Alumasc : 2020 Annual Report

Our purpose is to provide high quality products, systems and solutions, the majority of which manage the scarce resources of water and energy in the built environment.

Behave with integrity, building strong relationships and trust with our customers.

Be entrepreneurial and deliver on our promises.

Water

Management

(page 06)

Building

Envelope

(page 08)

Housebuilding

Products

(page 10)

02

Strategic Report

30

Governance

63

Financial Statements

& Company Information

The latest online...

More details on Alumasc's products and services can be found on our website at

www.alumasc.co.uk

Managing COVID-19

Having swiftly responded to the threat from the pandemic, the Group has been concentrating on the retention of its key people to drive recovery and future growth, meeting customer needs within the bounds of rigorous COVID-19 proofing of facilities and the furtherance of our goal to be a leading supplier to the call for low carbon buildings

• Trading profit is defined in note 4 to the Group financial statements. A summary of non-underlying items and a reconciliation to underlying profit before tax and underlying earnings per share is provided in note 5 and note 12 to the Group financial statements respectively.

SUSTAINABLE BUILDING PRODUCTS

Conwy Culture Centre

BREEAM Excellent certified Conwy Culture Centre contributes to a green future with a new Alumasc roof.

Sensitively designed to keep a low profile in its exceptional surroundings, the new Conwy Culture Centre has recently opened its doors to the public.

A Blackdown extensive sedum green roof completes the low-lying, single storey centre, helping it to become part of, and give back to, the natural environment.

Completed in 2019 on the site of an ex-primary school building, it is now a modern masterpiece designed to inform and entertain visitors in a beautiful, relaxing setting.

Alumasc provided a complete roofing solution which included the waterproofing and green roof system. Blackdown's extensive sedum green roof provides a variety of planting, generally comprising drought tolerant succulents such as sedum, rockery and alpine plants. An example of an extensive green roof, it was an ideal choice for

the project as it enabled its roofing element to both blend in with surroundings and positively contribute to the natural environment.

Report Strategic

Governance

Statements Financial

Investment case

Our profits will grow

from supplying a

growing market

fuelled by

low carbon specifications

and regulation

with premium products,

systems and solutions

backed by

market leading brands, technical sales and service

a strong balance sheet

and well invested freehold properties and manufacturing

Strategic objectives

Revenue Growth

Financial Returns

• Growing Operating Margins

Read about our engagement with stakeholders on pages 28 to 29

OUR BUSINESS MODEL

Our business segments

Sustainable building products backed by strong brands

Report Strategic

Structural Growth

Governance

Over 80% of Group revenues relate to the growth sectors of our long-term structural growth drivers

80% of Group revenues are linked to specification and regulation

Export revenues, currently 15% of Group sales, are being

targeted in selective external markets

Statements Financial

The wide range of actions taken in recent years to reposition Alumasc as a supplier of sustainable building products from a tighter, service oriented operating base, was proceeding well in the first

8 months of the past financial year: the assimilation of Wade, the restructuring of operations, the cost reduction programme, product innovation, corporate simplification, relisting on AIM, were all making good progress when the unforeseen asteroid of COVID-19 struck us all in the Spring of this year.

Summary

The Construction Industry was affected as severely as most, with widespread closures in response to the Government's lockdown request in March and minimal activity on sites that were able to remain open despite the blanket call.

Fortunately, Alumasc was already well advanced in a well-publicised programme to reduce its cost base by £2 million per annum but responded swiftly to combat this unprecedented threat, temporarily closing several of its businesses and requiring the large majority of employees either to work from home or to furlough pending developments. Action to conserve cash included an intense focus on debt collection and working capital controls more generally, the deferral of VAT payments and the cancellation of the interim dividend that would otherwise have been paid in April 2020.

• The long term redirecting of Alumasc towards the supply of premium, sustainable building products proceeds methodically and with considerable effect."

John McCall

Chairman

The result of this broad range of policy and mitigation actions has been outstanding: The loss of £14 million of revenues, mainly as a direct result of retrenchment by the industry in the face of COVID-19, resulted in a year on year fall of £1.4 million in trading profit, confirming the effectiveness of the reduction in the cost base and the squeeze on discretionary expenditure that followed; and the Group's net bank borrowings of £4.3 million at 30 June 2020, against total facilities of £24 million, were £0.8 million lower than at the previous year end.

While disappointing given our expectations after the first 8 months of the year, this is a highly creditable and reassuring outcome in the circumstances.

The encouraging news is that by May, there were signs that the industry was keen to resume activity within the health guidelines being applied and, by the end of June, all construction sites were again active and Alumasc operations fully operational.

While it is impossible for COVID-19 not to take centre stage in any report on the past 12 months, the long term redirecting of Alumasc towards the supply of premium, sustainable building products proceeds methodically and with considerable effect. We remain genuinely excited at the prospects for our Group and its positioning in the sustainable environment that continues to evolve. Further detail can be found in the Chief Executive's review and the Sustainability Report that follows.

The year under review

This year more than most, I refer you to the Chief Executive's report that follows for a detailed review of our activities.

I would like to highlight just three achievements which have relevance for the future: firstly, the significant reduction in our cost base which underpins future performance without diminishing opportunity. Secondly, the continuing drive towards sustainable operations and a sustainable, or "green", product range. Thirdly, the immediate and determined response by all our employees, for which I unhesitatingly offer the gratitude of all stakeholders, in the face of an existential threat.

Not only have we come through that test but we have done so in a manner that demonstrates our resilience and our strengths and enables the Board to recommend a return to dividend payments in respect of the full year. The Board is recommending a final dividend payment in respect of the Financial Year ending on 30 June 2020 of 2p per share (2019: 4.4p), making a total for the year of 2p per share (2019: 7.35p), payable to shareholders on the Register on

25 September 2020.

Strategic developments

Fortunately as it turned out, the focus of the past year was always to be on the delivery of results from previous policy and actions. Hence, there were no major projects that might have diverted from the total commitment required to counter COVID-19.

It would be wrong, however, to downplay the progress towards outperformance and sustainability, our twin strategic goals, now solidly embedded in our strategy, business model and year on year targets.

Build Back Better.

Build Back Greener.

Build Back Faster.

These words, deployed by the Prime Minister on 30 June 2020 as a central theme to his New Deal for the Nation, might have been devised as a strapline for Alumasc.

The summary of our strategy at the front of this Report highlights quality, sustainability and ease of construction, each as critical to our (future) success as to the Government's road map for recovery and levelling up.

Read about our Operating Segments on pages 06 to 11

Report Strategic

Governance

Statements Financial

Corporate actions

Following the high activity level of recent years, the only Corporate Action of significance in the year took place in April with the reset of the Group's capital base for the purpose of greater flexibility. Shareholders voted overwhelmingly in favour of this action, with 99.9% of votes cast in favour.

The Boardroom

The appointment of two Non-executive Directors earlier in 2019 was followed by the appointment of two Executives as Directors in September 2019 and we thank Gilbert Jackson

next stage of his career outside the Group and the exercise to fill this vacancy is well advanced, with a shortlist established. When the imposition of COVID-19 controls inevitably interrupted this process, we swiftly moved

to provide full and effective cover and support to the Finance team, in particular through the input of Vijay Thakrar, our Non-executive Director with 33 years' experience in major accounting firms, 22 years as a partner. While this is no long-term solution, we are fortunate to have been able to draw on Vijay's ideal experience and background to assist in these unusual circumstances.

and, hopefully, more permanent goals. While some things will undoubtedly change for ever, greater investment in many of the projects targeted by Alumasc - schools, hospitals, prisons, infrastructure - is seen both as part of the solution to the "problem" and as meriting much greater emphasis in their own right. This can only encourage the Board to believe that the changes of recent years have been right for Alumasc and will position it well in coming years.

John McCall

Chairman

and Michael Leaf for their contribution and support in a turbulent first year.

In February this year, Andrew Magson, our long-serving Finance Director, notified his intention to leave Alumasc to develop the

Prospects

Managing the unpredicted and unpredictable effects of the COVID-19 pandemic has required a combination of very short term - daily almost - assessment of market conditions,

up and down, with a firm eye on longer-term

ROYAL ALBERT HALL

Our brands

Report Strategic

Royal Albert Hall's refurbishment with Alumasc Apex Heritage Cast Iron gutters and downpipes.

AWMS played an integral part in the Grade One Listed Royal Albert Hall renovation project. AWMS was chosen for its ability to analyse and precisely recreate the original gutter and pipe mouldings that were used in the originally installed systems, therefore contributing to the preservation of the historic building. Over ten years ago, Alumasc Rainwater management systems were installed in a similar project at King's Cross St. Pancras Station.

With the need to retain as much of the Royal Albert Hall's original character and features as possible, Apex Heritage Cast Iron gutters and downpipes were moulded to exactly replicate the originals. They were successfully installed, promising another 100 years or more of smooth-running water management and maintaining the period look of the building.

Growth drivers

• Legislation aimed at conservation, attenuation and control of water
• Structural engineering specifications
• Building regulations

Operations and supply chain

• Partial UK in-house manufacture
• External supply chain including suppliers in Europe and North America

Routes to market

• Merchants and distributors; some via preferred installers

Opportunities and potential

• Outperformance of the UK construction market through continued market share gain and introduction of new products and systems
• Development of further synergies in our "Rain to Drain" strategy following the acquisition of Wade
• Increase divisional export sales with focus on systems using Gatic and Wade products
• Grow operating margins through new product introductions, improving customer service and operational efficiency

Governance

Statements Financial

Using the traditional skills of expert craftspeople, coupled with modern manufacturing technology, AWMS can copy and create bespoke designs for projects which require the utmost attention and sensitivity.

AWMS is the UK leader in metal rainwater systems with an unrivalled range of aluminium, cast iron & steel and now the new copper and quartz zinc systems.

Our products in action

Read more on our sustainable products on pages 26 to 27

DEPARTMENT OF WORK AND PENSIONS

Our brands

Report Strategic

Building Envelope solution provided to one of the largest new office developments in Wales.

Growth drivers

• Architectural specification
• Building regulations relating to energy management
• Demand for sustainable solutions

Operations and supply chain

• Partial UK manufacture providing fabrication, assembly and finishing operations
• Diversified specialist supply chain of mainly UK and European based suppliers
• Levolux: Installation of certain systems in the UK

Opportunities and potential

• Business development opportunities arising from the new Alumasc Building Envelope specification sales approach together with Alumasc Roofing
• Development of the UK balconies & balustrading business
• Development of North American export business
• Growth in operating margins through operational efficiencies and increasing the proportion of design and supply only

Governance

Statements Financial

Alumasc were chosen by the designers and contractors BECT to provide a building envelope solution for what would be the largest new office development to be built in the Welsh valleys. The client for this building was Rightacres of Cardiff to construct premises for the Department of Work and Pensions.

Starting on site in December 2018 the building is now nearing completion and has a final construction cost of circa £27 million to provide 133,000 square feet of office space housing some 1,700 staff.

An Alumasc roofing system comprising a Derbigum warm roof build up was designed to provide longevity and assurance with a proven life cycle benefit of over 60 years. It was a full, tapered insulation scheme to allow designated drainage to Alumasc Harmer outlet systems.

Through careful consideration by the design team this proposal was selected due to the outstanding system fire rating and the warranty. The building insurers were involved in the selection process in order to meet and exceed their own strict requirements.

Levolux designed and installed the 300mm aerofoil fins in standard PPC fitted back to a steel frame with a 200 x 50mm box section Infiniti system. This provides timber effect curtain wall areas with thermally broken brackets as an aesthetic design to the front elevation of the building, thereby breaking up the overall design with a highly visually pleasing façade.

Right from the very early design stage and throughout construction Alumasc was available to provide assistance and technical advice for modifications to ensure that a long-term working relationship was built upon trust and integrity, ensuring that the project requirements were delivered within budget.

Routes to market

• Direct to main building contractors in the UK
• Through general contractors and installing sub-contractors in North America

Our products in action

Read more on our sustainable products on pages 26 to 27

LIFETIME,

NOT SINGLE-USE

Multiple-use product designed for the lifespan of the building.

Timloc's ability to deliver products next day with low carriage paid order values is what sets it apart from competitors and has enabled it to become market leader within its sector.

Timloc Building Products are also at the forefront of sustainability within their industry. Manufacturing multiple-use products that are designed for the lifespan of a building and are recyclable at the end of the building life.

Timloc has implemented a circular economy for the production and consumption of many products. This regenerative system means recycled materials are being used to make recyclable products. Currently over 75% of Timloc products are manufactured from recycled materials.

Growth drivers

• Growth in UK house building demand and current under supply of houses
• Legislation and building regulations
• Ease of construction

Operations and supply chain

• Nearly all in-house manufacture

Routes to market

• Merchants and distributors
• House builder specification

Opportunities and potential

• Outperformance relative to the UK construction market with continued market share growth through product range development and best in class customer service
• Leveraging strong sales channels through product portfolio development and excellent customer service
• Margin improvement through operational efficiency and additional operational flexibility, utilising the new factory commissioned in early 2018 and significant investment in new machines and automation in 2019

Governance

Statements Financial

Timloc's continued innovation and development have seen the introduction of several new products and ranges over the last 12 months. Recent launches include Invisiweep, the almost invisible wall weep, and Adapt-Air, the one-piece ducting to airbrick adapter kit.

Timloc has established a reputation for consistently delivering exceptional levels of customer service and has been tried, tested and trusted by its customers for over 50 years. Trust Timloc to Deliver.

Our products in action

Read more on our sustainable products on pages 26 to 27

Financial highlights and Overview

• Revenue and profit from continuing operations excludes the revenues and profits of Alumasc Facades prior to its disposal on 31 October 2018 and its classification as a discontinued operation and non-underlying item. A reconciliation of underlying to statutory profit before tax is provided in note 5 to the Group financial statements.

"The Group has built on its strengths as a supplier of sustainable systems and products and has delivered substantial operational efficiencies."

Paul Hooper

Chief Executive

In recent years, Alumasc's strategy has been to re-position the Group to become a dedicated supplier of premium building products to the UK construction industry, while actively seeking opportunities to grow internationally. Simultaneously, the Group has built on its strengths as a supplier of sustainable systems and products and has delivered substantial operational efficiencies. For instance, it achieved its stated objectives during the year to move from ten operating sites to six. Total annualised cost savings of £2.4 million were achieved in the year versus an original target of £2.0 million.

In line with other businesses Alumasc was affected by COVID-19, particularly in April and May during lockdown. Nevertheless, the Group is pleased

to report a strong recovery from June onwards so far, with July 2020 being a record for the month and August 2020 trading also very strong. However, management remains appropriately cautious given the limited visibility as to how the wider economic situation will evolve and with the potential for a second wave of COVID-19.

Overview of performance

Alumasc's performance for the year was resilient against the difficult backdrop that included the run up to the December general election. Our second half year was severely impacted by the COVID-19 pandemic and subsequent lockdown from 23 March 2020, with immediate impact on all of our operations in some form. Further detail is provided in the separate COVID-19 section.

While our newly formed Building Envelope division suffered a loss in the year when Levolux was significantly restructured, it is encouraging to report that, despite the impact of COVID-19, it returned to profit in the final two months.

The star performer in the year was the Water Management Division (AWMS), delivering a higher profit than the prior year even despite the lockdown. This is testament to several factors, including the strength of its brand and quality of its sustainable systems in the market place, and the excellent technical support given to customers. The business also took swift action to ensure that adequate pricing was achieved commensurate with the trading environment. Simultaneously, unprofitable products were withdrawn and significant cost savings were made which were further enhanced by ongoing synergies achieved from the integration of Wade, acquired in January 2018. Not only has the product range been enhanced but the spare capacity in AWMS Wade (Halstead) allowed for Slotdrain manufacturing to be moved from rented facilities in Dover to the Alumasc owned Halstead facility. The overall cost savings are estimated to be circa £0.9 million. In addition, other savings were made across the division. Throughout the lockdown, our specialist drainage and rainwater distributor, Rainclear, stayed operational, taking significant market share. Pleasingly, its online business grew by 64%.

Our Housebuilding Products division also performed at record levels up until the lockdown and succeeded in launching several new products into its industry leading service model.

Strategy and performance against strategic objectives

Alumasc's strategy is to:

1. Build leading positions in specialist markets to grow revenues faster than the UK construction market
   The impact of COVID-19 makes any analysis of the most recent year unreliable when compared with the consistent outperformance of previous years.
2. Augment UK revenue growth through the development of selected export markets
   Compared to the prior year in which export revenues were 10% of Group revenues, during the year under review, export revenue accelerated to become 15% of Group revenue. Increased export investment in both Sales and Marketing for AWMS (Gatic and Wade) grew export sales for this business and the year-end export order book for AWMS stood at £4.8 million (versus £1.0 million in the prior year). Included in this was the win of this division's largest ever export order for Gatic at Hong Kong Chek Lap Kok's third runway.

Meanwhile, Levolux accelerated its export revenue by 14% and grew its year end export order book by 7% to £3.5 million. At the end of the final quarter, an experienced US Senior VP of Sales has been appointed in the USA. We anticipate good further growth in the USA from this development.

3. Grow profit at a faster rate than revenue by improving operating margins

The Group's underlying operating margins reduced from 6.5% to 5.5%, representing a creditable result against such a sharp decline in revenue. Prior to the lockdown on 23 March, the Group was close to achieving its stated objective to improve its operating margin by around 2 percentage points, having at that stage improved by 1.8 percentage points year to date at the end of February 2020. The targeted cost savings plans of £2.0 million announced a year ago were exceeded with circa £2.4 million cost savings actually delivered, underpinning the Group's performance prior and subsequent to lockdown.

Executing our priorities in FY2020

Management accelerated the pace of strategic development during its 2020 financial year:

1. Levolux business improvement plan

The objective of this plan was to return Levolux to sustainable profit. At the end of the prior year the Board announced a refocus of the business to those areas where it could clearly differentiate and add most value

to customers and therefore shareholders. This included concentration on developing the more profitable areas of the business, simplifying operational delivery and reducing risk. The key elements have been:

• Integrated sales approach. Incorporate Levolux solar shading, screening and balconies as major constituents in a new "Alumasc Building Envelope" division, providing integrated solutions for developers and specifiers seeking high quality roofing and walling systems. A new, collaborative divisional sales approach increases Levolux's existing market reach and leverages existing strong customer relationships.
  This objective is being achieved and examples where the 'cross-sell' and single expert service has been welcomed by specifiers and clients are growing. This has been particularly apparent in the second half year as the new concept developed;

• Leverage core strengths. Focus on design and supply activities, as is the case in the rest of the Alumasc Group. In-houseinstallation will only be offered where this service is particularly valuable to customers and Levolux. The expectation over time
  is that this will improve margin mix and enhance profit margins.
  This objective is being achieved, particularly in the second half of the year with the order book strengthening for supply only projects;
• Export opportunities. Invest in local technical sales resources to accelerate growth in the profitable Levolux business in North America. Current revenues in this market are circa £3.0 million per annum.
  This objective was achieved with a US- based Senior VP appointed in the final quarter of the year;
• Reduce overhead. We announced a significant restructuring of the existing Levolux operational and overhead cost base, with fixed cost savings of £1.0 million targeted in the Group's 2019/20 financial year, and further significant annualised savings expected in 2020/21. This includes the relocation of sites.
  The above was achieved with year on year savings of £1.8 million being achieved, significantly ahead of the target. In addition, Levolux moved out of its two leasehold facilities into the Alumasc freehold facility in St Helens. Alumasc continues to believe that Levolux, as part of the Building Envelope division, has a great future potential
  and continues to be one of the Group's strongest brands.

2. Develop further opportunities for specification cross-selling

There remains a significant future opportunity for the Group from offering an integrated "Building Envelope" of exterior building products facilitating the integration of walling, roofing, balconies, solar shading and integrated aluminium detailing. This not only provides a full external envelope solution but also mitigates both the client's and contractor's risks by ensuring that the horizontal and vertical planes are detailed

to remove tolerance and interfacing detail issues. Closer working between divisions has led to cross-selling opportunities, for example on page 27 of this report is shown a Water Management division sale of three systems with the Building Envelope's Roofing refurbishment system at Nottingham Trent University. This will continue to be a focus going forward.

Report Strategic

Governance

Statements Financial

1. Implementation of a more cost-efficient operating structure
   Following the move of the AWMS Gatic Slotdrain manufacturing from a leased facility in Dover to the freehold AWMS's Wade facility and the restructuring of Levolux described above, some c.£0.6 million per annum has been saved in leased property costs. The objective to move to six facilities from ten has also been achieved.
   Following the prior year simplification of the pensions structure we will have saved around £100k per annum in pension scheme running costs.
   Total annualised cost savings of £2.4 million were achieved in the year versus a target of £2.0 million.
2. Prioritising and focusing investment to drive profitable growth
   Following two years in which combined capital expenditure exceeded depreciation by £2.7 million, an investment of £1.7 million in the year under review was around £0.3 million below depreciation following a deliberate moderation of spending when the impact
   of the COVID-19 pandemic became apparent.
   Once again investment was focused on our businesses with the greatest manufacturing activity: our Water Management business and Timloc. Within this was an investment in tooling at strategic suppliers for the Water Management business which has improved manufacturing efficiencies and significantly lowered the carbon footprint of our suppliers along with ensuring continuity of supply. Investment continued at Timloc, to support new product launches. The benefit of the investments is evident in the relatively strong performances of these businesses. Investment in new people was directed into expanding the sales reach, notably in the Building Envelope division where previously weaker areas of the UK now have a stronger senior sales representation. Growing Levolux and Water Management divisional export sales have also been a focus.

1. Proactive management of our portfolio of businesses
   The Group continues to seek to grow through bolt-on acquisitions and there are no plans to make divestments. Whilst recent focus has been on navigating the challenges associated with COVID-19, the acquisition strategy remains relevant.
2. Remaining closely aligned with the sustainability agenda
   With the ever increasing low carbon and sustainable agenda Alumasc is in a perfect position to increase supply solutions to its customers that meet these criteria. Not only does it have strong positions in energy management through its presence in solar shading, which can reduce the energy consumption required to cool a building, but it also has innovative Roofing solutions, such as Olivine, which can actively reduce CO² in the environment. Within the Water Management division, the increasing scarcity of water can be managed very successfully. There are examples where both divisions combine to provide a 'Blue Roof'. This, in effect, produces an equivalent to an attenuation tank on a flat roof allowing the controlled egress into the water effluent systems while saving clients the significant alternative cost of an attenuation tank installation. Our Housebuilding Products division has also significantly contributed to the energy management within housing with its sealed ventilation systems, cavity closer and radiator seals. It is constantly innovating and launching new products that deliver sustainable solutions for our clients.
   All divisions are totally committed to, and insist on, the use of recycled material where appropriate. Alumasc is very proud to be able to state that 75% of the Group's products are sourced from recycled material.
   The relentless pursuit of both innovative energy and water management solutions combined with the increasing use of recycled material will continue. Alumasc is already very well placed in this regard. Our bespoke approach to product and specification means customers will be able to meet more stringent environmental criteria in the years ahead.

Overview of performance

1. Continuing operations Revenue analysis

With so many variables created by the COVID-19 impact we have decided to suspend our comparator to the UK construction market.

In the year some revenue reduction took place from the review of profitability by product and the subsequent targeted product deletion and price adjustment actions particularly in the Water Management division. During this time it is believed that market shares have been held and, in some cases, they have grown partly due to the availability of high quality products with professional service at a time when competitors were closed.

Gross margins

Until the lockdown in March (i.e. to

February 2020) the Group's Gross Margin was running at 30.3%, 1.2% ahead of the prior year. Remarkably, despite the significant disruption of the lockdown, by the end of June the full year Gross Margin was 29.7%, just 0.1% behind the prior year, a great testament to the management action taken and to the strength of Alumasc's brands. This overall performance was assisted by price increases to recover rising costs and the action taken on cost reductions.

Net fixed and operating expenses

Net fixed and operating expenses reduced by £2.4 million (excluding any furlough benefit) during the year. However, there was a small percentage of sales increase in the cost areas despite the impact of lockdown on sales. This would have been much higher were it not for the swift action taken in March 2020.

Underlying operating profit

Underlying operating profit was £4.2 million compared with £5.9 million in the prior year. The reduction was brought about by the impact of COVID-19 and the resultant temporary shutdown of our Housebuilding division and two thirds of the Water Management division. Around five weeks of trading were lost following the shutdown by many builders merchants and the cessation of some site activity. Alumasc took swift action and initially had to furlough

293 (68%) employees while a further 83 (19%) moved to work from home. Site activity did not return in any meaningful way until June when the effect was still a slowdown in activity with contractors having to abide by COVID-19 safety requirements. June was a strong month for the Group and by the end of June only 38 staff (9%) remained furloughed.

The Alumasc Group plc Report and Accounts 2020

15

Bank interest

Bank interest of £0.3 million was similar to the prior year. This was assisted by swift actions to conserve cash during and beyond the lockdown period and is despite the decision taken by the Board in May to fully draw down the £20.0 million committed Revolving Credit Facility.

Underlying profit before tax

Underlying profit before tax was £3.7 million (2018/19: £5.6 million) reflecting the impact of COVID-19 and the subsequent lockdown on reduced revenue.

Non-underlying,non-recurring items

Non-underlying and non-recurring items (relating to continuing operations) amounted to a £1.3 million net cost in the period compared with a £4.6 million net cost in the prior year. In 2019/20, the larger items in this category were restructuring and relocation costs of £0.8 million, mainly associated with the continued cost reduction programme

at Levolux. Further details are given in the Financial Review.

1. Discontinued operations and profit (after tax) for the year

The net gain from discontinued operations was £0.3 million, reflecting the deferred consideration sales proceeds received in the current financial year in accordance with the Alumasc Facades business sale agreement. The Group's resulting overall statutory profit (after tax) for the year was £2.3 million (2018/19: £3.6 million).

Sustainability in action

Percentage of Product Range manufactured from Recycled Materials

Timloc takes its responsibility to protect the environment very seriously and aims to help reduce plastic waste in the building industry. Timloc's products are designed for long-life use, it builds sustainable, durable products which are recyclable at the end of their useful life.

In recent years Timloc has committed to reducing its environmental impact through investment in recycled materials and the majority of its products are manufactured using recycled materials. The plastics recycled originate from a range of sources such as plastic bottles, trays and car parts, e.g. bumpers and dashboards.

Goal

2020

Any waste material generated as a by-product of the manufacturing process is collected and granulated onsite and returned to the material store in the factory to ensure no material is wasted. In addition, 100% of Timloc's packaging is recyclable.

This year Timloc achieved its objective to manufacture 75% of its products from recycled polymers further reducing its requirement for virgin polymers and consequently protecting the environment. The product 1201, a telescopic underfloor ventilator (also referenced on page 26) is produced from 100% recycled material.

Report Strategic

Governance

Statements Financial

Water Management

2019/20 performance highlights

• Revenue: £33.7 million
  (2018/19: £38.9 million)
• Underlying operating profit*:
  £4.8 million (2018/19: £4.3 million)
• Underlying operating margin*: 14.3%
  (2018/19: 10.9%)
• Operating profit: £4.6 million
  (2018/19: £3.6 million)

• Prior to restructuring costs of £0.1 million in 2019/20 (£0.6 million in 2018/19) and brand amortisation charges of £0.1 million in both years.

Building Envelope

2019/20 performance highlights

• Revenue: £33.2 million
  (2018/19: £39.8 million)
• Underlying operating (loss) / profit*: £(0.9) million (2018/19: £0.6 million)
• Underlying operating margin*:(2.8)% (2018/19: 1.4%)
• Operating loss*:£(1.4) million
  (2018/19: £(2.1) million)

• Prior to restructuring costs of £0.3 million in 2019/20 (£2.5 million in 2018/19) and brand amortisation charges of £0.2 million in both years.

Housebuilding Products

2019/20 performance highlights

• Revenue: £9.1 million
  (2018/19: £11.4 million)
• Operating profit: £1.2 million
  (2018/19: £1.7 million)
• Operating margin:13.7% (2018/19: 15.2%)

Divisional review

(a) Water Management

Despite the COVID-19/lockdown challenges in the final quarter this division produced a higher profit (£567k (13%)) than the year before.

The drivers of the improvement were not revenue related (which reduced by £5.2 million (13%)) but by selective price increases, product portfolio management, cost reductions (partly brought about by the move of Gatic Slotdrain manufacturing from Dover to Wade's freehold facility), and general efficiency improvement and tight cost control.

Water Management's operating profit return on sales increased to 14.3% from a prior year

of 10.9%. This was a very encouraging performance and is indicative of improved margins.

(b) Building Envelope

The division sells principally into the UK commercial new build construction market which, following the previous year, continued to experience falling demand through the year, accelerated inevitably in the final quarter.

As described above Levolux's turnaround was generally on track though affected in the first half year by below expected performance in a handful of construction contracts entered into prior to the restructuring of the business and relating mainly to balcony work. Levolux's restructuring has taken significant cost out of the business and when combined with a more selective strategy for work that it will target with a focus on supply only, along with a stronger push into export markets, the benefits began to show through in the final quarter.

Alumasc Roofing's performance was resilient in the refurbishment sector. This was the most successful element of the division's performance and, while Roofing did not manage to match its prior year performance, it enters the new financial year with a significant order book and with its strongest sales team ever. This bodes well for the new financial year.

(c) Housebuilding Products

Timloc, our Housebuilding products business, continued to perform well up until the lockdown, with further operational improvements in turn benefitting margins. However, the impact of lockdown on this particular sector has been well documented.

New product development continues to be an important factor in Timloc's success and it launched a new product virtually in every month of the first half year including AdaptAir, the Ducting to Airbrick Adaptor, which not only has a cost saving benefit for housebuilders but also improves Health & Safety on site by taking out the requirement for core drilling.

Timloc receives very positive feedback from its customers on its excellent service and promotes this through its #Trust Timloc to deliver strapline.

With its constant focus on improving efficiencies, new product development and customer service Timloc is well positioned as housebuilders recommence work on site post lockdown and the housebuilding sector catches up with significant latent demand.

Outlook

In light of the COVID-19 impact on construction activity, the Board is taking a cautious view on 2020/21. However, the significant £2.4 million of cost savings taken in the last financial year should stand the Group in good stead for what could be uncertain times. Notwithstanding this the Group has had a strong start to the new financial year.

The Board believes that Alumasc's strong strategic and market opportunities, which underpin its established track record over many years of outperforming the UK construction market, together with:

• the excellent Water Management division's performance which is benefitting from both its UK and export re-focused strategy, as well as its extensive online offering;
• the formation of the Building Envelope division to drive specification cross-selling;
• the major restructuring of the Levolux business within the Building Envelope division;
• focused investments in new products, manufacturing capability and automation;
• investments in sales resources to grow the business both in the UK and internationally;
• lower fixed costs and actions taken to deliver operational efficiencies across the Group; and
• close alignment to the sustainability agenda,

position Alumasc to grow organically in the current financial year and beyond.

As ever, the Board is confident in its ability to deliver operationally but cannot ignore the unknowns ahead with regards to the macroeconomic climate.

Financial Review

Reconciliation of underlying to statutory profit before tax

Underlying profit before tax for the 2019/20 financial year of £3.7 million exceeded statutory profit before tax of £2.7 million for the reasons shown in the table below:

Taxation

The Group's underlying effective tax rate was 20.3% (2018/19: 20.4%), slightly above the UK statutory rate of tax of 19% applicable to the Group's financial year due to certain costs that are disallowable for tax purposes. We expect the Group's underlying tax rate to be circa 20% in the 2020/21 financial year.

The Group's effective tax rate on statutory profit before tax was 16.4% (2018/19: 7.4%). Reconciliations from the actual to statutory rates of tax are provided in note 10 to the financial statements. The reconciling items chiefly relate to the tax treatment of the one- off items in the Group's income statement described above.

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The reconciling items were:

• Amortisation of acquired brands of £0.2 million (2018/19: £0.2 million). This is a non-cash charge determined by management judgment in applying accounting standards. It does not affect the economic value of the Group.
• Net IAS 19 defined benefit pension scheme costs of £0.3 million (2018/19: £1.2 million) are also non-cash charges. These relate to the Group's legacy defined benefit pension scheme, which has been closed to future accrual for over ten years. The value of the charge is determined by actuarial assessment and the 2019/20 charge represents the non- cash notional financing cost of the Group's pension deficit due to the time value of money. In the 2018/19 financial year, the charge to the income statement was higher than usual, due to a one-off £1.1 million increase in liabilities relating to guaranteed minimum pension equalisation between men and women. This was partly offset by a one- off actuarial gain of £0.3 million arising from the merger of the Group's pension schemes during the prior year.

• One-offrestructuring and relocation costs of £0.8 million (2018/19: £3.0 million) mainly associated with the continued cost reduction programme at Levolux, with costs incurred due to relocating certain functions and operations from two leased sites to our freehold property at St Helens, and staff changes, see note 5 to the financial statements. The cost in the prior year related to the redundancy and operational costs of relocating Gatic Slotdrain production from Dover to Wade's freehold factory in Essex and the aforementioned Levolux relocation. All of these actions helped to enable Alumasc to reduce fixed costs by circa £2.4 million in the 2019/20 financial year.
• The net gain from business disposals reflects the deferred consideration sales proceeds of £0.3 million received in the 2019/20 financial year in accordance with the Alumasc Facades business sale agreement. The prior year comparator represents the gain on sale of the Alumasc Facades business on 31 October 2018, together with its operating profit from the beginning of the 2018/19 financial year to the date of disposal.

Earnings per share

Underlying earnings per share for the year was 8.2 pence (2018/19: 12.4 pence). This reduction is consistent with the lower underlying profit before tax for the year for the reasons described in the operational review.

Basic earnings per share of 6.3 pence (2018/19:

10.1 pence) reflected the reduction in underlying profit before tax for the year, partially offset by the lower level of net one-off costs in 2019/20 relative to 2018/19 described above.

Dividends

The Board is recommending to shareholders a final dividend of 2 pence per share (2018/19:

1. pence), applicable to members on the share register on 25 September and to be paid on
   30 October. The interim dividend for 2019/20, that was due to be paid on 7 April 2020 at a cash cost of £1.1 million, was cancelled as part of the Group's COVID-19 cash conservation programme, making a total dividend for
   the year of 2 pence per share (2018/19:

1. pence).

Statements Financial

Investment in growth, cashflow and net debt

Summarised Cashflow Statement

* EBITDA: Underlying operating profit from continuing operations before interest, tax, depreciation and amortisation.

Pensions

The Group's IAS 19 defined benefit pension scheme deficit for accounting purposes at

30 June 2020 was £19.3 million (30 June 2019: £13.0 million), with an increase in the valuation of gross pension liabilities due to reduced gilt yields partially offset by a good investment performance, including the benefit of interest rate hedging within the investment portfolio.

The formal triennial valuation of the merged Alumasc Group Pension Scheme at 31 March 2019 was finalised during the financial year.

This showed a significantly improved deficit of £22.4 million compared with £33.0 million in 2016, reflecting cash contributions from Alumasc, above target investments returns, mortality experience and changes to future mortality expectations in the intervening period.

Banking facilities

Alumasc's banking facilities were renewed as a matter of routine during the year and comprise:

As per the Group's announcements on 27 March and 1 April 2020, the Group responded quickly to the COVID-19 outbreak to protect the business, its employees and all our stakeholders. At this time, the Group also acted promptly and decisively to conserve cash in light of uncertainties caused by the pandemic, including suspending dividends, defined benefit pension contributions (in agreement with the pension scheme trustees) and capital expenditure, imposing very tight controls over operating expenditure and accessing government support in the UK (such as the Job Retention Scheme and tax deferrals). Strong focus has been given to cash collections from debtors while creditors have continued to be paid on a timely/agreed basis to protect supplier relationships.

As a result of all of these actions, the Group recorded a net cash inflow for the year of £0.8 million and at 30 June 2020 the Group continued to have a modest level of net debt of £4.3 million (30 June 2019: £5.1 million).

The net cash inflow in the year was after capital investment of £1.7 million, which was £0.3 million below the depreciation charge for the year, and a working capital inflow of £2.5 million, both reflecting the cash conservation measures introduced in the last quarter of the financial year.

Statement of financial position and return on investment

The Group's net assets and shareholders' funds reduced from £25.4 million at the beginning of the financial year to £19.8 million at 30 June 2020, with the impact of pension scheme actuarial losses and the payment of the prior year's final dividend in October 2019 more than offsetting retained profit after tax for the year.

The Group defines its capital invested as the sum of shareholders' funds, excluding net bank debt, pension deficit (net of tax) and lease liabilities. Following the adoption of IFRS16, Leases, the Group's capital invested increased by £5.0 million, reflecting the Group's leased properties being brought onto the statement of financial position for the first time. Post tax return on investment, with property leases included as part of capital invested for the whole 12 month period, was 7.2% (2018/19: 10.2%, re-stated to include property leases), reflecting the lower underlying profit in the year.

Going Concern and COVID-19

In assessing Going Concern to take account of the uncertainties caused by COVID-19, the Group has modelled a Base Case (BC) trading scenario on a "bottom up" basis. Given the continuing uncertainty regarding the impact of COVID-19 (including potential further waves of the pandemic) on the economy, customer behaviour and ultimately on the Group's performance, the Group has also modelled increasingly stressed scenarios compared to BC (which assume 10% ("Mid Case") and

20% ("Low Case") revenue reductions from BC, along with increasingly conservative assumptions in these scenarios regarding cash collections from debtors). Under the lowest point in these stress tested scenarios (which exists during April 2021), the Group retains headroom of at least £6.7 million against its total banking facilities for the next 13 months to September 2021.

The Alumasc Group plc Report and Accounts 2020

19

"As per the Group's announcements on

27 March and 1 April 2020, the Group responded quickly to the COVID-19 outbreak to protect the business, its employees and all our stakeholders."

The Group has been in regular dialogue with its main bankers, HSBC, as its scenario plans have developed and has pro-actively and transparently shared the aforementioned scenario models. While they show headroom of £6.7 million at the lowest point in the Low Case scenario for the next 13 months, they did indicate potential Bank covenant breaches at the two testing points in the period, December 2020 and June 2021, due to the impact of COVID-19 on revenues and profits in the Mid and Low case scenarios modelled. Although current trading levels would suggest that the sensitised scenarios are unlikely to materialise, given the uncertainties caused by the pandemic formal agreement was reached with HSBC

to relax the relevant covenant testing for the tests arising in December 2020 and June 2021 to the levels that the Board are satisfied can be met in light of the scenarios modelled and relevant cost saving measures that would be implemented in such scenarios.

Having taken into account all of the aforementioned comments, actions and factors in relation to Going Concern and the potential impact of COVID-19, and in light of the bank facility headroom under various scenarios, the Directors consider that the Group has adequate resources to continue trading for the foreseeable future. Accordingly, they continue to adopt the Going Concern basis in preparing the financial statements. See note 1 to the financial statements for the full Going Concern assessment.

Introduction of new accounting standards

The Group implemented IFRS 16 during the financial year and details of the impact are provided in notes 2 and 31 to the financial statements. In essence, the impact was to bring the Group's leased properties onto the statement of financial position for the first time. This increased both property, plant and equipment and lease liabilities each by £5.0 million on 1 July 2019 when the new accounting standard was adopted. Therefore, the Group's capital invested also increased by £5.0 million, with no change to shareholders' funds at the date of adoption. The full year impact on the Group's income statement was an increase in EBITDA by £0.5 million; increase in depreciation charge by £0.4 million and increased financing charges by £0.2 million, thereby reducing profit before tax by £0.1 million.

Paul Hooper

Chief Executive

8 September 2020

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Statements Financial

• Customer satisfaction process.

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Legacy defined benefit pension obligations

Comment

Alumasc's pension obligations are material relative to its market capitalisation and shareholders' funds.

• Continue to grow the business so the relative affordability of pension deficit contributions is improved over time. The pension deficit increased during the year due to market performance.
• Maintain constructive relationship with Pension Trustees.
• Meet agreed pension funding commitments.
• Regular review at Group Board level.
• Use of specialist advisors.
• Investment performance and risk/return balance overseen by an Investment Committee.
• Monitor and seek opportunities to reduce gross pension liabilities. The Alumasc Group Pension Scheme as part of its investment strategy uses derivatives to partly mitigate inflation and interest rate risk.

Statements Financial

Supply chain risks

Comment

International supply chain risks could increase through local lockdowns due to the COVID-19 pandemic, increased tariffs/duties, Brexit risks in Europe and political/global volatility.

• Annual strategic reviews, including supplier, quality, reliability and sustainability.
• Regular key supplier visits, good relationships maintained including quality control reviews and training.
• Regular supplier quality, value for money and risk reviews.
• Avoidance of strategic dependence on single sources of supply.
• Contingency plans to manage Brexit risks.
• Continuing to monitor China sourcing risks.
• Supply questionnaires and export checks are completed to ensure compliance.
• Training is scheduled to be provided on customs duties, particularly on managing new arrangements post Brexit.

Cyber security and Business Interruption

Comment

Cyber security risks and Business Interruption risks are increasing globally and have increased during the COVID-19 pandemic.

• IT disaster recovery plans are in place, with close to real time back up arrangements.
• Business continuity plans in place, or being evolved where we are relocating operations.
• Awareness training and management briefings held on cyber security risks and actions taken on preventative measures.
• Regular reviews of cyber security, including external penetration testing and reviews with external IT professionals.
• Energy supply and contingency arrangements reviewed periodically.
• Critical plant and equipment are identified, with associated breakdown/recovery plans, including assessment of engineering spares held on site.
• Business interruption insurance to cover residual risks.
• Review of Cyber security with an external party to ensure we have the appropriate protections in place.

Sustainability at a glance

Health & Safety KPI

Performance rate index1

2.82

Health & Safety

Health & Safety is Alumasc's primary focus, and this is reflected in how we operate our business in a highly regulated environment. The Board member responsible for Health & Safety is our CEO who is responsible for our Health & Safety Policy statement. Group policy on Health & Safety requires that it is the first agenda item for Group and operating subsidiary board meetings. Our target is for Zero harm. This has informed our Health & Safety programme and has helped us develop our compliance with industry best practice and focus on continuous improvement.

We promote manager and worker awareness of their responsibilities, the hazards and risks associated with operations and safe ways of working through targeted training. We use e-learning programmes, workshops for supervisors, hazard alerts and safety/compliance checklists.

Operating businesses and sites have Health

• Safety Committees. External consultants conduct regular Health & Safety audits. Action plans from Health & Safety audits are monitored by management and progress reviewed at Board meetings.

Near miss reporting has remained at the same high level of the prior year. In addition, the number of days lost in the workplace relating to accidents was 39 compared to 54 in the prior year. There have been no working days lost between January 2020 and 30 June 2020 and during this period we had three sites temporarily closed in April 2020.

Our principal Health & Safety KPI, the performance rate index (a relative measure capturing the total number of lost time and other safety incidents, relating the result to the overall number of hours worked), was 2.82 (compared to 2.69 in 2018/19). Alumasc's Health & Safety performance was good over the last year, and there is a longer-term trend of overall improvement; due to focus on a Zero harm outcome and continuous improvement by both management and employees. Our risks arise from working with machinery, forklift trucks crossing walkways, and car/lorry travel. Health & Safety initiatives include robust risk assessments and we work continuously to ensure that improvements are implemented.

Working days lost between

January 2020 and 30 June 2020

None

Waste packaging and recycling

We seek to reduce packaging and single non- reuse plastics and we encourage recycling and waste segregation at each of our locations. Office waste is minimised where possible, with our computerised systems for documents. We are a member of Valpak for compliance reporting, and we comply with the commitments under the Producer Responsibility Obligations (Packaging Waste) regulations.

We are working with Valpak to reduce waste packaging and information about the costs of packing provided to the businesses. Ideas to reduce waste from Valpak are shared with the divisions.

Packaging and recycling

The Board supports continuous improvements in environmental standards throughout the Group. This is achieved through a variety

of methods, including product process development, promoting use of recycled materials, waste minimisation, energy efficiency and reducing the emissions from all our operations. Additional information about the use of recycled plastics by Timloc can be found on pages 10 and 11.

Climate change and sustainability

Our environmental audits are certified by external consultants. These audits are part of our internal programme to maintain our ISO14001:2015 Environmental Management accreditation in several of our businesses. Alumasc maintains the appropriate environmental management standards in the business to meet our statutory and moral obligations and has an excellent record in this regard. We have continuous improvement as part of our environment programme and findings from audits are communicated with management and employees. Our Code of Conduct states that every employee must seek to protect and minimise any adverse impact on the environment.

Water consumption

In excess of 80% of our water consumption is for welfare purposes at Timloc and Wade. Alumasc has some new properties such as Timloc in Howden and Wade in Halstead, with the latest water efficient systems.

Greenhouse gas (GHG) emissions reduction

35%

Environmental and sustainability matters

Alumasc recognises its responsibility to protect the environment. As a business we are focused on using materials that can be re-used, particularly metals. The Group seeks to improve its environmental footprint by looking at new, more energy efficient, technologies and by reducing emissions. During the year we have approved investments with some of our overseas suppliers to move to more environmentally friendly methods of casting to help protect the environment by reducing particulates. Information about some of sustainable solutions can be found on pages 26 to 27.

A high proportion of Alumasc's building products are focused on providing effective solutions to enhance sustainability in the built environment. Alumasc has established leading positions in water management, through brands such as Alumasc Water Management Solutions, Wade, Gatic, Alumasc Roofing, Derbigum Olivine membranes, and Timloc; and energy/light management through Levolux.

1 A relative measure capturing the total number of lost time and other safety incidents, relating the result to the overall number of hours worked.

Our community

Alumasc supports local community initiatives, local sports groups and a number of charitable donations have been made throughout the year by the business, following fundraising activities.

Alumasc Water Management Systems (AWMS) held a raffle to raise funds and a Valentine's bake sale for Team Mikayla's 2020 events. Team Mikayla is a registered charity that supports children with cancer.

Amount raised

£200

Building Envelope held a Bake Sale to raise money for Macmillan Cancer Support. It included a Berry Pie game, to guess the number of berries used. The team in St Helens raised £220 for Macmillan.

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Statements Financial

The Building Products division in St Helens took part in the Knowsley 10K for Sam's Diamonds in memory of a former member of staff. The run took place around Knowsley Safari Park!

To date £600 has been raised for Sam's Diamonds Cancer Support.

We support our local community by providing use of our car park for neighbouring Kettering Town FC.

Our Wade site supported Halstead in Bloom. Some planting was unfortunately delayed due to the COVID-19 lockdown.

Diversity and inclusion

Alumasc is an equal opportunities employer and its policies for recruitment, training, career development and promotion are based on the aptitude and abilities of the individual regardless of religion, ethnicity, gender and sexual orientation. Employees with disabilities are afforded equality of opportunity in respect of entering and continuing employment

with us. The Group aims to provide training opportunities that are identical, as far as possible, for disabled and non-disabled employees. Should employees become disabled after joining the Company, every effort is made to ensure that employment continues, and appropriate training is given. A formal Equality and Diversity Policy has been approved by the Group Board and applies to all our businesses.

We recognise the benefits of a diverse workforce and we promote a working environment that is fair and inclusive. We seek to extend these principles to our customers, suppliers, stakeholders and the communities where we operate. The chart above provides headcount data as at 30 June 2020.

We are committed to promoting diversity and equal opportunities from recruitment, employment and career progression to learning and development. We recognise the benefit of calling on the widest range of experience, knowledge and skills.

Employee helpline

A confidential employee assistance helpline is available free to all staff. We publicise the telephone number on our notice boards and make staff aware of this service. The helpline has been obtained from a supplier that operates 24/7. Counselling and wellbeing services can be accessed via an app.

Alumasc Code of Conduct

Our Code of Conduct sets out the ethical standards and expected behaviours from all employees. The Code explains that employees need to act honestly and be responsible

and trustworthy, is supported by employee handbooks and outlines obligations on a number of policies including Anti-bribery and corruption, Whistleblowing and ethical trading.

Greenhouse gas ("GHG") emissions data

Carbon Footprint Limited work with the Alumasc Group to help us monitor and report our GHG emissions and to help Alumasc improve its energy efficiency. The Group aims to reduce carbon emissions year-on-year.

We aim to do this by reducing our carbon emissions, fuel consumption, and by reducing waste consumption. Carbon Footprint have independently assessed our GHG emissions in accordance with the UK Government's "Environmental reporting guidelines, including Streamlined Energy and Carbon Reporting" requirements. The assessment prepared for Alumasc by Carbon Footprint included the 2019 emission conversion factors published by the Department for Environment, Food and Rural Affairs (Defra) and the Department for Business, Energy and Industrial Strategy (BEIS).

Our carbon footprint includes emissions where we have direct responsibility, for example, vehicles and heating fuel (Scope 1) and emissions from third parties from the generation of electricity (Scope 2). We have voluntarily disclosed Scope 3 that demonstrates a significant reduction in emissions, partly due to lockdown restrictions following the COVID-19 pandemic.

We collect details on energy consumption from our trading divisions and this information is input onto the Carbon Footprint data tracker. The information provided is verified by the submission of invoices and evidence of fuel consumption. The information is audited and verified by Carbon Footprint.

The Group companies are continually reviewing energy consumption and considering new technologies to deliver ongoing reductions

in emissions. Our carbon footprint includes all emission sources as required under S12008/410 for large unquoted companies.

Employees are kept informed of divisional and Group matters, through briefing sessions and presentations. We are always looking at ways to improve communications to motivate employees. During COVID-19 the business kept in touch with staff and ensured that people who live on their own were safe and well. Alumasc values the views of its employees and consults with them about matters that affect them and the business. Some sites issue quarterly internal newsletters with company updates, community/ charitable events and employee related news.

The financial review for each scope was as follows:

1. kWh includes Alumasc's energy usage from building energy (Scope 1 & 2, excluding refrigerants) & grey fleet (Scope 3) only, as per SECR guidelines.
2. Scope 3 has been voluntarily disclosed.

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We are pleased to report this year a decrease of 35% in the Group's emissions. Large reductions in GHG emissions have been achieved for

the period 2019/2020 when compared to 2018/2019. The reduction in emissions could be attributed to:

• Energy efficient buildings for Wade and Timloc;
• Reduction of energy used due to COVID-19 temporarily closing three manufacturing sites for three weeks and re-opening on a phased basis;
• Replacement of old machinery with newer more efficient machinery; and
• Reduced travel (in particular this was as an impact of the COVID-19 pandemic).

In addition, during the year Alumasc also completed a detailed Energy Savings Opportunity Scheme (ESOS) energy audit of the amount used, and has a number of recommendations for implementation.

Human Rights and Modern Slavery Act 2015

Alumasc treats people fairly and we are honest and straightforward in all our business relationships. We have established long-term relationships built on trust and reliability.

Following the enactment of the Modern Slavery Act 2015, Alumasc introduced a Modern Slavery and Human Trafficking Policy. The Alumasc Group plc has a zero- tolerance approach to modern slavery and is committed to act ethically and comply with all laws and regulations. The Group Modern Slavery Statement is published on our website: www.alumasc.co.uk in line with Home Office guidance. Alumasc works with its supply chain to ensure that there is a zero tolerance to Modern Slavery. The 2020 statement will be published on our website in compliance with the requirements before the deadline.

Alumasc expects its suppliers and those in the supply chain, where possible, to confirm that all suppliers have the same or similar policies. The latest Modern Slavery Statement and previous disclosures are available at www.alumasc.co.uk.

Anti-bribery and Anti-corruption

Alumasc has a zero-tolerance of bribery and corruption. The Group's Anti-Bribery Policy gives clear guidance of the ethical standards and compliance required. Training is provided to employees either via an online training module and/or by face-to-face training. We encourage all employees to be vigilant and to report any suspicious matter.

Statements Financial

Dundee University

A CO₂ neutralising roof? Dundee University benefits from Olivine roofing from Alumasc Roofing Systems.

One of the busiest buildings at the University of Dundee was able to benefit from a complete replacement of its waterproof roofing with Alumasc Derbigum Olivine roofing membranes.

The August 2018 project ran for six weeks and was completed on time, without any complications, after a thorough site survey to correctly identify the project needs.

"Olivine membranes are extremely special," explained Permatop Roofing Director Jim McVeagh, who headed up the project. "Olivine is a highly effective, durable waterproofing solution for roofs which also actively purifies the air by neutralising CO2 in rainwater."

Olivine membranes use a naturally occurring mineral upper layer that neutralises the most prevalent greenhouse gas via an irreversible chemical reaction when it comes into contact with rainfall.

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NTU also selected a Derbigum Olivine roofing system. This carbon dioxide neutralising roofing helped NTU stay as one of the UK's most environmentally friendly universities.

Alumasc Derbigum Olivine roofing absorbs and neutralises CO2 on contact, as it falls in rainwater, so when it reaches the drains it's carbon-free. Olivine grains decrease in size with each reaction, however, they are large enough to last 30 years plus before having completely reacted. This environmentally focused solution was used

in the recent redesign and refurbishment of Nottingham Trent University's Clifton Campus Library, which now features over 1,000m2 of Olivine, providing a waterproof, BBA approved roofing solution.

The refurbishment also included the specification of Alumasc Rooflights and Harmer aluminium Roof Outlets, together with GX Pressed Aluminium Gutters and Heritage Circular Pipes, ensuring adequate drainage.

GX Pressed Aluminium Gutters are designed to accommodate thermal movement at every joint, being also lightweight, durable, non-corrodible, and are 100% recyclable.

Harmer AV roof outlets combine innovative product design with full industry compliance to meet the needs of rainwater drainage in any construction project, with the ability to drain up to 40% more roof area than conventional gravity outlets. These outlets are sustainable, lightweight, durable and have a non-corrodible design.

The UK market for green construction projects has grown significantly in the last 10 years and is poised to grow further. As environmental awareness grows, more developments are including "green" and sustainable solutions.

Under Section 172 of the Companies Act 2006, there is a general duty on every director to act in a way that they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its shareholders as a whole.

The Directors consider that they have performed their duty in good faith to engage under s.172 of the Companies Act 2006, to promote the success of the Company for the benefit of the members as a whole, while taking into consideration, amongst other matters:

• The likely consequences of any decisions in the long term;
• The interests of the Company's employees;
• The need to foster the Company's business relationships with suppliers, customers and others;

• The impact of the Company's operations on the community and the environment;
• Maintaining a reputation for high standards of business conduct; and
• The need to act fairly between the members of the Company.

be made via the CEO and/or our advisers using our website contact email.

Additionally, an Investor day was organised in order to obtain feedback and input from our shareholders. We have also engaged with key shareholders in connection with the proposed 2020 Remuneration Policy.

Communication with our shareholders may be face to face, via our website, our Annual Report and Accounts and at the AGM. Information is provided in Broker, and Analyst, briefings. Formal presentations are made to shareholders via Analyst briefings following the annual and interim results. The Notice of the AGM is also sent out to shareholders at least 21 days before the meeting. Information on the voting received is published on the Company's website after the AGM.

We organised a visit for investors to our Timloc factory in Howden, Yorkshire. Any feedback is reflected in our governance and/or our strategy. We listen to feedback from our investors, sharing comments with the Board to help inform strategy and decision making. We are committed to developing our investor communications.

importance of Health & Safety is demonstrated by the fact that it is always the first agenda item for Board meetings. Communications and career development/succession planning meetings have been held. Divisional site-based meetings and /or virtual meetings, regular communications and updates are provided for staff.

We have invested in Health & Safety and provide appropriate training, personal protective equipment and additional courses for supervisors. During the COVID-19 pandemic additional communication was required for staff, particularly for those working from home. Additionally, employees who lived alone had other colleagues check on their wellbeing. Every effort was made during and after the COVID-19 pandemic to protect employees. We also seek to share our vision and longer-term strategy with staff. Targeted questionnaires were used during the COVID-19 pandemic and we have had good feedback on our approach to the welfare of staff who are working from home.

We strive to understand what products our customers require and how to improve our customer service.

Customers provide feedback about product use and ask about new product development. Often, we bring out new products after feedback/requests are received. Customers are encouraged to provide feedback about our products and services. We continue to prioritise customer service and strive for continual improvements.

We work with our supply chain partners to ensure minimum disruption due to the COVID-19 pandemic. We consider the routes to market that our customers prefer, for example Timloc has a following day delivery to site, subject to a minimum order value.

and to make sure that the Trustees are consulted on significant developments.

At the beginning of the COVID-19 pandemic we used our relationship to ask for a three-month deferral of contributions to the Scheme and this was granted. We are now paying the deferred amount in our contributions and will have completed these payments before the next triennial valuation. Regular dialogue with the Trustees during the COVID-19 pandemic has been important and provided additional assurance.

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Communities: We also support our communities; for example, we have a good relationship with Kettering Town FC and Acorn Day Nursery who are near neighbours in Burton Latimer.

Governance

Statements Financial

Compliance with Section 414 of the Companies Act 200

We have complied with the requirements under the provisions of the Companies Act 2006 contained in Sections 414CA and 414CB of the Companies Act and the relevant references can be found below.

Application of s.172

We have continued to comply with the requirements under s.172 in the period of the COVID-19 pandemic. The Board conducted weekly calls to consider all matters, with the primary focus being the Health & Safety of all employees, customers and suppliers. The Board also focused on what was necessary for the long-term success of the business.

Key decisions made included: enabling office based staff and sales executives to work from home; implementing additional cyber and IT security; temporarily closing three manufacturing sites for three weeks; conserving cash and monitoring the Group's liquidity; furloughing some staff; announcing the cancellation of the interim dividend; and rolling out and implementing a Health & Safety checklist and procedures in line with Government guidelines.

Any new business strategies, supply-chain, new products development and investment decisions considered the following:

• the health, safety and wellbeing of employees, customers and suppliers;
• the interests of all stakeholders particularly, shareholders and The Alumasc Group Pension Scheme;
• the environment and sustainability;
• the views of our bankers; and
• local/community issues.

John McCall

MA (Cantab)

Chairman

Appointed: 1984

Experience: John McCall was appointed Chairman and Chief Executive on the foundation of the Company in 1984. He was called to the Bar in 1968. His previous employment was with the mining finance house Consolidated Gold Fields plc with whom he gained extensive international experience in the fields of mining and construction materials. He also holds the position of Chairman to the Nomination Committee.

N

Registered Office

The Alumasc Group plc

Burton Latimer

Kettering

Northamptonshire NN15 5JP

Company Advisers

Michael Leaf

Executive Director

Appointed: 2019

Experience: Michael Leaf joined Alumasc in 2011 as Managing Director of Timloc Building Products where he has overseen significant growth in both the revenues

and profitability of the business. Michael has also performed a number of other roles during his time with Alumasc including the management of the Pendock and Engineering businesses prior to their sale. Michael is currently the Divisional Managing Director of the Housebuilding Products division. For the last 25 years Michael has held a number of senior positions within the Building Products Industry and prior to joining Alumasc, Michael was a Director at Ideal Standard (UK) Ltd.

The Board

At Alumasc we have a strong and experienced Board, bringing a wealth of skills and knowledge to the Company.

David Armfield

LLB

Non-executive Director

Appointed: 2014

Experience: David Armfield began his career as a solicitor at Wilde Sapte, moved to Lehman Brothers in its Investment Banking group in 1987 and later in 2000 became a partner at PwC. David was a founding partner of Kinetix Critchelys Corporate Finance LLP in 2010, which provides corporate finance advice to the clean technology and environmental sustainability sectors. David

is also Senior Independent Director at Xeros Technology Group plc and a non-executive director of Myonlineschool Ltd. He is a member of the Audit, Remuneration and Nomination Committees.

1. N R
   Board tenure

Vijay Thakrar

BSc, FCA

Non-executive Director

Appointed: 2019

Experience: Vijay is a chartered accountant who was a partner at Deloitte and EY before taking up a number of non-executive director (NED) roles. He has served as NED on various boards, including The Quoted Companies Alliance and Quorn Foods. He is currently on the boards of MK Dons Sports

• Educational Trust, Treatt plc and Walker Greenbank plc. Vijay is Chairman of the Alumasc Audit Committee and is a member of the Remuneration and Nomination Committees.

A N R

Stephen Beechey

BSc, MA, MRICS, MCIOB, MAPM

Non-executive Director

Appointed: 2019

Experience: Stephen has worked in the construction industry for over 30 years and has a broad understanding of all aspects of the sector. He is also an executive director of the Wates Group, one of the largest privately-owned construction, development and property services companies

in the UK, where he sits on the Group Executive Committee and the Construction Group Board. He is a member of the Audit, Remuneration and Nomination Committees.

1. N R

Helen Ashton BA, FCG

Group Company Secretary

Statements Financial

The Alumasc Group plc Board of Directors

(Biographical details can be found on pages 30 to 31)

The Board adopted the QCA Corporate Governance Code 2018 (the QCA Code) on

25 June 2019 pursuant to Rule 26 of the AIM rules. The following section outlines the Group's approach to governance and how the Board and Committees operate.

Executive Committee

Further information on our Corporate Governance can also be found on our website (www.alumasc.co.uk).

Director induction

On appointment to the Board,

Mr Michael Leaf and Mr Gilbert Jackson were provided with:

• Access to the Group Company Secretary
• A tailored induction appropriate to their position
• Information as appropriate
• A briefing from the Nomad

Deliver growth continued

Principle 3:

Take into account wider stakeholder and social responsibilities and their implications for long-term success

Alumasc is aware of its corporate and social responsibilities and the need to build strong relationships across a range of stakeholder groups. The business seeks to protect its employees and takes its Health & Safety responsibilities very seriously.

Further information about our approach to Health & Safety and our approach to COVID-19 can be found on pages 1, 4, 5, 12, 13, 18, 20, 22, 24, 28, 29, 41, 45.

Deliver growth continued

Principle 4:

Embed effective risk management considering both opportunities and threats throughout

the organisation

The Board's policy on risk management encompasses all significant business risks to the Group, including: strategic, commercial, financial, operational and Health & Safety risks, which could undermine the achievement of business objectives. The Board sees the discussion of principal risks as critical for our business and the risk management approach is outlined on pages 20 to 21 and 41 to 43.

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Statements Financial

Principle 10:

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The business sets a high priority on maintaining good communications with its stakeholders to ensure that the Alumasc Group's processes and procedures are clear and understood. On our website (www.alumasc.co.uk) the "Investors" section is regularly updated. We communicate with our shareholders through: the Annual Report, the half-year announcements, the AGM and roadshows/meetings with investors and at analysts' briefings.

The Board also pays attention to the voting recommendations provided by third party proxy voting services, as well as the voting outcomes of specific resolutions with a view to determining whether any further action is required.

The Company maintains a dedicated email address for use by current and/or potential investors (alumasc@camarco.co.uk). After the AGM the Company announces the results of the voting, including details of the proxy votes cast or received.

In addition, this information is available on the investor section of our website.

The Board also receives information on the views of shareholders from its brokers and Nomad. Feedback from analysts, other advisers and investors is also reviewed. Discussions, where needed, are held to enable closer alignment between the way in which the Group is led and shareholder views.

Additional information is provided in the s.172 Statement on pages 28 to 29.

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Governance

John McCall

Chairman

Statements Financial

Audit Committee membership

The members of the Committee are as follows:

• Vijay Thakrar (Chairman)
• David Armfield
• Stephen Beechey
• Jon Pither

The Group Chairman, Chief Executive, Group Finance Director, Group Financial Controller and the external auditors usually attend the meetings of the Committee. The Committee met three times in the year, all of which were attended by the external auditor, and

a record of the meeting attendance by Committee members is set out opposite. After each Audit Committee meeting that the auditors attend, the Committee meets the auditors without members of the management team being present.

"Management took swift actions to protect the business and conserve cash at the onset of the COVID-19 pandemic."

Vijay Thakrar

Chairman of the Audit Committee

Dear Shareholders,

I am pleased to present the Audit Committee's report for the year ended 30 June 2020.

Meeting attendance

The Alumasc Group plc Report and Accounts 2020

41

The Committee's main duties are as follows:

• monitoring and reviewing the integrity of the financial reporting process and reviewing the financial statements, including the appropriateness of judgments and estimates taken in preparing the financial statements and preparations for the introduction of new accounting standards;
• monitoring and reviewing the effectiveness of the Group's internal financial controls including approval of the scope and review of the results of the Company's internal audit activities;
• monitoring and reviewing the external auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;
• making recommendations to the Board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment, re- appointment and removal of the external auditor and to approve
  the remuneration and terms of engagement of the external auditor;
• to review any proposal for the external auditor to supply non-audit services, in view of Group policy and relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and
• to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken.

Activities of the Committee in the 2019/20 financial year

The main activities of the Committee during the year were:

• reviewing and challenging management's forecasts and scenarios relating to COVID-19's impact on the Group, its liquidity position and the appropriateness of adopting a Going Concern basis in these financial statements;
• reviewing the interim and full year results announcements and financial statements, with particular focus on the key estimates and judgments taken by management in the preparation of those statements and the external auditor's comments in those areas;
• reviewing and approving the audit plan of the external auditor, including the scope of the work, the key areas of focus in terms of audit risk and judgment, and the basis on which the auditor assesses materiality;
• considering the effectiveness of the external audit and the independence of the auditors;
• reviewing the methodology, impact and disclosures in the financial statements relating to the introduction of IFRS 16, Leases, during the 2019/20 financial year;
• reviewing and approving the plan and scope of internal audit work, including consideration of internal audit reports issued during the year and discussion of the key matters and improvement points arising from those audits with management; and
• reviewing with management the Group's tax advisor arrangements and overseeing the tender process, which led to the Board's decision to appoint KPMG to replace Deloitte from 17 January 2020.

Significant issues considered in relation to the financial statements

The Committee considered, in conjunction with management and the external auditor, the significant areas of estimation, judgment and possible error in preparing the financial statements and disclosures, discussed how these were addressed and approved the conclusions of this work. The principal areas of focus in this regard were:

(i) Going Concern and COVID-19 impact

Management took swift actions to protect the business and conserve cash at the onset of the pandemic. The Committee has challenged management on their base case trading and cashflow scenarios prepared for the period between now and September 2021, including stress tested and reverse stress tested scenarios as set out on page 73, taking account of the impact of COVID-19 and the possibility of a second wave of COVID-19. Management have discussed these scenarios with the Group's bankers and have negotiated relaxations of bank covenants to provide headroom in the event of downside scenarios materialising as also set out on page 73. The Committee has also discussed these issues with the external auditors to seek their opinion. In light of these actions and, taking account of the comments on page 64, the Committee considers that the disclosure of the Board's assessment of Going Concern

is complete and understandable.

(ii) Revenue recognition

Revenue recognition on construction projects carried out in the Building Envelope division, which has bespoke construction projects with performance obligations that can span more than one accounting period, leads to the application of judgment in the recognition of revenue and profit over time, including estimation of the percentage of contract completion and estimates of costs to complete the work, as described in the accounting policy note on page 80. Having reviewed these judgments taken at the year end with management and the external auditors, the Committee was satisfied with management's judgments for the level of revenue and profit recognised on construction projects for the financial year.

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Statements Financial

1. Defined benefit pension schemes' valuation

As described in the risk review on pages 20 and 21, Alumasc has relatively significant legacy defined benefit pension obligations in the context of the overall size of the Group. Therefore, relatively small changes to market assumptions (particularly the discount rate and inflation rate) and actuarial assumptions used to value defined benefit pension obligations under IAS 19 can have a material impact on the Group's Consolidated Statement of Financial Position and Consolidated Statement of Comprehensive Income. Further details are given in note 22 to the consolidated financial statements. Having reviewed the valuation assumptions adopted by management, in conjunction with actuarial advice received and the review of those assumptions by the external auditors, the Committee was satisfied that

the Group balance sheet reflects an estimated valuation of the Group's pension obligations that is consistent with IAS 19's valuation methodology.

(iv) Accuracy and valuation of inventory

All of the Group's businesses carry significant levels of inventory, whether manufactured in-house or bought-in. The accuracy of the records of physical inventory on hand and the valuation of that inventory, including judgments as to the value of manufacturing cost to be absorbed into the inventory valuation and

the net realisable value particularly of old and slow-moving inventory, can affect both the Group's Consolidated Statement of Financial Position and its Consolidated Statement of Comprehensive Income. Inventory records, including an analysis of trends and the evolution of management judgments on valuation are reviewed by the Executive Directors in monthly meetings with operating company management and in associated board reports. Internal audit has particular focus on checking the accuracy of the inventory records through attendance at stock counts and reviewing the application of judgments taken by local management surrounding valuation. Physical stock counts are held at the financial year end and half

year end, and more regularly when needed. The Committee reviews regular reports from executive management, internal audit and the results of the external audit to satisfy itself that inventory values across the Group are materially accurate.

(v) Valuation of goodwill

In light of the restructuring of the Levolux business announced in the 2019 financial statements, the Committee has challenged management on the progress made and whether the carrying values for the Levolux business in the Group and Company financial statements are appropriate. This included challenging progress in respect of Levolux's restructuring, trading performance and budgets/ forecasts. The Committee also asked the auditors to pay particular attention to Levolux in their audit work. It has not been considered necessary or appropriate to impair the carrying values.

Assessment of the effectiveness of external audit

The Committee assessed the performance of BDO both through formal Committee meetings, BDO's reports to the Committee and more informal interaction throughout the year. The Committee also received structured feedback from senior Group level and operational management on the robustness, value added and efficiency of the external audit.

Having considered this information, the Committee concluded that the external audit continues to be robust and effective.

Assessment of the independence of the external auditor

The Group's policy on the independence of auditors is consistent with ethical standards published by the Financial Reporting Council.

The Group changed its external auditor from KPMG to BDO in January 2019. The Committee assesses the effectiveness and independence of the external auditor every year.

Any non-audit services proposed to be carried out by the external auditor are discussed and approved in advance by the Committee. During the financial year under review BDO did not carry out any non-audit work. Prior to their appointment as auditors to Alumasc, BDO had acted as the auditors to the Group's defined benefit pension schemes. BDO resigned as auditors to the Group's defined benefit pension schemes on their appointment as the Group's auditors in January 2019.

BDO have confirmed to the Committee that they consider themselves to be independent within the meaning of regulatory and professional requirements.

In view of all the above, the Committee is satisfied with the independence of the external auditor.

Appointment and re-appointment of the external auditor

The audit for Alumasc's financial year ended

30 June 2020 was BDO's second following their appointment in January 2019. Resolutions are being put to the AGM to be held in October 2020 to recommend their re-appointment for the 2020/21 financial year.

Effective internal control and risk management

The Alumasc Board as a whole acknowledges that it is ultimately responsible for the Group's system of internal control and for reviewing its effectiveness. The system is designed to be robust in its management of the risk of failure to achieve business objectives. This risk, however, cannot be wholly eliminated and therefore the system can only provide reasonable and not absolute assurance against the risk of material misstatement, fraud or loss.

The Group has an ongoing process for identifying, evaluating and managing the significant risks faced by the business. The process was in place during the year and remained in place on the date that the Annual Report and financial statements were approved by the Board. The main elements of the Group's internal control process are as follows:

(i) Risk management

Risk management is a continuing activity throughout the year, dealt with through the board meetings of operating companies.

In addition, a formal business risk review exercise is conducted every year at each operating company and for the Group as a whole. This identifies the most important risks, their likelihood of occurrence and possible business and financial implications and the effectiveness of mitigating controls. A Group level summary of these risk reviews is provided on pages 20 and 21. Each operating company has implemented procedures for controlling the relevant risks of their business.

Based on their attendance at the board meetings of each operating company, the Executive Directors report periodically to the Board on the risk management processes that have been in place during the year and the effectiveness of the level of control in managing the identified risks. The Board is able to confirm that these procedures are ongoing.

(ii) Financial reporting and monitoring

The Board receives regular financial reports, including monthly management accounts, quarterly re-forecasts, annual budgets and three-year plans. These procedures are intended to ensure that the Board maintains full and effective control over all financial issues.

An Executive Committee, comprising the Group's Executive Directors and the Divisional Managing Directors of the Group's operating segments, reviews trading activities and addresses matters of common interest

with regard to safety, strategic development, performance, risk and other matters

of mutual Group interest.

Day to day management of the Group companies is delegated to operational management with

a clearly defined system of control, including:

• An organisational structure with an appropriate delegation of authority within each company;
• The identification and appraisal of business and financial risks both formally, within the annual process of preparing business plans and budgets, and informally, through close monitoring of operations;
• A comprehensive financial reporting system within which actual results are compared with approved budgets, re-forecasts and the previous year's figures on a monthly basis and reviewed at both local and Group level; and
• An investment evaluation procedure
  to ensure an appropriate level of scrutiny and approval for all significant items of capital expenditure.

(iii) Internal Controls Assurance

The Audit Committee on behalf of the Board has reviewed during the year the effectiveness of the system of internal financial control from information provided by management, the Group's external auditors and the results from internal audits. The Board as a whole assessed internal control more generally, including the key risks affecting the Group in the delivery of its long-term strategies, as summarised on pages 20 and 21. No material weaknesses in internal control were identified in the year.

(iv) Internal Audit

The Committee's view is that the size and complexity of the Group and the close involvement of the Executive Directors make it unnecessary for Alumasc to have a dedicated internal audit function, although part of the Group Financial Controller's role, and that of her team, is to carry out internal audits in each of the Group's principal operating locations each year. This position is kept under annual review by the Committee.

The principal focus of this internal audit work is to check the existence and effective operation of key internal financial controls.

The Committee reviews and approves the proposed scope of internal audit activities each year, and ensures that key risk areas are covered, and that agreed recommendations arising from previous internal and external audits are re-reviewed to assess whether they have been implemented. The Committee has requested future work to be focused on high risk areas that could have a material business or financial impact.

Whistleblowing policy

The Group has a Whistleblowing policy, which provides a formal mechanism whereby every Group employee can, on a confidential basis, raise concerns over potential malpractice or impropriety within the Group.

Anti-Bribery policy

The Group has in place a policy with regards to compliance with the Bribery Act 2010. The Group's Anti-Bribery policy and guidelines reflect the Directors' zero tolerance approach to bribery and corruption of all kinds.

This policy has been cascaded down into the operating companies with relevant training provided. Any matters of particular concern, whether arising from due diligence or otherwise with regard to related parties as defined in the Bribery Act 2010, are raised and discussed at monthly operating company board meetings.

Code of Conduct

The Group has in place a Code of Conduct, setting out the standards of business practice that the Group expects from its executives and employees. This policy is subject to periodic review to ensure it reflects the operation of the Group and the business environment in which it operates.

Copies of this policy, the Whistleblowing policy and the Anti-Bribery policy can be found on the Group's website www.alumasc.co.uk.

Vijay Thakrar

Chairman of the Audit Committee

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Statements Financial

Dear Shareholder

I am pleased to present the Report of the Remuneration Committee ("the Committee") for the financial year ended 30 June 2020.

As an AIM listed entity, the Company is not required to apply the full Listing Rules of the Financial Conduct Authority or the requirements under SI 2008/410 schedule 8 and hence is not required to present a report on remuneration in accordance with those rules. However, the Board considers it appropriate for the Company to provide shareholders with information in respect of executive remuneration that follows the "spirit" of the Regulations given previous disclosures before the Company joined AIM.

Meeting attendance

Details of the Committee members who served during the year can be found below.

The main duties of the Remuneration Committee are set out in the Committee's terms of reference and these can be found at www.alumasc.co.uk

"The Company will continue to review its remuneration policies and consult with investors as necessary."

J. P Pither

Chairman

Remuneration Committee

Our Remuneration Policy was approved by shareholders at the 2017 AGM and that policy will come to the end of its three-year life later this year. Therefore, a new Remuneration Policy (the 2020 Policy) is being put forward for shareholder approval at the 2020 AGM, following consultation with our major shareholders. If approved, this policy will replace the one passed in 2017. Companies listed on the AIM market are not required to put their policies to a shareholder vote but, reflecting the Board's approach to high levels of governance and good practice, we are voluntarily putting ours to a vote. There will be a second advisory vote on the Annual Report on Remuneration.

I hope you will be able to support our resolutions.

This Remuneration Report sets out the 2020 Policy and the remuneration paid to the Directors during the period. The Company will continue to review its remuneration policies and consult with investors as necessary.

The details of membership of the Committee can be found on this page.

2020 Policy

The key objective of the Remuneration Committee is to put in place a simple set of arrangements that provides strong alignment with shareholders and other key stakeholders. As outlined in our Strategic Report the Board of Alumasc has been pursuing a growth strategy to develop new products for each of our divisions that further demonstrate our commitment to customer service and "green building products". We are also seeking to grow our export markets and our involvement in infrastructure projects. Following consultation with our major shareholders, I hope the 2020 Policy supports the delivery of this strategy by focusing on both short-term and long-term performance and delivering a significant proportion of the total package

in shares, thereby providing alignment with shareholders.

Having reviewed the existing policy, we are of the view that the current structure - comprising base salary, benefits, a pension contribution and participation in the annual bonus and Long Term Incentive Plan (LTIP) - remains appropriate. We are, however, taking the opportunity to update the policy to take account of prevailing and emerging good practice.

• Pensions - The 2017 Remuneration Policy provides a maximum pension contribution of 20% of salary for Executive Directors.
  The Remuneration Committee is cognisant of the scrutiny on executive pensions as investors have urged companies to align rates with the wider workforce.
• In light of this, under the 2020 Policy any new Executive Directors (either promotions to the Board or external hires) will have contributions aligned with the workforce rate. There are various pension schemes in operation at Alumasc and different contribution rates depending on length of service and age.
  The Company will review the current schemes and arrive at an appropriate 'workforce rate' that will apply for new Directors (including the new Finance Director).
• LTIP maximum limit - The 2017 Policy included the option to increase the LTIP policy maximum to 100% of salary under any new plan introduced by the Company. A new LTIP was approved by shareholders in 2018 and this includes a limit of 100% of salary per individual. The 2020 Policy reflects the limit contained in the previously approved 2018 LTIP, however please note that our current practice to make awards at a lower level will remain.

• LTIP clawback - Previously LTIP awards were subject to a malus condition which enabled the Committee to lapse unvested awards
  in certain circumstances. In line with good practice, this provision has been extended to include clawback so that amounts received in respect of vested awards can also be recovered in exceptional circumstances too. This is consistent with the bonus plan.
• LTIP performance measures - The
  2017 Policy hardwired EPS and TSR as the measures that apply to LTIP awards. To provide the Remuneration Committee with greater flexibility to take account of changing priorities over the life of the next three-year period, it is proposed that the 2020 Policy will enable the Committee to set alternative measures including Underlying Profit Before Tax (UPBT) to better reflect the outlook and priorities at the time.

Performance and remuneration outcomes for the year ending 30 June 2020

The financial and operating performance for the Group in 2020 is set out on pages 69 to 124. 2020 was a challenging year with the second half particularly impacted from the interruption caused by COVID-19. The Board took swift and prudent decisions to support the Group's businesses during this difficult period and to ensure that cashflow was protected as part

of a broader cash conservation programme. These actions include the suspension of capital expenditure, a freeze on new hiring and cancelling the interim dividend as previously announced.

We discussed rewards in view of the impact of COVID-19, and the additional work it generated. Some of the senior executives had to carry out more than one role and remuneration

was discussed in this context. The business welcomed the introduction of the Government's Coronavirus Job Retention Scheme as this has helped the business to support staff.

The Group achieved the following results for the year:

• Group revenues from continuing operations decreased by 16% to £76 million
• Underlying profit before tax decreased by 34% to £3.7 million
• Underlying earnings per share decreased by 34% to 8.2 pence.

The 2019/20 annual bonus was based on Group underlying PBT targets. The threshold level of profit was not achieved and therefore no bonus became payable. As disclosed in last year's report, a £10,000 bonus was agreed as payable to the CEO and CFO in the prior financial year.

This was the second part of the Facades sale bonus (contingent on earn-out), and although paid during this financial period, it related to the previous financial year and was paid before COVID-19.

Awards were granted under the LTIP to senior executives in October 2017 based on EPS and TSR performance for the three-year period ending October 2020. The minimum thresholds were not met and therefore this award will lapse in full in October 2020.

The Remuneration Committee believes the incentive outcomes reflect the performance of the business during this challenging period. The Remuneration Committee has not applied any discretion during the year to any part of the Directors' remuneration.

Key decisions

During the year there were three formal meetings and the following topics were discussed:

• Review of base salaries of the Group Executive Directors (including the two new Executive Directors), members of the Executive Committee and Group employees more generally;
• Determining the key terms of the 2020 Remuneration Policy;
• Variable pay, in particular long-term incentive plan (LTIP) targets for the current year;
• The review of performance criteria for the current LTIP and the ESOS; and
• The exit terms for Mr Magson.

Additional attendees by request include the Chairman, the Chief Executive and Company Secretary; they take no part in discussions relating to their own remuneration.

As mentioned above, there will be two votes on remuneration at the 2020 AGM to be held on 22 October 2020; one to approve the new 2020 Remuneration Policy which will apply for the next three-year period, and another to approve the Directors' Remuneration Report. I hope you will be able to support these resolutions. If you have any questions on this report or our approach to remuneration more generally, please feel free to contact me via the Company Secretary.

Jon Pither

Chairman of the Remuneration Committee

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Statements Financial

Benefits

The Group operates a policy whereby Executive Directors are provided with health insurance, disability insurance and life cover, and are given a cash alternative to a company car and associated expenses.

Annual bonus

For the year to 30 June 2020 the minimum level at which any annual bonus would become payable was set at on a scale to underlying profit before tax (UPBT) of £7.0 million. This target was not met and therefore no bonus was earned by Executive Directors for performance relating to the 2019/20 financial year.

2017 LTIP out-turn

Awards were made under the LTIP in October 2017. These were subject to EPS and TSR performance criteria. The minimum EPS target required growth of RPI +2.5% per annum using a base EPS figure of 18.3 pence. This target was not met and therefore the award lapsed.

The Committee exercised no discretion in determining the vesting and considered that the formulaic outcome reflected the underlying performance of the Group.

No Directors exercised any options during the year (2018/19: Nil).

Pensions

The Group makes provision to pay into a defined contribution pension scheme of each executive's choosing or a cash alternative. Pension contributions are as follows:

The pension contribution rates for Messrs Jackson and Leaf were agreed at the time they joined the Company.

As part of the terms of the new policy, any new Executive Director appointments will have contributions aligned to the workforce rate. There are various pension schemes in operation at Alumasc and different contribution rates depending on length of service and age. The Company will review the current schemes and arrive at an appropriate 'workforce rate' that will apply for new directors (including the new Finance Director).

Payments in compensation to past directors and for loss of office

Mr. Andrew Magson resigned on 6 February 2020 and he was paid his salary, benefits and bonus achieved, as part of his notice period to 30 September 2020, amounting to £268,102.

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Statements Financial

Long Term Incentive Plans

The table below reconciles movements in LTIP awards during the year.

• The market price at the award date is based on the price on the day the Employee Trust or the Company granted the award. This price can differ from the market value at the date the Remuneration Committee recommended the award to the Trust or Company.

1. Mr. Magson resigned from the Board on 6 February 2020.
2. No LTIPs were awarded to Mr. Gilbert Jackson and Mr. Michael Leaf in 2019.
3. The October 2017 LTIP has failed to meet the hurdle criteria and will lapse in October 2020.

Non-executive Directors

The policy of the Board is that the remuneration of the Non-executive Directors should be consistent with the levels of remuneration paid by companies of a similar size and complexity. Non-executive Directors receive an annual fee and are reimbursed expenses incurred in performing their duties. They do not receive any performance related remuneration or pension contributions. The non-executive fees were not increased during the year.

The Chairman and Non-executive Directors have letters of appointment and details of their terms can be seen in the Appendix to Schedule 1 published on our website.

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Statements Financial

'

Bonus

For 2020/21 the annual bonus for the Executive Directors will be determined by performance against a sliding scale of demanding Underlying Profit Before Tax targets set at the beginning of the financial year. The targets themselves are commercially sensitive and will be disclosed in next year's reports.

Long-term Incentive Plan

It is intended that awards under the 2018 LTIP will be made in October 2020. The face value of the awards at grant will be 75% of salary for the CEO and 40% of salary for the other Executive Directors. To reflect the fall in share price as a result of the global pandemic and to avoid granting awards over too many shares, the number of awards will be calculated by reference to the higher of the share price at the time of grant or a notional share price of 130 pence.

The awards will vest subject to profit growth targets, defined as Underlying Profit before Tax (UPBT). For the CEO, 65% (out of his 75% of salary award) will be based on this measure and the measure will apply to all of the awards granted to other Executive Directors. The remaining 10% of salary grant for the CEO will be based on a relative Total Shareholder Return (TSR) measure. Details of the two measures and targets are set out below:

Underlying PBT

Awards will vest depending on growth achieved using a notional base UPBT figure of £7.0 million. Performance is based on the third year of the performance period, being the financial year ending 30 June 2023.

Awards will vest according to the following targets:

Total shareholder return

As mentioned above, 10% (out of the 75% of salary award) for the CEO is subject to a relative TSR measure.

If the Company's TSR is below the FTSE All Share index, no part of this award will vest. If performance is at median/index, then 25% will vest. For performance at upper quartile or higher, this part of the award will vest in full. For performance between median/index and upper quartile, vesting will be on a straight-line basis.

Mr Gilbert Jackson's and Mr Michael Leaf's LTIP awards are based on targets relating to the profit performance of their respective divisions: Building Envelope, and Housebuilding Products. The base profit figures for each division are equivalent to the total Group base figure of £7.0 million used for the UPBT measure above. The base figures for each division are not disclosable at this stage due to commercial sensitivity, but will be disclosed when they cease to be so.

The targets applying to each of the divisional profit measures are as follows:

In addition, a Group profit underpin applies requiring the Group UPBT threshold of RPI + 2.5% p.a. (using a base profit of £7.0 million) to be met before any of these awards can vest.

* A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast 'For' or 'Against' a resolution.

The Directors' Remuneration Policy on pages 52 to 57 and this Report were both approved by the Board of Directors on 8 September 2020 and signed on its behalf by the Remuneration Committee Chairman.

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Statements Financial