optimal capital structure to reduce the cost of capital.

 

In order to maintain or adjust the capital structure, the Group may adjust the issue of shares or sell assets to reduce debts.

 

The Group defines capital based on the total equity of the Company. The Group monitors its level of cash resources available against future planned operational activities and the Company may issue new shares in order to raise further funds from time to time.

 

The gearing ratio at 31 December 2019 is as follows:

 


Consolidated


31 December 2019

31 December 2018


£

£

Total borrowings (Note 24)

59,655,351

19,768,986

Less: Cash and cash equivalents (Note 22)

(9,867,696)

(3,771,735)

Net debt

49,787,655

15,997,251

Total equity

102,047,994

54,129,111

Total capital

151,835,649

70,126,362

Gearing ratio

0.33

0.23

 

 

4.    Critical Accounting Estimates

 

The preparation of the Financial Statements in conformity with IFRSs requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amount of expenses during the year. Actual results may vary from the estimates used to produce these Financial Statements.

 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Significant items subject to such estimates and assumptions include, but are not limited to:

 

a)    Land and Mineral Reserves

 

The determination of fair values of land and mineral reserves are carried out by appropriately qualified persons in accordance with the Appraisal and Valuation standards published by the Royal Institution of Chartered Surveyors. The estimation of recoverable reserves is based upon factors such as estimates of commodity prices, future capital requirements and production costs along with geological assumptions and judgements.

 

The PPAs included the revaluation of land and minerals based on the estimated remaining reserves within St John's, Les Vardes and Aberdo quarries. These are then valued based on the estimated remaining life of the mines and the net present value for the price per tonnage.

 

b)    Estimated Impairment of Goodwill

 

The determination of fair values of assets acquired and liabilities assumed in a business combination involves the use of estimates and assumptions such as discount rates used and valuation models applied as well as goodwill allocation.

 

Goodwill has a carrying value of £73,004,627 as at 31 December 2019 (31 December 2018: £16,826,369). The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.6 to the Financial Statements.

 

Management has concluded that an impairment charge was not necessary to the carrying value of goodwill for the period ended 31 December 2019 (31 December 2018: £nil). See Note 2.6 to the Financial Statements.

 

c)    Restoration Provision

The Group's provision for restoration costs has a carrying value at 31 December 2019 of £718,822 (31 December 2018: £632,011) and relate to the removal of the plant and equipment held at St John's, Les Vardes and Aberdo quarries. The cost of removal was determined by management for the removal and disposal of the machinery at the point of which the reserves are no longer available for business use.

 

The restoration provision is a commitment to restore the site to a safe and secure environment. The provisions are reviewed annually.  

 

d)    Fair Value of Share Options

 

The Group has made awards of options and warrants over its unissued share capital to certain Directors and employees as part of their remuneration packages. Certain warrants have also been issued to suppliers for various services received.

 

The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in Note 29 to the Financial Statements.

 

5.    Dividends

 

No dividend has been declared or paid by the Company during the year ended 31 December 2019 (2018: nil).

 

6.    Segment Information

 

Management has determined the operating segments based on reports reviewed by the Board of Directors that are used to make strategic decisions. During the periods presented the Group had interests in three key geographical segments, being the United Kingdom, Channel Islands and Belgium. The Belgium segment was included as a key geographical segment in October 2019 when the Group acquired CDH Développement SA. Activities in the United Kingdom, Channel Islands and Belgium relate to the production and sale of construction material products and services.



 


31 December 2019


United Kingdom

Channel Islands

Belgium

Total


£

£

£

£

Revenue

32,964,660

29,241,597

8,156,215

70,362,472

Profit from operations per reportable segment

8,170,774

9,198,697

2,068,792

19,438,263

Additions to non-current assets

20,908,087

(1,689,474)

76,354,868

95,573,481

Reportable segment assets

72,555,343

49,710,145

85,515,641

207,781,129

Reportable segment liabilities

51,548,505

4,796,404

49,388,226

105,733,135

 


 


31 December 2018


United Kingdom

Channel Islands

Total


£

£

£

Revenue

14,202,557

27,039,116

41,241,673

Profit from operations per reportable segment

4,147,759

7,288,834

11,436,593

Additions to non-current assets

3,866,559

(431,477)

3,435,082

Reportable segment assets

33,647,239

50,382,968

84,030,207

Reportable segment liabilities

25,525,191

4,375,905

29,901,096

 

7.    Revenue


Consolidated


31 December 2019

31 December 2018


£

£

Upstream products

6,972,097

4,334,071

Value added products

56,086,965

27,501,692

Value added services

6,652,397

9,119,421

Other

651,013

286,489


70,362,472

41,241,673

 

Upstream products revenue relates to the sale of aggregates and cement. Value added products is the sale of finished goods that have undertaken a manufacturing process within each of the subsidiaries. Value added services consists of the transportation, installation and contracting services provided.

 

8.    Expenses by Nature


Consolidated


31 December 2019

31 December 2018


£

£

Cost of sales



Changes in inventories of finished goods and work in progress

(680,415)

(2,214,864)

Production cost of goods sold

6,869,232

7,218,469

Distribution and selling expenses

5,921,567

2,751,855

Raw materials and consumables used

19,320,078

8,813,263

Employee benefit expenses

12,792,817

8,885,946

Depreciation and amortisation expense

4,912,383

3,560,332

Other costs of sale

1,788,547

790,079

Total cost of sales

50,924,209

29,805,080

Administrative expenses



Operational admin expenses

9,922,199

4,934,878

Corporate admin expenses

4,953,675

1,587,520

Total administrative expenses

14,875,874

6,522,398

 

Corporate administrative expenses include £3,562,584 of non-underlying expenses (refer to note 11).

 

During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's auditors and its associates:

 


Consolidated


31 December 2019

31 December 2018


£

£

Fees payable to the Company's auditor and its associates for the audit of the Company and Consolidated Financial Statements

171,165

102,000

Fees payable to the Company's auditor and its associates for tax services

30,572

19,335

Fees paid or payable to the Company's auditor and its associates for due diligence and transactional services

140,932

94,931

Fees paid to the Company's auditor for other services

17,877

30,725


360,546

246,991

 

9.    Employee Benefits Expense


Consolidated


Company


31 December 2019

31 December 2018


31 December 2019

31 December 2018

Staff costs (excluding directors)

£

£


£

£

Salaries and wages

16,823,415

10,699,931


902,710

148,112

Post-employment benefits

107,206

99,529


36,430

-

Social security contributions and similar taxes

134,524

1,133,171


59,217

64,538

Other employment costs

867,944

137,285


20,724

19,483


17,933,089

12,069,916


1,019,081

232,133

 


Consolidated


Company


31 December 2019

31 December 2018


31 December 2019

31 December 2018

Average number of FTE employees by function

#

#


#

#

Management

63

27


3

2

Operations

576

192


-

-

Administration

78

37


1

1


717

256


4

3

 

10.  Directors' Remuneration

 



31 December 2019


Directors' fees

Bonus

Taxable benefits

Pension benefits

Options issued

Total


£

£

£

£

£

£

Executive Directors







David Barrett

190,000

230,000

13,800

-

27,700

461,500

Garth Palmer

60,000

-

-

6,000

22,100

88,100

Max Vermorken

250,000

340,000

13,800

25,000

60,676

689,476

Non-executive Directors







Dominic Traynor

32,005

-

-

3,201

5,009

40,215

Patrick Dolberg

32,005

-

-

-

3,442

35,447

Timothy Hall (1)

24,580

-

-

-

11,897

36,477


588,590

570,000

27,600

34,201

130,824

1,351,215

 


31 December 2018


Directors' fees

Taxable benefits

Pension benefits

Options issued

Total


£

£

£

£

£

Executive Directors






David Barrett

190,000

13,800

-

-

203,800

Garth Palmer

60,000

-

6,000

-

66,000

Max Vermorken

250,000

13,800

25,000

-

288,800

Non-executive Directors






Dominic Traynor

25,000

-

2,500

-

27,500

Gary Drinkwater (2)

20,833

-

-

-

20,833

Patrick Dolberg

25,000

-

-

-

25,000


570,833

27,600

33,500

-

631,933







(1)   Appointed on 18 April 2019

(2)   Resigned on 7 November 2018.

 

The bonuses earned in the year by the Directors reflect the performance of the business, were based on industry standard criteria taking into account external market data, were recommended by the Remuneration Committee and approved by the Board.

 

Details of fees paid to companies and partnerships of which the Directors are related have been disclosed in Note 36.

 

11.  Non-underlying Items

 

As required by IFRS 3 - Business Combinations, acquisition costs have been expensed as incurred. Additionally, the Group incurred costs associated with obtaining debt financing, including advisory fees to restructure the Group to satisfy lender requirements.

 


Consolidated


31 December 2019

31 December 2018


£

£

Acquisition related gains and expenses (net)

2,615,860

552,981

Amortisation of acquired assets

1,213,574

305,598

Restructuring expenses

820,949

443,916

Equity & debt funding expenses

659,823

234,911

Discontinued operations

529,948

-

Share option expense

178,336

-

Net other non-underlying expenses & gains

160,590

85,372


6,179,080

1,622,778

 

Acquisition related expenses include costs relating to the due diligence of prospective pipeline acquisitions, stamp duty on completed acquisitions and other direct costs associated with merger & acquisition activity including a completion bonus to certain employees in relation to the acquisition of CDH. During the year the Group acquired four businesses, being CCP, GDH, Stone and CDH for a combined enterprise value of approximately £112 million and proforma EBITDA of approximately £17 million.

 

Amortisation of acquired assets are non-cash items which distort the underlying performance of the businesses acquired. To be consistent with management's treatment of amortisation of acquired of assets, last year's figure has been amended to include amortisation of certain fair value uplifts resulting from the PPA process.

 

Restructuring expenses include advisory fees, redundancy costs and rebranding expenses. During the year these primarily related to the SigmaPPG platform.

 

Equity & debt funding expenses include £550,000 redemption premium for the convertible loan notes and associated advisory fees.

 

Share option expense is the fair value of the share options issued during the year, refer to note 29 more information.

 

Discontinued operations include the trading expenses, stock adjustments and redundancies incurred at the Bury site for the period from February 2019 to December 2019. Refer to note 14 for more information.

 

12.  Net Finance (Expense)/Income

 


Consolidated


31 December 2019

31 December 2018


£

£

Convertible loan redemption interest premium

(500,000)

-

Convertible loan note interest expense

(39,452)

(599,094)

Other interest (expense)/income

(1,294,666)

(358,437)

Other finance (expense)/income

(129,461)

(90,139)


(1,963,579)

(1,047,670)

 

 

13.  Other Net Gains/(Losses)

 


Consolidated


31 December 2019

31 December 2018


£

£

Gain/(losses) on disposal of property, plant and equipment

(14,536)

10,556

Other gain/(loss)

56,361

37,752

Share of earnings from associates

84,018

-

Loss on discontinued operations

(529,948)



(404,105)

48,308

 

For more information on the loss on discontinued operations, please refer to note 14.

 

14.  Discontinued Operations

 

From due diligence undertaken as part of the acquisition of CCP in January 2019, doubts existed over the viability of the flagging & paving division at its site in Bury. After a detailed review it was determined that the business unit was loss making and it was decided that the operations at this site be discontinued effective from 1 February 2019.

 

Financial information relating to the discontinued operation for the period is set out below.

 

Income statement

31 December 2019

£

Revenue

811,862

Cost of sales

(1,103,550)

Gross profit

(291,688)

Administration

(146,429)

Other expenses

(91,831)

Loss from discontinued operation

(529,948)

Basic earnings per share attributable to owners of the parent (expressed in pence per share)

(0.28)

 

Cash movement

31 December 2019

£

Net cash inflow from operating activities

(125,846)

Net cash inflow from investing activities

(212,465)

Net cash inflow from financing activities

-

Net decrease in cash generated by the subsidiary

(338,311)

 

15.  Taxation


Consolidated


31 December 2019

31 December 2018

Tax recognised in profit or loss

£

£

Current tax

(448,518)

(471,532)

Deferred tax

-

192,777

Total tax charge in the Income Statement

(448,518)

(278,755)

 

The tax on the Group's profit/(loss) before taxation differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits/(losses) of the consolidated entities as follows:


Consolidated


31 December 2019

31 December 2018


£

£

Profit/(loss) before tax subject to charge

(2,621,437)

3,109,695

Non-taxable profit/(loss)

4,347,983

788,204

Net profit/(loss) before taxation

1,726,545

3,897,899

Apply Group Relief on taxable profit

-

(2,625,830)

Tax at the applicable rate of 20.81%

359,294

96,289

Effects of:



Expenditure not deductible for tax purposes

639,226

-

Timing differences

237,384

(213,723)

Differences on tax rates attributable to other jurisdictions

(1,041,015)

(29,991)

Depreciation in excess of/(less than) capital allowances

227,160

426,180

Net tax effect of losses carried forward

26,469

-

Tax charge

448,518

278,755

 

The weighted average applicable tax rate of 20.81% (2018: 19.9%) used is a combination of the standard rate of corporation tax rate for entities in the United Kingdom of 19% (2018: 19%), 20% on quarrying of minerals and rental property (2018: 20%) in Jersey and Guernsey and 33.99% in Belgium.

 

16.  Property, Plant and Equipment

 


Consolidated


Office Equipment

Land and minerals

Land and buildings

Plant and machinery

Furniture and vehicles

Construction in progress

Total


£

£

£

£

£

£

£

Cost








As at 1 January 2018

356,745

35,860,567

20,404,547

17,544,307

7,846,370

438,635

82,451,171

Revaluations

-

(114,034)

13,868

(22,234)

(747,027)

-

(869,427)

Additions

26,695

2,109,015

2,054,095

483,269

503,926

1,493,447

6,670,447

Disposals

-

-

-

(35,060)

(165,907)

-

(200,967)

As at 31 December 2018

383,440

37,855,548

22,472,510

17,970,282

7,437,362

1,932,082

88,051,224

As at 1 January 2019

383,440

37,855,548

22,472,510

17,970,282

7,437,362

1,932,082

88,051,224

Acquired through acquisition

3,194,969

14,844,352

13,385,643

57,825,258

9,642,516

-

98,892,738

Transfer between classes

-

(4,600,000)

5,760,000

-

-

(1,304,466)

(144,466)

Fair value adjustment

-

1,762,000

-

-

-

-

1,762,000

IFRS 16 Adjustment

22,689

-

584,785

875,388

-

-

1,482,862

Additions

139,414

145,140

435,886

1,403,634

869,033

391,256

3,384,363

Disposals

(1,173)

-

(4,105,000)

(81,860)

(117,000)

(172,660)

(4,477,693)

Forex

(47,800)

(243,375)

(161,148)

(881,369)

(154,468)

-

(1,488,160)

As at 31 December 2019

3,691,539

49,763,665

38,372,676

77,111,333

17,677,443

846,212

187,462,868

Depreciation








As at 1 January 2018

303,195

6,097,372

12,536,431

10,181,059

6,777,085

-

35,895,142

Revaluations

-

(95,824)

8,875

(35,451)

(747,027)

-

(869,427)

Charge for the year

18,128

949,295

860,187

1,081,800

345,053

-

3,254,463

Disposals

-

-

-

(35,060)

(165,905)

-

(200,965)

As at 31 December 2018

321,323

6,950,843

13,405,493

11,192,348

6,209,206

-

38,079,213

As at 1 January 2019

321,323

6,950,843

13,405,493

11,192,348

6,209,206

-

38,079,213

Acquired through acquisition

2,812,176

703,698

8,309,696

49,944,448

4,789,797

-

66,559,815

Transfer between classes

-

(63,594)

63,594

-

-

-

-

IFRS 16 Adjustment

-

-

153,779

292,103

-

-

445,882

Charge for the year

130,206

1,010,954

1,089,546

2,019,029

820,604

-

5,070,339

Disposals

(159)

-

(200,298)

(51,769)

(117,000)

-

(369,226)

Forex

(42,585)

(11,537)

(132,643)

(777,290)

(77,433)

-

(1,041,488)

As at 31 December 2019

3,220,961

8,590,364

22,689,167

62,618,869

11,625,174

-

108,744,535

Net book value








As at 31 December 2018

62,117

30,904,705

9,067,017

6,777,934

1,228,156

1,932,082

49,972,011

As at 31 December 2019

470,578

41,173,300

15,683,509

14,492,465

6,052,269

846,212

78,718,333

 

The depreciation on the right of use assets for the year ended 31 December 2019 was £611,627 and the net book value is £6,969,922.

 



Company


Office Equipment

Land & Buildings

Motor Vehicle

Total


£

£

£

£

Cost





As at 1 January 2018

6,363

-

-

6,363

Additions

6,237

-

-

6,237

Disposals

-

-

-

-

As at 31 December 2018

12,600

-

-

12,600

As at 1 January 2019

12,600

-

-

12,600

Additions

8,207

-

24,328

32,535

IFRS 16 Adjustment

-

54,363

-

54,363

Disposals

-

-

-

-

As at 31 December 2019

20,807

54,363

24,328

99,498

Depreciation





As at 1 January 2018

2,508

-

-

2,508

Charge for the year

5,753

-

-

5,753

Disposals

-

-

-

-

As at 31 December 2018

8,261

-

-

8,261

As at 1 January 2019

8,261

-

-

8,261

Charge for the year

6,072

-

87

6,159

IFRS 16 Adjustment

-

13,313

-

13,313

Disposals

-

-

-

-

As at 31 December 2019

14,333

13,313

87

27,733

Net book value





As at 31 December 2018

4,339

-

-

4,339

As at 31 December 2019

6,474

41,050

24,241

71,765

 

 

17.  Intangible Assets

 





Consolidated

 


Goodwill

Customer Relations

Intellectual property

Research & Development

Branding

Other Intangibles

Total


£

£

£


£

£

£

Cost & net book value








As at 1 January 2018

17,827,833

-

641,569

-

486,000

-

18,955,402

Additions

317,788

-

7,179

-

-

-

324,967

Price Purchase Allocation - Topcrete

(926,000)

775,000

-

-

151,000

-

-

Price Purchase Allocation - Poundfield

(393,252)

159,000

121,252

-

-

113,000

-

Amortisation

-

(83,154)

(85,444)

-

(24,000)

(113,000)

(305,598)

As at 31 December 2018

16,826,369

850,846

684,556

-

613,000

-

18,974,771

As at 1 January 2019

16,826,369

850,846

684,556

-

613,000

-

18,974,771

Additions

-

-

-

3,611

-

-

3,611

Additions through business combination

61,717,258

-

(83,843)

1,210,452

400,000

414,018

63,657,885

Price Purchase Allocation - CCP

(5,539,000)

3,480,000

-

-

297,000

-

(1,762,000)

Amortisation

-

(481,324)

(44,481)

(26,174)

(43,969)

(13,788)

(609,736)

Forex

-

-

-

(20,807)

-

-

(20,807)

As at 31 December 2019

73,004,627

3,849,522

556,232

1,167,082

1,266,031

400,230

80,243,724

 

An adjustment has been made to reflect the initial accounting for the acquisition of CCP Building Products Limited ('CCP') by the Company, being the elimination of the investment in CCP against the non-monetary assets acquired and recognition of goodwill. In 2019, the Company determined the fair value of the net assets acquired pursuant to the acquisition of CCP, via a Purchase Price Allocation ('PPA') exercise.  The PPA's determined a decrease of £5,539,000 of goodwill in CCP with the corresponding movement to be recognised as Customer Relations, Branding and uplift the value of the Land and Minerals at Aberdo quarry.

 

Amortisation of intangible assets is included in cost of sales on the Income Statement.

 

Impairment tests for goodwill

 

Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis, or more frequently if there are indications that the goodwill may be impaired. Goodwill is allocated to groups of cash generating units according to the level at which management monitor that goodwill, which is at the level of operating segments.

 

The five operating segments are considered to be Ronez in the Channel Islands, Topcrete in the UK, Poundfield in the UK, CCP in the UK and CDH in Belgium.

 

Key assumptions

The key assumptions used in performing the impairment review are set out below:

 

Cash flow projections

Cash flow projections for each operating segment are derived from the annual budget approved by the Board for 2020 and the three-year plan to 2021 and 2022. The key assumptions on which budgets and forecasts are based include sales volumes, product mix and operating costs. These cash flows are then extrapolated forward for a further 17 years, with the total period of 20 years reflecting the long-term nature of the underlying assets. Budgeted cash flows are based on past experience and forecast future trading conditions.

 

Long-term growth rates

Cash flow projections are prudently based on 2 per cent and therefore provides plenty of headroom.

 

Discount rate

Forecast cash flows for each operating segment have been discounted at rates of 11 per cent which was calculated by an external expert based on market participants' cost of capital and adjusted to reflect factors specific to each operating segment.

 

Sensitivity

The Group has applied sensitivities to assess whether any reasonable possible changes in assumptions could cause an impairment that would be material to these consolidated Financial Statements. This demonstrated that a 1% increase in the discount rate would not cause an impairment and the annual growth rate is assumed to be 2%.

 

The Directors have therefore concluded that no impairment to goodwill is necessary.

 

Impact of Brexit

In performing the impairment review, the Directors have carefully considered the additional uncertainty arising from Brexit through performing additional sensitivity analysis based on Brexit specific scenarios. These included changes to the discount rate and modelling the impact of a significant decline in short-to-medium term growth caused by an economic shock following an exit. This additional analysis indicated the existence of continued headroom for all segments.

 

18.  Investment in Subsidiary Undertakings

 


Company


31 December 2019

31 December 2018


£

£

Shares in subsidiary undertakings



At beginning of the year

55,481,505

1

Additions

45,723,272

8,094,299

Disposals

-

-

At period end

101,204,777

8,094,300

Loan to Group undertakings

(6,833,932)

47,387,205

Total

94,370,845

55,481,505

 

Investments in Group undertakings are stated at cost less impairment. During the year the Company acquired 100% of CCP Building Products Limited, 40% in GDH (Holdings) Limited, 100% of CDH Développement SA and 49% in Stone Holdings.

 

Details of subsidiaries at 31 December 2019 are as follows:

 

Name of subsidiary

Country of incorporation

Share capital held by Company

Share capital held by Group

Principal activities

SigmaFin Limited

England

£1


Holding company

Foelfach Stone Limited

England


£1

Construction materials

SigmaGsy Limited

Guernsey


£1

Shipping logistics

Ronez Limited

Jersey


£2,500,000

Construction materials

Pallot Tarmac (2002) Limited

Jersey


£2

Road contracting services

Island Aggregates Limited

Guernsey


£6,500

Waste recycling

Topcrete Limited

England


£926,828

Pre-cast concrete producer

A. Larkin (Concrete) Limited

England


£37,660

Dormant

Allen (Concrete) Limited

England


£100

Holding company

Poundfield Products (Group) Limited

England

£22,167


Holding company

Poundfield Products (Holdings) Limited

England


£651

Holding company

Poundfield Innovations Limited

England


£6,357

Patents & licencing

Poundfield Products Limited

England


£63,568

Pre-cast concrete producer

Alfabloc Limited

England


£1

Dormant

CCP Building Products Limited

England

£50


Construction materials

Cheshire Concrete Products Limited

England


£1

Dormant

Clwyd Concrete Products Limited

England


£100

Dormant

Country Concrete Products Limited

England


£100

Dormant

CCP Trading Limited

England


£100

Dormant

CCP Aggregates Limited

England


£100,000

Construction materials

CDH Développement SA

Belgium

€23,660,763


Holding company

Carrières du Hainaut SCA

Belgium


€16,316,089

Construction materials

Coordination du Hainaut SCS

Belgium


€45,184,400

Financing company

CDH International SCA

Belgium


€62,000

International marketing

 

 

Name of subsidiary

Registered office address

SigmaFin Limited

7-9 Swallow Street, London, W1B 4DE

Foelfach Stone Limited

7-9 Swallow Street, London, W1B 4DE

SigmaGsy Limited

Les Vardes Quarry, Route de Port Grat, St Sampson, Guernsey, GY2 4TF

Ronez Limited

Ronez Quarry, La Route Du Nord, St John, Jersey, JE3 4AR

Pallot Tarmac (2002) Limited

Ronez Quarry, La Route Du Nord, St John, Jersey, JE3 4AR

Island Aggregates Limited

Les Vardes Quarry, Route de Port Grat, St Sampson, Guernsey, GY2 4TF

Topcrete Limited

38 Willow Lane, Mitcham, Surrey, CR4 4NA

A. Larkin (Concrete) Limited

38 Willow Lane, Mitcham, Surrey, CR4 4NA

Allen (Concrete) Limited

38 Willow Lane, Mitcham, Surrey, CR4 4NA

Poundfield Products (Group) Limited

The Grove, Creeting St. Peter, Ipswich, England, IP6 8QG

Poundfield Products (Holdings) Limited

The Grove, Creeting St. Peter, Ipswich, England, IP6 8QG

Poundfield Innovations Limited

The Grove, Creeting St. Peter, Ipswich, England, IP6 8QG

Poundfield Products Limited

The Grove, Creeting St. Peter, Ipswich, England, IP6 8QG

Alfabloc Limited

The Grove, Creeting St. Peter, Ipswich, England, IP6 8QG

CCP Building Products Limited

Llay Road, Llay, Wrexham, Clwyd, LL12 0TL

Cheshire Concrete Products Limited

Llay Road, Llay, Wrexham, Clwyd, LL12 0TL

Clwyd Concrete Products Limited

Llay Road, Llay, Wrexham, Clwyd, LL12 0TL

Country Concrete Products Limited

Llay Road, Llay, Wrexham, Clwyd, LL12 0TL

CCP Trading Limited

Llay Road, Llay, Wrexham, Clwyd, LL12 0TL

CCP Aggregates Limited

Llay Road, Llay, Wrexham, Clwyd, LL12 0TL

CDH Développement SA

Rue de Cognebeau 245, B-7060 Soignies, Belgium

Carrières du Hainaut SCA

Rue de Cognebeau 245, B-7060 Soignies, Belgium

Coordination du Hainaut SCS

Rue de Cognebeau 245, B-7060 Soignies, Belgium

CDH International SCA

Rue de Cognebeau 245, B-7060 Soignies, Belgium

 

For the year ended 31 December 2019 the Company was entitled to exemption from audit under section 479A of the Companies Act 2006 related to the following subsidiary companies:

 

·    SigmaFin Limited

·    Foelfach Stone Limited

·    Topcrete Limited

·    A. Larkin (Concrete) Limited

·    Allen (Concrete) Limited

·    Poundfield Products (Group) Limited

·    Poundfield Products (Holdings) Limited

·    Poundfield Innovations Limited

·    Poundfield Products Limited

·    Alfabloc Limited

·    CCP Building Products Limited

·    Cheshire Concrete Products Limited

·    Clwyd Concrete Products Limited

·    Country Concrete Products Limited

·    CCP Trading Limited

·    CCP Aggregates Limited

 

Impairment review

 

The performance of all companies for the year ended 31 December 2019 are in line with forecasted expectations and as such there have been no indications of impairment.

 

19.  Investment in Equity Accounted Associates

 

On 18 April 2019, the Company acquired a 40% equity interest in GDH (Holdings) Limited ('GDH'), a quarrying group located in South Wales for a cash consideration of £4.89 million. GDH is based in South Wales and owns six quarries as well as concrete and tarmac plants and is a provider of aggregates for commercial and domestic customers.

 

On 11 September 2019, the Company acquired 49% equity interest in Stone Holdings SA ('Stone') for a cash consideration of £563k (€658k). Stone is based in Belgium and operates two quarries and a wharf and contracting business which focusses on armour rock for river and sea defence work.

 

GDH and Stone are included in the consolidated financial statements using the equity method.

 



Proportion of ownership interest held

Name

Country of incorporation

31 December 2019

31 December 2018

GDH (Holdings) Limited

United Kingdom

40%

-

Stone Holdings SA

Belgium

49%

-

 

 

Summarised financial information

GDH

31 December 2019


£

As at 31 December 2019


Current assets

10,275,551

Non-current assets

26,343,207

Current liabilities

(11,234,400)

Non-current liabilities

(10,939,312)



For the period 19 April 2019 to 31 December 2019


Revenues

18,982,758

Profit after tax from continuing operations

83,054

 

Stone Holdings

31 December 2019


£

As 31 December 2019


Current assets

830,404

Non-current assets

3,586,218

Current liabilities

(1,716,439)

Non-current liabilities

(549,671)



For the period 11 September 2019 to 31 December 2019

Revenues

Profit after tax from continuing operations

964

 

20.  Trade and Other Receivables

 


Consolidated


Company

 


31 December 2019

31 December 2018


31 December 2019

31 December 2018


£

£


£

£

Trade receivables

14,662,423

4,906,459


533,606

116,509

Prepayments

1,111,141

495,396


247,050

43,586

Other receivables

6,459,032

1,065,352


7,169

757,168


22,232,596

6,467,207


787,825

917,263

 

The carrying value of trade and other receivables classified as loans and receivables approximates fair value.

 

The carrying amounts of the Group and Company's trade and other receivables are denominated in the following currencies.


Group


Company


31 December 2019

31 December 2018


31 December 2019

31 December 2018

UK Pounds

15,939,755

6,467,207


787,825

917,263

Euros

6,292,841

-


-

-


22,232,596

6,467,207


787,825

917,263

 

 

Other classes of financial assets included within trade and other receivables do not contain impaired assets.

 

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

 

21.  Inventories


Consolidated


31 December 2019

31 December 2018

Cost and net book value

£

£

Raw materials and consumables

3,695,360

2,525,173

Finished and semi-finished goods

7,416,751

2,157,737

Work in progress

48,463

161,573


11,160,574

4,844,483

 

The value of inventories recognised as a debit and included in cost of sales was £490,462 (31 December 2018: £5,827,520).

 

 

22.  Cash and Cash Equivalents

 


Consolidated


Company


31 December 2019

31 December 2018


31 December 2019

31 December 2018


£

£


£

£

Cash at bank and on hand

9,867,696

3,771,735


3,935,831

115,756


9,867,696

3,771,735


3,935,831

115,756

 

All of the Group's cash at bank is held with institutions with an AA credit rating.

 

The carrying amounts of the Group and Company's cash and cash equivalents are denominated in the following currencies:

 


Group


Company


31 December 2019

31 December 2018


31 December 2019

31 December 2018

UK Pounds

8,410,763

3,771,735


3,935,831

115,756

Euros

1,456,933

-


-

-


9,867,696

3,771,735


3,935,831

115,756

 

23.  Trade and Other Payables

 


Consolidated


Company

 


31 December 2019

31 December 2018


31 December 2019

31 December 2018


£

£


£

£

Trade payables

10,306,033

3,939,708


       763,808

204,370

Wages payable

4,072,972

907,939


-

-

Accruals

4,173,341

1,102,871


1,268,750

424,601

VAT payable / (receivable)

660,033

398,652


(85,508)

(46,956)

Deferred consideration payable for acquisitions

16,025,254

1,464,791


14,881,493

-

Other payables

1,920,378

240,313


15,475

13,072


37,158,011

8,054,274


16,844,018

595,087

 

The carrying amounts of the Group and Company's trade and other payables are denominated in the following currencies:

 


Group


Company


31 December 2019

31 December 2018


31 December 2019

31 December 2018

UK Pounds

27,130,229

8,054,274


16,844,018

595,087

Euros

10,027,782

-


-

-


37,158,011

8,054,274


16,844,018

595,087

 

24.  Borrowings


Consolidated


Company


31 December 2019

31 December 2018


31 December 2019

31 December 2018

 


£

£


£

£

 

Non-current liabilities






 

Santander term facility

25,907,847

9,662,389


-

-

 

Convertible loan notes

-

10,000,000


-

10,000,000

 

Bank Loans

26,216,013

-


-

-

 

Finance lease liabilities

3,070,155

32,016


41,671

-

 


55,194,015

19,694,405


41,671

10,000,000

 

Current liabilities






 

Finance lease liabilities

4,461,336

74,581


24,827

-

 


4,461,336

74,581


         24,827

-

 

 

On 5 January 2017 the Company issued 10,000,000 unsecured convertible loan notes at a par value of £1 per loan note accruing interest daily at a rate of 6% per annum and repayable on 5 January 2022 (the 'Loan Notes'). The Loan Notes were convertible into Ordinary Shares by the holders issuing a conversion notice any time prior to the repayment due date at a fixed price of £0.52 per Ordinary Share.

 

In April 2017 the Company entered into an £18 million term facility with Santander (the 'Facility'); on 18 October 2017 drew down £9 million to satisfy the initial cash consideration for Topcrete Limited; and, on 21 June 2018 drew down £1 million to assist with the purchase of Foelfach Stone Limited.  

 

In January 2019, the Company amended and restated its term facility with Santander and increased it to £34 million (the 'restated facility'). On 23 January 2019, the Company drew down £10.8m to satisfy the redemption of the Loan Notes; on 1 February 2019, drew down £1.5 million to for working capital in relation to the acquisition of CCP; and on 18 April 2019, drew down £4 million to satisfy the purchase of 40% of GDH (Holdings) Limited.

 

The restated facility is secured by a floating charge over the assets of SigmaFin Limited and its subsidiary undertakings. Interest is charged at a rate between 1.5% and 2.75% above LIBOR ('Interest Margin'), based on the calculation of the adjusted leverage ratio for the relevant period. For the period ending 31 December 2019 the Interest Margin was 1.75%.

 

In October 2019, as part of the acquisition of CDH, the Group agreed to assume its term loan facility with the view to refinance. CDH has a term loan facility with Belfius Bank, ING Belgium, BNP Paribas Fortis and KBC Bank (the 'Term Loan'). Interest is charged at 3.15% and the Term Loan is secured via floating charges and assets in CDH.

 

The carrying amounts and fair value of the non-current borrowings are:

 


Carrying amount


Fair value


31 December 2019

31 December 2018


31 December 2019

31 December 2018

 


£

£


£

£

 

Santander term facility

25,907,847

9,662,389


-

-

 

Belgian bank loans

26,216,013

-


-

-

 

Convertible loan notes

-

10,000,000


-

10,000,000

 

Finance lease liabilities

7,531,491

32,016


-

-

 


59,655,351

19,694,405


-

10,000,000

 

 

The fair values are based on cash flows discounted using the borrowing rate of 3% (2018: 6%), which represents the cost of debt of the Group.

 

Finance Lease Liabilities

 

Lease liabilities are effectively secured, as the rights to the leased asset revert to the lessor in the event of default.


Consolidated


31 December 2019

31 December 2018

Finance lease liabilities - minimum lease payments

£

£

Not later than one year

4,461,336

74,581

Later than one year and no later than five years

2,902,039

32,016

Later than five years

168,116

-


7,531,491

106,597

Future finance charges on finance lease liabilities

367,910

13,011

Present value of finance lease liabilities

7,899,401

119,608

 

For the year ended 31 December 2019, the total finance charges were £280,496.

 

The contracted and planned lease commitments were discounted using a weighted average incremental borrowing rate of 3%.

 

The present value of finance lease liabilities is as follows:


Consolidated

 


31 December 2019

31 December 2018


£

£

Not later than one year

4,595,176

79,056

Later than one year and no later than five years

2,989,100

30,204

Later than five years

173,159

-

Present value of finance lease liabilities

7,757,436

109,260

 

Reconciliation of liabilities arising from financing activities is as follows:


Consolidated


Long-term borrowings

Short-term borrowings

Lease liabilities

Liabilities arising from financing activities


£

£

£

£

As at 1 January 2019

19,662,389

-

106,597

19,768,986

Increase/(decrease) through financing cash flows

6,300,000

-

(1,300,570)

4,999,430

Amortisation of finance arrangement fees

(129,461)

-

-

(129,461)

Increase through IFRS 16

-

-

8,725,464

8,725,464

Increase through obtaining control of subsidiaries

26,290,932

-

-

26,290,932

As at 31 December 2019

52,123,860

-

7,531,491

59,655,351




Consolidated


Long-term borrowings

Short-term borrowings

Lease liabilities


£

£

£

£

As at 1 January 2018

18,572,360

-

199,952

18,772,312

Increase/(decrease) through financing cash flows

-

-

(93,355)

(93,355)

Amortisation of finance arrangement fees

90,029

-

-

90,029

Increase through obtaining control of subsidiaries

1,000,000

-

-

1,000,000

As at 31 December 2018

19,662,389

-

106,597

19,768,986

 

25.  Provisions


Consolidated


31 December 2019

31 December 2018


£

£

As at 1 January

632,011

632,011

Acquired on business combination

6,620,250

-

Deduction

(315,507)

-


6,936,754

632,011

 

The provision total is made up of £632,011 as a restoration provision for the St John's and Les Vardes sites which is based on the removal costs of the plant and machinery at both sites, £86,812 as a restoration provision for the Aberdo site which is based on the removal costs of the plant and machinery at the site. Cost estimates in Jersey and Guernsey are not increased on an annual basis - there is no legal or planning obligation to enhance the sites through restoration. The commitment is to restore the site to a safe environment; thus the provision is reviewed on an annual basis. St John's quarry has an estimated expiry of 7 years, Les Vardes is 5 years and Aberdo is 14 years. 

 

Of the remaining amount £2.1m is to cover the loss on the Holcim contract in CDH and £3.5m is the provision for early retirement in Belgium, where salaried workers can qualify for early retirement based on age and the number of years of service.  The provision for early retirement consists of the estimated amount that will be paid by the employer to the "early retired workers" till the age of the full pension.

 

The future reclamation cost value is discounted by 12% (2018: 12%) which is the weighted average cost of capital within the Group.

 

26.  Retirement benefit schemes

 

The Group sponsors various post-employment benefit plans. These include both defined contribution and defined benefit plans as defined by IAS 19 Employee Benefits.

 

Defined contribution plans

 

For defined contribution plans outside Belgium, the Group pays contributions to publicly or privately administered pension funds or insurance contracts. Once the contributions have been paid, the Group has no further payment obligation. The contributions are expensed in the year in which they are due. For the year ended, contributions paid into defined contribution plans amounted to £434k.

 

Defined benefit plans

 

The Group has group insurance plans for some of its Belgian employees funded through defined payments to insurance companies. The Belgian pension plans are by law subject to minimum guaranteed rates of return. In the past the minimum guaranteed rates were 3.25% on employer contributions and 3.75% on employee contributions. A law of December 2015 (enforced on 1 January 2016) modifies the minimum guaranteed rates of return applicable to the Group's Belgian pension plans. For insured plans, the rates of 3.25% on employer contributions and 3.75% on employee contributions will continue to apply to the contributions accumulated before 2016. For contributions paid on or after 1 January 2016, a variable minimum guaranteed rate of return with a floor of 1.75% applies. The Group obtained actuarial calculations for the periods reported based on the projected unit credit method.

 

Employee benefits amounts in the Statement of Financial Position

£

Assets

-

Liabilities

3,758,285

Net defined benefit liability at end of year

3,758,285

 

Amounts recognised in the Statement of Financial Position

£

Present value of funded defined benefit obligations

2,252,187

Fair value of plan assets

(2,095,797)


156,390

Present value of unfunded defined benefit obligation

3,601,895

Unrecognised past service cost

-

Total

3,758,285

 

Amounts recognised in the Income Statement

£

Current service cost

61,871

Interest cost

3,308

Expected return on plan assets

(46,342)

Total pension expense

18,837

 

Changes in the present value of the defined benefit obligation

£

Defined benefit obligation at beginning of year

-

Current service cost

61,871

Interest cost

3,308

Benefits paid

(84,815)

Remeasurements

(46,342)

Acquired in business combination

3,824,263

Defined benefit obligation at end of year

3,758,285

 

Amounts recognised in the Statement of Changes in Equity

£

Prior year cumulative actuarial remeasurements

-

Remeasurements

(46,342)

Cumulative amount of actuarial gains and losses recognised in the Statement of recognised income / (expense)

(46,342)

 

Movements in the net liability/(asset) recognised in the Statement of Financial Position

£

Net liability in the balance sheet at beginning of year

-

Total expense recognised in the income statement

61,871

Contributions paid by the company

3,308

Amount recognised in the statement of recognised (income)/expense

(84,815)

Acquired in business combination

(46,342)

Defined benefit obligation at end of year

3,758,285

 

Principal actuarial assumptions as at 31 December 2019


Discount rate

0.60%

Future salary increases

2.25%

Future inflation

1.75%

 

Post-retirement benefits

 

The Group operates both defined benefit and defined contribution pension plans.

 

Pension plans in Belgium are of the defined benefit type because of the minimum promised return on contributions required by law. The liability or asset recognised in the Statement of Financial Position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Income Statement. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the Statement of Changes in Equity and in the Statement of Financial Position.

 

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

 

27.  Financial Instruments by Category

 

Consolidated

31 December 2019


Loans & receivables

Total

Assets per Statement of Financial Performance

£

£

Trade and other receivables (excluding prepayments)

21,121,455

21,121,455

Cash and cash equivalents

9,867,696

9,867,696


30,989,151

30,989,151





At amortised cost

Total

Liabilities per Statement of Financial Performance

£

£

Borrowings (excluding finance leases)

52,123,860

52,123,860

Finance lease liabilities

7,531,491

7,531,491

Trade and other payables (excluding non-financial liabilities)

37,158,011

37,158,011


96,813,362

96,813,362

 

 

Consolidated

31 December 2018


Loans & receivables

Total

Assets per Statement of Financial Performance

£

£

Trade and other receivables (excluding prepayments)

5,971,811

5,971,811

Cash and cash equivalents

3,771,735

3,771,735


9,743,546

9,743,546





At amortised cost

Total

Liabilities per Statement of Financial Performance

£

£

Borrowings (excluding finance leases)

19,662,389

19,662,389

Finance lease liabilities

106,597

106,597

Trade and other payables (excluding non-financial liabilities)

8,054,274

8,054,274


27,823,260

27,823,260

 

 

Company

31 December 2019


Loans & receivables

Total

Assets per Statement of Financial Performance

£

£

Trade and other receivables (excluding prepayments)

540,775

540,775

Cash and cash equivalents

3,935,831

3,935,831


4,476,606

4,476,606

 

 




At amortised cost

Total

Liabilities per Statement of Financial Performance

£

£

Borrowings (excluding finance leases)

-

-

Finance lease liabilities

66,498

66,498

Trade and other payables (excluding non-financial liabilities)

16,844,018

16,844,018


16,910,516

16,910,516

 

 

 

Company

31 December 2018


Loans & receivables

Total

Assets per Statement of Financial Performance

£

£

Trade and other receivables (excluding prepayments)

873,677

873,677

Cash and cash equivalents

115,756

115,756


989,433

989,433





At amortised cost

Total

Liabilities per Statement of Financial Performance

£

£

Borrowings (excluding finance leases)

10,000,000

10,000,000

Finance lease liabilities

-

-

Trade and other payables (excluding non-financial liabilities)

595,087

595,087


10,595,087

10,595,087

 

28.  Share Capital and Share Premium


Number of shares

Ordinary shares

Share premium

Total



£

£

£

Issued and fully paid





As at 1 January 2018

136,705,557

1,367,056

50,161,904

51,528,960

Cost of secondary placing (1)

-

-

(25,000)

(25,000)

As at 31 December 2018

136,705,557

1,367,056

50,136,904

51,503,960

As at 1 January 2019

136,705,557

1,367,056

50,136,904

51,503,960

Issue of new shares - 25 January 2019 (2)

35,135,101

351,351

13,596,828

13,948,179

Issue of new shares - 1 February 2019

1,976,888

19,770

730,230

750,000

Issue of new shares - 15 October 2019 (3)

79,921,640

799,216

30,894,594

31,693,810

As at 31 December 2019

253,739,186

2,537,393

95,358,556

97,895,949

 

(1)   Issue costs on secondary placing of £25,000

(2)   Includes issue costs of £457,215

(3)   Includes issue costs of £1,074,061

 

On 25 January 2019 the Company raised £12,405,392 net of issue costs via the issue and allotment of 30,257,053 new Ordinary Shares at a price of 41 pence per share. On the same day the Company issued and allotted 4,878,048 at a price of 41 pence per share as consideration for CCP Building Products Limited of £2,000,000.

 

On 1 February 2019 the Company issued and allotted 1,976,888 at a price of 39 pence per share to the vendor of Poundfield Products (Group) Limited as satisfaction for the deferred consideration of £750,000.

 

On 15 October 2019 the Company raised £31,693,810 net of issue costs via the issue and allotment of 79,921,640 new Ordinary Shares at a price of 41 pence per share.

 

29.  Share Options

 

Share options and warrants outstanding and exercisable at the end of the year have the following expiry dates and exercise prices:

 




Options & Warrants




31 December 2019

31 December 2018

Grant date

Expiry date

Exercise price in £ per share



5 January 2017

4 January 2022

0.44

1,026,014

1,026,014

5 January 2017

22 August 2021

0.25

78,044

78,044

5 January 2017

5 January 2022

0.25

286,160

286,160

5 January 2017

5 January 2022

0.40

12,183,225

12,183,225

15 April 2019

15 April 2026

0.46

3,216,978

-

30 December 2019

30 December 2026

0.46

2,704,353

-




19,494,774

13,573,443

 

The Company and Group have no legal or constructive obligation to settle or repurchase the options or warrants in cash.

 

The fair value of the share options and warrants was determined using the Black Scholes valuation model. The parameters used are detailed below:

 

 



2017 Options A

2017 Options B

2017 Options C

2017 Options D

Granted on


5/1/2017

5/1/2017

5/1/2017

5/1/2017

Life (years)


5

4

5

5

Share price


0.425

0.425

0.425

0.425

Risk free rate


0.52%

0.52%

0.52%

0.52%

Expected volatility


24.81%

24.81%

24.81%

4.03%

Expected dividend yield


-

-

-

-

Marketability discount


50%

-

-

50%

Total fair value


£46,900

£15,083

£76,418

£234,854

 



2019 Options E

2019 Options F


Granted on


15/4/2019

30/12/2019


Life (years)


7

7


Share price


0.465

0.525


Risk free rate


0.31%

0.55%


Expected volatility


4.69%

8.19%


Expected dividend yield


-

-


Total fair value


£49,638

£128,698


 

The risk-free rate of return is based on zero yield government bonds for a term consistent with the option life.

 

A 50% discount was applied to Options A & D due to the uncertainty surrounding the future performance of the Group. The Options A & D were issued in the first year of acquisitions which at the time had not had a significant impact on the Company's share price. Therefore a 50% discount was applied to reflect the fact the Company was still in an early stage with regards to acquiring niche company's and building value for the shareholders.

 

A reconciliation of options and warrants granted over the year to 31 December 2019 is shown below:

 

 


31 December 2019


31 December 2018



Weighted average exercise price



Weighted average exercise price


Number

£


Number

£

Outstanding at beginning of the year

13,573,443

0.40


13,573,443

0.40

Granted

17,777,991

0.46


-

-

Exercised

-

-


-

-

Outstanding as at year end

31,351,434

0.44


13,573,443

0.40

Exercisable at year end

19,494,774

0.42


13,573,443

0.40

 

30.  Other Reserves

 

 


Company


Deferred shares

Capital redemption reserve

Foreign currency translation reserve

Total


£

£

£

£

As at 1 January 2018

761,679

600,039

-

1,361,718

As at 31 December 2018

761,679

600,039

-

1,361,718

As at 1 January 2019

761,679

600,039

-

1,361,718

Currency translation differences

-

-

(447,978)

(447,978)

As at 31 December 2019

761,679

600,039

(447,978)

913,470

 

31.  Earnings Per Share

 

The calculation of the total basic earnings per share of 0.92 pence (2018: 2.65 pence) is calculated by dividing the profit attributable to shareholders of £1,726,546 (2018: £3,619,144) by the weighted average number of ordinary shares of 188,418,538 (2018: 136,705,557) in issue during the period.

                                                                                                                          

Diluted earnings per share of 0.82 pence (2018: 2.41 pence) is calculated by dividing the profit attributable to shareholders of £1,726,546 (2018: £3,619,144) by the weighted average number of ordinary shares in issue during the period plus the weighted average number of share options and warrants to subscribe for ordinary shares in the Company, which together total 209,045,831 (2018: 150,383,059).

 

Details of share options that could potentially dilute earnings per share in future periods are disclosed in Note 29.

 

32.  Fair Value Estimation

 

The Group holds call options to purchase €7,100,000 on 29 June 2020 and €4,300,000 on 30 December 2020.

 

The call options were bought on 20 December 2019 for £211,592 and as at 31 December they had a fair value of £198,123 resulting in a loss of £11,542.

 

33.  Fair Value of Financial Assets and Liabilities Measured at Amortised Costs

 

Financial assets and liabilities comprise the following:

                                                                                        

·    Trade and other receivables

·    Cash and cash equivalents

·    Trade and other payables

 

The fair values of these items equate to their carrying values as at the reporting date.

                                                                                        

34.  Business Combinations

 

CCP Building Products Limited

On 25 January 2019, the Group acquired 100% of the share capital of CCP Building Products Limited ('CCP') and its subsidiaries for initial cash consideration of £4.7 million (being £9.8 million less adjustments for various obligations assumed by the Group as part of the acquisition). CCP is registered and incorporated in the United Kingdom. The principal activity is the production of high quality aggregates and supply of value-added construction materials.

 

The following table summarises the consideration paid for CCP and the values of the assets and equity assumed at the acquisition date.

 

Total consideration

£

Cash

7,049,102

Share based payments

2,000,000

Deferred cash

748,635


9,807,737

 

Recognised amounts of assets and liabilities acquired

£

Cash and cash equivalents

(42,762)

Trade and other receivables

3,564,595

Inventories

859,486

Property, plant & equipment

3,832,468

Tax liabilities

(176,507)

Trade and other payables

(6,972,916)

Borrowings

(4,642,061)

Provisions for liabilities

(86,813)

Total identifiable net liabilities

(3,664,510)

Goodwill (refer to note 17)

13,472,247

Total consideration

9,807,737

 

Carrières du Hainaut SCA

On 15 October 2019, the Group acquired 100% of the share capital of Carrières du Hainaut SCA ('CDH') and its subsidiaries for initial cash consideration of £25 million (being £26.1 million less adjustments for various obligations assumed by the Group as part of the acquisition). CDH is registered and incorporated in the Belgium. The principal activity is the production of high-quality aggregates and supply of value-added construction materials.

 

The following table summarises the consideration paid for CDH and the values of the assets and equity assumed at the acquisition date.

 

Total consideration

£

Cash

25,049,142

Deferred cash

13,155,740


38,204,882

 

Recognised amounts of assets and liabilities acquired

£

Cash and cash equivalents

1,317,276

Trade and other receivables

7,404,563

Inventories

5,966,633

Property, plant & equipment

27,244,292

Intangible assets

1,283,135

Tax liabilities

(577,397)

Trade and other payables

(11,673,010)

Borrowings

(35,133,458)

Provisions for liabilities

(6,533,437)

Total identifiable net liabilities

(10,701,403)

Goodwill (refer to note 17)

48,906,284

Total consideration

38,204,882

 

35.  Contingencies

 

The Group is not aware of any material personal injury or damage claims open against the Group.

 

36.  Related party transactions

 

Loans with Group Undertakings

Amounts receivable/(payable) as a result of loans granted to/(from) subsidiary undertakings are as follows:


Company


31 December 2019

31 December 2018


£

£

Ronez Limited

 (9,625,760)

(4,995,129)

SigmaGsy Limited

(3,014,167)

(1,995,066)

SigmaFin Limited

(8,756,846)

50,336,445

Topcrete Limited

(1,022,931)

(850,425)

Poundfield Products (Group) Limited

7,088,761

4,799,580

Foelfach Stone Limited

442,858

91,800

CCP Building Products Limited

6,372,333

-

Carrières du Hainaut SCA

1,681,820

-


(6,833,932)

47,387,205

 

Loans granted to or from subsidiaries are unsecured, interest free and repayable in Pounds Sterling when sufficient cash resources are available.

 

All intra Group transactions are eliminated on consolidation.

 

Other Transactions

Heytesbury Corporate LLP, a limited liability partnership of which Garth Palmer is a partner, invoiced a total fee of £370,000 (2018: £85,000) for the provision of corporate management and consulting services to the Company which includes £285,000 for services relating to acquisitions of CCP, GDH, Stone and CDH. A balance of £178,477 was outstanding at the year-end.

Druces LLP, a limited liability partnership of which Dominic Traynor is a partner, invoiced a fee of £330,072 (2018: £177,302) for the provision of legal services for acquisitions. There was no balance outstanding at year end.

 

Julia Traynor, the wife of Non-Executive Director Dominic Traynor, invoiced a fee of £40,000 for the provision of administrative and legal services to the Company in relation to prospective acquisitions. No balance was outstanding at the year-end.

 

Patrick Dolberg invoiced a fee of £45,000 (2018: £45,000) for the provision of consulting services to the Company in relation to prospective acquisitions. No balance was outstanding at the year-end.

 

Michael Roddy, a Director of the subsidiary companies was loaned £6,000 in August 2019 by Allen Concrete Limited. The loan is for a period of 12 months to be repaid by 12 monthly instalments starting October 2019 and at year end £4,000 was outstanding.

 

37.  Ultimate Controlling Party

 

The Directors believe there is no ultimate controlling party.

 

38.  Events After the Reporting Date

 

On 11 March 2020, the World Health Organisation declared the Coronavirus outbreak to be a pandemic in recognition of its rapid spread across the globe, with over 200 countries now affected. Many governments are taking increasingly stringent steps to help contain or delay the spread of the virus and as a result there is a significant increase in economic uncertainty.

 

For the Group's 31 December 2019 financial statements, the Coronavirus outbreak and the related impacts are considered non-adjusting events. Consequently, there is no impact on the recognition and measurement of assets and liabilities. Due to the uncertainty of the outcome of current events, the Group cannot reasonably estimate the impact these events will have on the Group's financial position, results of operations or cash flows in the future.

 

 

 

- ends -

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
FR GPUQACUPUGRB

Quick facts: SigmaRoc

Price: 45

Market: AIM
Market Cap: £114.18 m
Follow

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

SigmaRoc PLC has been trading profitably each month of this year-to-date

SigmaRoc PLC's (LON:SRC) Max Vermorken speaks to Proactive London's Andrew Scott after announcing they've generated revenues of £42mln during the five months to the end of May 2020. He adds that each platform within the group, and the group itself, has been EBITDA positive for each month of this...

1 month ago