Final Results 2015

RNS Number : 3583S

Safestyle UK PLC

17 March 2016

Safestyle UK plc

("Safestyle UK" or the "Group")

Final Results 2015

Strong operating performance delivers further market share gains

Safestyle UK plc (AIM: SFE), the window and door replacement company, today announces its final results for the year ended 31 December 2015.

Financial Highlights

	Year ended 31 December 2015 £m	Year ended 31 December 2014 £m	% change
Revenue	148.9	136.0	9.5%
Gross profit	54.5	49.7	9.7%
EBITDA	18.6	17.4	6.9%
Underlying*EBITDA	19.1	17.8	7.3%
PBT	17.6	16.4	7.3%
Underlying PBT*	18.0	16.8	7.1%
Earnings per share
Basic	17.8p	16.5p	7.9%
Underlying*	18.4p	17.0p	8.2%

*	Excludes items relating to share-based payments

Board proposing payment of two dividends:

· Recommended final dividend of 6.8p (2014: 6.2p) per share giving a total ordinary dividend for the year of 10.2p per share

· Special dividend of 6.8p per share

Operational Highlights

· A record 60,134 installations with volume of frames installed increased by 4.4% to 279,453 (2014: 267,642)

· Average unit sales price up 5.4% to £531 (2014: £504)

· Average order value up 5.6% to £2,963 (2014: £2,806)

· Growth in market share to 9.46% at 31 December 2015 from 8.48% at prior year end

· Leads generated from media and internet marketing grown by 13.5% to 59,965 (2014: 52,842)

· 11^th consecutive year of market share growth

Steve Birmingham, CEO of Safestyle UK plc, said:

"Safestyle has continued to grow both revenue and profit, achieving record levels of both in 2015. For the eleventh consecutive year we have increased our market share and, as a result, strengthened our position as the leading operator in the retail replacement window and door market. During 2015 we continued our geographic expansion by opening three new sales branches, added conservatory upgrades to our product range and introduced an improved suite of promotional consumer finance options.

The Group is well positioned to continue to grow market share, expand our sales branch network and broaden our product range. In the current financial year, so far, order intake has been very strong giving us the confidence that we will maintain our successful progress in the year ahead."

Enquiries:

Safestyle UK plc Steve Birmingham, Chief Executive Officer Mike Robinson, Chief Financial Officer	via FTI Consulting
Zeus Capital (Nominated Adviser & Joint Broker) Nick How / Dominic King	Tel: 0203 829 5000
Liberum Capital Limited (Joint Broker) Neil Patel / Tom Fyson	Tel: 0203 100 2100
FTI Consulting (Financial PR) Oliver Winters / Alex Beagley / James Styles	Tel: 0203 727 1000

About Safestyle UK plc

The Group is the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market. For more information please visit www.safestyleukplc.co.uk or www.safestyle-windows.co.uk.

Chairman's Statement

I am pleased to report the Group's results for the year ended 31 December 2015.

Summary of Financial Performance

The Group has again delivered record revenue, profit and market share. Revenue increased 9.5% to £148.9m (2014: £136.0m), delivering profit before tax of £17.6m, up 7.3% (2014: £16.4m). Earnings per share increased 7.9% to 17.8p (2014: 16.5p).

As expected, after a slower first half in terms of profit growth, we delivered significant growth in the second half as a number of initiatives began to bear fruit. This included further refinements to our advertising and online strategies, the delivery of our enhanced range of consumer finance offerings, and the launch of our conservatory refurbishment programme. In the second half, revenue was up 12% and profit before tax up 13%, very creditable results in a market that, in overall terms, contracted in the period.

Market Share

FENSA data reported a 6.6% contraction in the overall market in 2015. However, Safestyle UK has continued to grow and to gain market share, which increased to 9.46% for the year to 31 December 2015, up from 8.48% a year earlier.

Factory Expansion Plans

Since 2008, the Group has delivered sustained growth, with installations up from 40,700 in 2008 to 60,134 in 2015. Throughout this period, we have invested in our manufacturing facilities, with total expenditure on fixed assets, excluding freehold properties, of £6.2 million in the last five years.

To ensure we continue to capture manufacturing efficiencies and have the capacity to handle further increase in demand for our products, the Board has approved the development of further manufacturing space and an additional glass furnace, adjacent to our existing freehold facilities at Wombwell, South Yorkshire. The Group owns the adjoining site, on which we have planning permission to construct a 5,750 sq m factory extension. We expect to increase our production capacity by up to 50% when fully operational, and by up to 100% once we have fully utilised all available space.

We have committed up to £7.25m for this project, with expenditure commencing in Q2 2016 and the facilities operational by Q3 2017. The investment will be funded from current cash resources through 2016 and the first half of 2017.

Balance Sheet, Final Dividend and Special Dividend

The business continues to be highly cash generative, with 2015 cash conversion (the ratio of net cash inflow from operating activities, after adjusting for proceeds of £2.37m from the exercise of share warrants during the year, before taxation to underlying EBITDA,) at 95%, compared with 88% for 2014. As a consequence, our balance sheet remains strong and the business had £16.5m net cash at 31 December 2015, an increase of £8.0m in the year.

The Board recommends, subject to approval at the Annual General Meeting to be held on 19 May 2016, a final dividend of 6.8p per share payable to ordinary shareholders registered on 17 June 2016. Together with our interim dividend already paid of 3.4p per share, this takes total proposed ordinary distributions up to 10.2p per share, representing cover of circa 1.78x.

The Board has also considered the levels of resources it needs for its future plans. Our policy is to maintain cash resources for investment in manufacturing and other operating facilities, and to maintain a buffer in the event of a sustained period of market regression. This is reflected in our historic dividend cover. We also seek to have sufficient flexibility in our funding structure to take advantage of strategic growth opportunities that may from time to time become available.

The Board is committed to returning excess capital to shareholders where our cash resources are materially in excess of investment requirements. In keeping with our capital allocation policy and taking into account the Group's current financial strength, our anticipated trading performance, our known and anticipated investment plans, and the level of cash available, the Board is proposing that cash amounting to £5.5m (6.8p per share) will be returned to shareholders in the form of a special dividend, payable at the same time as the final dividend, to shareholders registered on 17 June 2016.

Looking Ahead

We expect to continue to deliver market outperformance, gaining market share and growing in absolute terms. This reflects the compelling nature of our proposition from financial, aesthetic and energy efficiency perspectives. We have a suite of products that represent excellent value, we have invested heavily in technology to enhance the customer proposition, and we have an outstanding leadership team which drives excellent performance.

So far this year to date, I am pleased to report that order intake has been significantly ahead of the same period in 2015 and the Board looks forward to further progress in 2016.

I would like to thank our many stakeholders, and especially our employees, for their commitment and contribution to our continued success.

RS Halbert

Chairman

17 March 2016

CEO's Statement

I am pleased to report that Safestyle UK enjoyed a record year in 2015 and I would like to formally express my thanks to all our people for their dedicated hard work and loyalty.

Business Review

In 2015 Safestyle's market share increased for the eleventh consecutive year to 9.46% (from 8.48% in 2014) consolidating our sector leading position. During the period we carried out a record 60,134 installations (up 4.4% on 2014) consisting of 279,453 window and door frames (up 4.3% on 2014). Our average frame sales price excluding VAT increased by 5.4% to £531 and our average installed order value increased from £2,806 to £2,963. This strong operational performance resulted in increased revenue up 9.5% to £148.9m and profit before tax up 7.3% from £16.4m in 2014 to £17.6m in 2015.

We continued to expand our sales branch network in the South of England with new branch openings in Watford in February 2015 and in Guildford on 1 January 2016. In addition we also responded to increased demand throughout the rest of the country by opening new sales branches in Newcastle and Stockport. During 2016 we will seek to expand our sales branch network in line with strategy by identifying locations in which we are relatively under represented in relation to our target customer base. We added an installation depot in Stevenage in the last quarter of 2015 and now have a network of 12 installation depots.

Leads generated from our digital activities and direct response channels accounted for 37% of all business in 2015, a significant increase on the 31% in 2014. Lead generation from door canvassing remains an important part of the marketing mix and, although the value of business from this source remained constant in 2015, it reduced to under 50% as a proportion of the total. Our continuing increased investment in direct and digital marketing will be a key factor in gaining market share and reducing average lead generation costs.

From 1 July 2015 we enhanced our consumer finance offer which resulted in a significant step up in order intake. This growth came with additional subsidy costs which we have sought to recover with an increase in our prices from 1 January 2016. Early indications are that despite this price increase we expect to maintain our market leading price and value proposition.

Manufacturing Expansion Plan

As part of our five year asset replacement plan during 2015 we invested in a new machining and cutting centre at our Wombwell manufacturing facility. In addition, in February 2016 we committed to constructing a new 5,750 sq m factory adjacent to our existing freehold facilities in Wombwell, South Yorkshire. Construction of the new factory is expected to commence in the second half of 2016 and be completed in the first half of 2017. On completion this factory will house a new glass toughening furnace, replacing the current furnace which is 12 years old, and the glass manufacturing process. This will bring the manufacturing of both the frames and double glazed units to a single site which will reduce handling and increase efficiency. The remaining increased manufacturing area in the new factory will allow us to extend and optimise our manufacturing operations, improve our product quality and provide sufficient capacity for the foreseeable future. Once vacated it is intended to use the current glass manufacturing factory for the manufacture of non standard and specialist bought in items.

Product Development

In April 2015 we launched our conservatory upgrade product to an initial eight selected sales branches. Following proof of concept we then rolled out the product to all our sales branches. Order intake in the second half of 2015 and in the first two months of 2016 has continued to gain momentum and suggests that our target number of installed conservatory upgrades of 450 in 2016 will be comfortably met.

At the beginning of 2016 we launched our Heritage range of PVCu windows and doors, which are intended to reproduce the authentic look of traditional timber, our Inspire aluminium bi-folding doors and in spring 2016 we will be launching three new coloured PVCu frames to enhance our product offering. The Board believes that as more customers look to replace their existing double glazed PVCu products an increased variety of options will be an important factor in their decision making process.

Outlook

During 2016 we will continue our drive to grow market share and expand our sales branch network. We will continue to invest in our manufacturing equipment and will commence a major expansion of our factory. We have established a solid foundation following our entry into the conservatory refurbishment market in 2015 and expect growth in this exciting area to accelerate in 2016.

Our robust cash generation and strong financial position will enable the Group to make the substantial investment in its infrastructure outlined without compromising returns to our shareholders. Furthermore we will maintain sufficient flexibility to take advantage of any strategic opportunity to enhance our market leading position should any such opportunity arise.

We believe that our enhanced range of energy efficient products, compelling consumer finance options and value proposition will continue to drive growth in a highly fragmented market.

The Group again delivered record results in 2015 and it is our intention to continue our successful progress in 2016. Early indications for the first two months of 2016 are very encouraging and we have started the year well.

S.J. Birmingham FCA

Chief Executive Officer

17 March 2016

Financial Review

Revenue

Revenue for the year was £148.9 million, an increase of 9.5% over 2014. The key factors underpinning this growth were:

· 31.6% growth in order value generated from direct response channels

· 4.4% growth in the volume of frames installed from 267,642 to 279,453

· 5.4% growth in average unit price from £504 to £531

· 5.6% growth in average order value from £2,806 to £2,963

The introduction in April and phased rollout of our conservatory upgrade product resulted in 108 installations and added £0.9 million to revenue for the period.

The further enhancement of our consumer finance offer has been a key driver of sales during the year. This reflects our strategy of using finance to generate incremental business and has resulted in the elimination of all products that had previously earned the Group introductory commissions.

Gross margin

Gross profit increased by 9.7% in the year to £54.5 million (2014: £49.7 million), with gross margin higher at 36.6% (2014: 36.5%). The gross margin improvement was driven by a higher average sales price and a continued reduction in the proportion of sales being generated by door canvass operations but was impacted, particularly in the second half, following the decision to further enhance our consumer finance offer.

Average sales prices increased from £504 per unit in 2014 to £531 in 2015 while the proportion of sales generated by door canvass operations reduced from 52% in 2014 to 47% in 2015.

The additional subsidies paid for the enhanced finance offer resulted in a reduction in the gross margin from 37.2% in the first half of the year to 36.0% in the second half. A price increase was implemented from the beginning of 2016 with the aim of increasing gross margin back to around 37%.

Other operating expenses

Other operating expenses for 2015 were £37.0 million (2014: £33.3 million), an increase of 11%. Marketing costs were the biggest contributor to the increase with an additional £1.7 million being invested in TV and online advertising. This represented an 18% increase in cost but this resulted in a 32% increase in the value of orders generated.

Other major cost areas including salaries, fleet and property costs increased at a slower rate than sales.

EBITDA and PBT

EBITDA was £18.6 million for the year (2014: £17.4 million), an increase of £1.2 million. PBT was £1.2 million higher at £17.6 million, and after adjusting for share-based payments was 7.1% higher than last year at £18.0 million (2014: £16.8 million).

The earnings per share were 17.8p for the year, up from 16.5p in 2014. The current year figure was impacted by the exercise of warrants. Diluted earnings per share increased from 15.9p in 2014 to 17.3p for the period. The basis for these calculations is detailed in note 4. Underlying EPS before share based payments was 18.4p versus 17.0p in 2014.

Cash

Strong operating cash flow resulted in the Group increasing its cash balance from £8.5 million at 31 December 2014 to £16.5 million as at 31 December 2015 while paying £7.5 million in dividends in the year.

The Group received £2.5 million during the year from the exercise of warrants issued on IPO.

Capital expenditure in the period was £1.6 million (2014: £1.6 million). The majority of this investment was part of our 5 year asset upgrade plan for our manufacturing facility.

Dividends

The Board is proposing a final dividend of 6.8 pence per share subject to approval by shareholders at the AGM. The dividend will be paid on 11 July 2016 to shareholders on the register at close of business on 17 June 2016.

The Board has also considered its priorities for the use of cash and proposes to pay a special dividend to shareholders. The special dividend will be 6.8 pence per share and will be paid at the same time as the 2015 final dividend.

MJ Robinson

Chief Financial Officer

17 March 2016

Consolidated statement of comprehensive income for the year ended 31 December 2015

	Note	2015	2014
		£000	£000

Revenue		148,902	136,012
Cost of sales		(94,384)	(86,323)

Gross profit		54,518	49,689
Other operating expenses		(37,033)	(33,339)

Operating profit		17,485	16,350


EBITDA before share based payments		19,060	17,759

Equity settled share based payments charges		(443)	(363)
Depreciation and amortisation		(1,132)	(1,046)

Operating profit		17,485	16,350

Finance income		96	97
Finance costs		(18)	(44)

Profit for the year		17,563	16,403

Taxation	5	(3,603)	(3,572)

Profit after taxation		13,960	12,831

Other comprehensive income		-	-

Total comprehensive income for the period attributable to equity shareholders		13,960	12,831


Earnings Per Share

Basic (pence per share)		17.8p	16.5p
Diluted (pence per share)		17.3p	15.9p

All operations were continuing throughout all periods.

Consolidated statement of financial position as at 31 December 2015

		2015	2014
	Note	£000	£000
Assets
Intangible assets - Trademarks		504	504
Intangible assets - Goodwill		20,758	20,758
Intangible assets - Software		609	492
Property, plant and equipment		7,492	7,153
Deferred tax asset		1,241	340

Non-current assets		30,604	29,247

Inventories		1,500	1,463
Trade and other receivables		3,858	3,314
Cash and cash equivalents		16,485	8,457

Current assets		21,843	13,234

Total assets		52,447	42,481

Equity
Called up share capital	6	803	778
Share premium account		79,440	77,000
Profit and loss account		24,278	16,537
Common control transaction reserve		(66,527)	(66,527)

Total equity		37,994	27,788

Liabilities
Trade and other payables		10,159	10,317
Financial liabilities		108	96
Corporation tax liabilities		1,746	1,589
Provision for liabilities and charges		668	690

Current liabilities		12,681	12,692

Financial liabilities		70	179
Provision for liabilities and charges		1,702	1,822

Non-current liabilities		1,772	2,001

Total liabilities		14,453	14,693

Total equity and liabilities		52,447	42,481

Consolidated statement of changes in equity for the year ended 31 December 2015

	Share capital	Share premium	Profit and loss account	Common control transaction reserve	Total equity
	£000	£000	£000	£000	£000

Balance at 1 January 2014	778	77,000	9,793	(66,527)	21,044

Total comprehensive income for the year	-	-	12,831	-	12,831

Transactions with owners recorded directly in equity:
Equity settled share based payment transactions	-	-	363	-	363
Deferred tax asset taken to reserves	-	-	239	-	239
Dividends	-	-	(6,689)	-	(6,689)
Balance at 31 December 2014	778	77,000	16,537	(66,527)	27,788

Total comprehensive income for the year			13,960		13,960

Transactions with owners recorded directly in equity:
Issue of shares	25	2,440	-	-	2,465
Equity settled share based payment transactions	-	-	443	-	443
Deferred tax asset taken to reserves	-	-	808	-	808
Dividends	-	-	(7,470)	-	(7,470)
Balance at 31 December 2015	803	79,440	24,278	(66,527)	37,994

Consolidated statement of cash flows for the year ended 31 December 2015

	2015	2014
	£000	£000
Cash flows from operating activities
Profit for the year	13,960	12,831
Adjustments for:
Depreciation of plant, property and equipment	957	907
Amortisation of intangible fixed assets	175	139
Finance income	(96)	(97)
Finance expense	18	44
Profit on sale of plant, property and equipment	-	(35)
Equity settled share based payments	443	363
Tax expense	3,603	3,572
	19,060	17,724
Increase in inventories	(36)	(114)
Increase in trade and other receivables	(544)	(921)
Decrease in trade and other payables	(160)	(1,035)
Decrease in provisions	(142)	(23)
	(882)	(2,093)
Hire purchase interest paid	(17)	(43)
Other interest paid	(1)	(1)
	(18)	(44)
Taxation paid	(3,540)	(3,900)
Net cash from operating activities	14,620	11,687

Cash flows from investing activities
Acquisition of property, plant and equipment	(1,343)	(1,573)
Interest received	96	97
Proceeds from sale of property, plant and equipment	-	159
Acquisition of intangible fixed assets	(243)	(182)
Net cash outflow from investing activities	(1,490)	(1,499)

Cash flows from financing activities
Proceeds from the sale of ordinary shares	2,465	-
Payment of hire purchase and finance leases	(97)	(279)
Dividends paid	(7,470)	(6,689)
Net cash outflow from financing activities	(5,102)	(6,968)

Net increase in cash and cash equivalents	8,028	3,220
Cash and cash equivalents at start of year	8,457	5,237

Cash and cash equivalents at end of year	16,485	8,457

Notes to the financial statements

1 Statement of compliance

Whilst the financial information included in this Preliminary Announcement has been prepared on the basis of the requirements of International Financial Reporting Standards (IFRSs) in issue, as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS.

The Group expects to publish full Consolidated Financial Statements in March 2016. The financial information set out in this Preliminary Announcement does not constitute the Group's Consolidated Financial Statements for the years ended 31 December 2015 or 2014, but is derived from those Financial Statements. Statutory Financial Statements for 2015 will be delivered to the registrar of companies with the Jersey Financial Services Commission (JFSC), following the Company's Annual General Meeting. The auditor, KPMG LLP, has reported on the 2015 Financial Statements. Their report was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under Section 113B (3) or (6) of the Companies (Jersey) Law 1991.

Safestyle UK plc is a public listed company incorporated in Jersey. The company's shares are traded on AIM. The company is required under AIM rule 19 to provide shareholders with audited consolidated financial statements. The registered office address of the Safestyle UK plc is 47 Esplanade, St Helier, Jersey JE1 0BD.

The company is not required to present parent company information.

Basis of preparation

The Group's financial statements for the year ended 31 December 2015 ("financial statements") have been prepared on a going concern basis under the historical cost convention and are in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the International Financial Reporting Standards Interpretations Committee interpretations issued by the International Accounting Standards Board ("IASB") that are effective or issued and early adopted as at the time of preparing these financial statements.

Safestyle UK plc was incorporated on 8 November 2013. On 3 December 2013 Safestyle UK plc acquired Style Group Holdings through a share for share exchange. This was accounted for as a common control transaction. The result of this is that the financial statements of Style Group Holdings have been included in the group consolidated financial statement of Safestyle UK plc at their book value at the IFRS transition date of 1 January 2010 with the assumption that the group was in existence for all the periods presented. The excess of the cost at the time of acquisition over its book value has been recorded as a common control transaction reserve.

The preparation of financial statements requires Management to exercise its judgement in the process of applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to these financial statements are disclosed in note 2.

(a) New and amended standards adopted by the Group

The Group has adopted the following new standards and amendments for the first time. Unless otherwise stated, they have not had a material impact on the financial statements.

· Defined Benefit Plans: Employee Contributions - Amendments to IAS 19

· Annual improvement cycles 2010 - 2012 and 2011 - 2013

(b) New standards, amendments and interpretations issued but not effective and not early adopted

At the date of approval of these financial statements, the following standards, amendments and interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases have not yet been adopted by the EU):

· Annual improvement cycles 2012 - 2014

· Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (mandatory for year ending 31 December 2016).

· Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

· Amendments to IAS 16 and IAS 41: Bearer plants (mandatory for year ending 31 December 2016)

· Amendments to IAS 27: Equity method in separate financial statements (mandatory for year ending 31 December 2016).

The Group is currently considering the implication of these standards, however it is anticipated the impact of these standards on the financial position and performance of the Group will be minimal and effects will principally relate to amendment and extension of current disclosures.

The Board is aware of the effective dates and will continue to review the potential impact on the financial statements.

Basis of consolidation

Subsidiaries are entities that the Company has power over, exposure or rights to variable returns and an ability to use its power to affect those returns. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases.

Intragroup transactions and balances are eliminated on consolidation.

Responsibility Statement

The Statement of Directors' Responsibilities is made in respect of the full Annual Report and Accounts not the extracts from the financial statements required to be set out in this Announcement.

The Directors confirm that to the best of our knowledge:

· The Group Consolidated Financial Statements, contained in the 2015 Annual Report and Financial Statements prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and

· The Strategic Report contained in the 2015 Annual Report and Financial Statements includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

Cautionary Statement

This Report contains certain forward looking statements with respect to the financial condition, results, operations and business of Safestyle UK plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this Report should be construed as a profit forecast.

2 Accounting estimates and judgements

Details of the Group's significant accounting judgements and critical accounting estimates are set out in these financial statements and include:

Recoverability of trade receivables

The assessment of whether trade receivables are recoverable requires judgement. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.

Warranty provisions

The Group gives guarantees against all its products, which in the majority of cases covers a period of 10 years. The level of provision required to cover the expected future costs of rectifying faults and the future rate of product failure arising within the guarantee period requires judgement.

3 Dividends

The aggregate amount of dividends paid comprises:	2015	2014
	£000	£000

Final dividend paid of £0.062 (2014: £0.055) per ordinary share	4,822	4,278
Interim dividend paid of £0.034 (2014: £0.031) per ordinary share	2,648	2,411
	7,470	6,689

4 Earnings per share

	2015	2014

Basic earnings per ordinary share (pence)	17.8	16.5
Diluted earnings per ordinary share (pence)	17.3	15.9


Note: Earnings per share

a) Basic earnings per share
The calculation of basic earnings per share has been based on the following profit attributable to ordinary shareholders and weighted-average number of shares outstanding.


i) Profit attributable to ordinary shareholders (basic)

	2015	2014
	£000	£000

Profit attributable to ordinary shareholders	13,960	12,831

ii) Weighted-average number of ordinary shares (basic)


	No of shares	No of shares
	'000	'000
In issue during the year	78,283	77,778




b) Diluted earnings per share
The calculation of diluted earnings per share has been based on the following profit attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.



i) Profit attributable to ordinary shareholders (diluted)

	2015	2014
	£000	£000

Profit attributable to ordinary shareholders	13,960	12,831

ii) Weighted-average number of ordinary shares (diluted)


	No of shares	No of shares
	'000	'000
Weighted-average number of ordinary shares (basic)	78,283	77,778
Effect of conversion of share options and warrants	2,435	2,843

	80,718	80,621

5 Taxation

	2015	2014
	£000	£000
Recognised in the statement of comprehensive income
Current tax
Current tax on income for the period	3,696	3,610
Adjustments in respect of prior periods	-	(56)
Total current tax	3,696	3,554

Deferred tax
Origination and reversal of timing differences	(87)	7
Effect of change in tax rate	1	(6)
Adjustments in respect of prior periods	(7)	17
Total deferred tax (see note 15)	(93)	18

Total tax expense	3,603	3,572

The current year tax charge is split into the following:
Underlying tax charge	3,603	3,572

Total tax expense	3,603	3,572

Reconciliation of effective tax rate
	2015	2014
Current tax reconciliation	£000	£000

Profit for the year	13,960	12,831
Total tax expense	3,603	3,572
Profit excluding tax	17,563	16,403

Expected tax charge based on the standard rate of corporation tax in the UK of 20.25% (2014: 21.50%)	3,557	3,527
Effects of:
Expenses not deductible for tax purposes	52	90
Adjustments to tax charge in respect of prior periods	(7)	(39)
Effect of change in tax rate	1	(6)
Total tax expense	3,603	3,572

Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015. This will reduce the company's future current tax charge accordingly. The deferred tax asset at 31 December 2015 has been calculated based on these rates.

6 Share capital

	2015	2014
	£000	£000
Authorised
77,777,777 Ordinary Shares @ 1p each	778	778
97,223 Ordinary Shares @ 1p each on 17 July 2015	1	-
2,367,143 Ordinary Shares @ 1p each on 22 October 2015	24	-

	803	778

Allotted, issued and fully paid
77,777,777 Ordinary Shares @ 1p each	778	778
97,223 Ordinary Shares @ 1p each on 17 July 2015	1	-
2,367,143 Ordinary Shares @ 1p each on 22 October 2015	24	-

	803	778

During the year 97,223 ordinary shares of £0.01 each were issued relating to the 2013 LTIP scheme at an exercise price of £1.00 per share, settled in cash. £972 was credited to share capital and £96,251 was credited to the share premium account.

During the year 2,367,143 ordinary shares of £0.01 each were issued on exercise of warrants granted to Zeus Capital in lieu of flotation fees, at an exercise price of £1.00 per share, settled in cash. £23,671 was credited to share capital and £2,343,472 was credited to the share premium account.

7 Share Based Payments

At 31 December 2015 the Group had the following share based payment arrangements:

LTIPS

The Group operates an equity-settled LTIP remuneration scheme for directors and certain management ("LTIP 2013"). The only vesting conditions attached to the LTIP 2013 scheme are that the individual must remain an employee of the Group for a minimum period. On 1 April 2015, a further 595,866 options were granted ("LTIP 2015"). The LTIP 2015 scheme requires a combination of specific performance based criteria and remaining an employee for a minimum period.

The number of share options in existence during the year were as follows:

	2015		2014
	Number of share options	Weighted average exercise price	Number of share options	Weighted average exercise price
Outstanding at start of period	4,083,333	£1.00	4,083,333	£1.00
Granted during the year	595,866	£1.79	-	-
Issued in the year	(97,223)	£1.00
Outstanding at end of period	4,581,976	£1.10	4,083,333	£1.00
Exercisable at end of period	3,986,110	£1.00	-	-

Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the fair value of the options granted during the period.

	LTIP 2015	LTIP 2013
Grant date	01/04/2015	05/12/2013
Vesting date	01/04/2018	05/12/2015
Lapsing date	01/04/2025	05/12/2018

Risk free interest rate	1.28%	1.19%
Expected volatility	43.13%	38.90%
Expected option life (in years)	6.50	3.50
Weighted average share price after adjusting for PV of dividends	£1.80	£0.77
Weighted average exercise price	£1.79	£1.00
Weighted average fair value of options granted	44.78p	15.93p
Dividend Yield	5.20%	8.00%
Remaining contractual life	9.76	3.44

At the grant date there was no share price history for the company on which to calculate volatility. Volatility was therefore estimated using companies classified in the 'Home Improvement Retailers' subsector on the London Stock Exchange.

7 Share Based Payments (continued)

SAYE

On 1 April 2015 the company launched a new share save (SAYE) scheme ("SAYE 2015") in addition to the existing scheme ("SAYE 2014") for employees. Both schemes allow employees to acquire a certain number of shares at a discount of 20% of the share price prior to the invitation to join the scheme, using amounts saved under a 'Save As You Earn' savings contract.

	2015		2014
	Number of share options	Weighted average exercise price	Number of share options	Weighted average exercise price
Outstanding at start of period	262,598	£1.31
Granted during the year	211,657	£1.43	262,598	£1.31
Lapsed during the period	(21,795)	£1.31	-	-
Outstanding at end of period	452,460	£1.37	262,598	£1.31
Exercisable at end of period	-	-	-	-

Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the fair value of the options granted during the year.

	SAYE 2015	SAYE 2014
Grant date	01/04/2015	27/03/2014
Vesting date	01/05/2018	01/05/2017
Lapsing date	01/11/2018	01/11/2017

Risk free interest rate	0.76%	1.31%
Expected volatility	33.54%	40.04%
Expected option life (in years)	3.35	3.35
Weighted average share price after adjusting for PV of dividends	£1.80	£1.57
Weighted average exercise price	£1.43	£1.31
Weighted average fair value of options granted	41.52p	58.40p
Dividend Yield	5.20%	8.00%
Remaining contractual life	3.34	2.34

At the grant date there was little share price history for the company on which to calculate volatility. Volatility was therefore estimated using companies classified in the 'Home Improvement Retailers' subsector on the London Stock Exchange.

7 Share Based Payments (continued)

Warrants

In December 2013 the Group also issued warrants to Zeus Capital in lieu of payment for services related to the IPO. The warrant is for 3% of the fully diluted share capital of the company following the exercise of the subscription rights. The warrant was exercised on 22 October 2015 with the issue of 2,367,143 ordinary shares.

Expense recognised in consolidated statement of comprehensive income

The total share-based expense comprises: