Victorian plumbing.cour Annual Report and Financial Statements 2024 Company number: 13379354 ![img-0.jpeg](img-0.jpeg) ![img-1.jpeg](img-1.jpeg) ![img-2.jpeg](img-2.jpeg) ![img-3.jpeg](img-3.jpeg) --- Victorian Plumbing is the UK's leading bathroom retailer, offering a one-stop shop solution for the entire bathroom. Victorian Plumbing offers its customers a choice of over 36,000 products spanning the entire bathroom, with more than 150 own and third party brands across a wide spectrum of price points. Victorian Plumbing brands | Victorian Plumbing.com | AREZZO | | --- | --- | | MILAN | SUNYWORTH | | KESWICK | ALIPOLA | | Stonehouse Studio | | ## Strategic Report | At a glance | 42 | | --- | --- | | Our growth story | 04 | | Investment case | 06 | | Chair's statement | 08 | | CEO's statement | 10 | | Market review | 14 | | Business model | 15 | | Our brands and products | 20 | | Our strategy | 22 | | Stakeholder engagement | 28 | | Key performance indicators | 30 | | Environmental, Social and Governance: | | | Making a splash | 34 | | Environmental sustainability | 36 | | Diversity and inclusion | 36 | | Governance and ethics | 42 | | Reporting frameworks | 44 | | SASB disclosure and accounting metrics | 46 | | --- | --- | | Non-financial and sustainability information | 47 | | Financial review | 48 | | Risk management | 54 | | Principal risks | 56 | | Viability statement | 62 | ## Corporate Governance | Corporate governance at a glance | 54 | | --- | --- | | Chair's introduction to corporate governance | 65 | | Board of Directors | 66 | | Division of responsibilities | 68 | | Corporate governance statement | 69 | | Nomination Committee report | 74 | | Audit and Risk Committee report | 76 | | Directors' remuneration report | 80 | | Directors' report | 87 | ## Financial Statements | Independent auditor's report | 92 | | --- | --- | | Consolidated statement of comprehensive income | 98 | | Consolidated statement of financial position | 99 | | Consolidated statement of changes in equity | 100 | | Consolidated statement of cash flows | 101 | | Notes to the consolidated financial statements | 102 | | Company balance sheet | 135 | | Company statement of changes in equity | 136 | | Notes to the Company financial statements | 138 | ## Additional Information | Unaudited five-year record | 143 | | --- | --- | | Glossary – Alternative Performance Measures | 144 | | Advisers | 145 | --- Strategic Report Corporate Governance Financial Statements Agenda for International Development # 2024 Key Events ## New distribution centre Moved into our new **$44,000 square feet** distribution centre (CDC) located in England, Lancashire. The CDC is a major part of the interim government in pre-tax logistics, customer delivery and experience. Sustainable features, such as solar panels, electric vehicle chargers, staff gyro and staff canteen, are built to consume our 25% credentials. ![img-4.jpeg](img-4.jpeg) ![img-5.jpeg](img-5.jpeg) ## Strategic acquisition of Victoria Plum In May 2024, the strategic acquisition and subsequent review of Victoria Plum, one of our major competitors. Victoria Plum.com ## Victorian Plumbing app Summer 2024 was the full launch of the app and additional features to enhance the customer service experience over time. ![img-6.jpeg](img-6.jpeg) Find out more inside... ![img-7.jpeg](img-7.jpeg) 06 Investment case 06 Investment case 22 Our strategy 34 ESG ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # At a glance ## Our purpose Our purpose is to improve the quality of home life. We provide affordable bathrooms to every home by sustainably investing in a broad range of products, advanced logistics and a values-driven, customer-focused and data-oriented culture. ## Our strategy Our strategy focuses on three horizons: ![img-8.jpeg](img-8.jpeg) Core B2C (see pages 24 to 25) ![img-9.jpeg](img-9.jpeg) Trade (see page 26) ![img-10.jpeg](img-10.jpeg) Expansion categories (see page 27) (9) Read Our strategy on PAGE 22 ## Financial highlights ### Revenue **£295.7m +4%** ![img-11.jpeg](img-11.jpeg) ### Adjusted EBITDA² **£27.2m +14%** ![img-12.jpeg](img-12.jpeg) ### Free cash flow⁴ **£18.6m +16%** ![img-13.jpeg](img-13.jpeg) ### Gross profit margin¹ **50% +3ppts** ![img-14.jpeg](img-14.jpeg) ### Adjusted profit before tax³ **£23.1m +14%** ![img-15.jpeg](img-15.jpeg) ### Total ordinary dividend per share **1.61p +15%** ![img-16.jpeg](img-16.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ## Our values Everything we do is driven by a set of shared values: ![img-17.jpeg](img-17.jpeg) We take responsibility ![img-18.jpeg](img-18.jpeg) We innovate ![img-19.jpeg](img-19.jpeg) We respect people ![img-20.jpeg](img-20.jpeg) We develop and grow ![img-21.jpeg](img-21.jpeg) We're humble ![img-22.jpeg](img-22.jpeg) We celebrate success ## All of which is underpinned by our way of working, based on an unwavering commitment to: ![img-23.jpeg](img-23.jpeg) Our stakeholders ![img-24.jpeg](img-24.jpeg) Our people and culture ![img-25.jpeg](img-25.jpeg) Risk management ![img-26.jpeg](img-26.jpeg) Governance ## Operational highlights ### Total orders ('000) 1,022 +10% ![img-27.jpeg](img-27.jpeg) ### Marketing as a % of revenue 28.9% +1.1ppts ![img-28.jpeg](img-28.jpeg) ### Trade revenue as a % of total 23% +2ppts ![img-29.jpeg](img-29.jpeg) ### Average order value £290 -5% ![img-30.jpeg](img-30.jpeg) ### Trustpilot score (out of 5.0) 4.6 +0.1 ![img-31.jpeg](img-31.jpeg) 1. Gross profit margin is defined as gross profit as a percentage of revenue. Gross profit is defined as revenue less cost of sales. 2. Adjusted EBITDA is a non-GAAP measure – please refer to the glossary on page 144. 3. Adjusted profit before tax is a non-GAAP measure – please refer to the glossary on page 144. 4. Free cash flow is a non-GAAP measure – please refer to the glossary on page 145 5. A special dividend was approved for 2022 (1.70p per share) in addition to the total ordinary dividend of 1.10p per share. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 03 --- # Our growth story ![img-32.jpeg](img-32.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ![img-33.jpeg](img-33.jpeg) ![img-34.jpeg](img-34.jpeg) Sponsor of Bolton Wanderers Football Club Release of the Victorian Plumbing app ![img-35.jpeg](img-35.jpeg) #1 bathroom retailer in the UK ![img-36.jpeg](img-36.jpeg) Listed 24th in The Sunday Times Fast Track 100 – ‘Fastest Growing Private Companies’ 3 million orders Admission to AIM – June 2021 ![img-37.jpeg](img-37.jpeg) New HQ opened and launch of recruitment drive >500 employees ![img-38.jpeg](img-38.jpeg) ![img-39.jpeg](img-39.jpeg) ![img-40.jpeg](img-40.jpeg) Acquisition of AHK Designs Limited, trading as Victoria Plum ![img-41.jpeg](img-41.jpeg) Transition of warehouse operations to new distribution centre ![img-42.jpeg](img-42.jpeg) Headline sponsor of the Victorian Plumbing UK Snooker Championship ![img-43.jpeg](img-43.jpeg) VitrA Stonehouse Studio ![img-44.jpeg](img-44.jpeg) DURAVIT # Our ongoing growth story Consumers continue to choose Victorian Plumbing as the number one bathroom retailer because of our fair pricing, unrivalled high-quality product range and excellent product availability. We remain focused on our three growth horizons: core B2C, expansion categories and trade. Our continued investment in marketing enhances brand awareness and supports customer acquisition, as consumers continue to respond positively to the bold and distinctive Victorian Plumbing brand. A Read Our strategy on PAGE 22 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Investment case Why invest in us? ## 1 Digitally native leading brand We are the leading retailer of bathroom products and accessories in a large market where consumer buying behaviour continues to shift to online channels. We have a highly recognisable brand with a reputation for quality products and great service. ## £1.7bn market size of bathroom and bathroom accessories in 2024, according to Mintel [🖥️] Read Our strategy on PAGE 22 ## Agile supply chain Long standing relationships with our global supplier base allow us to manage and work effectively with our supply chain, bringing choice and differentiated products to both the consumer and trade audience. [🖥️] Read Our strategy on PAGE 22 ## Significant product range Our extensive range of own and third party brands enables customers to complete their entire basket of bathroom purchases. We currently offer more than 36,000 products from over 150 brands to provide a one stop solution for our broad customer base. We also have an exciting opportunity to expand our reach into products that often come later in the buying journey, such as tiles and décor, heating and kitchens. [🖥️] SKUs available across own and third party brands [🖥️] Read Our strategy on PAGE 22 ## 4 Seamless customer journey Our convenient and intuitive website provides a seamless, fully digital journey from homepage to payment and beyond. The website is optimised across multiple devices and tracks each customer's behaviour to intelligently provide visitors with complementary products, maximising conversion and customer satisfaction. Our app, launched in 2023, has been further developed this year to enhance the customer journey for both consumer and trade. ## 2% Revenue run rate through the app [🖥️] Read Our strategy on PAGE 22 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Entrepreneurial and collaborative approach Our Executive Leadership Team comprises the Group’s founder, Mark Radcliffe, his brother, Neil (Product Director), other long-standing members of Victorian Plumbing management and senior hires brought into the business over recent years; all work together to grow the business into the market leader. ## £22.2m Acquisition of Victoria Plum from existing cash reserves [Read Our strategy on PAGE 22] ## Robust financial position With an individual reach record of profitability and strong cash generation, an external debt and a robust balance sheet, we are in a strong position to continue to invest and grow our share of the businesses and expansion category market. Adjusted EBITDA (2023: £23.8m) Operating cash conversion (2023: 68%) [Read Our strategy on PAGE 22] ![img-45.jpeg](img-45.jpeg) ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 07 --- # Chair's statement ![img-46.jpeg](img-46.jpeg) Philip Bowcock Chair ## Highlights - Significant profit progression in a year of transition - Continued strong cash generation in a year of warehouse investment and the acquisition of AHK Designs Ltd ("Victoria Plum") - New 544,000 square feet distribution centre located in Leyland, Lancashire ("DC"), now operational, releasing capacity constraints - Full year final ordinary dividend recommended for 2024 ## Introduction The last 12 months have been ones of continued progress for Victorian Plumbing, with positive order growth for the second year running, strong operating cash flow, and a robust balance sheet, while further cementing its position as the largest retailer of bathrooms in the UK¹. In addition, we are pleased to have finalised the move into our new DC in December 2024. This new facility will enable growth in the traditional bathroom market alongside our expansion categories of tiles and décor. ## 2024 performance Revenue grew by 4%, adjusted EBITDA² increased by 14% and adjusted EBITDA margin increased to 9% (2023: 8%). Robust operating cash conversion of 68% with free cash flow growing by 16%. ## Our people The dedication and hard work of our people across the organisation, during a period of change, have enabled the Group to deliver another year of strong strategic progress. On behalf of the Company's Board of Directors (the "Board"), I'd like to thank all the Group's employees, agents and contractors for their contribution during the year. ## Our Board and corporate governance The Board is committed to upholding the highest level of corporate governance, and this has already been demonstrated by our undertaking to adopt the UK Corporate Governance Code (the "Code") from Admission. Although this is not required for companies on AIM, we believe that it is important to hold ourselves to high standards in all areas of our business, including governance. The continued presence of two independent Non-Executive Directors along with myself, also independent on appointment, means that the composition of the Board remains compliant with this area of the Code. We recognise that only 20% of our Board members are women, which is below the target of 33% set by the Hampton-Alexander Review. Diversity, whether it be gender or ethnicity, is important to us at all levels. VICTORIAN PLUMBING GROUP PLC 1 Bathrooms and Bathroom Accessories UK, 2024, Mintel Group Ltd. 2 Adjusted EBITDA is a non-GAAP measure. A reconciliation to operating profit can be found within note 4 of the consolidated financial statements. --- Strategic Report Corporate Governance Financial Statements Additional Information # Looking ahead In light of the current trading environment, the Board is pleased with the start to the new financial year. It is confident that the Group is well positioned to drive sustained profitable growth as it now seeks to capitalise on investment in its warehouse infrastructure. The Group continues to lead the shift in its markets from offline to online, and takes advantage of opportunities in the trade sector and in complementary product categories. The Board looks forward to making strong strategic and operational progress in the year ahead. # Dividend In order to distribute a total ordinary dividend for the year of 1.61 pence per share (2023: 1.40 pence per share), the Board is pleased to recommend a full year final ordinary dividend of 1.09 pence per share for the 2024 financial year (2023: 0.95 pence). The Board considered that a special dividend wasn't appropriate for the 2024 financial year considering the investment made in the new DC, together with the cost of acquiring Victoria Plum and its subsequent cessation. I would like to take this opportunity to express my thanks to all the employees of Victorian Plumbing for what has been an extremely busy and successful year. Philip Bowcock Chair 14 January 2025 # Governance ![img-47.jpeg](img-47.jpeg) On Admission, the Company agreed to comply with the UK Corporate Governance Code (the "Code"), and details of our compliance with the Code are set out on page 69. The Board's composition is as follows: ![img-48.jpeg](img-48.jpeg) ![img-49.jpeg](img-49.jpeg) - Chair (independent on appointment) - Independent Non-Executive Directors - Executive Directors - Read more on PAGE 64 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # CEO's statement ![img-50.jpeg](img-50.jpeg) ## Mark Radcliffe Chief Executive Officer ## Legislation - Retained our position as the number one bathroom retailer in the UK - Acquisition of Victoria Plum and the removal of brand confusion - Record level of orders, surpassing one million orders in the year - Continued outperformance of the RMI market - Fully operational in our new DC, as planned and within budget ## Overview The business has continued to deliver on its strategy to grow profitably, with revenue growth of 4%. This has been driven by continued order growth (10%), alongside an average order volume ("AOV") reduction (5%) that reflects the impact of the lower-priced range at Victoria Plum in the four and a half months following its acquisition. On a like-for-like basis ("LFL"), revenue declined by 1%, with order growth of 3% offset by a 4% reduction in AOV, as the mix of sales continued to shift to our own brand range. The consumer continues to choose Victorian Plumbing as the number one bathroom retailer¹ because of our fair pricing, unrivalled high-quality product range and excellent stock availability. Order levels have surpassed previous records with over one million orders delivered in the year, and our Trustpilot scores have improved in the face of this continued growth. The switch to higher margin product has continued to improve our profitability throughout the year. Our commitment to provide the most extensive choice of high quality bathroom products and the best customer experience, together with investment in our new warehouse infrastructure, sets us up well for the next phase of profitable growth. ## Summary of performance Revenue grew by 4% compared to the prior year at £295.7m (2023: £285.1m) reflecting an increase in total orders of 10% and a reduction in AOV of 5%. Adjusted EBITDA² increased by 14% to £27.2m (2023: £23.8m) and adjusted EBITDA margin increased to 9% (2023: 8%). ## Victorian Plumbing (LFL) Outperforming the wider RMI market³, on a LFL basis we reported revenue decline of 1% at £281.0m (2023: £285.1m), reflecting an increase in total orders of 3% and a decline in AOV of 4%. The first half of the financial year saw an increase in order volume (2%) and reduction in AOV (4%), resulting in a 1% decline in revenue. The second half of the financial year saw the trends continue, with order volume growth of 3% versus the second half of 2023, and AOV reduction of 4%, resulting in revenue decline of 1%. The reduced AOV represented a continued shift to own brand products which, together with continuing tailwinds from shipping and foreign exchange rate improvement, resulted in gross margin improvement of 3ppt to 50% (2023: 47%). Online marketing spend as a % of revenue decreased from 26.3% in 2023 to 26.2% in 2024, with brand marketing spend increasing from 1.5% to 2.5% in the same period, resulting in overall marketing spend increasing from 27.8% in 2023 to 28.7% in 2024. VICTORIAN PLUMBING GROUP PLC 1 Bathrooms and Bathroom Accessories UK, 2024, Mintel Group Ltd. 2 Adjusted EBITDA is a non-GAAP measure. A reconciliation to operating profit can be found within note 4 of the consolidated financial statements. 3 Barclays UK Consumer Spend Report - during the year homeware spend was between 2ppt and 7ppt below the previous year. --- Strategic Report Corporate Governance Financial Statements Additional Information The investment in brand reflects the creation of new marketing content that will go live in 2025 to drive profitable growth following the removal of the Victoria Plum brand after its acquisition, and to capitalise on the increased capacity unlocked by the finalisation of our warehouse transformation programme. This financial performance proves the resilience of our business model and our competitive advantage irrespective of consumer sentiment, underpinning our confidence in short, medium and long-term profitable growth. ## Our strategic focus We continue to leverage our market and brand position, as well as our strong balance sheet, to deliver on our clear strategic objectives, which remain unchanged and focus on three growth horizons: core B2C, expansion categories and trade. Our core market is retailing bathroom products and accessories to UK consumers through our market-leading online platform. Consumers are continuing to shift online to purchase bathroom products and accessories and there is still a considerable way to go before this transition reaches maturity. We are particularly well placed to continue to gain further market share in the short-term through these structural tailwinds and by taking share from traditional physical retailers, omnichannel players and other online competitors. We continue to improve the customer buying journey, with the launch of 'product detail pages' that better showcase the different options and specifications available to purchase within a selected range, and the search functionality has been developed to incorporate the latest advances in AI. Our second horizon focuses on expansion categories. Given our solid position in the bathroom product and accessories market, we have an exciting opportunity to expand our reach into products such as tiles and décor. We were very pleased to see our expansion category revenue increase by 23% to £12.4m (2023: £10.1m), despite the space constraints that we operated within prior to the new warehouse becoming operational. Finally, our third growth horizon focuses on the B2B opportunity to retail bathroom products and accessories to trade customers. During 2024, our trade revenue grew by 13% to £67.3m (2023: £59.5m), representing 23% (2023: 21%) of our total revenue, compared with an estimated 50:50 split across the wider market⁴. Whilst we primarily target smaller independent traders, the Victorian Plumbing brand has historically been consumer focused and so we believe we can make meaningful market share gains in this area by broadening our marketing approach, such as via targeted radio advertising, expanding the range of relevant products we offer to trade customers, and by continually > The successful delivery of our warehouse transformation reaffirms confidence in our profitable growth strategy that is delivering long-term value for all stakeholders. improving the platforms so that they are more tailored to suit trade customers' needs. The technology enhancements made to the Victorian Plumbing app during the year further strengthens our proposition in this regard and, along with the investment in our dedicated Trade team during H1 2024, means we are well placed to attract trade customers and drive further growth in trade revenue. ## Strengthening our competitive position We are the UK's largest bathroom retailer, and during the period have continued to strengthen our competitive moat by improving the customer journey through innovative technology improvement and category expansion. Our investment in marketing continues to enhances brand awareness and supports customer acquisition, as consumers continue to respond positively to the bold and distinctive Victorian Plumbing brand. We have entered our second year of a three-year partnership with Bolton Wanderers Football Club as their title and front of shirt sponsor. We also partnered with the World Snooker Tour as the headline sponsor of the Victorian Plumbing UK Championship 2024, part of snooker's Triple Crown Series, that aired live on the BBC in November 2024 and attracted over 14 million viewers. Our creative offline content is complemented by our investment in increasingly targeted digital performance-based marketing. This dynamic marketing strategy, together with our bold marketing campaign, 'Boss Your Bathroom', has further improved our strong brand awareness score⁸ of 66% (2023: 64%). As an online retailer, we continue to benefit from the ongoing structural shift in consumer buying behaviour from offline to online. Online sales represented c.27% of total retail sales in 2024⁹, and we expect our addressable market to grow even further in the coming years. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # CEO's statement continued ## A one-stop shop for bathroom products and accessories Offering customers a wide selection of products across a variety of price points ensures that we are the true one-stop solution for any bathroom-related purchase. At 30 September 2024, we have increased the number of available products to more than 36,000 from over 150 brands, ensuring there is something available, affordable and suitable for everyone. The relationships that we have developed over time with well-known third party brands enable us to complement our own brand offerings, which are exclusively available on the Victorian Plumbing platforms. We have developed over 25 own brands using our in-house product development team, and these are increasingly popular with customers. In the period, 79% of revenue generated (2023: 78%) came from own brand products, including Stonehouse Studio, our in-house tile range. This unique own brand proposition alongside established third party brands helps to ensure that profitability is maintained, irrespective of wider market conditions, and is testament to the resilience of the business model. ## Agile supply chain Geopolitical tensions have resulted in shipping cost increases in the second half of the year. However, by leveraging the positive working relationships we have with our shipping partners, as well as those built with our global suppliers over 20 years of trading, we have avoided supply chain disruption – also evidencing the benefit of scale we have achieved in recent years. We continue to work closely with specialist tile and décor manufacturers, many of whom are based in Southern Europe, to expand this category at margins that are closely aligned with the existing Group margin. ## Seamless customer journey We are extremely proud that we continue to be rated 'Excellent' by Trustpilot and have improved our average score in the period to 4.6 out of 5.0 (2023: 4.5). We received a record number of reviews via Trustpilot during the period and as a Group have surpassed 370,000 reviews in total, the highest of any specialist bathroom retailer on the site. The 'Excellent' rating we have across this volume of reviews is testament to the dedicated work of our colleagues. ![img-51.jpeg](img-51.jpeg) ## Development of our technology platform Our growing Technology Development and Infrastructure teams work hard to facilitate the continual development of our bespoke technology platforms to ensure we remain best in class across online retail. There has been significant work undertaken over the last 24 months to completely re-platform the website to improve its functionality and scalability, introduce a newly designed structure to give prominence to our expansion categories, enhance our search functionality to include AI features, and introduce other developments, such as improved courier software to augment the customer experience. These strategic developments have supported an improvement in user conversion from 3.5ppt to 3.8ppt in 2024†. The Victorian Plumbing app was released in October 2023 and has enabled our customers to browse and purchase products more efficiently. A successful full launch completed in summer 2024 has developed functionality further and driven more customers to use the app, with c.2% of revenue currently generated through the app. In addition, the Technology Development team successfully enhanced our existing warehouse management system alongside the larger project to transform warehouse operations, with the new DC becoming operational with minimal issues. By performing this work in-house, we can better control costs, improve quality, and provide more certainty over the benefits that the improved technology brings. † Google Analytics GA4 – H2 2024 vs H2 2023. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Acquisition and subsequent closure of Victoria Plum Victoria Plum was acquired by Victorian Plumbing from existing cash reserves for £22.2m on 17 May 2024. The acquisition contributed £14.7m of revenue and incurred an adjusted EBITDA loss of £2.2m during the four and a half month period to the end of the financial year. As previously announced, we took the decision in August 2024 to close Victoria Plum and its operations in Doncaster. This resulted in the website traffic being redirected to Victorian Plumbing from November 2024, with all remaining inventory transferred from the exited Doncaster site by 31 January 2025. The acquisition and subsequent closure of Victoria Plum represents the removal of a confusing factor for our customers, owing to the business trading with a similar name, which was a drag on the Victorian Plumbing reputation. This provides an opportunity to invest in brand marketing with confidence for a greater return. # New distribution centre We achieved legal completion on the 20-year lease of our new 544,000 square feet DC on 4 October 2023 and became fully operational in our new warehouse infrastructure, as planned and within budget, by the end of December 2024; a timeframe that is best in class when compared to other warehouse transformation programmes in the retail industry. We now look forward to reaping the benefits of this landmark investment for the rest of the current year and beyond, as capacity constraints have been removed and efficiency gains can be extracted as we become a more scalable organisation. # Entrepreneurial approach Our entrepreneurial approach and our desire to trial new concepts, such as expanding into tiles and decor, has played a key part in the success of the business to date. We continue to be entrepreneurial, knowing that this gives us a competitive edge, whilst maintaining robust and appropriate monitoring and reporting procedures. BB This financial performance proves the resilience of our business model and our competitive advantage. DD # ESG Taking responsibility is one of our core values, and we are clear that every one of us has a role to play in making a positive difference to the environment and the communities in which we operate. Our ESG strategy is centred around three focus areas: environmental sustainability, diversity and inclusion, and governance and ethics. We continue to support our chosen charity, Emmaus, who work to end homelessness, with employee volunteering days. In collaboration with Bolton Wanderers in the Community, the charity name is adorned on the back of the Bolton Wanderers third kit for the second year running. Our electricity contracts remain 100% renewable, and we continue to work with suppliers to reduce the levels of plastic packaging on our products. We have installed photovoltaic panels on the new DC to ensure we are maximising the renewable energy source opportunities available to us. # Our people As a Board, we continue to be impressed by the commitment and capability of our people; collectively, their innovation and hard work have been the driving force behind the growth and success experienced by the Group over recent years. We are proud of the values-led, principles-driven culture that is deep-rooted throughout Victorian Plumbing, and it is this culture that underpins our ability to adapt and respond positively to challenges. ![img-52.jpeg](img-52.jpeg) ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 13 --- # Market review ## Overview The UK bathroom and bathroom accessories market, as estimated by Mintel, has demonstrated steady growth in recent years despite economic challenges. Between 2020 and 2024, the market expanded from £1.43 billion to an estimated £1.74 billion, reflecting compound annual growth of approximately 3.2%. Growth has been driven by a combination of rising home ownership, increased spending on home improvements, and changing consumer preferences. However, growth slowed in 2024 to 1.5%, down from 3.9% in 2023, due to the ongoing cost-of-living crisis, which pushed consumers towards cost effective, small-scale bathroom upgrades over expensive, full-scale renovations. ![img-53.jpeg](img-53.jpeg) Looking forward, Mintel expects the market to grow by 16% between 2024 and 2029, reaching c.£1.94 billion. This growth is expected to be fuelled by an improving economic climate, a stronger housing market, and demographic shifts, including an ageing population and the rise of multi-generational households. These factors are projected to drive demand for inclusive, adaptable bathroom products and energy-efficient solutions. By 2025, a rebound in consumer spending is anticipated as inflation eases and interest rate cuts by the Bank of England boost the housing market, encouraging larger renovation projects. Victorian Plumbing continues to be the leading UK bathroom retailer, outperforming those with shops, omnichannel retailers and other online competitors. ## Market size and insights In 2024, the UK bathroom market was impacted by macroeconomic challenges, evolving consumer priorities, and the need to improve digital shopping experiences. Amid the cost-of-living crisis, growth in the market slowed down, with consumer spending increasing by just 1.5% in 2024 compared to 3.9% in 2023. Rising inflation and financial constraints have inhibited large-scale renovations, prompting consumers to focus on smaller, cost-effective upgrades such as redecorating or adding bathroom accessories. With this in mind, the bathroom accessories section of the market was forecast to grow by 5% in 2024 and bathroom fittings and furniture by just 1%. However, with inflation easing and the Bank of England expected to continue to reduce interest rates, a rebound in the housing market is anticipated, which could reinvigorate spending on major bathroom projects. Market value (£m inc. VAT) Source: Mintel ![img-54.jpeg](img-54.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information Home ownership is increasing, as soaring rents encourage more individuals to invest in properties, which could further strengthen demand for comprehensive bathroom refits. Demographic trends, including an ageing population and a rise in multi-generational households, are shaping market priorities, with greater emphasis on inclusive and space-efficient bathroom designs to accommodate diverse needs. Over the long term, the market is projected to grow by 16% by 2029, spurred by improving economic conditions, demographic shifts, and renewed activity in the housing sector. The current market climate is characterised by a challenging cost-of-living crisis, impacting consumer spending patterns within the bathroom retail sector, yet there are signs this is starting to ease. The home remains an important area of spending for consumers, but with escalating costs affecting disposable income there is a noticeable shift in consumer spending preferences towards more affordable bathroom accessories. Retailers in the bathroom sector have an opportunity to support consumers who are more affected by the financial strains brought on by the cost-of-living crisis. Businesses must recognise the importance of aligning their offerings with the consumers' evolving needs and values, focusing on affordability, wellness and sustainability to secure a strong position in a competitive market. Victorian Plumbing has an extensive product range from over 150 brands across a variety of price points. This, together with our agile supply chain, means the Group is well-equipped to satisfy the constantly evolving consumer demand. ## Evolving consumer priorities Consumers' priorities in bathroom projects are evolving, reflecting their financial and lifestyle considerations. Energy efficiency has become a key focus, with 36% of consumers aiming to reduce energy usage and 35% seeking to conserve water. This has fuelled interest in smart technology, such as energy-monitoring showers and water-saving fixtures. Wellness is another significant trend, with a growing number of homeowners investing in spa-like bathrooms. Features such as aromatherapy, chromotherapy, and hydrotherapy are increasingly popular, providing opportunities for brands to collaborate with wellness-focused partners and introduce high-end products that create tranquil, restorative spaces at home. ![img-55.jpeg](img-55.jpeg) ## Innovation in the bathroom "Which of the following would you prioritise when planning a project for your bathroom, shower room or separate toilet/cloakroom?" ![img-56.jpeg](img-56.jpeg) Source: Mintel In addition, while 42% of consumers have recently added new or replacement accessories in their bathrooms as a smaller upgrade to their homes, 29% have undertaken a complete or partial refit, suggesting there is still a healthy demand for larger household projects. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 15 --- Market review continued ## Most recent consumer projects “And which of these was done most recently? If more than one was done simultaneously, please select the one that cost the most.” | Added free-standing bathroom accessories (e.g. soap holder, toilet brush) | 27% | | --- | --- | | Complete refit | 16% | | Installed new/replaced fitted bathroom accessories (e.g. bath screen, wire shelves) | 15% | | Partial refit (e.g. replaced sink or toilet) | 13% | | Added new free-standing bathroom furniture (e.g. cupboard, drawers) | 10% | | Installed new/replaced fitted bathroom furniture (e.g. cabinets built-in) | 10% | | Installed new bathroom/shower room (e.g. in an extension) | 8% | | Don’t know/can’t remember | 1% | Source: Mintel While functionality and practicality remain essential, aesthetics are a leading driver of consumer decisions, especially among older homeowners. Updating the appearance of bathrooms often takes precedence, followed by functional improvements like maximising storage or meeting the needs of multi-generational households. Customisation is also gaining traction, particularly among affluent consumers who are willing to pay a premium for personalised fixtures and bespoke bathroom designs. These trends underscore the market’s growing potential to cater to both practical and aspirational consumer demands. ## Online penetration The pandemic provided the opportunity for online specialists to appeal to consumers who had not previously considered using these channels to research and ultimately purchase products for their bathrooms. While the online specialist sector was already growing rapidly before the pandemic, this changing consumer behaviour accelerated the transition, and it has continued, with online specialists increasing their market share year-on-year, transitioning the revenue from shops and omnichannel retailers. Across the wider retail environment, and equally so within the bathroom and bathroom accessories market, it is anticipated that online penetration will continue to grow as technology advances and consumers increase their trust in and appreciate the convenience of online channels. This provides growth opportunities for the business, given Victorian Plumbing’s position as the clear number one retailer in the online space. Online-only retailers are gaining popularity, particularly among older consumers, signalling a shift towards digital channels. Social media platforms such as YouTube, Instagram, and TikTok are crucial sources of inspiration for bathroom renovations, particularly among younger consumers like Gen Z and Millennials. Retailers that leverage these platforms to create shoppable content or provide expert advice have the opportunity to strengthen engagement and sales. ![img-57.jpeg](img-57.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Inspiration for bathroom projects “Which of the following have you used for inspiration for projects for your bathroom, shower room or separate toilet/cloakroom in the last three years? Please select all that apply.” ![img-58.jpeg](img-58.jpeg) Source: Mintel # Market opportunities Consumer appetite for discretionary spend on home improvements in the midst of the current macroeconomic environment may influence the overall market growth over the forthcoming year. This may naturally create pressure on the performance of some smaller, less well financed companies in the sector. In addition, with interest rates remaining high, the cost of borrowing continues to plague many companies, particularly those with a bricks and mortar presence. While there has been some consolidation in the market in recent years, it is likely that further opportunities will arise out of the current trading environment. Given our unrivalled range, excellent availability and strong financial health, the Group is well placed to capitalise on opportunities that may arise. # Improving the online experience To further enhance the online shopping experience, retailers are incorporating advanced technologies such as virtual reality ("VR") and augmented reality ("AR"). These tools allow customers to visualise bathroom designs and configurations before purchasing, increasing confidence and satisfaction. AI-powered chatbots and smart bathroom technologies, including app-controlled fixtures and voice-activated devices, are also becoming increasingly popular. Sustainability remains a critical consideration for consumers. Brands are addressing this demand by introducing eco-friendly products, such as water-recycling showers that reduce water and energy usage. Highlighting sustainability credentials and integrating green technologies into bathroom solutions are essential strategies for capturing the attention of environmentally conscious shoppers. Despite current economic challenges, the UK bathroom market is poised for growth, driven by consumer demand for affordable yet innovative upgrades, wellness-oriented designs, and sustainable solutions. Brands that adapt to these changing priorities, enhance digital experiences, and offer products that balance functionality with aesthetics are likely to thrive in this competitive landscape. # Supply chains and operations Over the past twelve months, there have been several challenges that have disrupted supply chains both in the UK and across the world. Global supply chain disruption, including higher transportation costs and delays, strained stock availability, while rising energy prices and inflation put pressure on both production and operational costs. In the UK, as the demand for staff across most areas, most notably warehouse personnel and developers, has increased, companies are continuing to have to make themselves attractive from both a remuneration and wellbeing perspective to ensure they attract and retain the appropriate amount of resource. In addition, recent announcements to increase the National Living Wage by 6.7% whilst also increasing employer National Insurance contributions, will create further costs to businesses, increasing the pressure on some companies to absorb costs to ensure they remain competitive, or to reduce headcount to offset these growing costs. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- Business model ## Our resources ![img-59.jpeg](img-59.jpeg) ### Leading market position and strong market penetration Number one bathroom retailer in the UK ### Extensive product range More than 36,000 SKUs across 150 own and third party brands ### Trusted customer brand Continue to be rated 'Excellent' by Trustpilot with a score of 4.6 in the period ### Scalable technology platform Significant work over the last 24 months to re-platform the website and improve its functionality and scalability, with capability of supporting new growth opportunities ### Warehouses and distribution centre driven by data In-house-built warehouse management software enables agile changes as business requirements evolve ### Cash generation Continued year-on-year improvements in operating cash conversion and operating cash flows ## What we do ### Compelling marketing campaigns #### Investment in marketing to drive traffic Bold marketing campaign to 'Boss Your Bathroom' extended across our expansion categories with 'Boss Your Home' campaign Confidence to invest in brand marketing for a greater return following the acquisition of Victoria Plum #### Sport sponsorship to increase brand awareness Title and front-of-shirt sponsor for Bolton Wanderers Headline sponsor for the 2024 Victorian Plumbing UK Snooker Championship, one part of snooker's Triple Crown Series #### Strong margins Our own brand higher-margin products improve profitability as consumers trade down in a difficult market #### Robust balance sheet Warehouse transformation programme and acquisition of Victoria Plum funded from existing cash reserves. Year-on-year increase in free cash flow supports dividend growth ## Strong financial performance and data system VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Value we create ## Customer-centric product planning ![img-60.jpeg](img-60.jpeg) ### Continuous investment in own brand and new products Strategically developed to enhance customer engagement while addressing specific market gaps ![img-61.jpeg](img-61.jpeg) ### Retailing notable third party brands for client acquisition and product choice Ensures that we deliver on our commitment to being a one-stop shop for bathroom solutions and that we capture all customer purchase intents ![img-62.jpeg](img-62.jpeg) ### Unleashing the potential in trade buyers Widening our product offering for trade customers and focusing on their customer journey to maximise repeat orders and AOV ## Product availability Excellent product availability for the customer when supply chain issues are impacting other retailers ## Excellent customer experience improving conversion Driven by continuous investment in our in-house built website and app ## New distribution centre to enhance logistics capability Unlocking our capacity constraints and allowing us to focus on our growth strategy ## Highly efficient e-commerce and logistics platforms ## Employees We care about our employees and operate with a values-led culture ## Suppliers We operate in a transparent way with our suppliers, who are able to participate in our success as we grow ## The community and environment We support our wider community and are putting an increasing focus on our environmental impact ## Customers We provide customers with an extensive range of quality bathroom products and accessories ## Investors We continually invest in our marketing, platform and people to create a long-term sustainable business Read more on PAGE 28 ![img-63.jpeg](img-63.jpeg) ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 19 --- # Our brands and products ## Victorian Plumbing brands Own brands are a core component of the Victorian Plumbing offering. With a high volume of products on the platform, our proprietary brands allow for the effective segmentation of offerings, showcasing distinct features such as water filtration, waterproofing and design aesthetics. Own brands collectively account for 79% of total product revenue. These brands are strategically developed to enhance customer engagement while addressing specific market gaps. Our brands span almost all product categories, with highlights including innovative solutions and market-leading designs. Key examples are outlined below, demonstrating their contribution to both revenue growth and customer satisfaction. ![img-64.jpeg](img-64.jpeg) ![img-65.jpeg](img-65.jpeg) ## Victorian Plumbing Our core own brand product range includes an extensive selection of everyday bathroom fixtures and fittings. With over 3,500 unique SKUs, our offering spans baths, porcelain and brassware at a variety of price points to suit every budget. ![img-66.jpeg](img-66.jpeg) ![img-67.jpeg](img-67.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # AREZZO ## Arezzo Caters to the style-conscious customer, inspired by luxury hotels and aspirational homes. This range features designer fixtures and stylish finishes, including matt black, brushed brass and gunmetal. A go-to choice for those aiming to create an elevated, contemporary look. # BROOKLYN ## Brooklyn The Brooklyn furniture range combines modern, stylish storage solutions with practicality, making it ideal for smaller and family bathrooms. Available in black, grey and wood finishes, Brooklyn offers a perfect blend of style and functionality. # CHATSWORTH ## Chatsworth Delivers a timeless, classic look, perfectly aligned with trends in kitchen cabinetry and trending paint colours. Customers choose Chatsworth to achieve farmhouse and cottage-inspired bathrooms, featuring finishes such as antique brass and elegant column radiators. # Stonehouse Studio ## Stonehouse Studio Our house tiling brand continues to go from strength to strength, now accounting for over 15% of our total tile SKU count. We have invested heavily in high-quality imagery for this range, helping to inspire and instil confidence in customers as they choose the perfect tiles for their home. # bower ## Bower Bower is our trusted in-house kitchen fittings brand, offering a versatile range of products. The collection includes regular and boiling-water kitchen taps, as well as designer kitchen sinks in ceramic, stainless steel and composite materials, combining style and practicality for the modern kitchen. ![img-68.jpeg](img-68.jpeg) # hansgrohe # Ideal Standard ROMAN SILVER EXPERIENCE Salamander Pumps winquin Genesis THE BAYERS EXPERIENCE # Third party brands Approximately 40% of the items available on our site are designed and produced by third party brands, comprising over 120 stocked brands. This extensive range offers customers a broad selection across various price points. Our portfolio includes established bathroom brands such as Hansgrohe and Ideal Standard, as well as niche and category-specific brands like Roman Showers. Additionally, we stock specialist products, including shower pumps from Salamander, plumbing components from Winquin and tile trims from Genesis. This diverse selection reinforces our position as a comprehensive provider, capable of addressing a wide spectrum of customer needs and preferences. This strategy ensures we deliver on our commitment to being a one-stop shop for bathroom solutions, contributing to higher average order values and ensuring we capture all customer purchase intents. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- Our strategy We think about our strategy with reference to three horizons ![img-69.jpeg](img-69.jpeg) ## Horizon 1 ## Core B2C - Customer acquisition, new product development and innovation - Improved customer lifecycle experience - Further market share gains through wide range and unrivalled product availability ![img-70.jpeg](img-70.jpeg) Core B2C Our extensive product range and unrivalled availability, coupled with our creative and bold marketing strategy, has enabled the Group to rapidly gain market share and solidify its position as the number one bathroom retailer in the UK. While proud of this achievement, our core focus is to ensure that we continue to grow, which means evolving our marketing offering, growing our product range, improving the customer experience and improving our efficiency. ### Focus areas - Grow our brand by providing the best customer journey, great customer service and investing in bold campaigns - Provide the largest choice of bathroom products - Improve warehouse and supply chain efficiency ![img-71.jpeg](img-71.jpeg) Trade The proportion of our revenue that is derived from trade customers, who will typically have a higher repeat rate, order frequency and average order value, continues to grow in absolute terms and as a proportion of the Group's overall revenue. By continuing to take a proactive approach to the trade segment, the Group believes that it can continue to penetrate this segment of the market. ### Focus areas - Adapt our customer journey to better serve the trade segment - Extend our product offering for trade customers ![img-72.jpeg](img-72.jpeg) Expansion categories We specialise in bathroom products but have also made progress to extend our products in expansion categories (such as tiles and décor), with further revenue benefit still to be achieved. Increasing our offering more broadly across the home will allow us to capture a greater share of the customer wallet, as well as attracting new customers who are shopping exclusively in these expansion categories. ### Focus areas - Increase our product range in our expansion categories Key performance indicators are detailed on PAGES 30 to 33 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # # Horizon 2 # Trade - Focus on sole traders and small and medium-sized enterprises - Victorian Plumbing app launched to better support the tradesperson - Increased range of trade-specific products and targeted trade marketing approach # Horizon 3 # Expansion categories - Increasing both the range and availability of the expansion category SKUs - Tailored marketing strategy to become a destination for improvements beyond the bathroom - Prominence and improved search functionality on our website # 2024 progress We have invested in our brand with the introduction of our 'Boss Your Home' campaign. We supplemented this with targeted performance spend to attract more visitors than ever before to our platform. In a tough market, our brand awareness score increased again. Our Trustpilot score maintained as 'Excellent' at 4.6 (out of 5.0). Strengthened relationships with our supply chain partners, which enabled us to avoid the disruptions to product availability that many retailers experienced in the year. # How we measure - Revenue - Gross profit and gross profit margin - Adjusted EBITDA and adjusted EBITDA margin - Profit before tax - Operating cash conversion - Total orders - Average order value - Marketing as a percentage of revenue - Trustpilot score - Active customers # Risks - Macroeconomic trends - Innovation and changes in consumer buying - Business interruption - Brand and reputation - Cybersecurity and data protection - Supply chain - Increase in competition - Sustainability and climate change # 2024 progress We have grown trade revenue to 23% of total revenue (2023: 21%). We have invested in our dedicated Trade team to attract and retain our trade customers. We have invested in targeted trade marketing campaigns. We have developed a trade credit offering due to be launched in 2025. # How we measure - Trade revenue - Trade revenue as a percentage of total revenue - Gross profit and gross profit margin - Adjusted EBITDA and adjusted EBITDA margin - Total orders - Average order value # Risks - Macroeconomic trends - Innovation and changes in consumer buying - Business interruption - Brand and reputation - Cybersecurity and data protection - Supply chain - Increase in competition - Sustainability and climate change # 2024 progress We have significantly grown our range of tile offerings in the year and increased revenue from tiles and décor by 23% to £12.4m (2023: £10.1m). Development of a quick and easy checkout for free tile samples. Dedicated TV adverts and creative for tiles. # How we measure - Revenue - Gross profit and gross profit margin - Total orders - Average order value - Number of offerings # Risks - Macroeconomic trends - Innovation and changes in consumer buying - Brand and reputation - Supply chain - Increase in competition - Sustainability and climate change For details on the Group's principal risks and uncertainties, see PAGES 56 to 61 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- Our strategy continued ![img-73.jpeg](img-73.jpeg) # Core B2C Our core B2C market continues to offer a strong runway for growth, underpinned by continuous improvement of the customer journey and the steady ongoing transition of consumers to online channels. ## 1. Action areas Grow our brand by providing the best customer journey, great customer service and investing in bold campaigns ![img-74.jpeg](img-74.jpeg) ## What we have done ### Acquired Victoria Plum The acquisition and subsequent cessation of Victoria Plum accelerates the growth of Victorian Plumbing and provides an opportunity to invest in brand marketing with more confidence and greater return. It removes significant customer confusion, which had existed for many years. ## Data-driven performance marketing Our relentless approach to pay-per-click advertising complements our bold and quirky offline marketing. A new 'Boss Your Home' campaign, an extension of our successful 'Boss Your Bathroom' creative, has been launched, to be seen on TV screens and Video on Demand. ## Technology advancements on site As the transition to online continues and available technology also improves, we have ensured that we have the ability for customers to visualise what their bathroom products would look like through our on-site 3D room planner. Customers can swap in and out products available on site for a room that matches their own layout and visualise what the end product will look like prior to confirming their order. We believe that embracing this technology early and becoming a leader in its deployment will deliver future growth. Improvements have been made to our search functionality utilising the latest AI developments to aid customer experience. ## Opportunities ### Further penetration in the UK and overseas Our brand awareness remains strong and we believe we have a good opportunity for growth in our UK core market. In the medium term, we are confident that the model we have honed in the UK can be just as successful in overseas markets that are further behind in their transition to online. ## 4.6 Average Trustpilot rating (score out of 5.0) ![img-75.jpeg](img-75.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ![img-76.jpeg](img-76.jpeg) ![img-77.jpeg](img-77.jpeg) ## 2 Focus area Provide the largest choice of bathroom products ![img-78.jpeg](img-78.jpeg) ## What we have done Expanded the number of products we offer We continue to expand our product range. We now offer over 36,000 SKUs (2023: 34,000), providing customers with a one-stop shop regardless of their budget. ## Provide a wide choice of brands Partnerships with well-known names in the industry continue to be strengthened, with additional third party brands added to our site in the year. ## Opportunities ### Furniture fashion The bathroom continues to be a 'statement' room for consumers. Our ongoing product research and innovation ensures we remain on the pulse with consumer trends. ### Eco-products Consumers are increasingly looking for sustainable products. We continue to increase the number of products we hold that are made from sustainable materials or have water-saving technology, with further opportunity to expand this range as our new DC unlocks capacity constraints. ## 3 Focus area Improve warehouse and supply chain efficiency ![img-79.jpeg](img-79.jpeg) ## What we have done New distribution centre Our purpose-built 544,000 square feet DC in Leyland, Lancashire has been designed to incorporate semi-automation to improve the customer experience and obtain efficiencies. ## Audit of supplier factories Consultants that we engage in the Far East allow us to proactively manage our key supplier relations in those regions. Having local experts available to us has also been key in undertaking a full cycle of rigorous audit checks of suppliers' factories and quality checks over the products they produce, with remediations required if any fail the standards set. ## Management of shipping agents As well as benefitting from reduced shipping costs, by actively managing our relationships across multiple suppliers, we ensured availability of products for our customers, in a year when many retailers suffered from supply chain delays. ## Opportunities ### Delivery management solution Ensuring our customers receive their goods in the most efficient manner and without damage is a key business objective. Having a portfolio of courier networks where we can actively manage both their operational effectiveness and cost requirements will support future growth, as well as providing an improved customer experience through updates to order tracking. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 25 --- Our strategy continued ![img-80.jpeg](img-80.jpeg) # Trade ![img-81.jpeg](img-81.jpeg) Our proposition has traditionally been targeted to the end consumer, and so we are underpenetrated in the trade segment. While we have seen strong growth across the year in trade, we believe there remains further opportunity to take a proportionate share of the trade market. ## 4 Focus area ### Adapt our customer journey to better serve the trade segment ![img-82.jpeg](img-82.jpeg) ### What we have done #### Trade account management We have invested in our trade team to provide additional support to our growing trade segment. Trade revenue increased to 23% of total revenue in the year (2023: 21%). ### Repeat orders and on-the-go convenience Trade customers often make repeat orders, which is efficient from a customer acquisition perspective. Trade customers often need to place orders on the move. Our Victorian Plumbing app was further developed in 2024 to enhance the trade customer experience and make their mobile customer journey more streamlined and efficient. ### Opportunities #### Improved next day delivery cut-off time Trade customers often need to place orders at short notice. An extended next day delivery cut-off time would provide a more compelling reason to shop with us. Our new DC will enable us to make improvements in this area. #### Trade credit A new digital trade credit offering will be launched in 2025. ## 5 Focus area ### Extend our product offering for trade customers ![img-83.jpeg](img-83.jpeg) ### What we have done #### One-stop shop for the trade To become a one-stop shop for the trade segment, we recognise that we will be required to provide the smaller 'plumbing' parts that they use frequently. We have further increased our offerings of these products this year, and will continue to do so as the new DC unlocks capacity constraints. ### Opportunities #### Trade versus consumer needs Our trade platform is, for the most part, identical to the consumer site. Trade customers have different priorities and so we have an opportunity to improve the prominence of products that take priority for the trade. We are also looking at the different ways that trade customers wish to pay for their orders so that we service their needs effectively. The launch of digital trade credit in 2025 supports this. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ![img-84.jpeg](img-84.jpeg) # Expansion categories Consumers often require products such as tiles to complete their bathroom renovation. We can grow our ranges to give consumers everything they require for their bathroom project, as well as then being front of mind for other areas of the home requiring complementary products. ## Focus area ### Increase our product range in our expansion categories ![img-85.jpeg](img-85.jpeg) ## £12.4m Tiles and décor revenue 2024 ## What we have done We have increased our tile range in the year and grown revenues of tiles and décor by 23% to £12.4m (2023: £10.1m). We have also further improved the design of our website pages to better showcase our expansion category ranges. Our in-house designer has expanded our offering in the Stonehouse Studio brand in tiles to ensure we are in line with current and emerging market trends, with 178 exclusive tiles designed in-house in the range. We have also started to source tiles from Southern Europe, India and Turkey, allowing us to increase our already outstanding tile portfolio further to cater to more customers, as well as spreading our supply chain risk globally. Tiles are a category where consumers may want to sample different colours and textures before committing to a larger purchase. We have improved our sample offering for tiles in terms of both the sample products we have available and the branding and packaging that is included with sample orders that customers receive. Functionality to introduce a quick and easy checkout for free tile samples has been developed and is due to be launched in 2025. ## Opportunities ### Expanding our ranges further We have made great strides this year but still have room to grow our expansion category ranges. Now that the DC is fully operational, the additional space will facilitate further growth in this area. ### Technology improvements Consumers continue to embrace technology more. Increasing our capability to show tiles and flooring in a 3D planner view is seen as a key driver to building on the success to date across our tile offering. ![img-86.jpeg](img-86.jpeg) ![img-87.jpeg](img-87.jpeg) ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 27 --- # Stakeholder engagement As a leading online retailer, we have a diverse set of stakeholders and aim to balance their needs and outcomes. We acknowledge that not every decision we make will necessarily result in a positive outcome for all our stakeholders. By understanding our stakeholders, and by considering their diverse needs, we can factor into Board and management discussions the potential impact of our decisions on each stakeholder group. This duty is enshrined in Section 172 of the Companies Act 2006 ("s.172"), which requires a director of a company to act in good faith, in a way which would most likely promote the success of the Company for the benefit of its members as a whole. In doing so, they must also have regard to a range of factors listed in s.172, including the interests of stakeholders. ## s.172 statement The Board confirms that, during the reporting period, in using its good faith and judgement, it has acted in a way that would be most likely to promote the success of the Group for the benefit of its shareholders, while having due regard to the matters set out in s.172(1)(a) to (f) of the Companies Act 2006. This statement includes the information demonstrating how the Board has had regard to these matters in its actions as set out in this section. --- **Understanding our customers is critical to the success of our business. Engagement with our customers, to improve their choice, experience and service, enables us to continually improve our customer proposition. In turn, this helps to drive sales and increase profitability.** ### Their needs - Extensive choice of products that are readily available - Ease of buying through our platform - Clear and accurate information - Fair and transparent pricing - Data protection - Timely delivery - Customer service - Trust and confidence in the Victorian Plumbing brand and the Victoria Plum brand post-acquisition ### How we engage - We actively invest in brand-led campaigns to drive awareness and preference in our brand among consumers - We have dedicated, highly responsive customer service teams for each of our consumer and trade customer groups - We actively seek reviews of our service and products via Trustpilot and in-house platforms to understand customer sentiment - We engage with customers who feel we could do better - We conduct an annual brand health survey with a panel of homeowners to understand awareness, considerations and how our brand is perceived - We measure consumer brand awareness regularly - We use third parties to conduct consumer research which informs our strategy ### Outcomes of engagements - Expansion of new ranges based on consumer trends within our product mix - Website optimisation to drive frictionless buying experiences - Adapting our service to meet emerging insights from consumer feedback - Optimisation of our media strategy to capture growth audiences - Design of creative output to meet objectives driven by research and insights - Release of our Victorian Plumbing app, designed with both trade and consumer in mind --- **Ending** Engagement with our people drives high performance and a willingness to go above and beyond. ### Their needs - Working conditions, environment and wellbeing - Communication - Development opportunities - Culture and values - Reward and benefits - Change management, particularly in relation to our warehouse and Victoria Plum colleagues that went through a consultation process in the year ### How we engage - Regular interaction from the Executive Leadership Team¹ ("ELT") across all departments - During the consultation processes, support available to those affected from management, the HR team and Mental Health Champions - Our Charity Committee organises events throughout the year, giving employees the chance to get involved in promoting and supporting charitable activities - Through our company intranet site 'The Loop', all employees are provided with regular Company updates and a gateway to employee benefits and discounts. The Loop is also used to share and celebrate colleagues' successes and achievements - A monthly newsletter which is posted on The Loop and includes an update from each department so employees across the business are aware what other departments are focused on - A benefits roadmap that is reviewed throughout the year - Mental Health Champions are available to all employees across the Company, with a focus on wellbeing in the workplace and how we can support it ### Outcomes of engagements - Continuous development of our bespoke reward gateway and intranet site - Investment in a state-of-the-art fitness studio at the new site, which gives our employees a place where they can exercise either independently or by using our virtual class capability - At our new site we have invested in a staff canteen, which offers healthy meal options and a relaxing space for employees to take their break - Strengthened culture and relationships as colleagues celebrate each other's successes and achievements - A continuation of the programme of volunteering days in conjunction with local charities - Launched our all-employee Save as You Earn scheme for the third year running in March 2024. All employees could choose to save up to £250 per month which can then be used to purchase shares at the end of the term - Several charity events organised by the Charity Committee to raise funds for our nominated local charity - Quarterly meetings of our Mental Health Champions help to raise awareness of different mental health issues through the promotion of awareness days such as Baby Loss Awareness Week and World Suicide Prevention Day ¹ The ELT comprises the two Executive Directors and seven other members of senior management. The ELT meets weekly to identify, assess, own, monitor, manage and mitigate risks, and exploit opportunities. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ![img-88.jpeg](img-88.jpeg) Strong relationships with our trusted suppliers are critical to the success of our business. Our supply chain is fundamental to the ability of the business to operate effectively and meet the needs of our customers. We are committed to having a positive impact on the lives of our customers, colleagues and communities. We consider the environmental impact of our operations and aim to reduce our impact on the planet. It is important that we engage with our investors to provide them with as clear a picture as possible of our business and our prospects, that is fair, balanced and understandable, to enable them to make informed investment decisions. ## Their needs - Prompt payment and fair terms and conditions - Long-term mutually supportive relationships - Growth opportunities - Responsible and ethical retailing ## Their needs - The environmental impact of our business and products, including our impact on the climate - Giving back to the community - ESG factors ## Their needs - A balanced and fair representation of financial results and future prospects - Responsible remuneration practices, including engaging an independent remuneration adviser and benchmarking against comparator groups - High governance standards - Share price performance and return - Strategic ambition and planning ## How we engage - Our purchasing and product teams maintain regular contact with our suppliers to build strong relationships - Supplier procurement processes engaged at the time of supplier onboarding and continue throughout the relationship - Early involvement from suppliers in the design and prototypes of new products - Ongoing process of factory audits, inspections and assessments across our Far East suppliers gives us the opportunity to feed back on how they can improve - Regular review and feedback of product quality which reduces product failures and improves quality ## How we engage - Encourage employee volunteering days through our partnership with a local charity, Emmaus, who support people to work their way out of homelessness - Our Charity Committee promotes a number of charity events during the year to support Emmaus - We continue to work with our suppliers to focus on alternatives to plastic packaging, the use of more sustainable materials and products with environmentally friendly features - We offer a range of products that have environmentally friendly features such as dual flush functions on toilets and water-saving taps and shower heads. ## How we engage - Open, honest and balanced communication available to all shareholders - Site tours and access to Executive Directors - Financial results presentations and investor roadshow - Availability of one-to-one meetings with management - Standing agenda item at Board meetings to provide and review market information - Private shareholders are encouraged to communicate with the Board through **info@ictorianplumbing.co.uk** - Through key disclosures on our website; annual report and accounts, market disclosures including results announcements, trading updates and ad-hoc updates - We share industry-related data, such as the latest Mintel report, with analysts - Review of financial advisors. ## Outcomes of engagements - Our auditing programme in China helps our suppliers identify areas in which they could improve. We support them to resolve these issues and to put plans in place to make further improvements - We give our suppliers insight on product performance so they can further develop their products - Data from suppliers has contributed to our own product development, and to the development of recyclable packaging - Our strong balance sheet and industry-leading payment terms provide assurance in a challenging economic environment - Honouring Victoria Plum supplier arrangements during the cessation process ## Outcomes of engagements - The installation of solar panels on the roof of our new DC, to help reduce our carbon footprint - An all-electric fleet of material handling equipment introduced at our new DC and the provision of electric vehicle charging points in the car park - For the second year running, as part of our sponsorship deal with Bolton Wanderers Football Club, and in collaboration with Bolton Wanderers in the Community, our chosen local charity, Emmaus, is adorned on the back of the 2024/25 shirt of the Bolton Wanderers third kit, helping to raise the profile of the charity - Our Charity Committee has organised several fundraisers over the year to help support our chosen charity - Employees have taken part in a number of volunteering days, supporting Emmaus - We are working to ensure that the impact on sustainability and the environment is a key consideration in the strategic decision-making process - Our purchasing and product teams work closely with our suppliers to encourage the use of more sustainable packaging ## Outcomes of engagements - Feedback from investors throughout the year informs Board decisions and helps us build and develop on our strategies - Adaption of reporting styles following analyst and investor feedback, to ensure clarity of key messages - Progression in share price - The review of financial advisors in 2024 resulted in a change of broker to Canaccord in November 2024 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 29 --- # Key performance indicators We measure performance through a defined set of financial and operational KPIs ## Financial | 1. Revenue | Relevant focus areas | Progress | Relevant risks | | --- | --- | --- | --- | | £295.7m +4% | £295.7m £285.1m £269.4m £268.8m £208.7m | Revenue growth of 4% in 2024 (decreasing 1% on a like-for-like basis), reflecting an increase in order volume of 10% and an average order value reduction of 5%. Consumer revenue grew by 1%, while trade revenue grew by 13%, the latter now representing 23% of the Group's revenue (2023: 21%). | • Macroeconomic trends • Innovation and changes in consumer buying • Business interruption • Brand and reputation • Cybersecurity and data protection • Supply chain • Increase in competition • Sustainability and climate change | | 2024 2022 2021 2020 | £295.7m £285.1m £269.4m £268.8m £208.7m | | | | 2. Gross profit and gross profit margins | Relevant focus areas | Progress | Relevant risks | | £147.8m +10% | £147.8m / 50% | Reported gross profit for the year increased by 10% to £147.8m with a 3ppt increase in gross profit margin to 50% (£141.7m (+5%) and 50% on a like-for-like basis). Increased profitability was driven by a product mix shift towards our own brand ranges, as well as reduced shipping costs in comparison to 2023. | • Macroeconomic trends • Business interruption • Supply chain • Increase in competition • Sustainability and climate change | | 2024 2023 2022 2021 2020 | £147.8m / 47% | | | | 3. Adjusted EBITDA and adjusted EBITDA margin^{1} | Relevant focus areas | Progress | Relevant risks | | £27.2m +14% | £27.2m / 9% | Adjusted EBITDA ("AEBITDA") is a non-GAAP measure defined as operating profit before depreciation, amortisation, exceptional items and IFRS 2 share-based payments expense. AEBITDA margin is AEBITDA as a percentage of revenue. | • Macroeconomic trends • Innovation and changes in consumer buying • Business interruption • Brand and reputation • Cybersecurity and data protection • Supply chain • Increase in competition • Sustainability and climate change | | 2024 2023 2022 2021 2020 | £27.2m / 9% £23.8m / 8% £19.5m / 7% £40.1m / 15% £26.2m / 13% | | | 30 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Key: Link to strategy 1. Grow our brand by providing the best customer experience and investing in bold campaigns 2. Provide the largest choice of bathroom products 3. Improve warehouse and supply chain efficiency 4. Adapt our customer journey to better serve the trade segment 5. Extend our product offering for trade customers 6. Expand available categories beyond core bathrooms # 4. Adjusted profit before tax and adjusted profit before tax margin² £23.1m +14% 2024 £23.1m / 8% 2023 £20.3m / 7% 2022 £15.7m / 6% 2021 £36.8m / 14% 2020 £23.7m / 11% ## Relevant focus areas 1 2 3 4 5 6 ### Definition Adjusted profit before taxation ("APBT") is defined as the profit attributable to equity holders of the parent, excluding any exceptional or share-based payment costs, before taxation. APBT margin is APBT as a percentage of revenue. ## Progress APBT increased as a result of the increase in gross profit with APBT margin up 1ppt to 8% (9% on a LFL basis). As with the previous year, in 2024, due to careful management of the Group's cash balances, we finished the year with a net interest receivable despite significant cash outflows relating to the acquisition of Victoria Plum and the transformation of our warehouse operations. ## Relevant risks - Macroeconomic trends - Innovation and changes in consumer buying - Business interruption - Brand and reputation - Cybersecurity and data protection - Supply chain - Increase in competition - Sustainability and climate change # 5. Operating cash conversion 68% 2024 68% 2023 68% 2022 73% 2021 81% 2020 105% ## Relevant focus areas 1 2 3 4 5 6 ### Definition Operating cash conversion is defined as cash generated from operating activities before exceptional items and taxation less capital expenditure and cash outflows in relation to leases as a percentage of adjusted EBITDA. ## Progress We continue to achieve strong cash generation resulting in robust cash conversion at 68% (2023: 68%). Net movement in working capital in line with prior year as we continue to deploy effective stock management and maintain our industry-leading practices with suppliers, strengthening and safeguarding our relationships for the future. ## Relevant risks - Macroeconomic trends - Innovation and changes in consumer buying - Business interruption - Brand and reputation - Cybersecurity and data protection - Supply chain - Increase in competition - Sustainability and climate change # 6. Free cash flow³ £18.6m +16% 2024 £18.6m 2023 £16.1m 2022 £14.3m 2021 £32.6m 2020 £27.6m ## Relevant focus areas 1 2 3 4 5 6 ### Definition Free cash flow is cash generated from operating activities before exceptional items and taxation, less routine capital expenditure and cash flows relating to leases. ## Progress The Group continues to achieve strong cash generation with an increase in free cash flow of 16% to £18.6m (2023: £16.1m). ## Relevant risks - Macroeconomic trends - Innovation and changes in consumer buying - Business interruption - Brand reputation - Cyber and data protection - Supply chain - Increase in competition Read The Group's principal risks and uncertainties on PAGES 56 to 61 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Key performance indicators continued ## Operational | 1. Total orders ('000) | | Relevant focus areas ① ③ ④ ⑤ | Progress The total number of orders increased by 10% (3% on a like-for-like basis) year-on-year (2023: 6%), driving the overall revenue growth (4%) in 2024. Our strategy has been effective in 2024 and remains unchanged: to retain our position as the number one UK bathroom retailer, growing our core offering of bathroom products and accessories to consumers; focusing on expansion categories; and increasing our trade proposition. | Relevant risks • Macroeconomic trends • Innovation and changes in consumer buying • Business interruption • Brand and reputation • Cybersecurity and data protection • Supply chain • Increase in competition • Sustainability and climate change | | --- | --- | --- | --- | --- | | 1,022 +10% | | Definition Total orders are defined as the total number of orders dispatched to customers in the period. | | | | 2024 | 1,022 | | | | | 2023 | 932 | | | | | 2022 | 880 | | | | | 2021 | 906 | | | | | 2020 | 776 | | | | | 2. Average order value | | Relevant focus areas ① ③ ④ ⑤ | Progress AOV decreased to £290 (£295 on a like-for-like basis) as consumers continued to shift away from more expensive third-party branded products to our own brand range during the period, with the latter representing 79% of revenue in 2024 (2023: 78%). | Relevant risks • Macroeconomic trends • Business interruption • Brand and reputation • Supply chain • Increase in competition • Sustainability and climate change | | £290 | -5% | Definition Average order value ("AOV") is defined as total dispatched revenue divided by total dispatched orders in the period. | | | | 2024 | £290 | | | | | 2023 | £306 | | | | | 2022 | £306 | | | | | 2021 | £297 | | | | | 2020 | £269 | | | | | 3. Marketing as % of revenue | | Relevant focus areas ① | Progress Marketing spend as a percentage of revenue increased to 28.9% (28.7% on a like-for-like basis) as we invest in brand marketing to pave the way for future growth. Our new and innovative marketing campaigns, which are bold and quirky, have continued growth in our brand awareness score, up 2ppts to 66%¹. | Relevant risks • Macroeconomic trends • Innovation and changes in consumer buying • Business interruption • Brand and reputation • Cybersecurity and data protection • Increase in competition | | 28.9% | -1.1ppts | Definition Total marketing spend, both online and brand, as a percentage of total revenue. | | | | 2024 | 28.9% | | | | | 2023 | 27.8% | | | | | 2022 | 28.3% | | | | | 2021 | 25.9% | | | | | 2020 | 25.0% | | | | ¹ Victorian Plumbing brand tracking - summer 2024 vs. winter 2023. 32 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Key: Link to strategy 1. Grow our brand by providing the best customer experience and investing in bold campaigns 2. Provide the largest choice of bathroom products 3. Improve warehouse and supply chain efficiency 4. Adapt our customer journey to better serve the trade segment 5. Extend our product offering for trade customers 6. Expand available categories beyond core bathrooms # 4. Trustpilot score (out of 5.0) ## 4.6 +0.1 | 2024 | 4.6 | | --- | --- | | 2023 | 4.5 | | 2022 | 4.5 | | 2021 | 4.3 | | 2020 | 4.3 | ## Relevant focus areas ① ② ### Definition The monthly average of all ratings submitted to Trustpilot during the year. ## Progress We have continued to focus on providing an exceptional customer experience with more than 370,000 Trustpilot reviews as a Group, reflecting the merged account with Victorian Plum. We continue to be rated 'Excellent' by Trustpilot, increasing our average score in the year to 4.6 (2023: 4.5) out of 5.0 (4.6 on a like-for-like basis). ## Relevant risks - Macroeconomic trends - Innovation and changes in consumer buying - Business interruption - Brand and reputation - Cybersecurity and data protection - Increase in competition # 5. Active customers ('000) ## 699 +10% | 2024 | 699 | | --- | --- | | 2023 | 634 | | 2022 | 608 | | 2021 | 638 | | 2020 | 565 | ## Relevant focus areas ① ② ③ ④ ⑤ ⑥ ### Definition Active customers are the number of unique customers who placed an order in the period. ## Progress The total number of active customers increased (10%) year-on-year, exceeding levels only seen previously during the height of the Covid-19 pandemic (640,000, increasing 1%, on a like-for-like basis). Our bold, brand and data-led marketing, together with the acquisition of Victoria Plum, attracted 699,000 consumers to our market-leading online platforms. ## Relevant risks - Macroeconomic trends - Innovation and changes in consumer buying - Business interruption - Brand and reputation - Cybersecurity and data protection - Supply chain - Increase in competition - Sustainability and climate change # 6. Trade revenue as a % of total ## 23% +2ppts | 2024 | 23% | | --- | --- | | 2023 | 21% | | 2022 | 20% | | 2021 | 16% | | 2020 | 14% | ## Relevant focus areas ① ② ③ ④ ⑤ ⑥ ### Definition The proportion of the total revenue of the business that is generated from trade customers. ## Progress Trade revenue grew by 13% in 2024, representing 23% of the Group's revenue (growth of 8% on a like-for-like basis, representing 23% of revenue). The improvement is a result of our ongoing strategy to increase our proposition for trade customers. ## Relevant risks - Macroeconomic trends - Innovation and changes in consumer buying - Business interruption - Brand and reputation - Cybersecurity and data protection - Supply chain - Increase in competition - Sustainability and climate change ⑧ Read The Group's principal risks and uncertainties on PAGES 56 to 61 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- Environmental, social and governance # Making a splash We take our environmental, social and governance responsibilities seriously and are taking action to make a difference to our people, our communities and the wider environment. We are continuing to develop our strategy and, although there is still some work to do, we are delighted to have made further progress this year. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Our purpose ## Our purpose is to improve the quality of home life. We do this by providing affordable bathrooms and bathroom-related accessories to every door through investing in a broad range of products, advanced logistics and a values-driven, customer-focused and data-oriented culture. Our strategy falls within three distinct pillars: ![img-89.jpeg](img-89.jpeg) ## Environmental sustainability By the end of December 2024, our new purpose-built DC in Leyland, Lancashire became operational. Sustainability was at the heart of our decision-making process for the fit-out and operations of this new site. Solar panels have been mounted on the roof of the building, electric vehicle charging facilities have been installed in the car park, and we have invested in a new fleet of electric automated warehouse vehicles. ![img-90.jpeg](img-90.jpeg) ## Diversity and inclusion We are proud of our inclusive environment where everyone can succeed, grow their career and be rewarded for their efforts. We understand that diversity in our workforce will help us to fuel innovation, drive engagement and both attract and retain talent. Labour shortages continue to be a key focus, which drives an extremely diverse and inclusive approach to hiring. We have work to do on enhancing the levels of data in this area to give us more visibility of the diversity of our workforce, which will help us to drive improvements. ![img-91.jpeg](img-91.jpeg) ## Governance and ethics We expect high standards from everyone in our business, and from those in our supply chain. Our people and our partners understand our expectation of behaving professionally, ethically and legally. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 35 --- # Environmental sustainability We are working hard to reduce our impact on the planet and believe we need to give back more than we take out. Environmental sustainability is also becoming increasingly important to our stakeholders. Our focus continues to be on the areas we can control, which are Scope 1 and Scope 2¹. We disclose our emissions on both a market-based and location-based approach². This highlights the positive impact our sustainable choices for renewable electricity have had on our emissions. However, as an online retailer with no manufacturing and limited logistics capability, we have a relatively low carbon footprint across these two areas. ## How we take action³ - Renewable energy – Our electricity contracts continue to be 100% renewable energy and we have invested in roof-mounted solar panels on our new DC, which are due to become operational in 2025. - Recycled materials – Our warehouses use only recycled pallets for deliveries. - Recycling services – We offer recycling services for large, electrical appliances. - Review of plastics – We continue to review, and where we can, make changes, to reduce the level of plastic that is used in the transportation and storage of our products. - Supporting consumers – We have a responsibility to enable them to make more sustainable choices by ensuring our platform provides the information they need. Not only do we offer choices made from sustainable materials, but we detail environmentally friendly features such as dual flush functions on toilets and water-saving taps and shower heads. ## Looking ahead 2025 will see us settle into our new warehouse infrastructure and see the benefits of having one primary distribution centre. Our all-electric fleet will be fully commissioned early in the year, and our roof-mounted solar panels are also due to become operational. ## Methodology The Group is required to measure and report its direct and indirect greenhouse gas ("GHG") emissions by the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. The GHG reporting period is aligned to the financial reporting year. The methodology used to calculate our GHG emissions and energy use is the GHG Protocol Corporate Accounting and Reporting Standard (Revised Edition). An operational control approach has been used. Emissions factors used are from UK Government conversion guidance for the year reported. ## Understanding our impact We currently understand and report our Scope 1 and Scope 2 Greenhouse Gas Emissions. We do not disclose our Scope 3 emissions. We continue to maintain our focus on how we can impact our Scope 1 and Scope 2 emissions. We monitor and review our emissions based on the level of control that we have to make changes; what we can control, what we can influence, and what we can't control but is a concern for us as it contributes to our Scope 3 emissions. This allows us to focus on the areas where we can have the biggest impact on our emissions. ![img-92.jpeg](img-92.jpeg) Scope 1 and 2 Greenhouse Gas Emissions² | | 2024 tCO₂e | 2023 tCO₂e | | --- | --- | --- | | Scope 1 (direct emissions): Total emissions from operations and combustion of fuel | 259 | 200 | | Scope 2 (indirect emissions): Total emissions from energy purchased: | | | | Market-based | 82 | 8 | | Location-based | 497 | 274 | | Total gross Scope 1 and 2: | | | | Market-based | 341 | 208 | | Location-based | 756 | 474 | | Revenue (£m) | 295.7 | 285.1 | | Carbon intensity ratio⁴ (Location-based) Tonnes of CO₂e per £m of revenue (tCO₂e) | 2.56 | 1.66 | | Energy use kWh (Scope 1 and 2) | 3,665,111 | 2,163,156 | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information The table below summarises where our emissions fall within those control, influence and concern boundaries. We will prioritise those within the control boundary and we will keep under review those within the influence and concern boundaries. As an online retailer with no manufacturing and limited logistics capability, we have a relatively low carbon footprint across Scope 1 and Scope 2, where we have the most control. We understand that changes to our Scope 3 emissions will, by far, have the greatest impact. We realise that the reach of our business extends far beyond our own office, warehouses and distribution centres. The products we sell have an impact that we must consider and look to manage. There are improvements to be made in the quality of our data for emissions reporting, and we continue to work with external consultants in this area, in understanding our impact on the environment and how we can operate more sustainably in the future. Our 2024 emissions have been impacted by the introduction of our 544,000 square feet DC, and also reflect the emissions of Victoria Plum in the period since acquisition. We expect to see our emissions reduce in 2025 following the closure of Victoria Plum and their 277,000 square feet Doncaster distribution centre. ## Helping consumers to make sustainable choices Our success comes from a breadth of expertise, and from offering consumers an extensive choice of products that are readily available. We know that consumers are now more conscious of the environmental credentials of the products they purchase. They look for features such as water-saving technology, lower energy consumption or sustainably sourced materials. We are therefore continuously increasing the range of such products and improving the information we provide to customers. We have also been working with our suppliers to develop more of these types of products, to satisfy increasing consumer demand. Customers who purchase electrical items from us can request collection of their large, bulky, unwanted electrical items. These are difficult items for customers to dispose of in an environmentally friendly manner, so this offering ensures that the items are disposed of in the most environmentally friendly way possible. ## Partnerships ### Environmental Impact We have an agreed partnership with GWM, a waste management provider. GWM assists us in disposing of unwanted items in the most environmentally conscious manner. All items must be taken up, plus are stored, supplied or manufactured to extend the lifespan of unwanted items and to prevent visible materials from coming up in limited space. January 2021 this partnership has helped us work on scope to benefit. ## Control All Scope 1 and Scope 2 emissions ### Influence Scope 3 categories such as: - Employee commuting, business travel, indirect purchased goods, services procured, capital goods, carriage ### Concern Scope 1 categories such as: - Manufacturing of sold products, shipping, and of line treatment of sold products 1. Scope 1 emissions are direct emissions from sources that are owned or controlled by the Group, for example the fuel consumption of Company vehicles. Scope 2 emissions are indirect emissions generated from purchased energy, for example the purchase of electricity used at our office and warehouses. 2. Location-based emissions reflect the energy consumed and the carbon intensity of the UK electricity grid. Market-based emissions take into account the renewable energy that we have purchased and the associated lower carbon intensity. 3. Our actions exclude Victoria Plum which was acquired and subsequently closed within the year. 4. In order to express our annual emissions in relation to a quantifiable factor associated with our activities, we have used revenue as our intensity ratio as this is a relevant indication of the size of our activity. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 37 --- # Diversity and inclusion At Victorian Plumbing, we understand the value of having a diverse and inclusive organisation. Building a diverse and inclusive workforce will fuel innovation, drive engagement and attract talent. It is only with a mix of different ideas and perspectives that we can come up with the most exciting new ideas and create the best experience for our customers and other stakeholders. Diversity for everyone at Victorian Plumbing means respect for, and appreciation of, differences in: gender identity and expression, age, sexual orientation, disability, race and ethnic origin, religion and faith, marital status, maternity, socio-economic background and way of thinking. We believe inclusion is a state of being valued, respected and supported for who you are and having the same career opportunities as others. We recognise that there is more that we can do to improve diversity and inclusion in our organisation. In the year, we have increased the proportion of women in leadership positions to 28% (2023: 26%), but we know we still have work to do in this area. We are also mindful that a large proportion of our employee base relates to warehouse roles where it can be challenging to attract female employees, due to the physical nature of the role. Warehouse roles are almost exclusively recruited from the local area, and the diversity of our workforce is, therefore, inextricably linked to the diversity of the surrounding environment. Labour shortages continue to be a key focus, and this drives an extremely diverse and inclusive approach to hiring. ## How we will take action: - We will strive to interview a diverse range of individuals for each role. Having a diverse pool of applicants reaching interview should ultimately result in greater diversity among those we recruit. - We will improve the employee experience, remove barriers and reduce the gender pay gap. ## How we will measure impact: - We will monitor the makeup of our people with specific focus on gender and those in leadership roles. - We will analyse and act on employee feedback. - We will report on our gender pay gap. ## Diversity We are committed to improving diversity and inclusion within our organisation, as we believe this improves individual and team performance and allows us to identify and attract talent that we may not otherwise access. ## Our values ![img-93.jpeg](img-93.jpeg) ### We take responsibility Each team member is responsible for the success of their place within our business. No matter the role, it's important that we understand the importance of taking responsibility for our work. ![img-94.jpeg](img-94.jpeg) ### We innovate We don't allow tired thinking and the normal way of doing things to get in the way of innovation. All ideas are respected, welcomed and given the access to make a difference to our performance. ![img-95.jpeg](img-95.jpeg) ### We develop and grow We recognise and reward hard work. At Victorian Plumbing, eagerness to self-develop and better ourselves is rewarded with the tools and investment needed to grow our team and our business. ![img-96.jpeg](img-96.jpeg) ### We're humble We don't take our success for granted, and we remain competitive, aware and agile no matter our size. ![img-97.jpeg](img-97.jpeg) ### We respect people Whether it's customers, our team members or our business partners, we recognise that our success is a product of people, collaborative work and respect for each other. ### We celebrate success We take time to acknowledge and celebrate our achievements, and we reward successes driven by our team. 38 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Gender The ratio of men to women on the Board has remained consistent with that post-Admission in June 2021, with a ratio of 4:1 (2023: 4:1). In 2024 we have once again increased the proportion of women in leadership positions, as defined by the Hampton-Alexander Review. This has increased to 28% (2023: 26%), with two additional female hires into leadership roles during the year. We recognise that this level of diversity in leadership positions still falls below the target of the Hampton-Alexander Review. We also recognise that we have under-representation of females in our technology team, which accounts for 14% of our total workforce. Given the skilled and specialist nature of the roles in the technology team, alongside the competitive market for tech talent, the salaries in this team are significantly higher in comparison to other parts of our business. We work with 'women in tech' communities to ensure that our technology team vacancies are reaching a wide pool of candidates. Our median hourly pay gap at the snapshot date of 5 April 2024 is 2.5% (2023: nil) and our mean hourly pay gap has decreased once again, to 6.7% (2023: 9.7%), reflecting the increase of women in leadership positions during the year. As long as a gender pay gap exists at Victorian Plumbing, we will continue to work hard to address the issues we believe are relevant to reduce this gap. # Equal opportunities Diversity to us means having respect for and appreciation of differences. As well as gender, this can include race and ethnic origin, age, sexual orientation, marital status, religion or belief, disability, maternity and socio-economic background. As with gender diversity, we acknowledge that we have more to do in these areas. We are looking at ways to improve the level of data we hold in this regard about our people, through building awareness and transparency about the reasons why we wish to hold such information, the value such insight can bring and how the data will be stored. Our business is committed to becoming more inclusive and welcoming of a diverse workforce, and ultimately retaining that diversity. # Employee engagement Our employees are key to helping us fulfil our purpose and so at Victorian Plumbing we promote a culture of open feedback. 2024 has been a year of change for our warehouse colleagues. Our warehouse transformation programme has seen our warehouse colleagues go through a consultation process, with a large proportion of them pleasingly relocating to our new DC. Employee engagement was key to our successful transition, and their feedback has been sought throughout the transition period. Employees also have the opportunity to provide feedback year-round through our Company intranet site, 'The Loop'. We rolled out our annual Save as You Earn ("SAYE") scheme again during the year, which provided all employees with the opportunity to purchase shares in the Company at a 20% discount to the market price at invitation. The implementation of this scheme promotes a culture of shared ownership as the business drives growth and seeks to capitalise on investment in its new warehouse infrastructure. # Investing in and supporting our talent To meet the ambitions of our core value, 'develop and grow', we do everything we can to support our people with learning opportunities. We offer our employees opportunities to learn new skills through both internal and external training, along with 'on-the-job' coaching. # Wellbeing of our employees The physical and mental wellbeing of our employees is always front of mind. We have invested in a state-of-the-art fitness studio at our new site, which, alongside the studio available at our legacy head office site, gives our employees a place where they can exercise either independently or by using our virtual class capability. At our new DC, we have also invested in a staff canteen, which offers healthy meal options and a relaxing space for employees to take their break. Our Mental Health Champions, introduced in 2023, continue to offer support to all employees across the Company. Our Champions help to raise awareness of different mental health issues through the promotion of awareness days. In conjunction with our Mental Health Champions, we also partner with Health Assured, the UK's largest Employee Assistance Programme provider, to provide our employees with an outlet to seek information or advice on a range of mental health topics should they wish to speak to anyone anonymously. Our dedicated online wellbeing centre, accessible to all employees via our Company intranet site, 'The Loop', provides education materials as well as tools to help support our employees live a healthier and happier life, with focus provided across four main areas: 'Move' (Get active), 'Munch' (Eat healthier), 'Money' (Financial wellbeing) and 'Mind' (Mastering your mental health). ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 39 --- # Diversity and inclusion continued ## Gender diversity As at 30 September 2024 | | Men | Women | Median % of total | Women as % of total | | --- | --- | --- | --- | --- | | Board | 4 | 1 | 80% | 20% | | ELT (excluding Board members) | 4 | 3 | 57% | 43% | | ELT direct reports | 24 | 8 | 75% | 25% | | Leadership positions^{1} | 28 | 11 | 72% | 28% | | Total employees | 547 | 168 | 77% | 23% | - Leadership positions includes both ELT and ELT direct reports As at 30 September 2023 | | Men | Women | Median % of total | Women as % of total | | --- | --- | --- | --- | --- | | Board | 4 | 1 | 80% | 20% | | ELT (excluding Board members) | 4 | 2 | 67% | 33% | | ELT direct reports | 22 | 7 | 76% | 24% | | Leadership positions^{1} | 26 | 9 | 74% | 26% | | Total employees | 466 | 170 | 73% | 27% | ![img-98.jpeg](img-98.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Gender pay gap Hourly pay gap between men and women 2024 2023 2022 Mean Mean Mean 67% 97% 102% 2024 2023 2022 Median Median Median Median 25% 10% 47% # Ethnic diversity As at 30 September 2024 | | White | Other | Not disclosed | White as % of disclosed | Other % of disclosed | | --- | --- | --- | --- | --- | --- | | Board | 5 | - | - | 100% | - | | ELT (excluding Board members) | 7 | - | - | 100% | - | | ELT direct reports | 29 | - | 3 | 100% | - | | Leadership positions | 36 | - | 3 | 100% | - | | Total employees | 374 | 96 | 245 | 80% | 20% | As at 30 September 2023 | | White | Other | Not disclosed | White as % of disclosed | Other % of disclosed | | --- | --- | --- | --- | --- | --- | | Board | 5 | - | - | 100% | - | | ELT (excluding Board members) | 6 | - | - | 100% | - | | ELT direct reports | 23 | 2 | 1 | 92% | 8% | | Leadership positions | 32 | 2 | 1 | 94% | 6% | | Total employees | 298 | 38 | 300 | 89% | 11% | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 41 --- # Governance and ethics ## Operating ethically At Victorian Plumbing, we are committed to carrying out all business activities in an honest and open manner, and strive to apply high ethical standards in all our business dealings. All our existing and new suppliers are required to adhere to a Supplier Code of Conduct. We proactively seek supplier relationships with those who share our passion for making a difference, and we encourage our suppliers and partners to drive their own ESG efforts in line with their principles. We continue to review our supplier onboarding process, ensuring alignment to the Modern Day Slavery Act 2015. Our supplier audit programme continued throughout 2024. The audits we perform cover areas such as employment conditions, health and safety, and terms of employee engagement. If suppliers fail to comply with our standards, we will work with them to improve or, if we do not believe that can be done, we will terminate our relationship with them. In the year, we conducted thirteen full factory audits in the Far East for potential new suppliers: of these, one potential new supplier failed and was not onboarded. Our full factory audits cover two tests: the first is for compliance against ISO9001:2015; the second is against our Supplier Code of Conduct. Our supplier audit programme also covers the re-audit of our suppliers every two years. This ensures that our suppliers continue to uphold the high standards that we expect. In the year, we conducted the re-audit of eighteen Far East suppliers, all of which passed. We have zero tolerance for any aspect of bribery and corruption, both within our business and in respect of any third parties we have dealings with. We have an established anti-bribery policy and procedures in place for reporting on gifts and hospitality. We actively cultivate a transparent and open culture, encouraging our employees to speak up if they have any concerns or experience any serious malpractice or wrongdoing in our business. The Company's whistleblowing policy is available to all employees on the Company's intranet site, 'The Loop', and contains clear and accessible information as to how employees can raise appropriate concerns. Concerns raised will be reported to the Audit and Risk Committee, which will then be advised of the investigations carried out and any actions arising as a result. ## Health and safety We recognise our responsibility for the health and safety of our workforce and others who could be affected by our activities, and we are committed to maintaining a safe working environment for all our workforce. We assess the hazards and risks faced by our workforce in the course of their work and take action to mitigate those risks. We meet our legal obligations by providing and maintaining a safe and healthy working environment so far as is reasonably practicable. We do this through: - providing leadership and adequate control of identified health and safety risks; - measuring our health and safety performance; - consulting with our employees on matters affecting their health and safety; - providing and maintaining safe plant and equipment; - ensuring the safe handling and use of substances; - providing information, instruction and training where necessary for our workforce, taking account of any who do not have English as a first language; - actively managing and supervising health and safety at work; and - aiming for continuous improvement in our health and safety performance and management through regular reviews of our policies. ## Data security At Victorian Plumbing, we take the risk of cybercrime very seriously. As an online retailer, protecting the data of our customers and ensuring safe online shopping is critical to our business. In the prior year, a Senior Information Risk Owner ("SIRO") was appointed to take responsibility for the overall information risk policy and risk assessment process and to ensure the communication of those risks to the Audit and Risk Committee. A quarterly meeting with key management, chaired by the SIRO, was held throughout 2024, to robustly review policies and processes, and manage the acquisition of various tools to improve Victorian Plumbing's security posture. Ultimately, this will enable Victorian Plumbing to seek certification under ISO 27001. We continuously monitor the availability and resilience of our platform and systems, and continue to invest in our security infrastructure. Our development teams use tools provided by Microsoft to implement effective security over our cloud applications. These tools allow regular reporting to detail how the infrastructure is protected against the CIS and NIST frameworks. Penetration testing is performed annually, with vulnerability scanning scheduled monthly and during 2024 no significant issues were found. All new employees are required to complete data protection and cybersecurity training as part of the induction process, with regular mandatory training for all employees. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ![img-99.jpeg](img-99.jpeg) ## Data protection Data is at the heart of everything we do, and for that reason we take the protection of it very seriously. When it comes to collecting and storing personal data, be that for customers, suppliers or our employees, we abide by a clear set of principles. We are committed to ensuring that the personal information we collect and use is appropriate for the purpose, does not constitute an invasion of privacy and is held securely, responsibly and transparently in accordance with our Data Protection Policy. We manage consent for our marketing emails in line with the Information Commissioner's Office ("ICO") guidelines. We may pass personal data to trusted third party service providers contracted to Victorian Plumbing in the course of dealing with customers or employees. We record all personal data breaches and have a rigorous data breach process in the unlikely event one occurs. This includes reporting notifiable breaches to the relevant regulatory authorities, including the ICO, without undue delay and within stipulated deadlines. Where required, we take corrective action as soon as possible. ## Tax transparency Victorian Plumbing is committed to being a responsible taxpayer, acting in a transparent manner at all times. Our detailed tax policy includes further transparency on our approach to risk management and governance, and our attitude towards tax planning. We will continue to review our tax strategy to ensure that the key objectives remain aligned with the overall strategic objectives of the Group. ## Treating people fairly We are committed to acting ethically and with integrity in all our business dealings and relationships, and to implementing and enforcing effective systems and controls to ensure modern slavery is not taking place anywhere in our own business or in any of our supply chains. For our full Modern Slavery Statement, please see our website (www.victorianplumbingplc.com/responsibility/modern-slavery). We have a zero-tolerance approach to modern slavery and expect the same high standards from all our contractors, suppliers and other business partners. All our employees and job applicants are treated fairly and equally. It is our policy to ensure that working practices, career progression and promotion opportunities are all free from discrimination or bias. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 43 --- # Reporting frameworks We are developing our disclosures in line with both the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations and Sustainability Accounting Standards Board (“SASB”) standards to provide our investors and other stakeholders with information about our approach. ## TCFD: Task Force on Climate-related Financial Disclosures We recognise that we have steps yet to be taken to integrate climate-related risks and opportunities into our strategic approach, and are working towards identifying clear actions to achieve full compliance, taking advantage of evolving good practice and guidance from other companies, advisers and regulators. ## TCFD alignment at a glance The Board recognises the risks and opportunities posed by climate change to the Group’s business model and strategy. As such, the Group risk register incorporates risks relating to the impact of climate change on our business, and this is disclosed as a principal risk. The disclosure below sets out our climate-related financial disclosures consistent with the four TCFD pillars. ### Governance The Board is responsible for setting the Group’s strategy, taking into account all relevant risks and opportunities, including those related to climate matters. The Group’s risk management framework is designed to identify and assess the likelihood and consequences of risks, and to manage the actions necessary to mitigate their impact, including climate-related matters. This is detailed on pages 54 and 55. Climate change considerations are increasingly integrated into day-to-day business activities. Our ELT, which comprises the two Executive Directors and seven other members of senior management, meets weekly and climate matters are considered in this forum. Planning for the new DC which cut across all business areas, has had environmental sustainability considered at every stage. ### Strategy As outlined in our principal risks on pages 56 to 61, we continue to monitor consumer sentiment and respond to climate change and sustainability risk. As an online retailer with no manufacturing and limited logistics capability, we have a relatively low carbon footprint across Scopes 1 and 2. Positive changes we can make or influence in relation to our Scope 3 emissions will drive the most significant environmental benefit. Our in-house design team continues to work with our suppliers to encourage the use of more sustainable materials, such as bamboo, and we will work in partnership with our suppliers to support them in various ways to help reduce supply chain emissions. The table on the following page highlights the material climate change risks and opportunities that we have considered. We have more work to do to factor these risks and opportunities into our financial planning process, and to agree the metrics and targets that we will measure ourselves against. In a high carbon scenario, physical risks are more likely to materialise. In a low carbon scenario, the transition risks are more likely to materialise. We consider the business to be sufficiently resilient against the identified climate risks. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Transition risks | Risk or opportunity | Description | | --- | --- | | Impact of carbon taxes | The UK government has confirmed that a carbon tax will be introduced in the UK by 2027. This is likely to lead to an increase in the cost of products with high GHG emissions. This could negatively impact profits, due to taxation on the Group, or taxation on suppliers that is passed on in product cost. | | Changes to fuel prices caused by increased taxation or by climate-related market disruption | Fuel prices are impacted by changing market dynamics and decarbonisation trends, such as the transition to non-fossil fuel alternatives. This could lead to increased fuel costs for our upstream and downstream transport and distribution partners, which will be passed on to the Group and could negatively impact profits. | | Reputational damage due to our sustainability strategy failing to meet stakeholder expectations | If we do not continue to move towards using more sustainable raw materials and offering sustainable products to our consumers, along with reducing our carbon emissions, we might lose customers who switch to other retailers they consider to be more sustainable. It could also become difficult to attract and retain talent. | # Physical risks | Risk or opportunity | Description | | --- | --- | | Physical risks such as drought, flooding and wildfire impact the availability of raw materials or impact manufacturing sites in countries from which we source our products | In the UK, none of our premises are in areas at high risk of flooding. Physical risks will primarily have an impact on our supply chain. | # Risk management Effective management of risk is fundamental to the achievement of our long-term objectives and delivering value for our stakeholders. Our approach to risk is integrated within the overall governance and management of the business. Our risk management framework (set out on pages 54 and 55) separates responsibilities into three lines of defence: First line of defence: Senior Leadership Team Second line of defence: Oversight functions Third line of defence: Independent assurance Our Group risk register includes sustainability and climate change as a principal risk (as detailed on page 61). It is therefore subject to the same governance, review process and management attention as other risks recorded on our Group risk register. # Metrics and targets We have reported our Scope 1 and 2 emissions on page 36. Our Carbon Intensity Ratio has increased in the year to 2.56 tonnes of $\mathrm{CO}_{2}$ per Em of revenue (2023: 1.66). This reflects a year of transition in which our new DC was double running alongside our other sites, and the acquisition of Victoria Plum. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 45 --- # SASB disclosure and accounting metrics ![img-100.jpeg](img-100.jpeg) We have set out below our progress against the e-commerce SASB standards. ## SASB disclosure topics and accounting metrics | Topic | Disclosure required | Progress | | --- | --- | --- | | Hardware, infrastructure, energy and water management | (1) Total energy consumed (2) Percentage grid electricity (3) Percentage renewable | Scope 1 and scope 2 emissions are disclosed. See page 36 for details. Grid electricity accounted for 65% (2023: 61%) of total energy usage and 90% of this (2023: 97%) was from renewable sources. | | | (1) Total water withdrawn (2) Total water consumed (3) Percentage of each in regions with high or extremely high baseline water stress | There was no water withdrawn by the Group in the year. The Group consumed 3,356 (2023: 1,574) cubic metres of water in the year. The increase in the year reflects the double running of our new DC, along with the acquisition of Victoria Plum. No water was consumed in regions with high or extremely high baseline water stress. | | | Discussion of the integration of environmental considerations into strategic planning for data centre needs | The Group primarily uses cloud-based services with some supplementary on-site servers, so does not own or operate any data centres itself. When selecting or renewing cloud-based services the Group has regard to environmental considerations, as well as other factors. For example, the Group uses a platform that has a stated focus on sustainability. | | Data privacy and advertising standards | Description of policies and practices relating to behavioural advertising and user privacy | See page 43 for details on our Data Protection Policy. Further improvements have been made as quarterly meetings with key management, chaired by the Senior Information Risk Owner (“SIRO”), were held throughout the year. | | Data security | Description of approach to identifying and addressing data security risks | See page 42 for further information on our approach to data security and privacy. | | | (1) Number of data security breaches (2) Percentage involving personally identifiable information (“PII”) (3) Number of users affected | (1) There were two reportable data breaches in the year (2023: nil) (2) 0% involved PII (3) 2 users were affected | | Employee recruitment, inclusion and performance | Employee engagement as a percentage | Our warehouse colleagues went through a consultation process in 2024 due to our warehouse transformation programme. As a result of this, there were high levels of engagement throughout the year to make the process and the transition as smooth as possible. It was therefore decided that an employee engagement survey would not be appropriate in the year so that the HR team could focus on the support of those colleagues (2023: 59%). | | | (1) Voluntary turnover rate for all employees (2) Involuntary turnover rate for all employees | The Group had a voluntary turnover rate for employees of 64% (2023: 66%). This reflects improvements in our recruitment and induction processes. Our involuntary turnover rate is 36% (2023: 34%). | | | Percentage of gender and racial/ethnic group representation for: (1) management; (2) technical staff; and (3) all other employees. | Gender representation for management and the workforce as a whole as at 30 September is reported on page 40. In addition, as at 30 September 2024, 83% (2022: 88%) of technical staff identify as male and 17% (2023: 12%) as female. The ethnic diversity of management and the workforce as a whole as at 30 September is reported on page 41. Of technical staff who disclose their ethnicity, 90% identify as white with 10% identifying as from an ethnic minority. (2023: 89% white, 11% ethnic minority). | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Non-financial and sustainability information The non-financial and sustainability reporting regulations in section 414CA and 414CB of the Companies Act 2006 require the disclosure of specific information relating to environmental matters, the Company's employees, social matters, respect for human rights and anti-bribery and anti-corruption matters, a summary of which is set out below. We have incorporated Climate-related Financial Disclosures (governance, strategy, risk management, and metrics and targets), into the Environmental Sustainability section of this report on pages 36 and 37. The table below sets out where stakeholders can find further information for each area within this Annual Report: | Non-financial risk | Policies and standards that govern our approach | Section within this Annual Report | KPIs | | --- | --- | --- | --- | | Environmental | • Supplier Code of Conduct • Greenhouse Gas Protocol, Corporate Accounting and Reporting Standard • SASB • TCFD | • Environmental sustainability (pages 36 to 37) • Reporting frameworks (pages 44 to 45) | • Scope 1 and 2 emissions • Total energy consumed • Percentage renewable | | Our people | • Employee handbook • Whistleblowing policy • Data protection policy | • Diversity and inclusion (pages 38 to 41) • Governance and ethics (pages 42 to 43) • Stakeholder engagement and s.172 statement (pages 28 to 29) | • Gender diversity • Gender pay gap • Women in leadership roles • Ethnic representation • RIDDOR^{1} incidents | | Social and community | • Supplier audits • Modern slavery policy • Tax strategy | • Governance and ethics (pages 42 to 43) • Stakeholder engagement and s.172 statement (pages 28 to 29) | • Gender diversity • Gender pay gap • Women in leadership roles • Suppliers audited | | Suppliers | • Supplier Code of Conduct • ISO9000:2015 • Whistleblowing policy | • Governance and ethics (pages 42 to 43) • Stakeholder engagement and s.172 statement (pages 28 to 29) | • Number of factory audits | | Customers | • Privacy policy | • Governance and ethics (pages 42 to 43) • Stakeholder engagement and s.172 statement (pages 28 to 29) | | | Human rights | • Modern slavery policy • Supplier audits | • Governance and ethics (pages 42 to 43) | • Factory audit results | | Anti-bribery and corruption | • Anti-bribery policy | • Governance and ethics (pages 42 to 43) | | | Business model | | • Business model (pages 18 to 19) | | | Principal risks | • Risk register | • Principal risks and uncertainties (pages 56 to 61) • Risk management (pages 54 to 55) | | | Non-financial key performance indicators ("KPIs") | | • Operational KPIs (pages 32 to 33) | • Total orders • Average Order Value (£) • Marketing as a % of revenue • Trustpilot score • Active customers • Trade revenue as a % of total | 1 Reporting of Injuries, Diseases and Dangerous Occurrences Regulations. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 47 --- # Financial review ![img-101.jpeg](img-101.jpeg) Daniel Barton Chief Financial Officer ## Highlights - Order volumes hit a record one million in the year - Pleasing performance across our trade and expansion categories - Finalised the move into our new DC, on time and in budget - Free cash flow¹ up 16% to £18.6m - Full year final dividend recommended with a total cash distribution of £5.2m ## Introduction Whilst navigating continuing macroeconomic volatility in the year, we are pleased to report strong financial performance, good operating cash generation and further market share gains in the year to 30 September 2024. | | Victorian Plumbing | Victoria Plum | 2024 £m | 2023 £m | LFL Change | Reported Change | | --- | --- | --- | --- | --- | --- | --- | | Revenue | 281.0 | 14.7 | 295.7 | 285.1 | (1%) | 4% | | Cost of sales | (139.3) | (8.6) | (147.9) | (150.5) | 8% | 2% | | Gross profit | 141.7 | 6.1 | 147.8 | 134.6 | 5% | 10% | | Gross profit margin % | 50% | 41% | 50% | 47% | 3ppt | 3ppt | | Underlying costs | (112.3) | (8.3) | (120.6) | (110.8) | (1%) | (8%) | | Adjusted EBITDA | 29.4 | (2.2) | 27.2 | 23.8 | 24% | 14% | | Adjusted EBITDA margin % | 10% | (15%) | 9% | 8% | 2ppt | 1ppt | | Depreciation and amortisation | | | (4.7) | (3.8) | | | | Share-based payments | | | (3.1) | (3.9) | | | | Exceptional items | | | (8.2) | (0.8) | | | | Operating profit | | | 11.2 | 15.3 | | | | Finance income/(costs) | | | 0.6 | 0.3 | | | | Exceptional items | | | (2.8) | - | | | | Profit before tax | | | 9.0 | 15.6 | | | ¹ Free cash flow is a non-GAAP measure – please refer to the glossary on page 145. ² Acquired on 17 May 2024. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Revenue Reported revenue grew by 4% in 2024, from £285.1m in 2023 to £295.7m. On a LFL basis revenue decreased by 1% in 2024, from £285.1m in 2023 to £281.0m. Order volume grew on a reported basis by 10% to a record 1,022,000, with AOV decreasing by 5% to £290. On a LFL basis, order volume grew 3% to 956,000 and AOV decreased by 4% to £295. On a reported basis, the average number of items per basket remained stable at 3.1 in both 2023 and 2024. On a LFL basis, both order volume growth and AOV remained consistent throughout the year, with a continuation of the shift from third party brands to our own brand product range, the latter carrying a higher margin, as reported in previous announcements. The acquisition of Victoria Plum increased revenue by £14.7m and added £6,000 orders in the four and a half-month period to 30 September 2024, at an AOV of £220; reflective of lower basket sizes and the discounted pricing policy under previous ownership. The profile of consumer and trade revenue from Victoria Plum was similar to Victorian Plumbing. Victoria Plum did not sell any tiles and décor range during the period post-acquisition and its revenue in the period related to sales of own brand products, as third party brands had ceased trading with the business following its administration, under previous ownership, in September 2023. Consumer revenue, on a LFL basis, reduced by 4% from £225.6m in 2023 to £217.0m and represents 77% of revenue in 2024 (2023: 79%). Trade revenue, driven by consistently higher order volumes offset by a 3% reduction in AOV, grew by 8% from £59.5m in 2023 to £64.0m on a LFL basis, and represents 23% of revenue (2023: 21%). Revenue continued to grow at pace in our expansion categories, albeit from a small base given the space constraints we faced because, as planned, our new DC only became fully operational in December 2024. Despite the space constraints, tiles and décor revenue grew by 23%, from £10.1m in 2023 to £12.4m in 2024, and delivered a gross margin that was in line with the wider core bathroom range. Product selection is largely driven by the consumer, irrespective of channel, and we saw a continued shift away from the more expensive third party branded product to our own brand range. The split between own and third party brands, on a LFL basis, was 79% versus 21% (2023: 78% vs. 22%), which was a key contributing factor to AOV decline in the year. > “We are pleased to report revenue and adjusted EBITDA in line with market expectations.” # Gross profit We define gross profit as revenue less cost of sales. Cost of sales includes all direct costs incurred in purchasing products for resale along with packaging, distribution and transaction costs (which include mark to market movements on forward currency contractual arrangements in line with our treasury policy). Reported cost of sales reduced by 2% to £147.9m (2023: £150.5m). Reported gross profit margin increased to 50% (2023: 47%), with reported gross profit for the year increasing by 10% to £147.8m (2023: £134.6m). On a LFL basis, cost of sales reduced by 8% to £139.3m (2023: £150.5m), gross profit margin increased to 50% (2023: 47%) and gross profit for the year increased by 5% to £141.7m. In addition to reduced shipping costs, the improvement in gross profit, on a LFL basis, also reflects the product mix change throughout the year. Gross margin from own brand products, on a LFL basis, increased to 55% (2023: 53%), and gross margin from third party products increased to 35% (2023: 27%), driven by more favourable supplier arrangements. Gross profit margin of 41% in Victoria Plum reflects the discounted pricing policy established by the previous owners and the less favourable arrangements compared to Victorian Plumbing within its supply chain. We continue to partner with the bathroom industry’s leading names which, alongside our own brand offering, allows us to provide consumers with a wide range of price points. This dynamic is a compelling component of our unique ungeared operating model, protecting shareholder return and building the foundation for future growth. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 49 --- # Financial review continued ## Underlying costs Reported underlying costs, which we define as administrative expenses before depreciation and amortisation, exceptional items and share-based payments, increased by 8% to £120.6m (2023: £110.8m) and represented 41% of revenue. Underlying costs on a LFL basis increased by 1% and represented 40% of revenue. The Victoria Plum underlying cost base was mainly fixed in nature and disproportionately large compared to its customer base, owing to its rapid decline following sustained competition from Victorian Plumbing prior to the acquisition. The Victoria Plum underlying cost base represents 56% of its revenue. | LFL basis: | 2021 £m | 2023 £m | Change | | --- | --- | --- | --- | | Marketing – online | 73.7 | 75.0 | 2% | | Marketing – brand | 6.9 | 4.2 | (64%) | | Total marketing | 80.6 | 79.2 | (2%) | | People costs (excl. share-based payments) | 22.4 | 19.6 | (14%) | | Property and other overheads | 9.3 | 12.0 | 23% | | Underlying costs | 112.3 | 110.8 | (1%) | Growing our brand awareness and increasing traffic to our site remains a focus for the Group and we have seen an improvement in our brand awareness score to 66% (2023: 64%). Total marketing costs increased by 2% to £80.6m (2023: £79.2m) and represent 28.7% (2023: 27.8%) of total revenue. Online marketing costs reduced by 2% to £73.7m (2023: £75.0m) representing 26.2% (2023: 26.3%) of total revenue, which is considered an excellent performance and reflects our brand strength improvement, which is well-timed against a backdrop of inflation in the pay-per-click environment in the UK. Investment in brand spend, including our three-year partnership with Bolton Wanderers Football Club and TV and outdoor advertising, increased to £6.9m (2023: £4.2m) representing 3% (2023: 2%) of total revenue. People costs, excluding share-based payments but including costs relating to agency staff, increased 14% to £22.4m (2023: £19.6m). This is in line with expectation given continued inflationary pressure from significant, above inflationary increases to the National Living Wage in a tight labour market, together with investments in certain other areas such as our dedicated Trade team. Overall full-time equivalents ("FTE") increased by 9% to 665 (2023: 612) as we transitioned away from expensive agency staff. Property and other overhead costs reduced by 23% to £9.3m (2023: £12.0m) as the Group exited expensive third party short-term rental properties in the second half of the financial year. ## Exceptional items | | 2024 £m | 2023 £m | | --- | --- | --- | | Warehouse transformation: | | | | • Double running and non-recurring administrative expenses | 5.7 | 0.8 | | • Impairment of right-of-use assets | 0.8 | – | | • Double running finance costs | 2.8 | – | | | 9.3 | 0.8 | | Acquisition and closure of Victoria Plum: | | | | • Closure costs: Victoria Plum | 1.1 | – | | • Legal and professional fees associated with business combinations | 0.6 | – | | | 1.7 | – | | Total exceptional items | 11.0 | 0.8 | ## Warehouse transformation On 4 October 2023, the Group entered into a 20-year lease agreement for a new DC in Leyland, Lancashire and commenced a period of fit-out ending in December 2024. Exceptional items in 2025 relating to the warehouse transformation are anticipated to be c.£2m. Cash outflows in 2025 relating to the warehouse transformation are anticipated to be c.£8m. ## Acquisition and closure of Victoria Plum On 17 May 2024, Victorian Plumbing Ltd, a subsidiary, acquired 100% of the share capital of Victoria Plum and, in August 2024, the decision was taken by the Group to cease trading Victoria Plum. The Victoria Plum website was redirected to Victorian Plumbing from November 2024. The legal and professional fees associated with the acquisition, and certain costs associated with the subsequent closure of that business, have been recognised as exceptional costs as they are non-recurring. During 2024, associated exceptional cash outflows of £0.8m (2023: £nil) have been incurred and recognised in the consolidated statement of cash flows in respect of these items. Following the closure of Victoria Plum, the Group anticipates a cash outflow in 2025 of c.£7m. Stock transferred from Victoria Plum to Victorian Plumbing in total will be c.£8.5m. 50 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ## Exceptional cash flows | | 2024 £m | 2023 £m | | --- | --- | --- | | Cash flows from operating activities | | | | Cash outflow from exceptional items: double running | (2.5) | (0.6) | | Cash outflow from exceptional items: business combinations | (0.8) | – | | Cash flows from investing activities | | | | Purchase of intangible assets: warehouse transformation | (0.3) | (0.2) | | Purchase of property, plant and equipment: warehouse transformation | (20.8) | (1.8) | | Cash flows from financing activities | | | | Payment of interest portion of lease liabilities: double running | (2.7) | – | | Payment of principal portion of lease liabilities: double running | (0.1) | – | | Cash flows from exceptional items | (27.2) | (2.6) | ## Operating profit and adjusted EBITDA Significant items of income and expense that do not relate to the trading of the Group are disclosed separately. Share-based payment charges are an example of such items. The table below provides a reconciliation from operating profit to adjusted EBITDA, which is a non-GAAP metric used by the Group to assess the operating performance. | | 2024 £m | 2023 £m | | --- | --- | --- | | Operating profit | 11.2 | 15.3 | | Amortisation of intangible assets | 3.1 | 2.3 | | Depreciation of property, plant and equipment | 0.5 | 0.6 | | Depreciation of right-of-use assets (not included in exceptional items) | 1.1 | 0.9 | | Share-based payments (including associated NI) | 3.1 | 3.9 | | | 19.0 | 23.0 | | Double running and non-recurring administrative expenses | 5.7 | 0.8 | | Impairment of right-of-use assets | 0.8 | – | | Closure costs: discontinuing Victoria Plum | 1.1 | – | | Legal and professional fees associated with business combinations | 0.6 | – | | | 8.2 | 0.8 | | Adjusted EBITDA | 27.2 | 23.8 | ## Profit before tax and adjusted PBT The ELT also measures the overall performance of the Group by reference to adjusted PBT, a non-GAAP measure. This adjusted profit measure is applied by the ELT as an alternative profitability measure, which incorporates the capital investment and the financing structure of the Group. | | 2024 £m | 2023 £m | | --- | --- | --- | | Profit before tax | 9.0 | 15.6 | | Share-based payments (including associated NI) | 3.1 | 3.9 | | Double running and non-recurring administrative expenses | 5.7 | 0.8 | | Impairment of right-of-use assets | 0.8 | – | | Double running finance costs | 2.8 | – | | Closure costs: Victoria Plum | 1.1 | – | | Legal and professional fees associated with business combinations | 0.6 | – | | Adjusted PBT | 23.1 | 20.3 | | | 2024 £m | 2023 £m | | --- | --- | --- | | Adjusted EBITDA | 27.2 | 23.8 | | Amortisation of intangibles | (3.1) | (2.3) | | Depreciation of property, plant and equipment | (0.5) | (0.6) | | Depreciation of right-of-use assets (not included in exceptional items) | (1.1) | (0.9) | | Finance income | 1.0 | 0.6 | | Finance costs (not included in exceptional items) | (0.4) | (0.3) | | Adjusted PBT | 23.1 | 20.3 | ## Share-based payments The Group incurred share-based payment charges (including associated National Insurance ("NI")) of £3.1m (2023: £3.9m). Share-based payment charges for the year include £1.7m (2023: £2.2m) for schemes relating to the Group's IPO in June 2021, along with £1.4m (2023: £1.7m) for ongoing schemes put in place post IPO. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 51 --- # Financial review continued ## Depreciation, amortisation and impairment The Group continues to invest in its platform and bespoke operational software, with £3.8m intangible assets capitalised in 2024 (2023: £3.0m). Capitalised intangible assets of £1.1m have been categorised as assets under construction and relate to the Group's bespoke operational software. Cash outflows of £1.0m have been incurred in relation to these assets under construction, £0.8m in the financial year ended 30 September 2024 (2023: £0.2m). These assets will be amortised over their useful economic life of 3 years once the software is ready for its intended use. £23.4m property, plant and equipment was capitalised in 2024 (2023: £4.1m), the majority of which related to the fit-out of the new DC, recognised as assets under construction. Once the assets under construction meet the criteria to be depreciated, they will be depreciated over a useful economic life of 5 to 20 years. On 4 October 2023, the Group entered into a 20-year lease agreement for the DC. An addition of £44.8m has been recognised as a right-of-use asset. This asset is being amortised over its useful economic life of 20 years. ## Finance income/(costs) Finance income of £1.0m during the year compares to a finance income of £0.6m for 2023 due to, inter alia, cash being placed on deposit to take advantage of recent high interest rates. Finance costs of £2.8m have been included within exceptional items as 'double running' (2023: £nil). ## Profit before taxation and adjusted profit before tax Profit before taxation reduced by 42% to £9.0m (2023: £15.6m). Profit before tax margin reduced to 3% (2023: 5%) due to improved performance offset by warehouse transformation related costs and business combination costs. Adjusted profit before tax increased by 14% to £23.1m (2023: £20.3m). Adjusted profit before tax margin increased to 8% (2023: 7%) due to improved performance. ## Taxation The Group tax charge of £3.5m (2023: £3.8m) represents an effective tax rate of 39% (2023: 24%) which is higher than the standard rate of UK tax of 25% because of Victoria Plum losses that cannot be utilised for tax purposes. The adjusted effective tax rate is 25% (2023: 24%) after considering the tax effect of exceptional items and share-based payments. ## Earnings per share Diluted earnings per share ("EPS") decreased by 54% to 1.7 pence per share (2023: 3.7 pence per share). Adjusted diluted EPS¹ increased in line with adjusted profit before tax by 13% to 5.3 pence per share (2023: 4.7 pence per share). ## Cash flow and net cash The Group continues to achieve strong cash generation with an increase in free cash flow of 16% to £18.6m (2023: £16.1m), resulting in robust operating cash conversion of 68% (2023: 68%). | | 2024 £m | 2023 £m | | --- | --- | --- | | Adjusted EBITDA | 27.2 | 23.8 | | Movement in working capital | (4.8) | (4.0) | | Repayment of lease liabilities (excluding exceptional items) | (1.3) | (1.1) | | VAT not recovered on assets under construction | 1.2 | 0.4 | | Capital expenditure (excluding exceptional items) | (3.7) | (3.0) | | Free cash flow | 18.6 | 16.1 | | Operating cash conversion | 68% | 68% | Changes in working capital resulted in a cash outflow of £4.8m in the year, largely because of timing differences with supplier payments. Stock value increased in the year due to the acquisition of Victoria Plum. Given the nature of our stock, we continue to incur low levels of obsolescence and our proprietary knowledge over two decades of trading benefits us in low levels of returns and damages. Capital expenditure (excluding exceptional items) of £3.7m (2023: £3.0m) included £3.3m of capitalised salaries included in intangible assets relating to development of the Group's bespoke software solutions (2023: £2.6m). At the year end, the Group had cash of £11.2m (2023: £46.4m). ## Events after the reporting period In August 2024, the decision was taken by the Group for Victoria Plum to cease trading and from November 2024, the Victoria Plum website was redirected to Victorian Plumbing. Victoria Plum will be treated as a discontinued operation in accordance with IFRS 5 'Non-current assets held for sale and discontinued operations' in the financial year ending 30 September 2025. On 18 December 2024, the Group entered into a new three-year revolving credit facility ("RCF") with HSBC, replacing the £10m RCF which was due to expire in December 2025. The new RCF has total commitments of £30m. The Group has provided a cross-guarantee by way of a debenture dated 7 June 2021 as security for the facility. The RCF remains undrawn at the date of this report. ¹ Adjusted diluted EPS is calculated as adjusted profit for the year divided by the total issued share capital of the Group (see note 13 to the consolidated financial statements). 52 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ![img-102.jpeg](img-102.jpeg) ## Dividend Victorian Plumbing generates significant operating cash flows and the underlying priority is to reinvest into the business and drive further profitable growth. The Board implemented a dividend policy in 2022 with an aim to maintain a dividend cover ratio of c.3.0-3.5x. This recognises that most growth opportunities, excepting the one-off warehouse transformation and optimisation, do not require significant capital, and reflect confidence in the strength, future growth prospects and cash generation of the business. Additionally, the Board may from time to time conclude that it has surplus cash, at which point it will consider further returns to shareholders. In order to distribute a total ordinary dividend for the year of 1.61 pence per share (2023: 1.40 pence per share), which would represent growth of 15%, the Board is recommending a full year final ordinary dividend of 1.09 pence per share (2023: 0.95 pence per share). This would represent dividend cover for 2024 of 3.3x (2023: 3.4x). The Board is not recommending a special dividend (2023: Enil) as it preserves cash to finance the remainder of the fit-out of the warehouse transformation and the closure of Victoria Plum without the need for indebtedness, and to maintain the robustness of the balance sheet. This results in a total cash distribution to shareholders of £5.2m (£1.5m interim paid and £3.7m final to be paid), subject to shareholders' approval at the AGM on 25 February 2025. The dividends will be paid on 7 March 2025 to shareholders on the register of members at the close of business on 7 February 2025. ## Daniel Barton Chief Financial Officer 14 January 2025 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 53 --- # Risk management Effective management of risk is fundamental to the achievement of our long-term objectives and delivering value for our stakeholders. Our approach to risk is integrated within the overall governance and management of the business. ## Risk management Effective management of risk is essential to the delivery of the Group's strategy. It protects our brand, supports better decision-making, and is fundamental to the achievement of our long-term objectives and delivering value for our stakeholders. The Board has overall responsibility for determining the nature of the principal risks faced by the business and setting the organizational risk appetite. It recognizes that some risks must be taken to grow the business in a sustainable and profitable way, but that those risks must be well understood and managed through an effective principal risk mitigation strategy. The Company does not currently have a separate risk committee or internal audit function, rather our approach to risk is integrated within the overall governance and management of the business, as detailed further in the Corporate Governance section of this report. Here page 10 for the Audit and Risk Committee report is published. The Group adopts a 'Three lines of defense' model to manage risk, internal control and resistance, as illustrated at the next page. ## Responsibilities ### Board - Collectively responsible for overseeing the Group's risk management and internal control framework - Determines the nature of the Group's principal risks and sets risk appetite and tolerance - Ensures appropriate and robust systems of risk management and internal controls are in place to identify, manage and mitigate risks to the overall viability of the Group ### Audit and Risk Committee - Supports the Board by providing oversight and challenge regarding the scope and effectiveness of the Group's risk management and internal control framework - Agrees the scope of the independent external auditors and reviews their work - Evaluates the need for an internal audit function ### Executive Leadership Team ("ELT") - Comprises the two Executive Directors and seven other members of senior management, and meets weekly to identify, assess, own, monitor, manage and mitigate risks, and exploit opportunities - Ensures risk management and internal controls are seen as business as usual - Determines and supervises corrective actions required to mitigate risks and address control deficiencies ![img-103.jpeg](img-103.jpeg) WESTORIAN PRURBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Lines of defence ![img-104.jpeg](img-104.jpeg) ## First line: Senior Leadership Team - Comprises members of management from all areas of the business, with primary responsibility for day-to-day oversight of business level risks - Embed risk management and internal controls as business as usual and monitor performance - Ensure corrective actions to mitigate risks are being implemented effectively - Escalate concerns regarding existing or emerging risks or ineffective controls ## Second line: Oversight functions - Includes Human Resources and Finance (internal controls) functions, and other groups, such as Health and Safety, Data Protection and Information Security - Establish appropriate policies, provide guidance, advice and direction on implementation - Monitor the first line of defence ## Third line: Independent assurance - Carried out by third parties such as external auditors or finance professionals - Provide independent assurance that risk is being appropriately managed - Identify process improvements and efficiencies # Our risk management process Strategic, operational, financial and legal risks are reviewed on an ongoing basis and captured in a risk register, which identifies the risk area, the likelihood of the risk occurring, the impact if it does occur and the actions being taken to mitigate or manage the risk to the desired level. The Board receives regular reports from management identifying and evaluating risks within the business, and the associated mitigation plans. Horizon scanning is frequently performed to understand any emerging (or changing) risks, and these insights are fed into the risk assessment and management process. A four-step process has been adopted to manage the risks to which the Group is exposed: # Explanation of the risk management process ## 1. Identify risks A top-down and bottom-up approach is used to identify principal risks across the business in the context of the Group's strategic objectives and our external operating environment. While the Board has overall responsibility for the effectiveness of internal control and risk management, the detailed work is delegated to the ELT. ## 2. Assess and quantify risks Risks and controls are analysed and evaluated to establish the impact and likelihood of occurrence with reference to the Group's standardised risk scoring matrix. The identified risks are consolidated and categorised into a Group-wide risk register. ## 3. Manage and mitigate risks Each risk is owned by a member of the ELT, who is accountable for the implementation of associated internal controls. If additional controls are required to mitigate identified risks, these are developed, and responsibilities assigned. ## 4. Monitor and review The ELT is responsible for monitoring principal risks and assessing the effectiveness and adequacy of mitigation measures in a continual process, in the context of the risk appetite determined by the Board and risk assessment results. Results of the monitoring process are reported to the Audit and Risk Committee, which is responsible for understanding the business impact, and evaluating the outputs individually and collectively before escalation to the Board for review. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 55 --- # Principal risks ## Identifying, assessing, mitigating and monitoring the Group's principal risks The Board has carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. This included an assessment of the likelihood and impact of risks identified, and the mitigating actions being taken. This year’s principal risks are detailed in the section below. We acknowledge that additional risks, including those that are not currently known or that the Group currently deems immaterial, may exist and affect operations or financial results. However, we believe those disclosed have the potential to impact execution of the Group’s strategic plans most significantly. ## Macroeconomic trends We fail to adapt quickly to changing macroeconomic conditions | Potential impact | Changes in the year | Key mitigations | | --- | --- | --- | | Macroeconomic factors can affect the size of our addressable market and / or how customers behave. They can also have an impact on our operations and those of our supply chain. Failing to be aware of those factors, and swiftly responding, could have an adverse impact on the Group’s forecasting accuracy, financial performance and growth potential. | Risk from macroeconomic factors has continued in 2024, with the escalating conflict in the Middle East creating a Red Sea shipping crisis, along with both domestic and international political and economic instability, and continuation of the cost-of-living crisis. Although we saw interest rate reductions in August and November 2024, the interest rate hikes and rising inflation seen in the prior year are still squeezing the consumer’s disposable income, with some delaying spend on ‘big-ticket’ projects as a result. | We continue to monitor shifts in all relevant macroeconomic risks, with particular focus on challenges that impact our customers, workforce and supply chain. Mitigations put in place to help the Group navigate macroeconomic volatility include the following: • Carefully controlled price increases and discounts, as we balance the Group’s strategy with our customers’ expectations. • Assessing our workforce reward, alongside the cost-of-living crisis that many of our staff are experiencing. • Horizon scanning for geopolitical factors that may impact our supply chain, which already consists of many suppliers across multiple locations, and minimising over-reliance on any individual country or supplier. • Maintaining strong relationships with multiple carriers and logistics providers, with technology solutions that support our ability to flex between providers as and when required. • Continually reviewing stock levels and increasing investment in stock when uncertainties arise, helping to reduce stock-outs and strengthening our competitive position. | 56 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Key: Link to strategy 1. Grow our brand by providing the best customer experience and investing in bold campaigns 2. Provide the largest choice of bathroom products 3. Improve warehouse and supply chain efficiency 4. Adapt our customer journey to better serve the trade segment 5. Extend our product offering for trade customers 6. Expand available categories beyond core bathroom products # Key: Risk movements in year 1. Increased risk 2. Same risk 3. Reduced risk 4. New principal risk for 2024 # Innovation and changes in consumer buying We fail to remain relevant and attractive to our customers | Potential impact | Changes in the year | Key mitigations | | --- | --- | --- | | Failing to innovate may impact our ability to attract new customers or retain our existing customers. A failure to continuously enhance our customer journey in a manner that responds to our consumers' evolving needs could have a material adverse effect on our financial performance. | We have continued to see consumers 'trading down' within a product range, as the cost-of-living crisis has restricted discretionary spending. Consumer appetite remains more in favour of spending on accessories and redecorating, rather than on 'big-ticket' projects. Demand has continued to move online given the perception that online retailers often provide a cheaper offering and as customers increasingly feel more easily able to 'shop around' within the online format, and without the difficulties experienced when shopping offline. | We remain at the forefront of innovation in the sector and are continuously updating our platform to provide improved user experience for our customers. We develop most of our technology platform in-house, meaning we can make bespoke changes quickly when a need is identified. Our product and marketing teams continuously research the latest consumer trends and buying behaviours using a range of platforms for the deepest insight. We use our agile approach to product development to bring products to market quickly once we identify a consumer need or latest trend. This approach allows us to bring a product to market at scale within six months of inception. Our focus on expansion categories also mitigates this risk, as we broaden our range with products that often come later in the buying journey, such as tiles and décor, heating and kitchens. Throughout the year, we have innovated and successfully launched a number of new products across several of our own brands, which are typically sold to customers at lower price points (but generally offer greater margins). In addition, we have further strengthened our position through partnerships with well-known third party bathroom product brands. We also continue to review the payment options available, seeking out the most cost-efficient, flexible and convenient payment methods to improve our customers' experience. | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 57 --- Principal risks continued ## Business interruption ### A significant event restricts the ability of the business to operate effectively | Potential impact | Changes in the year | Key mitigations | | --- | --- | --- | | A large-scale incident at one or more of our sites could immediately cause significant levels of disruption to our business operations, and thus the service we are able to provide to our customers. An event of this type, which resulted in substantial damage to physical premises, systems, electronic data and / or other records, could also take time and notable costs to rectify. | The Group physically operates out of multiple locations, thus minimising the potential impact of a single site event. During 2024, the Group embarked on the fit-out of our new DC in Leyland, Lancashire, and by the end of the financial year, more than half of all orders were being dispatched from this site. In addition, a number of sites within our existing estate commenced refurbishment, to expand distribution capabilities, particularly in our expansion categories. | We have a robust disaster recovery plan that covers critical systems. Many of our employees can work both on site and / or at home if that was required. We have dedicated security, health and safety, and maintenance teams on our sites, to monitor for issues and support the continued operation of our warehouses and head office. Should we encounter an issue with distribution from a warehouse, we have back-up facilities that enable us to quickly turn on additional dispatch capabilities from the others. We also hold insurance policies that would aid our operational recovery and remediation, if required. Furthermore, we hold long-standing and trusted relationships with our global suppliers, which would help us to navigate challenges associated with a significant business interruption. | ## Brand and reputation ### Consumers lose faith in the quality of our product or service levels | Potential impact | Changes in the year | Key mitigations | | --- | --- | --- | | Our brand is one of our biggest assets. Failure to maintain and protect our brand, or negative publicity that affects our reputation, could diminish the confidence that customers have in our products and the service we provide, resulting in a reduction in revenue and profit. | Our prompted brand awareness score increased to 66% (2023: 64%). During the year, we have increased our Trustpilot score to 4.6 out of 5.0 (2023: 4.5), which is commendable against a backdrop of warehouse transformation. Acquisition of Victoria Plum removes customer confusion and gives us the opportunity to invest in brand marketing with confidence for a greater return. | Our experienced Marketing team invest in new and innovative marketing campaigns that are bold and quirky to help differentiate us and grow our brand awareness. Alongside our data-driven pay-per-click strategy, this content helps us to stay front of mind with consumers. We have an open culture with our values at the core, and we promote transparency across the business. As described in the risk management section on page 54, our internal control and assurance framework also mitigates financial and legal risks, for which the consequences might ultimately involve damage to brand and reputation. We perform quality checks on products to ensure that items we deliver to customers are to the standard we expect. We perform audits at manufacturers and hold our suppliers to high quality standards, addressing any failure to meet expectations. Our customer service teams do everything they can to resolve queries quickly where they do arise. | 58 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ## Key: Link to strategy 1. Grow our brand by providing the best customer experience and investing in bold campaigns 2. Provide the largest choice of bathroom products 3. Improve warehouse and supply chain efficiency 4. Adapt our customer journey to better serve the trade segment 5. Extend our product offering for trade customers 6. Expand available categories beyond core bathroom products ## Key: Risk movements in year 1. Increased risk 2. Same risk 3. Reduced risk 4. New principal risk for 2024 ## Cybersecurity and data protection We fail to maintain the integrity and availability of the data we hold and the systems we operate | Potential impact | Changes in the year | Key mitigations | | --- | --- | --- | | As an e-commerce business, we are reliant on our IT infrastructure to continue to operate. Any significant downtime of our systems would result in an interruption to the services we provide. A significant cybersecurity or data protection issue, such as a data breach or infrastructure breakdown, whether because of our own failures or a malicious attack, would lead to a loss in confidence of both customers and suppliers. This could result in reputational damage, loss of audience, loss of revenue and potential financial losses in the form of penalties. | Quarterly meetings, chaired by Daniel Barton (Chief Financial Officer and Senior Information Risk Officer) with key management, robustly assess the progress of data protection and information security measures. During the year, several new solutions have been implemented to mitigate identified risks and we have continued to assess our IT environment. | We have a robust disaster recovery plan that covers critical systems. We hold low amounts of sensitive data, and several of our applications are hosted in the cloud, which increases the resilience of our systems and the security of our data. We monitor our resilience and susceptibility to attack through our vulnerability assessments and address risks as they emerge. Progress on data protection measures is reported weekly and the Information Security Team reports monthly, as we undertake reviews of our policies and processes, and acquire various tools to increase our security. Ultimately, this will enable us to seek certification under ISO 27001. | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 59 --- Principal risks continued ## Supply chain Operational effectiveness and growth are negatively impacted by actions or events in our supply chain | Potential impact | Changes in the year | Key mitigations | | --- | --- | --- | | We are reliant on multiple third party suppliers and service providers throughout the customer journey, from product to website, advertising to fulfillment. A significant change or failure on their part may disrupt our operations and business performance. A failure in day-to-day operations that impacts our ability to process or fulfil customer orders could result in a reduced customer proposition, lost opportunity, and a decrease in consumer confidence. Our customers expect us to provide quality products and have confidence that goods purchased from us have been ethically sourced. Failure to monitor our supply chain could lead to extensive reputational damage and ultimately financial loss. | During 2024, the escalation of the conflict in the Middle East, leading to the Red Sea shipping crisis, put significant pressure on supply chains. Incoming stock from the Far East suffered delays as diversions rerouted sea freight away from the Suez Canal. Market rate shipping costs surged nearly five-fold during the peak of the crisis. We were, in part, insulated from these effects by our significant stock-holding and favourable contracted freight rates. As our business grows, our spend with third parties increases, most notably in our principal marketing channels, with our key suppliers of stock, and the distribution channels we use. We continue to work closely with our local experts in China to ensure that we can readily perform due diligence on suppliers in that region. While supply chain pressures continue to exist, we do not believe that the risk has increased during the year. | Our highly experienced purchasing team continuously monitors stock availability and has strong relationships with a breadth of suppliers so that, where possible, we reduce potential single points of failure. We have an extensive supply chain spread across multiple regions, so that we mitigate exposure to localised disruption. We aim to be a ‘prompt payer’ to maintain the deep and trusted partnerships within our supply chain. In return, we hold all suppliers to high standards and address any failures promptly. We carry out due diligence on suppliers and the quality of the products they supply at the onset of our relationship and monitor throughout via our Chinese supplier audit programme. We are making substantial progress in mitigating ethical trade and sourcing risks by developing our expertise around product quality and ethical trading standards. We develop our website platform and certain key operational systems in-house to reduce exposure from third parties. We also continue to review the payment options offered to customers, in order to mitigate the risk of a merchant failure. | ## Increase in competition We fail to remain competitive, or new or developing competition adversely impacts our market position | Potential impact | Changes in the year | Key mitigations | | --- | --- | --- | | The UK market for bathroom products and accessories is highly competitive, particularly with respect to customer experience, price, quality, availability, product and delivery options, as well as digital capabilities. Increased competition could lead to an increase in customer acquisition costs. Competitors could also develop either a customer experience or products that we are unable to replicate. These factors could impact our financial performance. | On 17 May 2024 we acquired Victoria Plum. This acquisition brought a well-established brand with a solid base of customers, suppliers and product ranges into the Group. In 2024 we continued to see evidence that market pressures have led to other retailers in our sector struggling, and even entering administration. As consumers have grown accustomed to purchasing home products online, many traditional bricks and mortar retailers have started to strengthen their multichannel offering, developed their digital proposition and augmented their estate to support collection or delivery services. During the year we grew our trade sales team to focus on trade customer acquisition and we commenced refurbishment of one of our existing sites to support the growth of our expansion categories, both of which open us up to a wider competitor set. | We have the largest and most engaged audience across any online specialist bathroom retailer. The strength of our balance sheet enables us to invest in our brand, and our continued focus on pay-per-click marketing helps us protect and grow our audience. We monitor competitor activity closely through weekly and monthly reporting and review this at Executive Team and Board level. We continue to monitor stock levels and invest in our product offering. We engage with third party brands and continuously evolve our own brand products to ensure we are addressing the latest consumer trends and providing choice that is not easily replicated. While our strategic diversification widens our competitor landscape, it also provides mitigation should we experience significant competitive pressures in one particular category. | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ## Key: Link to strategy 1. Grow our brand by providing the best customer experience and investing in bold campaigns 2. Provide the largest choice of bathroom products 3. Improve warehouse and supply chain efficiency 4. Adapt our customer journey to better serve the trade segment 5. Extend our product offering for trade customers 6. Expand available categories beyond core bathroom products ## Key: Risk movements in year 1. Increased risk 2. Same risk 3. Reduced risk 4. New principal risk for 2024 # Sustainability and climate change ## Our sustainability strategy fails to meet stakeholder expectations | Potential impact | Changes in the year | Key mitigations | | --- | --- | --- | | We recognise the importance of combating climate change and acknowledge the responsibility and costs we have to bear as a business to play our part. The focus on climate change and sustainability continues to be at the forefront of stakeholder sentiment; therefore, we also risk adversely impacting our brand and reputation if we do not adequately react to their concerns. | On 22 November 2024, the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28), took place in Azerbaijan, with the UK committing to a more ambitious climate goal, to reduce all greenhouse gas emissions by at least 81% on 1990 levels. The newly elected Labour government announced a number of environmental measures as part of their autumn budget, in particular, confirmation that the UK Carbon Border Adjustment Mechanism (“CBAM”) will be introduced on 1 January 2027. While multi-national bodies and national governments continue to determine the best approach to climate change, which impacts all our stakeholders, our focus remains on risk mitigation within our control. | Following on from previous years’ improvements, we continue to monitor consumer sentiment and respond to climate change and sustainability risk. In the year, we have made several sustainable choices as part of the fit-out of our new DC. Solar panels have been fitted to the roof of the building, which will reduce our carbon footprint and increase our energy independence. All material handling equipment at the new DC is electric, and electric vehicle charging points have been installed in the car park. We supply sensibly sourced products, including bathroom taps and toilets with water-saving functionality, radiator valves with energy-saving technology and products made from sustainable materials. In addition, we continue to improve the information we provide to customers to enable them to make decisions that help lower their energy consumption, reduce their carbon footprint and make financial savings. Operationally, we continually assess our ways of working to determine whether other more environmentally friendly options are available. | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Viability statement In accordance with the UK Corporate Governance Code 2018 (the “Code”), the Directors have assessed the prospects and viability of the Group over a period to 30 September 2027. ## Assessment of prospects The Directors have assessed the Group’s prospects, taking into account its current financial position, its recent historical financial performance, its business model (pages 18 to 19), strategy (pages 22 to 27) and the principal risks and uncertainties (pages 56 to 61). The Board considered that a three-year period to September 2027 is the most appropriate period over which to provide its viability statement due to: - It being consistent with the Group’s rolling three-year strategic planning process; - It reflecting reasonable expectations in terms of the reliability and accuracy of operational forecasts; and - Projections looking out further than three years becoming significantly less meaningful given the pace of change in the retail market. The Directors are mindful, however, of the heightened uncertainty of consumer demand given the wider macroeconomic background and the pressure this may place on disposable income available to consumers, and accept that forecasting consumer behaviour across this time frame is more challenging. The first year of the financial forecast is based on the Group’s 2025 annual budget. The second and third years are prepared in detail and are flexed based on the actual results in year one. Progress against financial budgets, forecasts and operational focus areas are reviewed monthly by both the ELT and the Board. The key assumptions in the financial forecasts, reflecting the overall strategy, include: - Closing Victoria Plum and transitioning orders over to Victorian Plumbing; - Increasing our growth in expansion categories, such as tiles and décor; - Increasing our opportunities to retail bathroom products and accessories to trade customers; and - For 2025, to help facilitate the overall strategy, finalising our warehouse transformation. ## Assessment of viability The output of the Group’s strategic and financial planning process detailed previously reflects the Board’s best estimate of the future prospects of the business (the “Base Case”). To make the assessment of viability, however, additional scenarios have been modelled over and above those in the Base Case, built upon a number of the Group’s principal risks and uncertainties, which are documented on pages 56 to 61 – please refer to the ‘stress testing’ section. The Group’s Base Case currently meets its day-to-day working capital requirements from its cash balances, owing to its continued profitability and strong cash conversion. While the business has access to a £30m revolving credit facility, expiring in December 2027, this is not required to be drawn down. Equally, with no external debt funding, and no intention to use it in the future, there are no covenant requirements to be assessed. ## Stress testing Using the Base Case as the starting point, a stress test has been modelled to demonstrate the Group would remain in a net cash position for the entire viability period. In this stress test scenario, the following factors were incrementally modelled and assumed for the full period to 30 September 2027, in comparison to the Base Case: - A lower growth in dispatched order volumes than that achieved in 2024; - A decrease in average order value; and - A decrease in gross margin. While the likelihood of all factors occurring at once is remote, applying all concurrently provides a hypothetical, albeit severe, view to assess the Group’s viability. The results of this scenario modelling showed that the business would be able to withstand a combination of all factors, without recourse to mitigating actions. This reflects the resilient nature of the Group’s business model, its profitability and strong operating cash conversion, together with current strong liquidity. Throughout the stress testing, we have assumed no immediate cost mitigation actions to be taken and the continuation of dividend payments. However, in the event of such a scenario, management would have a number of options available to maintain the Group’s financial position. In addition to the potential of drawing down on the revolving credit facility, management has identified a course of actions that could be undertaken, which include but are not limited to: - Negotiating payment terms with our suppliers; - Continuing to manage stock levels to reflect changes in consumer demand; - Considering the need for discretionary spending; - Recommending no dividends are declared or paid; - Refinancing to access external debt; and - Raising additional equity finance in the business. A selection of these measures, which are deemed to be readily available and that could further strengthen the Group’s financial position and viability, have been modelled from 2025 onwards to give the Board oversight of profitability and cash options available should such a scenario occur. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ![img-105.jpeg](img-105.jpeg) ## Viability statement Based on their assessment of prospects and viability above, the Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period ending 30 September 2027. ## Going concern The Directors also considered it appropriate for the going concern review period up to 28 February 2026, to prepare the financial statements on the going concern basis, as explained in the 'basis of preparation' paragraph in note 1 to the consolidated financial statements. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 63 --- # Corporate governance at a glance ## The UK Corporate Governance Code: How we comply The Corporate governance report, which includes the principal Committee reports and Directors' report, explains how the Board has applied the principles and complied with the provisions of the UK Corporate Governance Code 2018 (the "Code"). On Admission to AIM, the Company agreed to comply with the Code. The Board has applied the principles and complied with the provisions of the Code during the financial year ended 30 September 2024, except for those provisions described on page 69. Prior to Admission, there was no requirement for the Company to comply with the Code. The table below sets out where the key content can be found in this report. ### 1. Board Leadership and Company Purpose - Purpose statement 02 - Business model 18 - Stakeholder engagement and section 172 (1) statement 28 - Culture, purpose and values 72 - Activities of the Board 71 ### 2. Division of Responsibilities - Board of Directors 66 - Our governance framework 64 - Division of responsibilities 68 ### 3. Composition, Succession and Evaluation - Nomination Committee report 74 - Gender balance of senior management 75 - Appointments to the Board 75 - Board composition and skills 75 - Board evaluation 75 - Diversity and inclusion 75 ### 4. Audit, Risk and Internal Control - Audit and Risk Committee report 76 - Risk management 77 - Directors' responsibility statement 91 - Viability statement and going concern 62 ### 5. Remuneration - Directors' remuneration report 80 ## Documents available at www.victorianplumbingplc.com - Victorian Plumbing Group plc Articles of Association - Matters Reserved to the Board - Terms of Reference for Board Committees - Terms of Reference for the Senior Independent Director - Modern Slavery Statement - Tax Strategy - Gender Pay Gap Report - Notice of Annual General Meeting ## Board at a glance ### Composition of the Board - Chair - ☐ Non-Executive Directors - ☑ Executive Directors ![img-106.jpeg](img-106.jpeg) ### Age - 30–39 - 40–49 - 50–59 - 60–69 - 52 years average age - 1 – 30–39 years old - 1 – 40–49 years old - ☐ 2 – 50–59 years old - ☑ 1 – 60–69 years old ### Gender - 4 males - ☐ 1 female VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Chair's introduction to corporate governance ![img-107.jpeg](img-107.jpeg) On behalf of the Board, I am pleased to present our Corporate governance report for the year ended 30 September 2024. The Board recognises the importance of, and is committed to, high standards of plc corporate governance. On Admission to AIM, the Company voluntarily committed to complying with the UK Corporate Governance Code ("Code"). All of the Directors are aware of their duties and responsibilities under the Code and the AIM Rules for Companies. In this Corporate governance report, we set out our approach to governance and the initiatives undertaken during the year. Our statement of compliance with the UK Corporate Governance Code is set out on page 67. The Board comprises two Executive Directors and three independent Non-Executive Directors which includes myself as Chair. The proportion of independent Non-Executives on the Board is compliant with the Code and has been throughout the year. This year has been busy for our Board and the principal Committees, with particular focus on: (a) strategic opportunities, including the acquisition of Victoria Plum, and the subsequent decision to close that business; (b) the transition into our new DC; (c) operational and financial performance; and (d) the composition of the Board and its principal Committees. In accordance with section 172 of the Companies Act 2006, the Board recognises the importance of our wider stakeholders to the sustainability of our business. Our s.172 statement (pages 28 to 29). sets out in more detail how the Board has approached this duty. Finally, I look forward to meeting shareholders at our next Annual General Meeting which will take place at 9:30am on 25 February 2025 at the Company's registered office at 1 Sustainability Way, Farington Moss, Leyland PR26 6TB. All Directors will seek re-election at the AGM. Should shareholders wish to discuss any governance matters in advance of the meeting, I am more than happy to do so and would ask that contact is made initially to ir@victorianplumbing.co.uk. # Philip Bowcock Chair 14 January 2025 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 65 --- # Board of Directors ## Key to Committee membership A Audit and Risk Committee N Reminder Committee R Reminder-Fire Committee Carnesine Club ![img-108.jpeg](img-108.jpeg) Mark Radcliffe Chief Executive Officer ![img-109.jpeg](img-109.jpeg) Daniel Barton Chief Financial Officer ## Appointed to plc Board: May 2021 (on incorporation) ## Significant current external appointments: Radcliffe Property Management Limited ## Appointed to plc Board: April 2023 ## Significant current external appointments: None Mark founded Victorian Plumbing in 2000 and has led the business ever since. Prior to that, Mark had established a number of successful e-commerce businesses, including Coral Phones. Daniel joined Victorian Plumbing in August 2022. In April 2023, he succeeded Paul Meehan as Chief Financial Officer and was appointed as the Group's Senior Information Risk Owner in 2024. He was previously Deputy Chief Financial Officer and Chief Transformation Officer at DWF Group plc and prior to that was Deputy Chief Financial Officer and Company Secretary at Wilmington plc. Daniel qualified as a chartered accountant (FCA) at PwC, where he worked in various roles in Manchester and London. ![img-110.jpeg](img-110.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ![img-111.jpeg](img-111.jpeg) N A R Appointed to plc Board: June 2021 Independent: Yes Significant current external appointments: Eurochange Limited Philip Bowcock was appointed as a Non-Executive Director and Chair in June 2021. He has extensive listed company experience, having been Chief Executive Officer of William Hill plc and, before that, Chief Financial Officer. Prior to joining William Hill plc, he was Chief Financial Officer of Cineworld Group plc and has had a number of other finance-related roles, including Finance Director at Luminar plc and Financial Controller and Head of Corporate Development at Barratt Developments plc. He also served as interim Chief Executive Officer of Countrywide Limited. ![img-112.jpeg](img-112.jpeg) A N R Appointed to plc Board: June 2021 Independent: Yes Significant current external appointments: THG plc Damian Sanders was appointed as the Senior Independent Non-Executive Director in June 2021. Damian has over 20 years' experience as a senior equity audit partner at Deloitte, acting as an adviser and corporate governance specialist for a number of FTSE boards. He previously served as a Non-Executive Director of Cineworld Group plc and is currently Chief Financial Officer of THG plc where he served as a Non-Executive Director from November 2020 before being appointed as Chief Financial Officer in January 2023. ![img-113.jpeg](img-113.jpeg) R A N Appointed to plc Board: June 2022 Independent: Yes Significant current external appointments: Inspired plc and Development Bank of Wales plc Dianne Walker was appointed as an independent Non-Executive Director in June 2022. Dianne is a Non-Executive Director of Inspired plc, Development Bank of Wales plc and a number of private companies. Dianne is a chartered accountant (FCA) with over 25 years as a trusted adviser to boards. She previously spent 12 years at PwC in a senior management role in the North West practice, providing listed companies and global groups with audit, business advisory and transaction support professional services. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Division of responsibilities ## The Board Main responsibilities include the following: - Providing the long-term leadership of the Group - Monitoring delivery of business strategy and objectives; responsibility for any necessary corrective action - Approval of changes to the capital, corporate and/or management structure of the Group - Approval of the dividend policy and capital policy - Overall authority for the management and conduct of the Group's business, strategy, objectives and development - Oversight of operations including effectiveness of systems of internal control and risk management - Approval of the Annual Report and Financial Statements - Communications with shareholders and the wider investment community ## Committees of the Board The Board has established the following Committees and has delegated certain functions and tasks within their approved Terms of Reference. This allows the Board to operate efficiently and to act on relevant areas of its responsibilities. The membership of each Committee and a summary of its role is below. The Executive Directors and/or other members of the ELT are sometimes invited to attend all or part of the Committees' meetings as appropriate. The full Terms of Reference of each Committee are published on the Company's Investor website at www.electrolanplumbingplcinnvestors. ## Nomination Committee **Members:** Philip Bowcock (Chair) Damian Sanders Dianne Walker **Role and Terms of Reference:** Reviews the structure, size and composition of the Board and its Committees, and makes recommendations to the Board. Also sets objectives for diversity and inclusion for the Board and senior management, talent development and succession planning ## Audit and Risk Committee **Members:** Damian Sanders (Chair) Philip Bowcock Dianne Walker **Role and Terms of Reference:** Reviews and reports to the Board on the Group's financial reporting, internal control, whistleblowing and the independence and effectiveness of the external auditor ## Remuneration Committee **Members:** Dianne Walker (Chair) Philip Bowcock Damian Sanders **Role and Terms of Reference:** Determines remuneration policy for the Executive Directors and designs a remuneration framework consistent with that policy. Also monitors remuneration practice for the ELT, as well as the wider workforce. Determines the fee level for all Non-Executive Directors VISYCREAM PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Corporate governance statement This Corporate governance statement explains key features of the Company’s governance framework and how it complies with the 2018 UK Corporate Governance Code (the “Code”). This statement also includes items required by the AIM Rules. ## Introduction On Admission to AIM, the Board committed to comply with the Code. The Directors consider that the Company has complied with the Code during this financial year save as set out below: | Provision | Detail | Explanation of non-compliance | | --- | --- | --- | | 24 | The board should establish an audit committee of independent non-executive directors, with a minimum membership of three, or in the case of smaller companies, two. The chair of the board should not be a member. | Given the size of the business on Admission, the Board deemed it preferable for the Audit and Risk Committee to have three members, one of whom was the Chair. The Nomination Committee reviewed this position again in this financial year and it was decided to continue with three members of the Audit and Risk Committee, with the Chair as one of the three members, particularly given his financial experience. | ## Board leadership and Group purpose Board The main responsibilities of the Board include the following: - Responsible for the Group’s performance - Providing the long-term leadership of the Group - Maintaining a strong and effective system of governance throughout the Group - Approval of changes to the capital, corporate and / or management structure of the Group - Approval of the dividend policy - Overall authority for the management and conduct of the Group’s business, strategy, objectives and development - Oversight of operations including effectiveness of systems of internal controls and risk management - Approval of any key strategic opportunities - Approval of the Annual Report and Financial Statements - Communications with shareholders and the wider investment community To ensure a clear division of responsibility at the head of the Company, the positions of Chair and Chief Executive Officer are not exercised by the same person. The roles and responsibilities of our Board members are clearly defined and are summarised below. For a more detailed description of the roles of the Chair and the Chief Executive Officer, please review the Terms of References on our investor website. ## Chair ### Philip Bowcock - Provides leadership of the Board - Ensures good governance - Creates and manages constructive relationships between the Executive and Non-Executive Directors - Ensures ongoing and effective communication between the Board and its key shareholders - Sets the Board’s agenda and ensures that adequate time is available for discussions - Ensures the Board receives sufficient, pertinent, timely and clear information ## Chief Executive Officer ### Mark Radcliffe - Responsible for the day-to-day operations and results of the Group - Proposes and develops the Group’s objectives and strategy - Ensures the successful execution of strategy - Responsible for the effective and ongoing communication with shareholders, alongside the CFO - Delegates authority for the day-to-day management of the business to the ELT (comprising the Executive Directors and senior management) ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 69 --- # Corporate governance statement continued ## Chief Financial Officer ### Daniel Barton - Provides strategic financial leadership of the Company and day-to-day management of the finance function - Responsible for the day-to-day operations and results of the Group - Responsible for the effective and ongoing communication with shareholders, alongside the CEO - Acts as the Company's Senior Information Risk Owner ("SIRO") ## Senior Independent Director ### Damian Sanders - Acts as a sounding board for the Chair - Being available to shareholders if they require contact both generally and when the normal channels of the Chair, Chief Executive Officer or other Directors are inappropriate - Leads the evaluation of the Chair's performance ## Non-Executive Directors ### Damian Sanders and Dianne Walker - Scrutinise and monitor the performance of management - Constructively challenge the Executive Directors and Group management team - Monitor the integrity of financial information, financial controls and systems of risk management - Ensure good governance - Help to develop proposals on strategy ## Company Secretary ### Alex Singer - Available to all Directors to provide advice and assistance - Responsible for providing governance advice - Ensures compliance with the Board's procedures, and with applicable rules and regulations - Acts as secretary to the Board and its Committees ## Committees of the Board The Board has delegated authority to its Committees to carry out certain functions and tasks on its behalf and to ensure compliance with regulatory compliance, within their approved Terms of Reference, which are reviewed and approved at least annually. This allows the Board to operate efficiently and focus on relevant areas of its responsibilities. The membership of each Committee and a summary of its role is below. The Executive Directors and / or other members of the ELT are, when appropriate, invited to attend all or part of the Committees' meetings. A summary of the Terms of Reference of each Committee is set out below. The full Terms of Reference of each Committee are available on the Company's investor website and from the Company Secretary on request. ## Audit and Risk Committee **Members:** Damian Sanders (Chair) Philip Bowcock Dianne Walker **Role and Terms of Reference:** Reviews and reports to the Board on the Group's risk framework and principal risks, financial reporting, internal controls, whistleblowing and the independence and effectiveness of the external auditor. ## Nomination Committee **Members:** Philip Bowcock (Chair) Damian Sanders Dianne Walker **Role and Terms of Reference:** Reviews the structure, size and composition of the Board and its Committees, and makes recommendations to the Board. Also sets objectives for diversity and inclusion for the Board and senior management, talent development and succession planning. ## Remuneration Committee **Members:** Dianne Walker (Chair) Philip Bowcock Damian Sanders **Role and Terms of Reference:** Responsible for all elements of the remuneration of the Executive Directors and the Chair. Determines the fee level for all Non-Executive Directors. ## Board meetings The Board makes decisions in order to ensure the long-term success of the Company while taking into consideration the interests of wider stakeholders, such as employees, customers, suppliers and investors, and other factors as required of it under s.172 of the Companies Act 2006. Board meetings are one of the mechanisms through which the Board discharges this duty. Further information about engagement with the Company's stakeholders is included on pages 28 and 29. The Board meets as often as necessary to effectively conduct its business. The Board has an annual rolling plan of items for discussion, which is reviewed and adapted regularly to ensure all matters reserved for the Board, with other items as appropriate, are discussed. Pre-agreed meeting agendas ensure that time is balanced between operating performance, strategy, governance and compliance so that the Board can discharge its duties effectively. To ensure the Board's time is used effectively in meetings, papers are circulated several days in advance to provide adequate time for reading and to raise any specific queries or questions. At each meeting, the Chief Executive Officer updates the Board on key operational developments and performance, provides an overview of the market and other key operational risks, and highlights the important milestones reached in the delivery of the VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information Group's strategic objectives. The Chief Financial Officer provides an update on the Group's financial performance, relationships with investors and potential investors, and shareholder feedback and analysis. Members of management are also invited to attend Board meetings to present on specific business issues and proposals. This way, the Board is given the opportunity to meet with the next layers of management and gain a more in-depth understanding of key areas of the business. The Board has adopted a formal schedule of matters reserved for its approval which is available on our investor website and from the Company Secretary upon request. The table below provides a high-level overview of some of the key issues that have been considered by the Board during the year ended 30 September 2024, with input from the ELT when appropriate. | Strategy | • Oversight of Group performance against strategy and delivery of transformation projects • M&A opportunities, including the acquisition of Victoria Plum • ESG governance | | --- | --- | | Operational | • Current trading • Deep dives into several areas of the business including marketing, warehouse operations, technology and health and safety • New DC • Brand creative ‘Boss Your Bathroom’ campaign | | Financial | • Approved the Group’s full-year and half-year results, trading statements, viability statement and going concern status • Reviewed and approved the tax strategy and several policies including the FX policy • Regular re-forecasting • Budget | | People and culture | • Remuneration framework and policy • Gender pay gap reporting • Employee engagement • Succession planning, talent, diversity and inclusion • Long Term Incentive Plan (“LTIP”), bonus plans and awards • Continuation of SAYE scheme for all employees | | Investor relations | • Market and shareholder feedback and updates • Approved payment of dividend | | Risk and governance | • Risk framework and internal controls review • Principal risks review and risk horizon scanning • Group delegation of authority policy • Continuing review of compliance with the Code • Board effectiveness and evaluation • External audit effectiveness • Modern slavery | ## Attendance at meetings | | Board | Nomination Committee | Audit and Risk Committee | Remuneration Committee | | --- | --- | --- | --- | --- | | Number of meetings held | 9 | 2 | 3 | 3 | | Director | | | | | | Philip Bowcock | 9/9 | 2/2 | 3/3 | 3/3 | | Mark Radcliffe | 9/9 | N/A | N/A | N/A | | Daniel Barton | 9/9 | N/A | N/A | N/A | | Damian Sanders | 9/9 | 2/2 | 3/3 | 3/3 | | Dianne Walker | 9/9 | 2/2 | 3/3 | 3/3 | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 71 --- # Corporate governance statement continued ## Strategy The Board is responsible for setting the Group's purpose, for determining the basis on which the Group generates value over the long-term and developing a strategy for delivering the objectives of the Group. The Strategic report, which can be found on pages 02 to 63, sets out the Group's purpose, strategy, objectives and business model. ## Culture and engagement with the workforce We have a culture that is values oriented. The Board plays an important role in ensuring that this culture remains aligned with the long-term strategy, in setting values and demonstrating behaviours consistent with these values. We have a flat structure which allows the Executive Directors to stay actively engaged with the workforce. In addition, since the date of their appointment, the Chair and Non-Executive Directors have spent time in the business with the ELT and key employees. To support our engagement strategy, we use a variety of ways to engage with our employees to understand what matters to them as detailed on pages 28 to 29. The Board also receives periodic updates which allows the Board to monitor various cultural indicators such as staff retention, diversity, absences and employee engagement. ## Shareholder engagement Our investor relations programme continues to develop as the Company continues its journey as a listed company. It is important to us that existing and potential investors understand the Company's strategy and performance. As part of this programme, the Executive Directors give formal presentations to investors and analysts for full-year and half-year results. Throughout the year we have hosted one-to-one and group meetings with institutional investors, fund managers and analysts. These meetings cover a wide range of topics, including strategy, performance and governance, but care is exercised to ensure that any price sensitive information is released to all shareholders, institutional and private, at the same time. When meetings relate to governance, the Chair or another Non-Executive Director will attend as appropriate. We encourage private shareholders to give feedback and communicate with the Board through ir@victorianplumbing.co.uk. The Board receives regular reports on issues relating to share price, trading activity and movements in institutional investor shareholdings. The Board is also provided with current analyst opinions, forecasts and feedback from its joint corporate brokers, and on the views of institutional investors on a non-attributed and attributed basis. Any concerns of major shareholders would be communicated to the Board by the Executive Directors. The Chair, the Senior Independent Director and other Non-Executive Directors are available to meet with shareholders, and arrangements to do so can be made through ir@victorianplumbing.co.uk. ## Annual General Meeting The AGM of the Company will take place at 9:30am on 25 February 2025 at the Company's registered office at 1 Sustainability Way, Farington Moss, Leyland PR26 6TB. Whether or not you are able to attend, the Board encourages all shareholders to cast their vote as soon as possible and in any event by 9.30am on 21 February 2025, and to send any questions, limited to the AGM business to ir@victorianplumbing.co.uk and these will be responded to on an individual basis. The notice of the AGM is being mailed out at the same time as this Annual Report and sets out the business of the meeting and an explanatory note on all resolutions. Separate resolutions are proposed in respect of each substantive issue. Results of resolutions proposed at the AGM will be announced to the London Stock Exchange and published on the Company's investor website following the AGM. ## Whistleblowing Victorian Plumbing is committed to the highest standards of ethical conduct, honesty and integrity in our business practices. The Company's whistleblowing policy is available to employees on the Company's intranet site, 'The Loop', and contains very clear and accessible information as to how employees can raise concerns. Concerns raised will be reported to the Audit and Risk Committee, which will then be advised of the investigations carried out and any actions arising as a result. ## External directorships and time commitment Each Director is expected to attend all meetings of the Board and of those Committees on which they serve and is required to devote sufficient time to the Group's affairs allowing them to fulfil their duties effectively as Directors. Any external appointments or other significant commitments of the Directors require the prior approval of the Board. As part of its annual review, the Nomination Committee has considered the external directorships and time commitment of all the Directors and agreed that these do not impact on the time that any Director devotes to the Company. Mark Radcliffe is the only Executive Director to hold an external directorship, as a director of Radcliffe Property Management Limited, a property company from which the Group leases a number of properties on an arm's length basis. Details of the Directors significant external directorships can be found on page 90. ## Directors' conflicts of interest Save as provided in the Company's Articles of Association or by the terms of any authorisation given by the Directors, a Director shall not vote on, or be counted in the quorum in relation to, any resolution of the Board or of a Committee of the Board concerning any contract or arrangement or any other proposal to which the Company is or is to be a party and in which he or she has a conflict of interest. In accordance with the Company's Articles of VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information Association, the Board has a formal system in place for Directors to declare conflicts of interest and for the Board to authorise potential conflicts of interest that may arise and to impose limits and conditions, as appropriate, when giving any authority. Any decision of the Board to authorise a conflict of interest is only effective if it is agreed without the conflicted Director's voting or without their votes being counted. In making such a decision, the Directors must act in a way they consider in good faith will be most likely to promote the success of the Company. Any external appointments or other significant commitments of the Directors require the prior approval of the Board. The Board is comfortable that external appointments of the Chair and the Non-Executive Directors do not create any conflict of interest. ## Information, support and development opportunities to Directors Full and timely access to all relevant information is given to the Board. For Board meetings, this consists of a formal agenda, minutes of previous meetings and a comprehensive set of papers including regular operational and financial reports, provided to Directors in a timely manner in advance of meetings. All Directors have access to the Company Secretary, who advises them on governance matters. In addition, Directors are entitled to take independent professional advice at the Company's expense in the furtherance of their duties, where considered necessary. ## Composition, succession and evaluation At the date of this report, the Board comprises five Directors consisting of the Chair, two Executive Directors and two Non-Executive Directors. Philip Bowcock, Chair of the Board, was deemed to be independent on appointment and remains so. In considering his independence, the Board took into account the terms of his restricted share award granted at the time of the IPO, particularly the absence of any performance conditions and the circumstances in which the restriction on all or some of the shares to be issued to him on Admission may be removed. The Board considers Damian Sanders and Dianne Walker to be independent in character and judgement, and free of any business or other relationship that could materially influence their judgement. Therefore, at 30 September 2024 and to the date of this report, at least half the Board, excluding the Chair, comprises independent Non-Executive Directors, in line with the Code. The composition of the Board has continued to be an area of focus for the Nomination Committee this year as it considers succession planning and seeks to ensure that the Board maintains the appropriate balance of skills, experience and independence, as well as providing the appropriate challenge and promoting diversity to enable it to meet its responsibilities. As can be seen from the biographies on pages 66 to 67, the Chair and the Non-Executive Directors collectively have significant industry and public company experience, which will support the Company in executing its strategy. The Company regards good governance as essential. During the year, an evaluation of the performance of the Board, its Committees and its members was undertaken in accordance with the Nomination Committee's Terms of Reference. In keeping with the Company's stated values and culture, the Directors are committed to the continuous improvement of the Board in achieving its strategic objectives. Undertaking an annual evaluation is a useful tool for reflection and continual improvement. The Board will look to commission an external review in future, but at this stage was satisfied that an Internal evaluation was sufficient. The Chair undertook the formal internal annual evaluation process by way of a written questionnaire that was designed by the Company Secretary, taking into account relevant regulatory guidance and best practice. The questionnaire assessed the effectiveness of all aspects of the Board, its Committees and its members, and the results were discussed by the Board once completed. ## Induction and development In preparation for Admission, all Directors received an induction briefing from the Company's legal advisers on their duties and responsibilities as Directors of a publicly listed company, and have access to training to ensure that they can refresh this and other appropriate training on a regular basis. On her appointment, Dianne Walker received a comprehensive and tailored induction, including a briefing from the Company's nominated adviser and meeting key members of the ELT to familiarise herself with the Group. ## Reappointment of Directors Following the Board evaluation process and the subsequent recommendations from the Nomination Committee, the Board considers that all Directors continue to be effective, committed to their roles and are able to devote sufficient time to their duties. Accordingly, all Directors will seek re-election at the Company's AGM. ## Letters of appointment The Chair and the Non-Executive Directors have letters of appointment, which are available for inspection at the registered office of the Company during normal business hours and at the place of the AGM from at least fifteen minutes before and until the end of the meeting; or on request from ingivictorianplumbing.co.uk. These letters set out the expected time commitment from each Director. The Non-Executive appointments to the Board are for an initial term of up to three years. Non-Executive Directors are typically expected to serve two three-year terms, although the Board may invite the Director to serve for an additional period. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 73 --- # Nomination Committee report ![img-114.jpeg](img-114.jpeg) I am pleased to introduce the Report of the Nomination Committee (the "Committee") for the year ended 30 September 2024. The members of the Committee are myself, Damian Sanders and Dianne Walker. Damian and I have been members since the Committee was formed in June 2021. Dianne joined the Committee on her appointment as a Director of the Company on 14 June 2022. Detailed experience and qualifications of all Committee members can be found on pages 66 and 67. The Code requires that the Committee is composed of a majority of independent Non-Executive Directors. I am Chair of the Board and was deemed to be independent on appointment, and the Board considers that I continue to be so. Damian and Dianne are also deemed independent. Therefore, the Board considers that the Committee comprises a majority of independent Non-Executive Directors, in compliance with the Code. The Group's General Counsel and Company Secretary acts as Secretary to the Committee. By invitation, the meetings of the Committee may be attended by the Chief Executive Officer and Chief Financial Officer to allow the Committee to understand their views, particularly in the context of succession planning within the business as a whole. Philip Bowcock Chair ## Role of the Committee The Committee reviews the structure, size and composition of the Board and its Committees, and makes recommendations to the Board for appointments to the Board and membership of its principal Committees. The Committee is responsible for ensuring that there are formal and orderly succession plans in place for appointments to the Board. The responsibilities of the Committee are delegated by the Board and are set out in its written Terms of Reference, which are reviewed, updated as necessary and approved each year. A copy of the Terms of Reference is available on our investor website or on request from the Company Secretary. ## Activities of the Committee Under its Terms of Reference, the Committee is required to meet at least twice a year. During the financial year, the Committee met formally twice. Key matters considered by the Committee during the year include: - reviewed and approved the Committee's Terms of Reference - considered the Board evaluation, the composition of the Board and its Committees and succession planning - approved the elections and re-elections of the Board ## How the Committee operates The Chair of the Board chaired all meetings of the Committee in the financial year (and will do so in future unless the business of the meeting relates to the appointment of his successor or other matters in which he may have a potential conflict of interest, in which case Damian Sanders as the Senior Independent Director will be invited to take the Chair (unless he is himself in contention for the role or also has a potential conflict of interest)). ## Succession planning The Committee believes that effective succession planning is critical to the Company's long-term success. The Committee considered succession planning for the Board and its Committees this year as part of the Board evaluation process. It also asked the Chief Executive Officer and the Chief Financial Officer to provide an update to the Board of the Group's formal succession plan for the senior management team, taking into account future skills required in the context of the Group's strategy, as well as the importance of growing and developing talent internally. ## Policy on appointments to the Board A priority for the Committee is to ensure that members of the Board collectively possess the broad range of skills, expertise and industry knowledge, and business and other experience necessary for the effective oversight of the Group. Appointments are to be made on merit, against objective criteria and with due regard to the benefits of diversity on the Board. The Committee will take account of a variety of factors before recommending any new appointments to the Board, including relevant skills to perform the role, experience, knowledge and diversity as a whole, including gender and ethnic diversity, but also VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information diversity of background and approach. When the Committee has identified a suitable candidate, it then makes a recommendation to the Board, which has responsibility for making a final decision. At the end of the financial year, 20% (2023: 20%) of the Board Directors were women. At a leadership level, 43% (2023: 33%) of the ELT and 25% (2023: 24%) of the ELT's direct reports were women, which equates to a combined total of 28% (2023: 26%). 0% (2023: 7%) of the ELT's direct reports identified as being from an ethnic minority, compared with 100% (2023: 93%) who identified as white. Of the Board of Directors and ELT, 100% identified as being white, which remains unchanged from last year. This will remain an important consideration in future appointments. ## Board composition and skills | Retail | Marketing | Consumer | e-Commerce | | --- | --- | --- | --- | | 4 | 1 | 5 | 4 | | Finance | International | Strategy | People | | 4 | 4 | 5 | 3 | ## Board evaluation During the year, an evaluation of the performance of the Board, its Committees and its members was undertaken in accordance with the Committee's Terms of Reference. The Company regards good governance as essential, and in keeping with its stated values and culture, the Board is committed to continuous improvement. Undertaking an annual evaluation is a useful tool for reflection and to ensure such continual improvement. The Board will look to commission an external review in future years, but at this stage it was satisfied that an internal evaluation was sufficient. The Chair undertook the formal internal annual evaluation process by way of a written questionnaire that was designed by the Company Secretary, taking into account relevant regulatory guidance and best practice. The questionnaire assessed the effectiveness of all aspects of the Board, its Committees and its members. The questionnaire required each Director to analyse and evaluate the performance and effectiveness of the Board as a whole, each Committee, and their respective Chairs and members, and included quantitative and open questions. The issues that the Directors were asked to evaluate included the following: - Board and Committee agendas – e.g. whether the right issues are brought to the Board, quality and relevance of Board papers, appropriate balance of presentation and discussions, appropriate handling of conflicts of interest; - leadership – e.g. effectiveness of the Chair, being clear as to the Group's purpose, direction, values, facilitating discussions, quality and effectiveness of relevant relationships; and - effectiveness – e.g. clear understanding of relevant roles, clear and robust decision-making, providing challenge and strategic advice, monitoring performance, exploitation of potential opportunities, identifying and reviewing relevant risks, effective communication with stakeholders, balance of expertise and experience, opportunities for Non-Executive Directors to be involved in the business outside formal Board meetings. The questionnaires were circulated to the Directors for completion and were returned to the Company Secretary, who prepared a summary report for consideration by the Chair. The Chair assessed the feedback and formally reported his findings to the Board. The areas of focus arising from this year's Board evaluation included the following: - continued development of succession planning, particularly across the wider workforce - improved consultation on potential changes to Board and Committee meeting timings - further developing and enhancing the Board's role in strategic planning and decision-making The Board was satisfied that the existing composition of the Board and the Committees gives the Company an appropriate balance of Executive and Non-Executive Directors, each of whom brings a wealth of different skills and experience. The Board was also satisfied that each of the Committees is effective in providing assurance to the Board in accordance with its respective Terms of Reference. ## Reappointment of Directors On the recommendation of the Committee and in accordance with the Code, all Directors will retire at the forthcoming Annual General Meeting ("AGM") and offer themselves for re-election to the Board. Following the evaluation process carried out this year, as described above, the Committee and the Board are satisfied that all Directors continue to be effective in, and demonstrate commitment to, their respective roles on the Board and that each makes a valuable contribution to the leadership of the Company. The Board therefore recommends that shareholders approve the resolutions to be proposed at the AGM relating to the re-election of the Directors. I will be available at the AGM to answer any questions on the work of the Committee. Philip Bowcock Chair, Nomination Committee 14 January 2025 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 75 --- # Audit and Risk Committee report ![img-115.jpeg](img-115.jpeg) I am pleased to present the Audit and Risk Committee (the "Committee") report for the year ended 30 September 2024. This report describes how the Committee has carried out its duties to provide independent scrutiny of the Group's financial reporting, risk management and internal control systems during the year, in order to determine whether these remain effective and appropriate. The Committee met three times during the year. Following the year end, the Committee met again to consider whether the Annual Report and Accounts were fair, balanced and understandable. During the year, the Committee comprised three members consisting of two independent Non-Executive Directors and the Chair of the Board. We acknowledge that the UK Corporate Governance Code advises against the Chair of the Board being a member of the Committee. The Nomination Committee has considered this again this year and decided it to be preferable to have three Committee members, one of whom is the Chair, who was independent on appointment, particularly given his financial experience. The Nomination Committee will review this position again during the year ahead. The Code requires that at least one Committee member has recent and relevant financial experience. The Board considers that all three Committee members have recent and relevant financial experience and so can provide appropriate challenge to management. The Committee is a sub-committee of the Board. The responsibilities of the Committee are delegated by the Board and are set out in its written Terms of Reference, which are reviewed, updated as necessary and approved each year. The primary function of the Committee is to assist the Board in fulfilling its responsibilities to protect the interests of the shareholders with regard to the integrity of the financial reporting, audit and internal controls. We aim to provide shareholders with timely communication on significant matters relating to the Company's financial position and prospects, and we are also responsible for monitoring fraud risk. In accordance with its Terms of Reference, the Committee will meet at least three times a year. The Group's General Counsel and Company Secretary acts as Secretary to the Committee. By invitation, the meetings of the Committee may be attended by the Chief Executive Officer and Chief Financial Officer to allow the Committee to understand their views. The list below provides a high-level overview of some of the key issues that have been considered by the Committee during the year: - focused on financial reporting to ensure the Annual Report and Accounts are fair, balanced and understandable - reviewed interim results statements and financial results presentations - reviewed the Group's risk management procedures - reviewed the effectiveness of the external audit process - reviewed the internal control environment - reviewed the non-audit fee policy and the audit and non-audit fees - reviewed the Group's whistleblowing policy and procedures - reviewed the Committee's Terms of Reference ## Damian Sanders Chair, Audit and Risk Committee VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Fair, balanced and understandable At the request of the Board, the Committee has reviewed the content of the Annual Report and Accounts for the year ended 30 September 2024 and considered whether, taken as a whole it is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy. Following the Committee's review, we were pleased to provide assurance to the Board that the Annual Report and Accounts, taken as a whole, was fair, balanced and understandable, and provided the information necessary for shareholders to assess the Company's position and performance, business model and strategy. This was confirmed to the Board, whose statement in this regard is set out on page 91 of the Directors' Report. # Risk management and internal controls The Board acknowledges its responsibility for establishing and maintaining the Group's system of internal controls. Good internal controls also facilitate the effectiveness and efficiency of operations, help to ensure the reliability of internal and external reports and assist in compliance with applicable laws and regulations. However, the system of internal controls is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. The Committee reviews the system of internal controls through reports received from management and external auditors. Management continues to focus on how internal controls and risk management can be further embedded into the operations of the business and on how to deal with areas of improvement that come to the attention of management and the Board. The Board has reviewed the effectiveness of the system of internal controls during the financial year, covering all material controls, including financial, operational and compliance controls, and risk management systems. The Board confirms that the actions it considers necessary have been, or are being, taken to remedy any significant failings or weaknesses identified from its review of the system of internal controls. This has involved considering the matters reported to it and developing plans and programmes that it considers are reasonable in the circumstances. The Board also confirms that it has not been advised of any material weaknesses in the part of the internal control system that relates to financial reporting. The key elements of the Group's system of internal controls, which have been in place throughout the year ended 30 September 2024 and up to the date of this report, include the following: | Element | Approach and basis for assurance | | --- | --- | | Risk management | Risk management is a matter for the Board as a whole. The Committee adopts a continuous and rigorous approach to risk to allow prioritisation and a more in-depth review of those risk areas for which the Board has least tolerance. Risks are highlighted through several different reviews and culminate in a risk register, which identifies the risk area, the probability of the risk occurring, the impact if it does occur and the actions being taken to manage the risk to the desired level. | | Financial reporting | Group consolidation is performed on a monthly basis with a month-end pack produced that includes an income statement, statement of financial position, cash flow and detailed analysis. The pack also includes KPIs, and these are reviewed by the ELT and the Board. Results are compared against the annual plan (referred to in the below paragraph) or re-forecast and a narrative provided by management to explain significant variances. | | Budgeting and re-forecasting | A detailed annual plan was produced before the start of the year to forecast the next three years of trading. The first year of this plan was used as a forecast for the year ended 30 September 2024 and monthly results reported against this. This plan has now been updated to forecast FY25 and the following two years. This plan is prepared using a bottom-up approach, informed by a high-level assessment of market and economic conditions. Reviews are performed by the ELT and the Board. The plan is approved by the ELT and the Board. | | Delegation of authorities | A documented structure of delegated authorities and approval for transactions is maintained beyond the Board's Terms of Reference. This is reviewed regularly by management and updated as required to ensure it remains appropriate for the business. | | Segregation of duties | Procedures are defined to segregate duties over significant transactions, including procurement, payments to suppliers, payroll and discounts/refunds. Key reconciliations are prepared and reviewed on a monthly basis to ensure accurate reporting. | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 77 --- # Audit and Risk Committee report continued ## Significant accounting matters In reviewing the financial statements with management and the external auditor, the Committee has discussed and debated the accounting judgements and key sources of estimation uncertainty set out in note 3 to the Financial Statements. As a result of our review, the Committee has identified the following items that require judgement or have significant potential impact on the interpretation of this Annual Report and Financial Statements. | Element | Approach and basis for assurance | | --- | --- | | Business combinations | The acquisition method of accounting is applied in accounting for the acquisition of subsidiaries. The acquiree's identifiable assets and liabilities are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and measured at cost, representing the excess of the aggregate of the consideration, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the fair value of its identifiable assets and liabilities at the date of acquisition. The consideration is measured at fair value, which is the aggregate of the fair values of the assets transferred, liabilities incurred or assumed, and the equity instruments issued in exchange for control of the acquiree. The Committee has reviewed the judgements made in this area by management and, after due challenge and debate, was content with the assumptions made and the judgements applied. | | Impairment of goodwill and other intangibles | During the period, the Group recognised goodwill upon the acquisition of Victoria Plum. This balance has been reviewed for impairment taking into account the forecasted benefits that the acquisition will bring to the Group. The Group has deemed that the carrying value of goodwill is in excess of the future forecasted benefit and thus there is no indication that the balance is impaired. An impairment review of other intangible assets, being 'computer software' and 'assets under construction', is not deemed to be necessary due to the growth enabling features and efficiency gains we anticipate from the investments made. Any assets held in the 'assets under construction' category will be brought into use during the year ended 30 September 2025. The Committee has reviewed the judgements made in this area by management and, after due challenge and debate, was content with the assumptions made and the judgements applied. | | Revenue recognition | Revenue recognition for the Group's revenue streams is not complex. The Group does, however, process a large volume of transactions and places reliance on manual adjustments in relation to cut-off procedures. The Committee has reviewed the estimates and judgements made by management in assessment of revenue cut-off and the associated gross profit impact. After due challenge and debate, the Committee was content with the judgements applied. When considering this, along with the processing of and adjustments to the underlying transactional data, the Committee is content with the procedures applied by management to ensure revenue recognition is appropriate and in line with the Group's accounting policy. | | Refund liability and right-of-return asset | The Group recognises a refund liability and corresponding right-of-return asset for expected returns after the reporting date. The liability is measured as the amount the Group ultimately expects it will have to return to the customer based on historical data, which therefore requires management to estimate the amount expected to be returned to customers after the reporting date. The Committee has reviewed judgements made in this area and is satisfied with the assumptions made and judgements applied. | | Warranty provision | The Group provides for the cost expected to be incurred in order to replace damaged or faulty items that existed at the time of sale. The provision related to these assurance-type warranties are recognised when the product is sold. Initial recognition is based on historical data. The Committee has reviewed judgements made in this area and is satisfied with the assumptions made and judgements applied. | | Intangible assets and capitalised development costs | Intangible assets include capitalised internal salaries and third party costs for computer software development. A certain proportion of the total IT costs incurred are capitalised as they relate to development costs, while the remaining costs are deemed to be maintenance costs and are expensed to the statement of comprehensive income. The proportion is calculated using a combination of management's best estimate and information provided by the third party. The Committee has reviewed the estimates made by management and is satisfied with the assumptions made. | | Inventory provision | The Group assesses the valuation of inventory on an ongoing basis and, in particular, the need for an inventory provision. Historical inventory write-offs, changes in consumer behaviour and likely resale value are evaluated versus the cost of inventory. The Group has deemed that no inventory provision is necessary. The Committee has reviewed the estimates made by management and is satisfied with the assumptions made. | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Internal audit The Group did not have an internal audit function during the year. The Committee considers, at least annually, the need for an internal function and have, to date, concluded that it is not necessary for the Group to have a separate internal audit function. The Committee looks to management to implement adequate independent procedures to test key financial controls and report the results to the Committee without having a dedicated internal audit function. In addition, the Committee will look to specialist advisers to perform specific reviews over specific risk areas when appropriate. # Whistleblowing The Group has established formal whistleblowing procedures by which all employees may, in confidence, raise concerns about possible improprieties in finance and other matters. The Committee monitors and reviews the effectiveness arrangements. Following its annual review of whistleblowing procedures, the Committee was satisfied that they were appropriate and provided colleagues with the opportunity to raise concerns about any form of wrongdoing anonymously. # External auditor One of the Committee's roles is to oversee the relationship with the external auditor and to evaluate the effectiveness of the external audit process and to review and monitor the external auditor's independence and objectivity. Following approval by shareholders at the 2024 AGM, Ernst & Young LLP ("EY") was reappointed as the Company's external auditor for the financial year ended 30 September 2024. The external auditor was not asked to look at any specific areas by the Committee during the review period. During the year, the Committee conducted an evaluation of the external audit process and at the same time considered the external auditor's independence and objectivity. The Chair undertook a formal internal evaluation process by way of a written questionnaire, which took into account relevant regulatory guidance and best practice. The issues that the questionnaire required relevant stakeholders to evaluate included the following: - the calibre of the external auditor, including its reputation - their quality processes, including the level and nature of review procedures, approach to audit judgements and issues, quality control reviews and approach to risk - the audit team, including their qualifications and experience, ability to be proactive, responsive and consistent, and their effectiveness as a team - the audit scope, including communication of plan, materiality and timely delivery - their communications, including clarity, accuracy and effectiveness - audit governance and independence, including integrity of staff and objectivity - value for money The questionnaires were circulated to relevant stakeholders for completion and were returned to the Company Secretary, who prepared a summary report for the Chair's consideration. Following that process, the Committee has concluded that the external auditor is effective. The Committee is also satisfied with the independence and objectivity of EY as the external auditor. Subject to shareholder approval at the 2025 AGM, EY is expected to be reappointed as the Company's external auditor for the financial year ending 30 September 2025 ("2025"). Following the completion of the 2025 audit, it is anticipated that the Company's audit partner at EY will rotate due to her length of tenure. At that time, the Company plans to conduct a review of its audit services. # Non-audit services The Company's external auditor may also be used to provide specialist advice where, as a result of its position as auditor, it either must, or is best placed to, perform the work in question. A formal policy has been put in place in relation to the provision of non-audit services by the external auditor to ensure that there is adequate protection of its independence and objectivity. Except in exceptional circumstances related to urgent transactions, or where the nature of the work to be undertaken by the external auditor is considered to be insignificant and immaterial, the Committee must approve the provision of all non-audit services by the external auditor. During the year, the Group did not engage EY to provide any non-audit related services (2023: Enil). A breakdown of the fees paid to EY during the year is set out in note 6 to the consolidated financial statements. # Damian Sanders Chair, Audit and Risk Committee 14 January 2025 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 79 --- # Directors' remuneration report ![img-116.jpeg](img-116.jpeg) I am pleased to present the Directors' remuneration report for the year ended 30 September 2024 ("2024"). This report sets out the remuneration paid to the Directors during the past financial year and the basis for their remuneration for the year ending 30 September 2025. It also includes a new Directors' Remuneration policy (the "Policy"), which we will be presenting to shareholders at the 2025 AGM for an advisory vote. Dianne Walker Chair, Remuneration Committee ## Reflecting on 2024 Remuneration payable in respect of 2024 ### Base salaries and fees As disclosed in the 2023 Annual Report, it was proposed that salaries for the Executive Directors would increase by 3%, effective from 1 April 2024. The Executive Directors subsequently waived their entitlement to this increase, so, salary levels for the 2024 financial year remained the same as the previous year. As disclosed in the 2023 Annual Report, the Non-Executive Directors did not receive an increase in their fees for 2024. ### Annual bonus plan ("ABP") The Remuneration Committee ("Committee") is pleased to report that the ABP for 2024 has paid out at 42% of maximum (2023: 45%). The Committee was satisfied that the bonus award was in line with expectations and an appropriate reflection of performance in the year. ### Share awards The first Long Term Incentive Plan ("LTIP") awards after the Company's IPO, granted on 29 March 2022, to Mark Radcliffe and Paul Meehan (former CFO) were based on performance targets, of earnings per share ("EPS") (75% weighting) and total shareholder return ("TSR") (25% weighting) for the three financial years to 30 September 2024. Neither of the performance targets were met, therefore, these awards lapsed in full. The Committee decided there was no reason to exercise its discretion to adjust this outcome. During the year, the Committee welcomed a number of additional key employees from critical areas of the business to the Deferred Bonus Plan (FY24 award) (2024: 68 participants, 2023: 62 participants). Levels of vesting were approved by the Committee. On 27 July 2024, the third anniversary of the Share Incentive Plan, the scheme vested, and 231 employees received 1,348 shares each or a pro rata equivalent based on their contractual hours. The scheme was put in place following IPO and eligible employees were awarded free shares valued at £3,000 each (or a pro rata equivalent based on their contractual hours) based on the closing share price on 26 July 2021. The Save as You Earn ("SAYE") scheme, available to all employees and offered at a 20% discount of the share price at grant date, was rolled out for a third year. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Looking ahead ## A refreshed approach to incentivisation The Group is at a pivotal stage in the evolution of its growth strategy; this has prompted the Committee to carry out a detailed review of the Policy, resulting in a renewed approach to incentivisation of Executive Directors. A 'hybrid' long term incentive structure has been designed to combine performance based outcomes with an element of time based remuneration. An increase in the maximum LTIP award is also proposed, from 150% to 200% of base salary (equal to the previous maximum opportunity under exceptional circumstances); this, coupled with the introduction of the time based element, will serve as a valuable incentivisation and retention tool as the Company navigates through a period of growth. As part of its review of the Policy, the Committee also assessed the base salary levels of the Executive Directors and will increase these to bring them more into line with market comparators. This assessment also takes into account Daniel Barton's progression in role since his appointment as Chief Financial Officer ("CFO") in April 2023, as well as the impact of salary levels on the value of incentives. The Company is not required to seek formal shareholder approval of its remuneration policy under the AIM Rules, however, in line with the approach taken for the 2021 remuneration policy and in the interests of good governance, we will be presenting our new Policy to shareholders at the 2025 AGM for an advisory vote. For ease of reference, the new Remuneration Policy is included on pages 82 to 83 of this report. # Implementation of the Policy in 2025 ## Base salaries and fees As set out above, following an assessment of the external market comparators, and Daniel Barton's progression in role since his appointment to the Board, the base salaries of the Executive Directors will be increased with effect from 1 April 2025: Mark Radcliffe: £400,000 (2024: £250,000) Daniel Barton: £274,000 (2024: £240,000) Non-Executive Director ("NED") fees will be increased by 3% with effect from 1 April 2025. This adjustment is intended to maintain market position and ensure the Company can effectively attract and retain NED talent. # ABP The maximum bonus opportunity for the Executive Directors will remain at 100% of salary and will continue to be determined 70% on the basis of performance against stretching financial targets, with the balance based on non-financial targets. The specific performance targets are not disclosed as they are considered to be commercially sensitive. # LTIP LTIP awards will be granted to the Executive Directors in 2025 equal to 200% of base salary under the new 'hybrid' structure. The Committee has determined that 62.5% of the award will be based on adjusted EPS performance over a three-year period, with the balance being subject to continued time in employment. A two-year post-vesting holding period will apply. I hope that you find the information in this report helpful. If shareholders wish to discuss any aspect of the report, please contact me via the Company Secretary. Dianne Walker Chair, Remuneration Committee ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 81 --- # Directors' remuneration report continued ## Directors' remuneration policy The following table summarises the changes being made to the Policy, alongside the rationale for these changes: | Element | Previous Policy (FY22-24) | Revised Policy | Rationale | | --- | --- | --- | --- | | Base salary | Salaries are reviewed annually and any changes are normally effective from 1 January in the financial year. | Salaries are reviewed annually. | Any changes will be effective from April to align with the timing of the implementation of the wider workforce salary review each year. | | LTIP | Maximum opportunity equal to 150% of base salary in normal circumstances, with a maximum opportunity of up to 200% of salary in exceptional circumstances. At least 50% of the LTIP awards will be based on performance against stretching financial targets. | Maximum opportunity equal to 200% of base salary. At least 62.5% of the LTIP award granted each year (i.e. up to 125% of base salary) will be based on performance against predetermined measures and targets. The balance of the award will be subject to continued employment. | Increased maximum opportunity level and introduction of a time-based element to provide stability and a strong incentive and retention tool throughout the strategic change ahead. | The following table summarises the key elements of the Policy and how it supports the Company's short and long-term strategic objectives. | Element and link to strategy | Operation | Maximum potential value | Performance conditions and assessment | | --- | --- | --- | --- | | Base salary and benefits Supports the recruitment and retention of Executive Directors, reflecting their role, skills and experience. | Salaries are reviewed annually. The Executive Directors receive benefits which include, but are not limited to, family private health cover, death in service life assurance and travel expenses for business-related travel (including tax, if any). | Base salaries will be set at an appropriate level with a comparator group of comparable-sized listed companies. The value of benefits is not capped. | N/A | | Pension Supports the recruitment and retention of Executive Directors. | The Committee retains discretion to provide pension funding in the form of a salary supplement or a direct contribution to a pension scheme. Any salary supplement would not form part of the salary for the purposes of determining the extent of participation in the Company's incentive arrangements. | Pension funding for the Executive Directors is aligned with the wider workforce, currently equal to 3% of base salary. | N/A | | ABP Supports the recruitment and retention of Executive Directors. Rewards the Executive Directors for delivering on key strategic and financial goals, encouraging sustainable performance of the business. | Annual bonuses are paid in cash, with no deferral into shares. Malus and clawback provisions will apply. | Maximum opportunity of 100% of base salary. | The majority of the annual bonus will be based on performance against stretching financial targets, with the balance based on non-financial metrics which are aligned to the business strategy. | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information | Element and link to strategy | Operation | Maximum potential value | Performance conditions and assessment | | --- | --- | --- | --- | | LTIP Supports the incentivisation and retention of Executive Directors. Facilitates the long-term alignment with shareholders based on the outcomes of performance conditions. | LTIP awards are granted annually. LTIP awards will vest at the end of a three-year period subject to the Executive Directors' continued employment and satisfaction of the performance conditions. A further two-year holding period will apply post-vesting. The Remuneration Committee may award dividend equivalents on awards to the extent that these vest. Malus and clawback provisions will apply. | Maximum opportunity equal to 200% of base salary. | At least 62.5% of the LTIP award granted each year (i.e. up to 125% of base salary) will be based on performance against predetermined measures and targets. The balance of the award will be subject to continued employment. | | Shareholding requirement | 200% of base salary to be built up over a five-year period and then subsequently held. Executive Directors will be required to retain 100% of their shareholding requirement (i.e. 200% of base salary) for two years post-cessation (or full actual holding, if lower). | N/A | N/A | | All-employee plan | The Company has a Share Incentive Plan in which the Executive Directors are eligible to participate (which is HMRC approved and is open to all eligible staff). The Company also operates a Save As You Earn scheme in which the Executive Directors are eligible to participate (which is HMRC approved and is open to all eligible staff). | Maximum permitted based on HMRC limits from time to time. | N/A | | Chair and Non-Executive Director fees | Non-Executive Directors are paid a base fee and additional fees for the chairing of Committees. No additional fees are paid to Non-Executive Directors or the Chair of the Company for the membership of Committees. Fees are reviewed annually, based on equivalent roles in an appropriate comparator group used to review salaries paid to the Executive Directors. Non-Executive Directors do not participate in any variable remuneration or benefits arrangements. The Company will pay reasonable expenses incurred by the Chair and Non-Executive Directors. | The base fees for the Non-Executive Directors are set with reference to the market rate. The level of any fee increase for the Non-Executive Directors will also take account of any change in responsibility. | N/A | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 83 --- # Directors' remuneration report continued ## Remuneration policy on recruitment The remuneration package for a new Executive Director is set in accordance with the terms of the Policy as detailed in the table on the previous pages. The Committee's policy is not to provide sign on compensation. However, in exceptional circumstances where the Committee decides to provide this type of compensation, it will endeavour to provide the compensation in equity, subject to a holding period during which cessation of employment will generally result in forfeiture and will be subject to the satisfaction of performance targets. ## Annual report on remuneration in 2024 (audited) The following table summarises the total remuneration of the Directors who served during the year to 30 September 2024: ### Executive Directors | £'000 | Salary | | Benefits³ | | Pension⁴ | | Total Fixed | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | | Mark Radcliffe | 250 | 250 | 2 | 2 | 10 | 10 | 262 | 262 | | Daniel Barton¹ | 240 | 120 | 1 | 1 | 8 | 4 | 249 | 125 | | Paul Meehan² | - | 153 | - | 3 | - | 14 | - | 170 | | Executive Directors | 490 | 523 | 3 | 6 | 18 | 28 | 511 | 557 | | £'000 | ABP⁵ | | LTIP⁶ | | Other⁷ | | Total Variable Remuneration | | Total Remuneration | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | | Mark Radcliffe | 105 | 112 | - | - | - | - | 105 | 112 | 367 | 374 | | Daniel Barton | 101 | - | - | - | 214 | 86 | 315 | 86 | 564 | 211 | | Paul Meehan⁸ | - | 71 | - | - | - | - | - | 71 | - | 241 | | Executive Directors | 206 | 183 | - | - | 214 | 86 | 420 | 269 | 931 | 826 | ### Non-Executive Directors | £'000 | 2024 | | | | 2023 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Fees | Other | Benefits | Total | Fees | Other | Benefits | Total | | Philip Bowcock | 150 | - | - | 150 | 150 | - | - | 150 | | Damian Sanders | 60 | - | - | 60 | 60 | - | - | 60 | | Dianne Walker | 60 | - | - | 60 | 60 | - | - | 60 | | Non-Executive Directors | 270 | - | - | 270 | 270 | - | - | 270 | 1. Daniel Barton's remuneration for 2023 reflects the period that he was an Executive Director in the year, from 1 April 2023 to 30 September 2023. 2. Paul Meehan's remuneration reflects the period that he was an Executive Director in 2023, from 1 October 2022 to 31 March 2023. 3. Benefits are in respect of private healthcare and life assurance. 4. Where employer's pension contributions were paid in respect of Executive Directors, they were paid at 3% of salary. 5. The payment for the ABP 2024 award will be paid shortly after the finalisation of this report. 6. The FY22 LTIP award lapsed in full as neither of the threshold TSR or EPS performance targets were achieved. 7. Other' includes share awards that have vested in the period, calculated using the share price on the vesting date. Restricted share awards of 104,167 vested on 22 August 2024. The share price on that date was £1.01. 8. Paul Meehan received a bonus of £105,970 in December 2023 in respect of the financial year to 30 September 2023. The bonus amount reported in this table reflects the period that he was an Executive Director in 2023, from 1 October 2022 to 31 March 2023, with the balance reflecting the period of time for which Paul remained in employment after stepping down from the Board from 1 April 2023 to 30 June 2023 in an advisory role. 84 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Payments to past Directors and for loss of office On 31 March 2023, Paul Meehan stepped down as CFO with the agreement and thanks of the Board. Paul remained in employment from 1 April 2023 to 30 June 2023 in an advisory role, ensuring an orderly handover of responsibilities. The Committee determined that Paul should be treated as a 'good leaver' for the purpose of the ABP, LTIP scheme and Management Incentive Plan ("MIP"); he, therefore, participated in the 2023 LTIP, pro rata his period of service (October 2022 to June 2023). In December 2023, Paul received a bonus of £105,970, paid in cash, under the ABP (FY23 award). On 22 June 2024, the final 386,394 of Paul's MIP shares vested. There were no other payments to past Directors or loss of office payments made in 2024. ## Outstanding share awards | Recipient | Award | Grant date | Final vesting date | Exercise price | Number of shares outstanding | Number of shares lapsed | | --- | --- | --- | --- | --- | --- | --- | | Philip Bowcock | IPO award¹ | 22 June 2021 | 22 June 2025 | nil | 381,679 | – | | Mark Radcliffe | 2022 LTIP award² | 29 March 2022 | 29 March 2025 | nil | – | 143,129 | | | 2023 LTIP award | 22 February 2023 | 22 February 2026 | £0.001 | 661,725 | – | | | 2024 LTIP award | 7 January 2024 | 7 January 2027 | £0.001 | 422,060 | – | | Daniel Barton³ | 2023 DBP | 31 March 2023 | 7 December 2026 | nil | 175,054 | – | | | 2023 SAYE | 30 March 2023 | 1 June 2026 | 67.52p | 13,329 | – | | | 2024 LTIP award | 7 January 2024 | 7 January 2027 | nil | 405,177 | – | ¹ Following the successful Admission to AIM, the Chair, Philip Bowcock, received a one off award of 1,526,718 restricted shares on 22 June 2021 in respect of his support and guidance during the IPO process equating to £4.0 million at the placing price, at a price of £0.001 per share. The shares vest in four equal tranches on the first four anniversaries of the Admission date. As such, 381,680 shares vested on 22 June 2022, 381,680 shares vested on 22 June 2023, 381,679 shares vested on 22 June 2024 and 381,679 shares remain restricted until 22 June 2025. ² The LTIP award for 2022 did not meet the performance targets over the three year performance period ending 30 September 2024. ³ 104,167 restricted shares vested on 22 August 2024 but remained unexercised at 30 September 2024. ## Statement of Directors’ shareholding and share interests | Director | Beneficially owned shares not subject to any conditions | Value of shares beneficially owned as a % of salary¹ | Target shareholding requirement (% of salary) | Shareholding requirements met? | Scheme interests subject to continued employment or time | Scheme interests subject to performance | | --- | --- | --- | --- | --- | --- | --- | | Mark Radcliffe | 155,733,657 | 64,162% | 200% | Yes | – | 1,083,785 | | Daniel Barton³ | 159,592 | 68% | 200% | No² | 180,978 | 405,177 | | Philip Bowcock | 693,039 | N/A | N/A | N/A | 381,679 | – | | Damian Sanders | 25,933 | N/A | N/A | N/A | – | – | | Dianne Walker | 22,154 | N/A | N/A | N/A | – | – | ¹ A share price of £1.03 has been used to calculate current shareholding as a percentage of salary being the closing share price on 30 September 2024. ² 104,167 restricted shares vested on 22 August 2024 but remained unexercised at 30 September 2024. 5,924 shares are the pro rated number of SAYE shares, being 16/36th of the total number of options granted for the three-year period of the scheme. 175,054 restricted shares relate to tranche two and three of the 2023 DBP award. ³ Daniel Barton was appointed to the Board on 1 April 2023 and has five years from this date to meet his shareholding requirement. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 85 --- # Directors' remuneration report continued ## Implementation of Policy for the year ending 30 September 2025 We summarise below the Executive Director salaries, pension levels and incentive opportunities for 2025: ### Base salary | Mark Radcliffe: | £400,000 | (60% increase; 2024 0% increase) | | --- | --- | --- | | Daniel Barton: | £274,000 | (14% increase; 2024 0% increase) | Salary increases for the Executive Directors will be effective from 1 April 2025. ### Pension 3% of base salary, aligned to the rate available to the wider workforce. ### ABP The maximum bonus opportunity for the Executive Directors will be 100% of salary. 70% of the bonus awards will be determined based on performance against stretching adjusted EBITDA targets, with the balance of 30% being split equally between customer satisfaction (15%) and employee engagement (15%) targets. The specific performance targets are not disclosed as they are considered to be commercially sensitive. Bonus awards will be paid in cash. ### LTIP In accordance with the new Policy, it is intended that awards will be granted to Mark Radcliffe and Daniel Barton during 2025. The maximum LTIP awards for the Executive Directors will be 200% of base salary. The vesting outcome for 62.5% of the award will be based on adjusted EPS measured over a three-year period, with the balance vesting subject to continued employment. A two-year post-vesting holding period will apply. ### Non-Executive Director fees for 2025 | Philip Bowcock: | £154,500 | (3% increase; 2024 0%) | | --- | --- | --- | | Damian Sanders: | £61,800 | (3% increase; 2024 0%) | | Dianne Walker: | £61,800 | (3% increase; 2024 0%) | Fee increases for the Non-Executive Directors will be effective from 1 April 2025. ### Advisers to the Committee The Committee has engaged the services of PwC LLP as independent remuneration advisor. The Committee is satisfied that the advice received was objective and independent. PwC is a member of the Remuneration Consultants Group and a signatory to its Code of Conduct. In addition, the Committee has satisfied itself that the advice it receives is objective and independent and PwC has confirmed there are no conflicts of interest. On behalf of the Board. ### Dianne Walker Chair of the Remuneration Committee 14 January 2025 86 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Directors' report The Directors have pleasure in submitting their report and the audited financial statements of Victorian Plumbing Group plc (the “Company”) and its subsidiaries (together the “Group”) for the financial year ended 30 September 2024. This Directors’ report includes the information required to be included under the Companies Act 2006 or, where provided elsewhere, an appropriate cross reference is given. The Corporate Governance Statement approved by the Board is provided on pages 60 to 73 and incorporated by reference into this Directors’ report. ## Statutory information Information required to be part of the Directors’ report can be found elsewhere in this document, as indicated in the table below, and is incorporated into this report by reference: | Section of Annual report | Page reference | | --- | --- | | Employee involvement | Strategic report: Environmental, Social and Governance – page 34 Stakeholder engagement – page 28 Section 172(1) statement – pages 28 and 29 | | Financial instruments | Financial statements: note 26 to the consolidated financial statements – pages 126 to 128 | | Future developments of the business | Strategic report: Our strategy – pages 22 to 27 | | Greenhouse gas emissions | Strategic report: Environmental, Social and Governance – page 36 | | Stakeholder engagement | Strategic report: Stakeholder engagement – pages 28 and 29 Section 172(1) statement – pages 28 and 29 | | Non-financial reporting | Strategic report: Environmental, Social and Governance – page 34 | ## Business overview The Company is incorporated and domiciled in the UK, its registered number is 13379554 and the address of its registered office is 1 Sustainability Way, Farington Moss, Leyland PR26 6TB. The Company is a public limited company and is listed on the AIM division of the London Stock Exchange. The Company has four subsidiaries, a complete list of which is provided within note 35 on page 135. ## Strategic report The Strategic report, which can be found on pages 02 to 63, sets out the Group’s strategy, objectives and business model; the development, performance and position of the Group’s business (including financial and operating key performance indicators); a description of the principal risks and uncertainties; and the main trends and factors likely to affect the future development, performance and position of the Group’s business. ## UK Corporate Governance Code The Company elected to adopt the UK Corporate Governance Code (“Code”) on Admission. The Company’s statement on corporate governance can be found in the Corporate Governance Statement on page 69 to 73, the Report of the Nomination Committee, the Report of the Audit and Risk Committee, and the Directors’ Remuneration Report report on pages 74 to 86; all of which form part of this Directors’ Report and are also incorporated into it by reference. ## 2025 Annual General Meeting The 2025 Annual General Meeting (“AGM”) will take place at 9:30am on 25 February 2025 at the Company’s registered office at 1 Sustainability Way, Farington Moss, Leyland PR26 6TB. We strongly encourage all shareholders to cast their votes by proxy, and to send any questions in respect of AGM business to ir@victorianplumbing.co.uk. The notice of meeting sets out the resolutions to be proposed and specifies the deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be passed at the AGM. All proxy votes will be counted and the numbers for, against or withheld in relation to each resolution will be announced at the AGM and published on the Company’s website. ## Board of Directors The following individuals were Directors of the Company for the entirety of the financial year ended 30 September 2024, and to the date of approving this report: - Philip Bowcock (Chair) - Mark Radcliffe (Chief Executive Officer) - Daniel Barton (Chief Financial Officer) - Damian Sanders (Senior Independent Director) - Dianne Walker (Independent Non-Executive Director) All Directors will stand for re-election at the 2025 AGM in line with the recommendations of the Code. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 87 --- # Directors' report continued ## Appointment and replacement of Directors At each AGM, each Director then in office shall retire from office with effect from the conclusion of the meeting. When a Director retires at an AGM in accordance with the Articles of Association of the Company ("Articles"), the Company may, by ordinary resolution at the meeting, fill the office being vacated by re-electing the retiring Director. In the absence of such a resolution, the retiring Director shall nevertheless be deemed to have been re-elected, except in the circumstances set out in the Company's Articles. ## Results and dividends The Group's and Company's audited financial statements for the year are set out on pages 98 to 142. In order to distribute a total ordinary dividend for the year of 1.61 pence per share (FY23: 1.40 pence per share), the Directors are recommending a full year final ordinary dividend of 1.09 pence per share (FY23: 0.95 pence per share). Subject to shareholders' approval at the AGM on 25 February 2025, the dividend will be paid on 7 March 2025 to shareholders on the register of members at the close of business on 7 February 2025. ## Amendment of the Articles The Company's Articles may only be amended by a special resolution at a general meeting of shareholders. No amendments are proposed to be made to the existing Articles at the forthcoming AGM. ## Issued share capital and control The Company's issued share capital comprises ordinary shares of £0.001 each which are listed on the London Stock Exchange (AIM: VIC). The ISIN of the shares is GB00BNVVHD43. As at 30 September 2024, the issued share capital of the Company comprised 326,334,279 ordinary shares of £0.001 each. On 9 December 2024, the Company completed an issue of 1,139,737 new ordinary shares of £0.001 each in the Company to satisfy the release of share awards under the terms of the Company's employee share schemes. As at the date of this document, the issued share capital of the Company comprised 327,474,016 ordinary shares of £0.001 each. Further information regarding the Company's issued share capital can be found within note 29 on page 129 of the consolidated financial statements. Details of the movements in issued share capital during the year are provided in note 29 to the Group's consolidated financial statements contained on page 129. All the information detailed in note 29 on page 129 forms part of this Directors' Report and is incorporated into it by reference. Details of employee share schemes are provided in note 31 to the financial statements on pages 129 to 133. ## Authority to allot shares At the AGM of the Company held on 27 February 2024, the Directors were granted authority to allot ordinary shares in the Company up to a maximum nominal amount of £217,556.19 (representing approximately two thirds of the Company's issued ordinary share capital), of which a maximum nominal amount of £108,778.09 (representing approximately one-third of the Company's issued ordinary share capital) can only be allotted pursuant to a rights issue. On 9 December 2024, the Company completed an issue of 1,139,737 new ordinary shares of £0.001 each in the Company to satisfy the release of share awards under the terms of the Company's employee share schemes. No other shares have been issued under this authority since 27 February 2024 to the date of this report. This standard authority is renewable annually: the Directors will seek to renew it at the 2025 AGM. ## Authority to purchase own shares At the AGM of the Company held on 27 February 2024, the Directors were granted authority to make market purchases of up to 32,633,427 of its ordinary shares, subject to minimum and maximum price restrictions. No shares were purchased under this authority since 27 February 2024 to the date of this report. This standard authority is renewable annually: the Directors will seek to renew it at the 2025 AGM. The Directors will only use this power after careful consideration, taking into account the financial resources of the Company, the Company's share price and future funding opportunities. The Directors will also take into account the effects on earnings per share and the interests of shareholders generally. ## Rights attaching to shares All shares have the same rights (including voting and dividend rights, and rights on a return of capital) and restrictions as set out in the Articles, described below. Except in relation to dividends that have been declared and rights on a liquidation of the Company, the shareholders have no rights to share in the profits of the Company. The Company's shares are not redeemable. However, following any grant of authority from shareholders, the Company may purchase or contract to purchase any of the shares on or off-market, subject to the Companies Act 2006 and the requirements of AIM rules. No shareholder holds shares in the Company that carry special rights with regard to control of the Company. There are no shares relating to an employee share scheme that have rights with regard to control of the Company that are not exercisable directly and solely by the employees, other than in the case of the Victorian Plumbing Group plc Share Incentive Plan, where share interests of a participant in such scheme can be exercised by the personal representatives of a deceased participant in accordance with the scheme rules. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Voting rights Each ordinary share entitles the holder to vote at general meetings of the Company. A resolution put to the vote of the meeting shall be decided on a show of hands, unless the Directors decide in advance that a poll will be conducted, or unless a poll is demanded at the meeting. On a show of hands, every member who is present in person or by proxy at a general meeting of the Company shall have one vote. On a poll, every member who is present in person or by proxy shall have one vote for every share of which they are a holder. The Articles provide a deadline for submission of proxy forms of not less than 48 hours before the time appointed for the holding of the meeting or adjourned meeting. No member shall be entitled to vote at any general meeting either in person or by proxy, in respect of any share held by the member, unless all amounts presently payable by the member in respect of that share have been paid. Save as noted, there are no restrictions on voting rights nor any agreement that may result in such restrictions. # Restriction on transfer of securities The Articles do not contain any restrictions on the transfer of ordinary shares in the Company other than the usual restrictions applicable where any amount is unpaid on a share. Certain restrictions are also imposed by laws and regulations (such as insider trading and marketing requirements relating to close periods) and requirements of the Company's share dealing code whereby Directors and certain employees of the Company require approval to deal in the Company's securities. # Change of control Save in respect of a provision of the Company's share schemes that may cause options and awards granted to employees under such schemes to vest on takeover, there are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) because of a takeover bid. # Significant contracts The only significant agreement to which the Company is a party that takes effect, alters or terminates upon a change of control of the Company following a takeover bid, and the effect thereof, is the revolving credit facility agreement, which contains customary prepayment, cancellation and default provisions including, if required by a lender, mandatory prepayment of all utilisations provided by that lender upon the sale of all or substantially all of the business and assets of the Group or a change of control. At the date of this Report, no amounts are drawn under the Company's Revolving Credit Facility. # Transactions with related parties Relationship agreement: On 17 June 2021 the Company entered into a relationship agreement with Mark Radcliffe, Neil Radcliffe (the "Controlling Shareholders") and Carole Radcliffe. Under the relationship agreement, the Controlling Shareholders shall, and have agreed to use their reasonable endeavours to procure that each of their associates shall, among other things: a. not take any action that is intended to preclude or inhibit the Company or any other member of the Group from operating independently of either of the Controlling Shareholders at all times; b. make and conduct all transactions and arrangements with the Company on an arm's length and normal commercial basis; c. not take any action that would have the effect of preventing the Board from being comprised of at least a majority of Directors who are independent of the Controlling Shareholders and their respective associates; d. not take any action that would have the effect of preventing the Directors, the Company or any other member of the Group from complying with obligations under any applicable laws; e. where the Company or any member of the Group has entered into a contract or other arrangement with either of the Controlling Shareholders and/or any of their respective associates, ensure that the relevant Controlling Shareholder and/or any of their respective associates procures that any decisions as to the implementation, amendment or enforcement of such contract or arrangement are taken independently of them and (in so far as they are able) their respective associates; f. procure that any disputes between the Company (or any member of the Group) and either of the Controlling Shareholders and/or any of their respective associates shall be exclusively dealt with on behalf of the Company or the relevant member of the Group by the Directors other than the Controlling Shareholders and, if applicable, their respective associates; and g. exercise any of their voting or other rights and powers as shareholders of the Company to procure that: i. the Group is managed for the benefit of shareholders as a whole and independently of the Controlling Shareholders and their respective associates, rather than for the benefit of any particular shareholder or group of shareholders of the Company; and ii. subject to the applicable laws and the provisions of the Relationship Agreement, the Company is managed in accordance with the chosen Corporate Governance Code (pursuant to AIM Rule 26) to the extent practicable and appropriate for the size, stage of development and operations of the Group from time to time. Compensation paid to Directors and key management is as disclosed in note 9 to the consolidated financial statements on page 116. The Group leases certain property from Radcliffe Property Management Limited, a third party for which Mark Radcliffe is an Executive Director. Related party transactions are disclosed within note 34 to the consolidated financial statements on page 135. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Directors' report continued ## Research and development Innovation, specifically in software, is a critical element of Victorian Plumbing's strategy and therefore of the future success of the Group. Accordingly, the majority of the Group's research and development expenditure is predominantly related to this area. During the year, the Group capitalised £3.3 million of salaries in relation to internally developed software (2023: £2.6 million). ## Indemnities and insurance The Company maintains Directors' and Officers' liability insurance which gives appropriate cover for any legal action brought against its Directors. The Company has also provided an indemnity for its Directors, which is a qualifying third-party indemnity provision, for the purposes of Section 234 of the Companies Act 2006. ## Environmental Information on the Group's greenhouse gas emissions is set out in the Environmental, Social and Governance section on page 36 and forms part of this report by reference. ## Political donations There were no political donations made during the year or the previous year. ## Post-balance sheet events On 18 December 2024, the Group entered into a new £30m revolving credit facility which replaced the Group's existing revolving credit facility and expires in December 2027. ## External branches The Group had no active registered external branches during the reporting period. ## Disabled employees The Group gives full consideration to applications for employment from disabled persons when the requirements of the role can be adequately fulfilled. Where existing employees become disabled, it is the Group's policy to provide continuing employment under normal terms and conditions whenever possible. More information regarding our approach to diversity and inclusion can be found on pages 38 to 41. ## Interest in voting rights At the date of this report, the Company had been notified, in accordance with Chapter 5 of the Financial Conduct Authority's Disclosure and Transparency Rules, or was aware of (to the best of its knowledge) the following significant interest in the issued ordinary share capital of the Company: | Shareholder | Number of ordinary shares/ voting rights | Percentage of voting rights over ordinary shares | | --- | --- | --- | | Mark Radcliffe | 155,733,657 | 47.56% | | Neil Radcliffe | 35,592,130 | 10.87% | | Blackrock | 12,098,952 | 3.70% | | Paradice Investment Management | 11,841,528 | 3.62% | There have been no other changes to the disclosure of significant interests since the year end. ## Disclosure of information to auditors Each of the Directors has confirmed that: - so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and - the Director has taken all the steps that he/she ought to have taken as a Director to make him/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006. Alex Singer Company Secretary 14 January 2025 ![img-117.jpeg](img-117.jpeg) 90 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Statement of Directors' responsibilities in respect of the Annual Report and financial statements The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the Group and parent company financial statements in accordance with UK-adopted international accounting standards ("IFRSs"), and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland ("FRS 102"). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period. In preparing these financial statements, the Directors are required to: - select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (and in respect of the parent company financial statements, Section 10 of FRS 102) and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent; - present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; - provide additional disclosures when compliance with the specific requirements in IFRSs (and in respect of the parent company financial statements, FRS 102) is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Company financial position and financial performance; - in respect of the Group financial statements, state whether UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; - in respect of the parent company financial statements, state whether UK-adopted international accounting standards, including FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and/or the Group will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's and Group's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the Company and the Group financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's corporate website. # Directors' responsibility statement The Directors confirm, to the best of their knowledge: - that the consolidated financial statements, prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the parent company and undertakings included in the consolidation taken as a whole; - that the Annual report, including the Strategic report, includes a fair review of the development and performance of the business and the position of the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and - that they consider the Annual report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy. Approved by the Board on 14 January 2025 and signed on its behalf. Mark Radcliffe Chief Executive Officer Daniel Barton Chief Financial Officer 14 January 2025 Signed by: Mark Radcliffe 12870269-2541441 DecoSigned by: C03F9F7G-17B4C7 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Independent auditor’s report to the members of Victorian Plumbing Group plc ## Opinion In our opinion: - Victorian Plumbing Group plc’s group financial statements and parent company financial statements (the “financial statements”) give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 30 September 2024 and of the Group’s profit for the year then ended; - the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; - the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and - the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Victorian Plumbing Group plc (the “parent company”) and its subsidiaries (the “Group”) for the year ended 30 September 2024 which comprise: | Group | Parent company | | --- | --- | | Consolidated statement of financial position as at 30 September 2024 | Balance sheet as at 30 September 2024 | | Consolidated statement of comprehensive income for the year then ended | Statement of changes in equity for the year then ended | | Consolidated statement of changes in equity for the year then ended | | | Consolidated statement of cash flows for the year then ended | Related notes 1 to 14 to the financial statements including a summary of significant accounting policies | | Related notes 1 to 37 to the financial statements, including a summary of significant accounting policies | | The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice). ## Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ## Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and parent company’s ability to continue to adopt the going concern basis of accounting included the following procedures: - In conjunction with our walkthrough of the Group’s financial statement close process, we confirmed our understanding of management’s going concern assessment process; - We obtained management’s going concern assessment, including the cash forecasts for the going concern review period being the period to 28 February 2026. The Group has modelled a base case scenario and severe but plausible downside scenarios and a reverse stress test. The sensitivities include considering the potential impact of a change in the spending patterns of consumers resulting in lower volume growth, reduced average order value and increased marketing spend and cost base resulting in lower gross margins. The extent to which these factors could adversely affect the Group’s revenue, EBITDA and cash was modelled and consideration given to mitigating actions; - We have tested the factors and assumptions included in each modelled scenario for the cash forecasts and have challenged the assumptions used in the stress testing performed by management. We utilised industry reports to interrogate the assumptions included by management. We considered the appropriateness of the methods used to calculate the cash forecasts and determined that they were appropriately sophisticated to be able to make an assessment on going concern. We also checked the arithmetical accuracy of the model, as well as the starting cash position as at 1 October 2024; 92 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information - We assessed management's reverse stress test in order to identify what factors would lead to the Group utilising all available cash during the period and performed our own reverse stress test to identify the circumstances under which all available liquidity would be extinguished, noting that this would require a reduction in revenue of more than 40% from the base case assumptions with no mitigating action taken; - We assessed management's forecast accuracy by comparing actual recent trading performance with forecasts, including post-year-end trading; - We enquired of management as to their knowledge of events or conditions beyond the period of their assessment that may cast significant doubt on the entity's ability to continue as a going concern. No such events or conditions were noted and we did not identify any contradictory evidence to suggest otherwise; - We read board minutes for any inconsistencies with the risks considered in the going concern assessment; - We reviewed the Group's going concern disclosures included in the Annual Report in order to assess that the disclosures were appropriate and in conformity with the reporting standards. We note that management has performed a going concern assessment with a base case scenario and severe but plausible downside sensitivity. The Group has a revolving credit facility in place of £30 million which expires in December 2027, is currently not utilised, nor is it forecast to be utilised in any of the scenarios modelled by management. ## Overview of our audit approach | Audit scope | • We performed an audit of the complete financial information of three components. • The components where we performed full or specific audit procedures accounted for 100% of Adjusted profit before tax, 100% of Revenue and 100% of Total assets. | | --- | --- | | Key audit matters | • Revenue recognition • Accounting for the acquisition and subsequent closure of AHK Designs | | Materiality | • Overall Group materiality of £1,177,000 which represents 5% of Adjusted profit before tax. | ## An overview of the scope of the parent company and group audits ### Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment and other factors such as recent internal audit results when assessing the level of work to be performed at each company. In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the four reporting components of the Group, we selected all four components, with one component representing the principal business unit within the Group. We performed an audit of the complete financial information of all four components ("full scope components") which were selected based on their size or risk characteristics. The reporting components where we performed audit procedures accounted for 100% (2023: 100%) of the Group's Adjusted profit before tax, 100% (2023: 100%) of the Group's Revenue and 100% (2023: 100%) of the Group's Total assets. ## Involvement with component teams All audit work performed for the purposes of the audit was undertaken by the Group audit team. ## Climate change There has been increasing interest from stakeholders as to how climate change will impact Victorian Plumbing Group plc. The Group has determined that the effects of climate change are not expected to have a significant impact on the Group's operations nor the viability of the Group over the next three years. These effects are referenced on pages 44 to 45 in the Sustainability report and on page 61 in the principal risks and uncertainties, which form part of the 'Other information', rather than the audited financial statements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements, or our knowledge obtained during the audit or otherwise appear to be materially misstated. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 93 --- Independent auditor's report to the members of Victorian Plumbing Group PLC continued ## Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. | Risk | Our response to the risk | Key observations communicated to the Audit Committee | | --- | --- | --- | | Revenue recognition: Risk of inappropriate revenue recognition (Revenue 2024: £295.7m, 2023: £285.1m) Refer to the Audit and Risk Committee Report (page 78); Accounting policies (page 103); and Note 5 of the Consolidated financial statements (page 113). Risk of inappropriate revenue recognition. This could occur as a result of management override of controls over journal entries recorded to revenue outside the normal flow of transactions throughout the year or through bias adopted in the assumptions used by management to calculate the year-end refund liability and deferred income calculation. | • Gained an understanding of and documented the key processes used to record revenue transactions by performing a walkthrough of the processes; • Used a data driven approach to identify journals to revenue outside of the normal flow of transactions. We assessed any material journals not posted to receivables or cash for any evidence of management bias by corroborating to supporting documentation; • Performed analytical procedures to compare monthly revenue trends to identify unusual items; • Tested management’s deferred income cut-off adjustment for completeness by testing a sample of items from the full year’s revenue (weighted towards items despatched in September) as well as a sample of items from post year end deliveries from the top three couriers used. We verified the delivery date on all items to third party tracking support to ensure that where appropriate, revenue was deferred at the year end; • Assessed the completeness of the refund liability by reference to historical trend analysis and performed testing over a sample of post-year end credit notes to the end of October to ensure that revenue had been reversed where a subsequent credit note had been raised. | Revenue has been recognised appropriately in the correct period and in accordance with IFRS 15, Revenue from Contracts with Customers. We did not identify instances of management override of controls in relation to revenue. | | Accounting for the acquisition and subsequent closure of AHK Designs (Goodwill 2024: £18.8m, Provisions 2024: £0.7m) Refer to the Audit and Risk Committee Report (page 78); Accounting policies (page 106); and Note 15 of the Consolidated financial statements (page 120). On 17 May 2024, the Group acquired AHK Designs Ltd for £22.2m. Acquisition accounting can be complex and requires judgement and estimation in identifying the assets acquired and their appropriate fair value as part of the purchase price allocation exercise. There is a significant risk that the intangible assets acquired, and the corresponding goodwill recognised are not valued appropriately. Trading of AHK Designs ceased in November 2024. There is an additional risk that provisions recorded for the closure costs are not in accordance with IAS 37. | Accounting for the acquisition Our procedures included: • Obtaining and reading the sale and purchase agreement; • Inspecting completion accounts and supporting documentation (including due diligence reports) to assess the appropriateness of the fair values of the assets and liabilities acquired; • Vouching the consideration paid to the bank statement on completion and the deferred consideration to the sale and purchase agreement; • With the assistance of EY Valuations specialists, assessing the completeness of intangible assets recognised and the appropriateness of the value of residual goodwill recognised; and • Searching for contradictory evidence to challenge the appropriateness of the purchase price allocation. Accounting for the subsequent closure of the business Our procedures included: • Critically assessing whether closure costs provided for at 30 September 2024 meet the recognition criteria under IAS 37; and • Vouching a sample of closure provisions to supporting evidence. | The purchase price allocation exercise has been performed appropriately in accordance with IFRS 3, Business Combinations and the provisions held at 30 September 2024 with regard to the closure of AHK Designs are in line with IAS 37, Provisions, Contingent Liabilities and Contingent Assets. | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Our application of materiality We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. # Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the Group to be £1,177,000, which is 5% of Adjusted profit before tax. Profit before tax is a key performance indicator used by management to monitor the Group's performance and also the figure that we believe to be the most relevant to the shareholders when assessing the performance of the Group. However, we considered the Adjusted profit before tax figure, (adjusted for IPO related share based payment charges) to be a more appropriate performance metric on which to base our materiality calculation, as the costs associated with the issuance of share based payments during the year (which are classified separately on the consolidated statement of comprehensive income) and the non-recurring costs are not indicative of the underlying operational performance of the Group. During the course of our audit, we reassessed initial materiality using the yearend figures per the financial statements, which lead to no significant change in our materiality levels. We determined statutory materiality for the parent company and have capped at the Group materiality of £1,177,000. # Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the Group's overall control environment, our judgement was that performance materiality was 75% (2023: 75%) of our planning materiality, namely £1,177,000 (2023: £907,000). Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to components was £176,000 to £793,000 (2023: £136,000 to £646,000). # Reporting threshold An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess of £58,000 (2023: £45,000), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. # Other information The other information comprises the information included in the Annual Report set out on pages 1 to 142, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. # Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: - the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and - the Strategic report and Directors' report have been prepared in accordance with applicable legal requirements. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Independent auditor's report to the members of Victorian Plumbing Group PLC continued ## Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or - the parent company financial statements are not in agreement with the accounting records and returns; or - certain disclosures of Directors' remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit. ## Opinions on other matters as per the terms of our engagement letter with the Company In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the basis of preparation set out in note 1. ## Corporate governance statement ISAs (UK) require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group and Company's compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: - Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting set out on page 63; - Directors' explanation as to its assessment of the Company's prospects, the period this assessment covers and why the period is appropriate set out on page 63; - Directors' statement on fair, balanced and understandable set out on page 91; - Board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 56 to 61; - The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on page 77; and; - The section describing the work of the Audit and Risk Committee set out on pages 76 to 79. ## Responsibilities of Directors As explained more fully in the Directors' responsibilities statement set out on page 91, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group and parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so. ## Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. ## Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Company and management. - We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant frameworks which are directly relevant to specific assertions in the financial statements are those that relate to the reporting framework (international accounting standards in conformity with the requirements of the Companies Act 2006, AIM Rules, UK Tax Legislation, General Data Protection Regulation, and the voluntary compliance with UK Corporate Governance Code 2018). VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information - We understood how Victorian Plumbing Group plc is complying with those frameworks by making enquiries of management, those responsible for legal and compliance procedures and the Company Secretary. We corroborate our enquiries through our review of Board minutes, papers provided to the Audit and Risk Committee and discussions with the Audit and Risk Committee. - We assessed the susceptibility of the Group's financial statements to material misstatement, including how fraud might occur by meeting with management and those charged with governance to understand where it considered there was a susceptibility to fraud. We also considered areas of significant judgement including complex transactions, performance targets, economic or external pressures and the impact that these have on the control environment. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk, refer to the Key Audit Matters section for further details. These procedures included testing manual journals and were designed to provide reasonable assurance that the financial statements were free from material fraud or error. - Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. For both direct and other laws and regulations, we considered the extent of compliance with those laws and regulations as part of our procedures on the related financial statement items. Our procedures involved making enquiries with those charged with governance and senior management, journal entry testing – with a focus on consolidation journals and journals indicating large or unusual transactions based on our understanding of the business and focused testing, as referred to in the key audit matters section above. In addition, we completed procedures to conclude on the compliance of the disclosures in the Annual Report and Accounts with the requirements of the relevant accounting standards, UK legislation and voluntary compliance with the UK Corporate Governance Code 2018. There were no significant instances noted of non-compliance with laws and regulations. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report. ## Use of our report This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report or for the opinions we have formed. Victoria Venning (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor VILVON VENNING Manchester 14 January 2025 ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 97 --- # Consolidated statement of comprehensive income for the year ended 30 September 2024 | | Note | Victorian Plumbing £m | Victoria Plum¹ £m | FOF£1 £m | 2023 £m | | --- | --- | --- | --- | --- | --- | | Revenue | 5 | 281.0 | 14.7 | 295.7 | 285.1 | | Cost of sales | | (139.3) | (8.6) | (147.9) | (150.5) | | Gross profit | | 141.7 | 6.1 | 147.8 | 134.6 | | Administrative expenses | 6 | (126.6) | (9.2) | (135.8) | (119.3) | | Impairment of assets | 7 | (0.8) | - | (0.8) | - | | Operating profit | 6 | 14.3 | (3.1) | 11.2 | 15.3 | | Finance income | 10 | 1.0 | - | 1.0 | 0.6 | | Finance costs | 10 | (3.2) | - | (3.2) | (0.3) | | Profit before tax | | 12.1 | (3.1) | 9.0 | 15.6 | | Income tax expense | 11 | (3.5) | - | (3.5) | (3.8) | | Profit for the year | | 8.6 | (3.1) | 5.5 | 11.8 | | Basic earnings per share (pence) | 13 | | | 1.8 | 4.1 | | Diluted earnings per share (pence) | 13 | | | 1.7 | 3.7 | ¹ The results of each operating segment have been presented separately to provide a LFL comparison - please refer to operating segments note 4. There are no items to be recognised in the statement of other comprehensive income in the current year or prior year, and hence the Group has not presented a separate statement of other comprehensive income. 98 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Consolidated statement of financial position at 30 September 2024 | | Note | 2024 £m | 2023 £m | | --- | --- | --- | --- | | Assets | | | | | Non-current assets | | | | | Goodwill | 15 | 18.8 | - | | Intangible assets | 16 | 4.7 | 4.0 | | Property, plant and equipment | 17 | 27.8 | 4.9 | | Right-of-use assets | 18 | 45.4 | 4.3 | | Derivative financial instruments | | - | 0.4 | | | | 96.7 | 13.6 | | Current assets | | | | | Inventories | 19 | 43.7 | 34.2 | | Trade and other receivables | 20 | 6.9 | 4.8 | | Cash and cash equivalents | | 11.2 | 46.4 | | | | 61.8 | 85.4 | | Total assets | | 158.5 | 99.0 | | Equity and liabilities | | | | | Equity attributable to the owners of the Company | | | | | Share capital | 29 | 0.3 | 0.3 | | Share premium | | 11.2 | 11.2 | | Capital redemption reserve | | 0.1 | 0.1 | | Capital reorganisation reserve | | (320.6) | (320.6) | | Retained earnings | | 361.3 | 357.8 | | Total equity | | 52.3 | 48.8 | | Liabilities | | | | | Non-current liabilities | | | | | Lease liabilities | 23 | 43.0 | 3.8 | | Derivative financial instruments | | 0.5 | - | | Provisions | 24 | 1.9 | - | | Deferred tax liability | 28 | 2.8 | - | | | | 48.2 | 3.8 | | Current liabilities | | | | | Trade and other payables | 21 | 44.2 | 38.0 | | Contract liabilities | 22 | 9.5 | 5.4 | | Lease liabilities | 23 | 3.1 | 1.0 | | Provisions | 24 | 1.0 | 0.2 | | Corporation tax | | 0.2 | 1.8 | | | | 58.0 | 46.4 | | Total liabilities | | 106.2 | 50.2 | | Total equity and liabilities | | 158.5 | 99.0 | The financial statements were approved by the Board of Directors on 14 January 2025 and authorised for issue. Daniel Barton Chief Financial Officer Victorian Plumbing Group plc Registered number: 13379554 Annual Report and Financial Statements 2024 --- # Consolidated statement of changes in equity for the year ended 30 September 2024 | | Share capital £m | Share premium £m | Capital redemption reserve £m | Capital reorganisation reserve £m | Retained earnings £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | | Balance at 1 October 2022 | 0.3 | 11.2 | 0.1 | (320.6) | 353.0 | 44.0 | | Comprehensive income | | | | | | | | Profit for the year | - | - | - | - | 11.8 | 11.8 | | Transactions with owners | | | | | | | | Dividends paid | - | - | - | - | (10.6) | (10.6) | | Employee share schemes – value of employee services | - | - | - | - | 3.5 | 3.5 | | Tax impact of employee share schemes | - | - | - | - | 0.1 | 0.1 | | Total transactions with owners recognised directly in equity | - | - | - | - | (7.0) | (7.0) | | Balance at 30 September 2023 | 0.3 | 11.2 | 0.1 | (320.6) | 357.8 | 48.8 | | Comprehensive income | | | | | | | | Profit for the year | - | - | - | - | 5.5 | 5.5 | | Transactions with owners | | | | | | | | Dividends paid | - | - | - | - | (4.8) | (4.8) | | Employee share schemes – value of employee services | - | - | - | - | 2.8 | 2.8 | | Total transactions with owners recognised directly in equity | - | - | - | - | (2.0) | (2.0) | | Balance at 30 September 2024 | 0.3 | 11.2 | 0.1 | (320.6) | 361.3 | 52.3 | 100 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Consolidated statement of cash flows for the year ended 30 September 2024 | | Note | 2024 £m | 2023 £m | | --- | --- | --- | --- | | Cash flows from operating activities | | | | | Cash generated from operating activities before exceptional items | 32 | 22.4 | 19.8 | | Cash outflow from exceptional items | | (3.3) | (0.6) | | Cash outflow from share-based payments | | (0.2) | – | | Cash generated from operating activities | | 18.9 | 19.2 | | Income tax paid | | (2.5) | (2.1) | | Interest received on cash deposits | | 1.0 | 0.6 | | Net cash generated from operating activities | | 17.4 | 17.7 | | Cash flows from investing activities | | | | | Purchase of intangible assets | | (3.8) | (3.0) | | Purchase of property, plant and equipment | | (21.0) | (2.0) | | Acquisition of subsidiary – net of cash acquired | | (19.1) | – | | Net cash used in investing activities | | (43.9) | (5.0) | | Cash flows from financing activities | | | | | Dividends paid | | (4.8) | (10.6) | | Finance arrangement fees | | (0.1) | (0.1) | | Payment of interest portion of lease liabilities | | (3.0) | (0.2) | | Payment of principal portion of lease liabilities | | (0.8) | (0.9) | | Net cash used in financing activities | | (8.7) | (11.8) | | Net increase/(decrease) in cash and cash equivalents | | (35.2) | 0.9 | | Cash and cash equivalents at the beginning of the year | | 46.4 | 45.5 | | Cash and cash equivalents at the end of the year | | 11.2 | 46.4 | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 101 --- # Notes to the consolidated financial statements ## 1. General information Victorian Plumbing Group plc is a public limited company, which is listed on the Alternative Investment Market ("AIM") of the London Stock Exchange and is domiciled and incorporated in the United Kingdom under the Companies Act 2006. The consolidated financial statements of the Company as at and for the year ended 30 September 2024 comprise the Company and its interest in subsidiaries (together referred to as the "Group"). The consolidated financial statements of the Group as at and for the year ended 30 September 2024 are available upon request to the Company Secretary from the Company's registered office at 1 Sustainability Way, Farington Moss, Leyland, England, PR26 6TB or are available on the corporate website at www.victorianplumbingplc.com. ## Basis of preparation The consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standards. The consolidated financial statements have been prepared on the going concern basis and on the historical cost convention modified for the revaluation of certain financial instruments. ## Basis of consolidation Subsidiaries are all entities over which the Group has control. Control exists when the Group has existing rights that give it the ability to direct the relevant activities of an entity and has the ability to affect the returns the Group will receive as a result of its involvement with the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intercompany transactions and balances between Group companies are eliminated on consolidation. ## Going concern The Group's ability to continue as a going concern is dependent on maintaining adequate levels of resources to continue to operate for the foreseeable future. The Directors have considered a number of key dependencies, which are set out in the Group's risk management section, specifically the Group's exposure to liquidity risk and foreign exchange risk as described in note 26. When assessing the going concern of the Group, the Directors have reviewed the year-to-date financial results, as well as detailed financial forecasts for the going concern review period up to 28 February 2026. The assumptions used in the base case financial forecast are based on the Group's historical performance and management's extensive experience of the industry. Taking into consideration the wider economic environment, the forecasts have been assessed and stress tested to ensure that a robust assessment of the Group's working capital and cash requirements has been performed. ## Liquidity and financing At 30 September 2024, the Group held instantly accessible cash of £11.2 million. The Group also had access to a revolving credit facility of £10.0 million with HSBC which was undrawn at 30 September 2024. On 18 December 2024, the Group entered into a three-year agreement with HSBC for a £30.0 million revolving credit facility which remains undrawn at the date of this report. There is a sufficient level of liquidity and financing headroom post-stress testing across the going concern forecast period to 28 February 2026, as outlined in more detail below. ## Approach to stress testing The going concern analysis, which was approved by the Board in January 2025, reflected the actual trading to December 2024, as well as detailed financial forecasts for the period up to 28 February 2026. The Group has taken a measured approach to its forecasting. The Group has balanced the expected trading conditions with opportunities available in a growing market which is transitioning online and the fact that it continues to lead the bathroom market. Given the uncertainty around the impact of the current macroeconomic environment, in its assessment of going concern, the Board has considered the potential impact of an economic downturn leading to a greater impact on the spending patterns of consumers. The extent to which this could adversely affect the Group's revenue and gross margin has been modelled, and the Board has considered likely areas of mitigations available to the Group should these scenarios play out. The Group has prepared a hypothetical, severe but plausible, downside scenario in comparison to the base case, incorporating all the following factors without recourse to mitigating actions: - A lower growth of dispatched order volumes than that achieved in FY24 - A decrease in average order value - A decrease in gross margin Throughout the stress testing, management has not factored in any cost savings or mitigating factors that could be executed. For example, negotiating payment terms with suppliers and continuing to manage stock levels to reflect changes in consumer demand. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information This severe downside scenario still results in sufficient cash forecast to be held throughout the period to 28 February 2026 to cover the Group's liabilities as they fall due, without utilisation of the Group's revolving credit facilities. A reverse stress test has been performed which demonstrates an implausible scenario. ## Going concern conclusion Based on the analysis described above, the Group has sufficient liquidity headroom throughout the forecast period. The Directors therefore have reasonable expectation that the Group has the financial resources to enable it to continue in operational existence for the period to 28 February 2026. Accordingly, the Directors conclude it is appropriate that these consolidated financial statements be prepared on a going concern basis. ## 2. Material accounting policies The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 30 September 2023 unless stated below. ## 2.1 Changes in material accounting policies ### New and amended standards adopted by the Group The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on 1 October 2023: - Narrow scope amendments to IAS 1 and IAS 8 - Annual improvements on IAS 12 and IAS 8 The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated. The adoption of these amendments has had no material effect on the Group's consolidated financial statements. ### Standards, amendments and interpretations to existing standards that are not yet effective There are a number of amendments to IFRS that have been issued by the IASB that become mandatory in a subsequent accounting period including: Definition and disclosure of accounting policies – additional standards IFRS 18 and IFRS 19, amendment to IAS 1, IFRS 16, IAS 21, IFRS 9 and IFRS 7. The Group has evaluated these changes and none are expected to have a significant impact on these consolidated financial statements. ## 2.2 Existing material accounting policies The following accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 30 September 2023. ### Revenue The Group derives revenue from contracts with customers relating to the sale of bathroom products, accessories and other expansion products. Revenue is measured based on the consideration specified in a contract with a customer. Revenue is stated: net of discounts, rebates, refunds and value-added tax. Revenue is recognised from the sale of goods when the Group has satisfied its performance obligation by transferring control of the promised good to the customer. Control is transferred to the customer on delivery of the bathroom products, accessories and other expansion products to the customer's location. The Group's policy is to sell its products to customers with a right to return within 30 days, and at its discretion may accept returns after this period. The Group estimates the value of goods that are expected to be returned based on historic data. A refund liability and a right-of-return asset is recognised. The right-of-return asset is measured at the former carrying amount of the inventory less any expected costs to recover the goods. The refund liability is recognised for the obligation to refund some or all of the consideration received from a customer. The liability is measured at the amount the Group ultimately expects it will have to return to the customer. Refund liabilities are included within trade and other payables (refer to note 21). The Group reviews its estimate of expected returns at each reporting date. The Group does not offer loyalty points to customers nor are any warranties, other than assurance type warranties (note 24), offered by the Group. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 103 --- # Notes to the consolidated financial statements continued ## 2. Material accounting policies continued ### Cost of sales Cost of sales includes all direct costs incurred in purchasing products for resale along with: packaging, distribution and transaction costs (which include mark to market movements on forward currency contractual arrangements in line with our treasury policy). ### Contract liability Cash is received from customers in advance of delivery of goods and so deferred income is recognised as a contract liability. ### Rebates Rebates from suppliers are accounted for in the period in which they are earned and are based on commercial agreements with suppliers. Rebates earned are mainly purchase volume related and are generally short-term in nature, with rebates earned but not yet received typically relating to the preceding quarter's purchases. Rebate income is recognised in cost of sales in the income statement and rebates earned but not yet received are included in accrued income in the statement of financial position. Accrued rebate income is included within trade and other receivables (refer to note 20). ### Employee benefits #### Defined contribution pension plan Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. Payments made to state managed retirement benefit plans are accounted for as payments to defined contribution plans where the Group's obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan. #### Short-term benefits Short-term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the employee's entitlement to the benefit accrues. #### Share-based payments The Group operates equity-settled share-based payment options and accounts for these awards in accordance with IFRS 2 Share-based Payments. Equity-settled awards are valued at the grant date, and the fair value is charged as an expense in the income statement spread over the vesting period with a corresponding change in equity. The fair value of each award is measured using a Black–Scholes model. The charge is reassessed at each reporting date to reflect the expected and actual levels of vesting. The Group recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. #### Finance income Interest income is recognised in the income statement using the effective interest method. #### Finance costs Finance costs are charged to the income statement over the term of the debt using the effective interest method. ### Current and deferred taxation The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities and there is an intention to settle the balances on a net basis. ## Separately disclosed items (non-GAAP) Significant items of income and expense that do not relate to the trading of the Group are disclosed separately. Examples of such items are exceptional items and share-based payment charges. ## Exceptional items (non-GAAP) The Group's income statement separately identifies exceptional items. Such items are those that, in the Directors' judgement, are one-off in nature or non-operating and need to be disclosed separately by virtue of their size or incidence and may include, but are not limited to, restructuring, acquisition and transformation related costs, costs of implementing new systems, impairment of assets and income from legal or insurance settlements. In determining whether an item should be disclosed as an exceptional item, the Directors consider quantitative as well as qualitative factors such as the frequency, predictability of occurrence and significance. This is consistent with the way financial performance is measured by management and reported to the Board. Disclosing exceptional items separately provides additional understanding of the performance of the Group. ## Adjusted EBITDA (non-GAAP) Adjusted EBITDA is EBITDA (earnings before interest, tax, depreciation and amortisation) less separately disclosed items (exceptional items and IFRS 2 charges in respect of share-based payments along with associated national insurance). This adjusted profit measure is applied by the Board to understand the earnings trends of the Group (note 4) and is considered an additional, useful measure under which to assess the operating performance of the Group. ## Adjusted profit before tax (non-GAAP) Adjusted profit before tax is profit before tax less separately disclosed items (exceptional items and IFRS 2 charges in respect of share-based payments along with associated national insurance). This adjusted profit measure is applied by the Board to understand the earnings trends of the Group and is considered an additional, useful measure under which to assess the performance of the Group (note 4). ## Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the ELT that makes strategic decisions (note 4). ## Underlying costs (non-GAAP) Underlying costs are defined as administrative expenses before depreciation and amortisation, and separately disclosed items. ## Foreign currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The financial statements are presented in sterling (£), which is the Group's functional and presentational currency. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in the income statement. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 105 --- # Notes to the consolidated financial statements continued ## 2. Material accounting policies continued ### Business combinations The acquisition method of accounting is applied in accounting for the acquisition of subsidiaries. The acquiree's identifiable assets and liabilities are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and measured at cost, representing the excess of the aggregate of the consideration, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the fair value of its identifiable assets and liabilities at the date of acquisition. The consideration is measured at fair value, which is the aggregate of the fair values of the assets transferred, liabilities incurred or assumed, and the equity instruments issued in exchange for control of the acquiree. ### Intangible assets Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: - it is technically feasible to complete the software product so that it will be available for use; - management intends to complete the software product and use or sell it; and there is an ability to use or sell the software product; - it can be demonstrated how the software product will generate probable future economic benefits; - adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and - the expenditure attributable to the software product during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software product include the software development employee costs. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Computer software development costs recognised as assets are amortised over their estimated useful lives, which is 2–3 years. ### Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their estimated useful lives as follows: | Leasehold improvements | – Amortised over the lease period | | --- | --- | | Plant and machinery | – 4 years | | Fixtures and fittings | – 4 years | | Office equipment | – 4 years | The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each reporting date and adjusted prospectively, if appropriate. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement within administrative expenses. ### Leases The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for new short-term leases (defined as leases with a lease term of twelve months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones) with a value of less than £5,000. For these leases, the Group recognises the lease payments as an operating expense on a straight line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. 106 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information For all other leases, the lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset, as detailed below: Leasehold property - Lease term Plant and machinery - Shorter period of 4 years or the lease term Motor vehicles - Shorter period of 4 years or the lease term If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of-use assets are presented within non-current assets in the statement of financial position (note 18). The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Impairment of non-financial assets' policy. ## Inventories Inventories are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is determined using the first-in, first-out ("FIFO") method. Where necessary, a provision is made to reduce the carrying value to no less than net realisable value, having regard to the nature and condition of inventory. Costs include all costs incurred in bringing each product to its present location and condition. This includes the purchase cost of products and import duties. ## Financial instruments Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument. ## Initial recognition and measurement The Group classifies financial assets on initial recognition as measured at amortised cost, fair value through other comprehensive income ("FVOCI") or fair value through profit or loss ("FVTPL") based on the Group's business model for managing the financial asset and the cash flow characteristics of the financial asset. Financial liabilities are classified and measured at amortised cost except for those derivative liabilities that are measured at FVTPL. All financial assets and financial liabilities are initially measured at fair value, including transaction costs, except for those classified as FVTPL which are initially measured at fair value excluding transaction costs. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in the income statement. ## Subsequent measurement For purposes of subsequent measurement, financial assets are classified in four categories: - Financial assets at amortised cost (debt instruments) - Financial assets at FVOCI with recycling of cumulative gains and losses (debt instruments) - Financial assets designated at FVOCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) - Financial assets at FVTPL ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 107 --- # Notes to the consolidated financial statements continued ## 2. Material accounting policies continued ### Derecognition Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when the obligations specified in the contracts are discharged, cancelled or expire. On derecognition of a financial asset or liability, any difference between the carrying amount extinguished and the consideration paid is recognised in the income statement. ### Impairment For trade receivables and contract assets, the Group applies a simplified approach in calculating expected credit losses (“ECLs”). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience. ### Derivatives Derivative financial instruments are used to manage the risks arising from changes in foreign currency exchange rates relating to the purchase of overseas products. The Group enters into derivative financial instruments to manage its exposure to foreign exchange risk via forward currency contracts. The Group does not hold or issue derivative financial instruments for speculative purposes. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting date. The resulting gain or loss is recognised in the income statement and presented within administrative expenses. ### Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with near insignificant risk of change in value, and have original maturities of three months or less. ### Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred, and are subsequently carried at amortised cost, with any difference between the proceeds (net of transaction costs) and the redemption value being recognised in the income statement over the period of the borrowings using the effective interest method. Finance and issue costs associated with the borrowings are charged to the income statement using the effective interest method from the date of issue over the estimated life of the borrowings to which the costs relate. Borrowings are derecognised when the obligation under the liability is discharged, cancelled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, such that the difference in respective carrying amounts together with any costs or fees incurred are recognised in the income statement. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date. ### Impairment of non-financial assets The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGUs”) fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. 108 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information The Group bases its impairment calculation on most recent budgets and forecast calculations, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of three years. A long-term growth rate is calculated and applied to project future cash flows after the third year. Impairment losses of continuing operations are recognised in the income statement in expense categories consistent with the function of the impaired asset. ## Provisions ### General Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current post-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. ### Warranties The Group provides for the cost expected to be incurred in order to replace damaged or faulty items that existed at the time of sale. The provision related to these assurance-type warranties is recognised when the product is sold. Initial recognition is based on historical experience. The estimate of the warranty-replaced costs is revised every six months. ### Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds. Where the Group purchases its own equity share capital, the consideration paid is deducted from equity attributable to the Group's shareholders. Where such shares are subsequently cancelled, the nominal value of the shares repurchased is deducted from share capital and transferred to a capital redemption reserve. Where the Group purchases its own equity share capital to hold in treasury, the consideration paid for the shares is shown as own shares held within equity. ### Share premium The amount subscribed for the ordinary shares in excess of the nominal value of these new shares is recorded in share premium. Costs that directly relate to the issue of ordinary shares are deducted from share premium net of corporation tax. ### Shares held by the Employee Share Option Trust The Employee Share Option Trust ("ESOT") provides for the issue of shares to Group employees principally under share option schemes. The Group has control of the ESOT and therefore consolidates the ESOT in the Group financial statements. Accordingly, shares in the Company held by the ESOT are included in the statement of financial position at cost as a deduction from equity. ### Capital reorganisation reserve The capital reorganisation reserve arose on consolidation as a result of the share-for-share exchange on 27 May 2021 as part of the IPO readiness. ### Dividends The Company recognises a liability to pay a dividend when the distribution is authorised and the distribution is no longer at the discretion of the Company. In accordance with UK company law, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. ### Earnings per share Basic EPS is calculated by dividing the profit for the year from continuing operations attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit for the year from continuing operations attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 109 --- # Notes to the consolidated financial statements continued ## 3. Judgements in applying accounting policies and sources of estimation uncertainty ### 3.1 Accounting judgements #### Business combinations The acquisition method of accounting is applied in accounting for the acquisition of subsidiaries. The acquiree's identifiable assets and liabilities are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and measured at cost, representing the excess of the aggregate of the consideration, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the fair value of its identifiable assets and liabilities at the date of acquisition. The consideration is measured at fair value, which is the aggregate of the fair values of the assets transferred, liabilities incurred or assumed, and the equity instruments issued in exchange for control of the acquiree. #### Impairment of goodwill and other intangibles During the period the Group recognised goodwill upon the acquisition of AHK Designs Limited trading as Victoria Plum ("Victoria Plum"). The goodwill arising upon this acquisition has been allocated to the main Group's CGU, Victorian Plumbing. The CGU of Victorian Plumbing has been assessed for impairment and at that level there is no indication of impairment. An impairment review of other intangible assets, being 'computer software' and 'assets under construction', has been performed and due to the growth enabling features and efficiency gains it was concluded that the future value of the investments made is greater than the carrying value. Any assets held in the 'assets under construction' category will be brought into use during the year ended 30 September 2025. #### Intangible assets Intangible assets relate to the development of the Group's internal bespoke software solutions and comprise both capitalised internal salaries and third party costs. Initial capitalisation of costs is based on management's judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. ### 3.2 Sources of estimation uncertainty The following areas of estimation uncertainty are not presented to comply with the requirements of paragraph 125 of IAS 1, 'Presentation of Financial Statements' as it is not expected there is a significant risk of a material adjustment to the carrying amount of assets within the next financial year. They are presented as additional disclosure of estimates used in the accounts. #### Revenue cut-off The Group's management information systems are configured to recognise revenue upon dispatch of inventory from the Group's warehouses, which may not be aligned to when control has transferred to the customer. Management therefore performs an assessment to capture items that have been dispatched from the Group's warehouses but not yet delivered by the reporting date, subsequently deferring the recognition of revenue and associated cost of sales into the following period. This gives rise to deferred income, which is recognised as a contract liability and associated inventory in the consolidated statement of financial position. Management uses a fixed number of distributor platforms to establish the value of revenue to defer. Where this is not possible in good time, an estimate is made based on the last quarter's data. The shipment delay identified in the distributors tested is extrapolated to the remaining couriers. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Refund liability and right-of-return asset The refund liability that is recognised within the consolidated financial statements relates to the obligation to refund some or all of the consideration received from a customer. The liability is measured at the amount the Group ultimately expects it will have to return to the customer. The refund liability therefore requires management to estimate the amount expected to be returned to customers after the reporting date. The refund liability and associated right-of-return asset are estimated using historical rates of the level of refunds relative to revenue. | | 2024 | 2023 | | --- | --- | --- | | Revenue (£m) | 295.7 | 285.1 | | Refund liability (£m) | 0.8 | 0.9 | | Refund liability % average quarterly sales | 1.1% | 1.3% | | Right of return asset (£m) | 0.3 | 0.3 | | Right of return asset % average quarterly sales | 0.4% | 0.4% | The impact on profit before taxation ("PBT") of increasing the refund rate by 100% would be a reduction of £0.8m (2023: a reduction of £0.9m). # Warranty provision The Company provides for the cost expected to be incurred in order to replace damaged or faulty items that existed at the time of sale. The provision related to these assurance-type warranties is recognised when the product is sold. Initial recognition is based on historical experience. The warranty provision is estimated with reference to the historical level of credit notes raised relative to revenue. | | 2024 | 2023 | | --- | --- | --- | | Revenue for the period (£m) | 295.7 | 285.1 | | Warranty provision (£m) | 0.3 | 0.2 | | Warranty provision % average quarterly sales | 0.4% | 0.3% | The impact on PBT of increasing the warranty provision by 100% would be a reduction of £0.3m (2023: a reduction of £0.2m). # Capitalisation of salaries The Group capitalises salary costs for product development projects where employees have been working to enhance an asset. In determining the amounts to be capitalised, management assesses the proportion of time spent by employees on each project. # Inventory provision Management has evaluated the level of inventory held and the ageing of inventory in order to consider the need for a provision over stock to cover either slow-moving items, obsolete items or items which the Group may sell at lower than cost. Management does not believe it is necessary to hold an inventory provision based on this analysis, which is consistent with the estimate made in previous years. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 111 --- # Notes to the consolidated financial statements continued ## 4. Segmental information IFRS 8 'Operating Segments' requires the Group to determine its operating segments based on information that is provided internally. Based on the internal reporting information and management structures within the Group, it has been determined that there are two operating segments, Victorian Plumbing and Victoria Plum, as the two entities are clearly and separately reported on internally. There is also considered to be two reporting segments, Victorian Plumbing and Victoria Plum. The results of each operating segment are shown in the consolidated statement of comprehensive income to provide a LFL comparison, given the decision in August 2024 to close Victoria Plum and to redirect its website traffic from November 2024. Management has determined that there are two operating and reporting segments based on the reports reviewed by the ELT which is the chief operating decision-maker ("CODM"). The ELT is made up of the Executive Directors and Key Management and is responsible for the strategic decision-making of the Group. ## Adjusted EBITDA Operating costs, comprising administrative expenses, are managed on a Group basis. The ELT measures the overall performance of the Group by reference to adjusted EBITDA, a non-GAAP measure. This adjusted profit measure is applied by the ELT to understand the earnings trends of the Group and is considered an additional, useful measure under which to assess the true operating performance of the Group. The Directors believe that these items and adjusted measures of performance should be separately disclosed in order to assist in the understanding of financial performance achieved by the Group and for consistency with prior years. | | Victorian Plumbing £m | Victoria Plum £m | 2023 £m | 2023 £m | | --- | --- | --- | --- | --- | | Operating profit | 14.3 | (3.1) | 11.2 | 15.3 | | Amortisation of intangible assets | 3.1 | – | 3.1 | 2.3 | | Depreciation of property, plant and equipment | 0.5 | – | 0.5 | 0.6 | | Depreciation of right-of-use assets | 1.1 | – | 1.1 | 0.9 | | Share-based payments (including associated NI) | 3.1 | – | 3.1 | 3.9 | | | 22.1 | (3.1) | 19.0 | 23.0 | | Double running and non-recurring administrative expenses | 5.7 | – | 5.7 | 0.8 | | Impairment of right-of-use assets | 0.8 | – | 0.8 | – | | Closure costs: Victoria Plum | 0.2 | 0.9 | 1.1 | – | | Legal and professional fees associated with business combinations | 0.6 | – | 0.6 | – | | | 7.3 | 0.9 | 8.2 | 0.8 | | Adjusted EBITDA | 29.4 | (2.2) | 27.2 | 23.8 | 112 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Adjusted PBT The ELT also measures the overall performance of the Group by reference to adjusted PBT, a non-GAAP measure. This adjusted profit measure is applied by the ELT as an alternative profitability measure, which incorporates the capital investment and the financing structure of the Group. | | 2024 £m | 2023 £m | | --- | --- | --- | | Profit before tax | 9.0 | 15.6 | | Share-based payments (including associated NI) | 3.1 | 3.9 | | Double running and non-recurring administrative expenses | 5.7 | 0.8 | | Impairment of right-of-use assets | 0.8 | - | | Double running finance costs | 2.8 | - | | Closure costs: Victoria Plum | 1.1 | - | | Legal and professional fees associated with business combinations | 0.6 | - | | Adjusted PBT | 23.1 | 20.3 | | | 2024 £m | 2023 £m | | --- | --- | --- | | Adjusted EBITDA | 27.2 | 23.8 | | Amortisation of intangibles | (3.1) | (2.3) | | Depreciation of property, plant and equipment | (0.5) | (0.6) | | Depreciation of right-of-use assets | (1.1) | (0.9) | | Finance income | 1.0 | 0.6 | | Finance costs (not included within exceptional items) | (0.4) | (0.3) | | Adjusted PBT | 23.1 | 20.3 | # 5. Revenue An analysis of revenue by class of business is as follows: | | 2024 £m | 2023 £m | | --- | --- | --- | | Online | 294.3 | 283.6 | | Showroom | 1.4 | 1.5 | | | 295.7 | 285.1 | All revenue arose within the United Kingdom. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 113 --- # Notes to the consolidated financial statements continued ## 6. Operating profit Expenses by nature including exceptional items: | | 2024 £m | 2023 £m | | --- | --- | --- | | Employee costs (excluding share-based payments) | 23.0 | 18.4 | | Agency and contractor costs | 1.7 | 1.3 | | Share-based payments (including associated NI) | 3.1 | 3.9 | | Marketing costs | 85.4 | 79.2 | | Property costs | 4.8 | 6.3 | | Computer costs | 2.9 | 2.5 | | Depreciation of property, plant and equipment | 0.5 | 0.6 | | Depreciation of right-of-use assets | 3.3 | 0.9 | | Depreciation capitalised during the fit-out of the DC | (2.2) | – | | Amortisation of intangibles | 3.1 | 2.3 | | Exceptional items within administrative expenses | 8.2 | 0.8 | | Other costs | 2.8 | 3.1 | | Total administrative expenses | 136.6 | 119.3 | | Share-based payments (including associated NI) | (3.1) | (3.9) | | Exceptional items within administrative expenses | (8.2) | (0.8) | | Total administrative expenses before separately disclosed items | 125.3 | 114.6 | Services provided by the Company's auditor | | 2024 £m | 2023 £m | | --- | --- | --- | | Fees payable for the audit of the Company and consolidated financial statements | 0.1 | 0.1 | | Fees payable for the audit of the subsidiary undertakings | 0.2 | 0.1 | | | 0.3 | 0.2 | ## 7. Exceptional items ### a. By nature | | 2024 £m | 2023 £m | | --- | --- | --- | | Warehouse transformation costs: | | | | – Double running and non-recurring administrative expenses | 5.7 | 0.8 | | – Impairment of right-of-use assets | 0.8 | – | | Closure costs: Victoria Plum | 1.1 | – | | Professional fees associated with business combinations | 0.6 | – | | Exceptional items recognised within administrative expenses | 8.2 | 0.8 | | Warehouse transformation costs: | | | | – Double running finance costs | 2.8 | – | | Exceptional items recognised within finance costs | 2.8 | – | | Total exceptional items | 11.0 | 0.8 | 114 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ## b. By function | | 2024 £m | 2023 £m | | --- | --- | --- | | Warehouse transformation costs: | | | | - Double running and non-recurring administrative expenses | 5.7 | 0.8 | | - Impairment of right-of-use assets | 0.8 | - | | - Double running finance costs | 2.8 | - | | | 9.3 | 0.8 | | Acquisition and closure of Victoria Plum: | | | | - Closure costs: Victoria Plum | 1.1 | - | | - Legal and professional fees associated with business combinations | 0.6 | - | | | 1.7 | - | | Total exceptional items | 11.0 | 0.8 | ## Warehouse transformation On 4 October 2023, the Group entered into a 20-year lease agreement for a new DC in Leyland, Lancashire and commenced a period of fit-out ending in December 2024. In accordance with IFRS 16, a lease liability of £41.7m has been recognised, with a corresponding right-of-use asset recognised in non-current assets. For the duration of the fit-out, the new DC was not generating economic benefit for the Group. Therefore, operating expenditure incurred during the fit-out period, together with non-recurring transformation costs such as associated professional fees, totalling £5.7m (2023: £0.8m) have been recognised above as exceptional costs. During 2024, associated exceptional cash outflows of £2.5m (2023: £0.6m) have been incurred and recognised in the consolidated statement of cash flows in respect of these items. Certain right-of-use assets will not be in use following completion of the warehouse transformation project and will, accordingly, not generate any economic benefit for the group. An impairment expense of £0.8m (2023: £nil) has been recognised during the year. No associated cash flows have been recorded. The imputed interest recognised against IFRS 16 lease liabilities for property considered to be non-underlying during the fit-out period has been recognised as 'double running finance costs'. Associated cash outflows of £2.8m have been expended for double running finance costs during the period (2023: £nil). These costs are being treated as exceptional to enable better LFL comparison. ## Acquisition and closure of Victoria Plum On 17 May 2024, Victorian Plumbing Ltd, a subsidiary, acquired 100% of the share capital of Victoria Plum and, in August 2024, the decision was taken by the Group to cease trading Victoria Plum. The Victoria Plum website was redirected to Victorian Plumbing from November 2024. The legal and professional fees associated with the acquisition, and certain costs associated with the subsequent closure of that business, have been recognised as exceptional costs as they are non-recurring. During 2024, associated cash outflows of £0.8m (2023: £nil) have been incurred and recognised in the consolidated statement of cash flows in respect of these items. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 115 --- # Notes to the consolidated financial statements continued ## 7. Exceptional items continued ### c. Exceptional cash flows | | 2024 £m | 2023 £m | | --- | --- | --- | | Cash flows from operating activities | | | | Cash outflow from exceptional items: warehouse transformation costs | (2.5) | (0.6) | | Cash outflow from exceptional items: business combinations | (0.8) | – | | Cash flows from investing activities | | | | Purchase of intangible assets: exceptional | (0.3) | (0.2) | | Purchase of property, plant and equipment: exceptional | (20.8) | (1.8) | | Cash flows from financing activities | | | | Payment of interest portion of lease liabilities: double running finance costs | (2.7) | – | | Payment of principal portion of lease liabilities: double running finance costs | (0.1) | – | | Cash flows from exceptional items | (27.2) | (2.6) | ## 8. Employee costs Employee costs, excluding agency and contractors but including Directors’ remuneration, were as follows: | | 2024 £m | 2023 £m | | --- | --- | --- | | Wages and salaries | 20.5 | 16.6 | | Social security costs | 2.1 | 1.5 | | Cost of defined contribution scheme | 0.4 | 0.3 | | Share-based payments (including associated NI) | 3.1 | 3.9 | | | 26.1 | 22.3 | Employee costs presented above exclude costs capitalised as part of internal software development as disclosed in note 16. The Company capitalised salaries of £3.3m in the year ended 30 September 2024 (2023: £2.6m) for in-house development of computer software. The average monthly number of employees, including the Directors, during the year were as follows: | | 2024 Number | 2023 Number | | --- | --- | --- | | Warehouse | 425 | 371 | | Office and management | 302 | 241 | | | 727 | 612 | ## 9. Directors’ and Key Management remuneration The remuneration of Directors is disclosed in the Directors’ Remuneration Report on pages 80 to 86. ### Key Management compensation Key Management comprised the members of the ELT (who are defined in note 4) and the Non-Executive Directors. The remuneration of all Key Management (including all Directors) was as follows: | | 2024 £m | 2023 £m | | --- | --- | --- | | Short-term employee benefits | 1.7 | 1.8 | | Share-based payments | 1.8 | 2.5 | | | 3.5 | 4.3 | 116 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # 10. Finance (costs)/income | | 2024 £m | 2023 £m | | --- | --- | --- | | Interest received on cash deposits | 1.0 | 0.6 | | Interest on undrawn revolving credit facility | (0.1) | (0.1) | | Interest expense on lease liability | (3.1) | (0.2) | | Total finance (costs)/income | (2.2) | 0.3 | # 11. Income tax expense | | 2024 £m | 2023 £m | | --- | --- | --- | | Corporation tax | | | | Current tax on profits for the year | 0.4 | 3.8 | | Adjustments in respect of previous periods | 0.2 | (0.2) | | Total current tax | 0.6 | 3.6 | | Deferred tax | | | | Origination of temporary differences | 2.9 | - | | Adjustments in respect of previous periods | - | 0.2 | | Total deferred tax | 2.9 | 0.2 | | Taxation on profit | 3.5 | 3.8 | # Factors affecting tax charge for the year The tax assessed for the period is higher (2023: higher) than the standard rate of corporation tax in the UK of 25% (2023: 22%). The differences are explained below: | | 2024 £m | 2023 £m | | --- | --- | --- | | Profit on ordinary activities before tax | 9.0 | 15.6 | | Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 25% (2023: 22%) | 2.3 | 3.4 | | Effects of: | | | | Expenses not deductible for tax purposes | 0.4 | 0.1 | | Share options | 0.1 | 0.3 | | Adjustments in respect of previous periods | 0.2 | - | | Losses not recognised in the year | 0.5 | - | | Total tax charge for the year | 3.5 | 3.8 | Taxation on items taken directly to equity was £nil (2023: £0.1m credit) relating to tax on share-based payments. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Notes to the consolidated financial statements continued ## 12. Dividends paid and proposed | | 2024 Pence per share | 2023 Pence per share | 2024 £m | 2023 £m | | --- | --- | --- | --- | --- | | Final ordinary dividend recognised as distributions in the year | 0.95 | 1.10 | 3.1 | 3.6 | | Interim ordinary dividend recognised as distributions in the year | 0.52 | 0.45 | 1.7 | 1.5 | | Total ordinary dividend paid in the year | 1.47 | 1.55 | 4.8 | 5.1 | | Special dividend recognised as distributions in the year | - | 1.70 | - | 5.5 | | Total dividend paid in the year | 1.47 | 3.25 | 4.8 | 10.6 | | Interim ordinary dividend | 0.52 | 0.45 | 1.7 | 1.5 | | Final ordinary dividend | 1.09 | 0.95 | 3.5 | 3.1 | | Total ordinary dividend | 1.61 | 1.40 | 5.2 | 4.6 | | Special dividend | - | - | - | - | | Total dividend | 1.61 | 1.40 | 5.2 | 4.6 | In order to distribute a total ordinary dividend for the year of 1.61 pence per share (2023: 1.40 pence per share), which would represent growth of 15%, the Board is recommending a full year final ordinary dividend of 1.09 pence per share (2023: 0.95 pence per share). The Board is not recommending a special dividend (2023: nil pence per share) as it prioritises the preservation of cash following the fit-out of the new DC and the acquisition of Victoria Plum, without the need for indebtedness and to maintain the robustness of the balance sheet. This results in a total cash distribution to shareholders of £5.2m (£1.7m interim paid and £3.5m final to be paid), subject to shareholders’ approval at the AGM on 25 February 2025. The dividends will be paid on 7 March 2025 to shareholders on the register of members at the close of business on 7 February 2025. ## 13. Earnings per share ### Basic and diluted earnings per share Basic earnings per share (“EPS”) is calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the number of incremental ordinary shares, calculated using the treasury stock method, that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The following table reflects the income and share data used in the EPS calculations: | | Weighted average number of ordinary shares | Total earnings £m | Pence per share | | --- | --- | --- | --- | | Year ended 30 September 2024 | | | | | Basic EPS | 302,424,169 | 5.5 | 1.8 | | Diluted EPS | 327,498,168 | 5.5 | 1.7 | | Year ended 30 September 2023 | | | | | Basic EPS | 284,604,317 | 11.8 | 4.1 | | Diluted EPS | 317,483,119 | 11.8 | 3.7 | 118 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information The number of shares in issue at the start of the year is reconciled to the basic and diluted weighted average number of shares below: | | 2024 | 2023 | | --- | --- | --- | | Weighted average number of shares for basic EPS | 302,424,169 | 284,604,317 | | Dilutive impact of unvested shares in relation to share awards | 25,073,999 | 32,878,802 | | Weighted average number of shares for diluted EPS | 327,498,168 | 317,483,119 | The average market value of the Group's shares for the purposes of calculating the dilutive effect of share-based incentives was based on quoted market prices for the period during which the share-based incentives were outstanding. ## Adjusted diluted earnings per share Adjusted diluted EPS is an Alternative Performance Measure ("APM") and has been calculated using profit for the purpose of basic EPS, adjusted for total adjusting items and the tax effect of those items divided by the total issued share capital. | | 2024 £m | 2023 £m | | --- | --- | --- | | Profit for the year | 5.5 | 11.8 | | Exceptional items | 11.0 | 0.8 | | Share-based payments | 3.1 | 3.9 | | Tax effect | (2.3) | (1.1) | | Total adjusted profit for the year | 17.3 | 15.4 | | | Number | Number | | --- | --- | --- | | Total issued share capital for the purposes of adjusted diluted earnings per share | 326,334,279 | 325,227,984 | | Adjusted diluted earnings per share (pence) | 5.3 | 4.7 | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 119 --- # Notes to the consolidated financial statements continued ## 14. Business combinations ### Acquisition of AHK Designs Limited – May 2024 On 17 May 2024, Victorian Plumbing Ltd, a subsidiary, acquired the entire issued share capital of AHK Designs Limited trading as Victoria Plum ("Victoria Plum"). Victoria Plum was acquired for initial consideration of £22.5m, with £0.3m repaid by the seller through the completion accounts adjustment. | | £m | | --- | --- | | Purchase consideration: | | | Initial cash paid | 22.5 | | Final working capital adjustment | (0.3) | | Total consideration | 22.2 | The provisional fair value of assets and liabilities recognised as a result of this acquisition are as follows: | | £m | | --- | --- | | Tangible fixed assets | - | | Intangible fixed assets | - | | Inventory | 8.9 | | Cash | 3.1 | | Trade and other receivables | 1.1 | | Trade payables | (3.2) | | Other taxation and NI | (1.5) | | Corporation tax | (0.3) | | Other payables | (0.7) | | Accruals | (2.3) | | Contract liabilities | (1.7) | | Net identifiable assets acquired | 3.4 | | Goodwill | 18.8 | | Net assets acquired | 22.2 | The acquired business contributed revenues of £14.7m, an adjusted EBITDA loss of £2.2m and loss before tax of £3.1m to the Group for the period from the date of acquisition to 30 September 2024. The annual results of Victoria Plum have not been included as it would be impracticable to do so. ## 15. Goodwill | | £m | | --- | --- | | Cost | | | At 30 September 2023 | - | | Additions | 18.8 | | At 30 September 2024 | 18.8 | | Net book value | | | At 30 September 2023 | - | | At 30 September 2024 | 18.8 | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information During the period, the Group recognised goodwill upon the acquisition of Victoria Plum, which was subsequently closed and trading ceased post year end. The goodwill represents the removal of a nuisance factor, being the competing brand with a similar name. This goodwill is expected to generate benefit for the existing Victorian Plumbing Group and has therefore been allocated to the Victorian Plumbing Group cash generating unit ("CGU"). This balance has been reviewed for impairment on a value in use basis by performing a discounted cash flow ("DCF") exercise for the CGU. The key assumptions within the DCF include expected revenue growth (market share and average order value) and costs in accordance with the three-year Board approved budget, followed by a long-term growth rate of 2.4% into perpetuity and a pre-tax discount rate of 12%. Significant headroom was retained over the carrying value of the goodwill. The value in use calculation was not sensitive to reasonably possible changes in these key assumptions and the carrying value of goodwill is considered recoverable. ## 16. Intangible assets | | Computer software £m | Assets under construction £m | Total £m | | --- | --- | --- | --- | | Cost | | | | | At 30 September 2022 | 10.1 | - | 10.1 | | Additions | 2.8 | 0.2 | 3.0 | | At 30 September 2023 | 12.9 | 0.2 | 13.1 | | Additions | 2.9 | 0.9 | 3.8 | | At 30 September 2024 | 15.8 | 1.1 | 16.9 | | Accumulated amortisation | | | | | At 30 September 2022 | 6.8 | - | 6.8 | | Charge for the year | 2.3 | - | 2.3 | | At 30 September 2023 | 9.1 | - | 9.1 | | Charge for the year | 3.1 | - | 3.1 | | At 30 September 2024 | 12.2 | - | 12.2 | | Net book value | | | | | At 30 September 2022 | 3.3 | - | 3.3 | | At 30 September 2023 | 3.8 | 0.2 | 4.0 | | At 30 September 2024 | 3.6 | 1.1 | 4.7 | Assets under construction represent costs incurred in the development of internal management systems, that are not yet available for use in the manner intended by management. Computer software comprises both internal salaries and external development capitalised in relation to the Group's bespoke operational software. The Group capitalised internal salaries of £3.3 million in the year ended 30 September 2024 (2023: £2.6 million) for development of computer software. For the year to 30 September 2024, the amortisation charge of £3.1 million (2023: £2.3 million) has been charged to administrative expenses in the income statement. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 121 --- # Notes to the consolidated financial statements continued ## 17. Property, plant and equipment | | Leasehold improvements £m | Plant and machinery £m | Fixtures and fittings £m | Office equipment £m | Assets under construction £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | | Cost | | | | | | | | At 30 September 2022 | 0.1 | 1.4 | 0.8 | 1.5 | – | 3.8 | | Additions | – | – | – | 0.2 | 3.9 | 4.1 | | Disposals | – | (0.1) | (0.3) | (0.5) | – | (0.9) | | At 30 September 2023 | 0.1 | 1.3 | 0.5 | 1.2 | 3.9 | 7.0 | | Additions | – | – | – | – | 23.4 | 23.4 | | At 30 September 2024 | 0.1 | 1.3 | 0.5 | 1.2 | 27.3 | 30.4 | | Accumulated depreciation | | | | | | | | At 30 September 2022 | – | 0.8 | 0.7 | 0.9 | – | 2.4 | | Charge for the year | – | 0.2 | 0.1 | 0.3 | – | 0.6 | | Disposals | – | (0.1) | (0.3) | (0.5) | – | (0.9) | | At 30 September 2023 | – | 0.9 | 0.5 | 0.7 | – | 2.1 | | Charge for the year | 0.1 | 0.1 | – | 0.3 | – | 0.5 | | At 30 September 2024 | 0.1 | 1.0 | 0.5 | 1.0 | – | 2.6 | | Net book value | | | | | | | | At 30 September 2022 | 0.1 | 0.6 | 0.1 | 0.6 | – | 1.4 | | At 30 September 2023 | 0.1 | 0.4 | – | 0.5 | 3.9 | 4.9 | | At 30 September 2024 | – | 0.3 | – | 0.2 | 27.3 | 25.6 | Assets under construction wholly represent capital expenditure for the fit-out of the new DC. This project remained ongoing as at 30 September 2024 and was ready for use in the manner intended by management by the end of December 2024. 122 VICTORIAN PLUMBING-GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # 18. Right-of-use assets | | Right-of-use assets £m | | --- | --- | | Cost | | | At 30 September 2022 | 8.3 | | Modifications | 0.7 | | At 30 September 2023 | 9.0 | | Additions | 44.8 | | Modifications | 0.4 | | Disposals | (0.3) | | Impairment | (0.8) | | At 30 September 2024 | 53.1 | | Accumulated depreciation | | | At 30 September 2022 | 3.8 | | Charge for the year | 0.9 | | At 30 September 2023 | 4.7 | | Charge for the year | 3.3 | | Disposals | (0.3) | | At 30 September 2024 | 7.7 | | Net book value | | | At 30 September 2022 | 4.5 | | At 30 September 2023 | 4.3 | | At 30 September 2024 | 45.4 | On 1 October 2023, the Group entered into a 20-year lease agreement for the DC. An addition of £44.8m has been recognised as a right-of-use asset, in accordance with IFRS 16 'Leases', representing the discounted future cash flows under the contract including stamp duty paid and an asset retirement obligation. During the period, the Group renewed the lease on three of its properties that had expired; this represents a modification under IFRS 16. The right-of-use asset was increased by £0.4m to reflect the value of the asset after the modification and the corresponding lease liability increased by £0.4m. In accordance with IAS 16 'Property, Plant and Equipment', £2.2m of right-of-use-asset depreciation was recognised as an addition to assets under construction within property, plant and equipment. Certain right-of-use assets will not be in use following completion of the warehouse transformation project and will, accordingly, not generate any economic benefit for the Group. An impairment expense of £0.8m (2023: Enil) has been recognised during the year. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 123 --- # Notes to the consolidated financial statements continued ## 19. Inventories | | 2024 £m | 2023 £m | | --- | --- | --- | | Goods for resale | 43.6 | 34.1 | | Packaging | 0.1 | 0.1 | | | 43.7 | 34.2 | Inventories recognised in cost of sales as an expense in the year totalled £111.5m (2023: £122.6m). No impairment loss was recognised in cost of sales in the year (2023: £nil). The inventories provision at the year end totalled £nil (2023: £nil). ## 20. Trade and other receivables | | 2024 £m | 2023 £m | | --- | --- | --- | | Trade receivables | 3.8 | 2.2 | | Right-of-return asset | 0.3 | 0.3 | | Accrued income | 1.2 | 0.6 | | Prepayments | 1.6 | 0.9 | | Amounts in escrow | - | 0.8 | | | 6.9 | 4.8 | The Group provides against trade receivables using the forward-looking expected credit loss model under IFRS 9. An impairment analysis is performed at each reporting date. Trade receivables, accrued income, and other receivables expected credit losses have been reviewed by management and have been determined to have an immaterial impact on these balances. Accrued income relates to rebates earned but not yet received. ## 21. Trade and other payables | | 2024 £m | 2023 £m | | --- | --- | --- | | Trade payables | 24.7 | 23.9 | | Other taxation and NI | 8.8 | 7.4 | | Refund liability | 0.8 | 0.9 | | Other payables | 1.5 | 1.3 | | Accruals | 8.4 | 4.5 | | | 44.2 | 38.0 | ## 22. Contract liabilities | | 2024 £m | 2023 £m | | --- | --- | --- | | Opening balance | 5.4 | 7.1 | | Revenue recognised in the year that was included in contract liability balance at the beginning of the year | (5.4) | (7.1) | | Additional deferred revenue in the period | 9.5 | 5.4 | | Closing balance | 9.5 | 5.4 | Deferred revenue outstanding at each year end is expected to be recognised within revenue within six months from the reporting date. 124 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # 23. Lease liabilities | | Lease liability £m | | --- | --- | | At 30 September 2022 | 5.0 | | Modifications | 0.7 | | Finance costs | 0.2 | | Lease payment | (1.1) | | At 30 September 2023 | 4.8 | | Additions | 41.7 | | Modifications | 0.4 | | Finance costs (not included in exceptional items) | 0.2 | | Finance costs (included in exceptional items) | 2.8 | | Lease payment (not included in exceptional items) | (1.0) | | Lease payment (included in exceptional items) | (2.8) | | At 30 September 2024 | 46.1 | On 4 October 2023, the Group entered into a 20-year lease agreement for the DC and commenced a period of fit-out. In accordance with IFRS 16, a lease liability of £41.7m has been recognised, with a corresponding right-of-use asset recognised in non-current assets. During the period, the Group renewed the lease on three of its properties that had expired; this represents a modification under IFRS 16. The right-of-use asset was increased by £0.4 million to reflect the value of the asset after the modification and the corresponding lease liability increased by £0.4 million. The Group had total cash outflows for leases of £3.8m (2023: £1.1m). Lease liabilities as at 30 September were classified as follows: | | 2024 £m | 2023 £m | | --- | --- | --- | | Non-current | 43.0 | 3.8 | | Current | 3.1 | 1.0 | | Total | 46.1 | 4.8 | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 125 --- # Notes to the consolidated financial statements continued ## 24. Provisions | | 2024 £m | 2023 £m | | --- | --- | --- | | Current | | | | Warranty provision | 0.3 | 0.2 | | Victoria Plum closure costs | 0.7 | - | | | 1.0 | 0.2 | | Non-current | | | | Asset retirement obligations | 1.9 | - | | | 1.9 | - | | | 2.9 | 0.2 | On 30 September 2024, the decision was taken by the Group to cease trading Victoria Plum. Upon this decision to cease trading, the Group has recognised provisions that represent Victoria Plum's obligations for employee redundancy. ## 25. Borrowings | | 2024 £m | 2023 £m | | --- | --- | --- | | Amounts drawn under revolving credit facility | - | - | | Unamortised debt issue costs | (0.1) | (0.1) | | | (0.1) | (0.1) | At 30 September 2024, the £10 million revolving credit facility ("RCF") remained undrawn. On 18 December 2024 a new RCF agreement was secured for £30 million with a termination date of 17 December 2027. The facility is secured by a debenture dated 7 June 2021. Interest on the RCF is charged at SONIA plus a margin based on the consolidated leverage of the Group. A commitment fee of 40% of the margin applicable to the RCF is payable quarterly in arrears on unutilised amounts of the RCF. There is no requirement to settle all, or part, of the debt earlier than the termination date. Unamortised debt issue costs of £0.1 million (2023: £0.1 million) are included in prepayments (note 20). ## 26. Financial instruments | | 2024 £m | 2023 £m | | --- | --- | --- | | Financial assets | | | | Financial assets measured at amortised cost | 5.0 | 3.6 | | Financial assets at fair value through profit and loss | - | 0.4 | | Cash | 11.2 | 46.4 | | | 16.2 | 50.4 | | Financial liabilities | | | | Financial liabilities measured at amortised cost | 37.6 | 30.6 | | Financial assets at fair value through profit and loss | 0.5 | - | | Lease liabilities | 46.1 | 4.8 | | | 84.2 | 35.4 | Financial assets that are debt instruments measured at amortised cost comprise trade receivables, accrued income, other debtors excluding supplier deposits, and amounts held in escrow. Financial liabilities measured at amortised cost comprise trade payables, refund liability, other payables and accruals. 126 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information Financial assets measured at fair value through profit and loss comprise foreign exchange forward contracts. The Group uses foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods generally from one to six months. The Directors consider that the carrying amount of trade and other payables/trade receivables approximates to their fair value. ## Financial risk management ### Risk management The Group seeks to reduce exposures to capital risk, liquidity risk, credit risk, interest rate risk and foreign currency risk, to ensure liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group does not engage in speculative trading in financial instruments and transacts only in relation to underlying business requirements, and in line with Board approved policy. The Group's treasury policies and procedures are periodically reviewed. ### Capital management The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders through an appropriate balance of debt and equity funding, while maintaining a strong credit rating and sufficient headroom. The Group makes adjustments to its capital structure in light of changes to economic conditions and the Group's strategic objectives. The Group has not made any changes to its capital management strategy in the year. The RCF remains unutilised; consequently no covenant compliance requirements have been in place during the year. ### Interest rate risk The Group has no external debt and holds significant cash, therefore any fluctuation in interest rates gives rise to variable interest income. ### Credit risk Credit risk principally arises on trade receivables. In the vast majority of cases, the Group takes payment in advance of dispatch and therefore the Group is not exposed to significant credit risk. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above. ### Liquidity risk Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities that are settled by delivering cash. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The following table details the Group's remaining contractual maturity for its financial liabilities based on undiscounted contractual payments: | Financial liabilities at 30 September 2024 | Within a year £m | 1 to 5 years £m | Over 5 years £m | Total £m | | --- | --- | --- | --- | --- | | Trade payables | 24.7 | - | - | 24.7 | | Other creditors | 1.5 | - | - | 1.5 | | Lease liabilities | 3.1 | 14.7 | 64.9 | 82.7 | | | 29.3 | 14.7 | 64.9 | 108.9 | | Financial liabilities at 30 September 2023 | Within a year £m | 1 to 5 years £m | Over 5 years £m | Total £m | | --- | --- | --- | --- | --- | | Trade payables | 23.9 | - | - | 23.9 | | Other creditors | 1.3 | - | - | 1.3 | | Lease liabilities | 1.2 | 2.3 | 2.3 | 5.8 | | | 26.4 | 2.3 | 2.3 | 31.0 | Cash flow forecasting is performed on an ongoing basis by the Group's finance team. Rolling forecasts of the Group's liquidity requirements are monitored to ensure it has sufficient cash to meet operational needs. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 127 --- # Notes to the consolidated financial statements continued ## 26. Financial instruments continued ### Foreign exchange risk The Group makes a significant amount of purchases from overseas and therefore is subject to fluctuations in foreign currency exchange rates, most notably in the US dollar rate. The Group enters into forward contracts to mitigate a part of the foreign exchange risk, in line with Board approved policy. A 10% appreciation or depreciation of pound sterling against the US dollar would increase or (decrease) profit before tax based on the balances at the reporting date as follows: | | 2024 £m | 2023 £m | | --- | --- | --- | | Strengthens by 10% | (0.7) | (0.5) | | Weakens by 10% | 0.8 | 0.6 | ## 27. Reconciliation of movements in liabilities to cash flows from financing activities | | Lease liabilities £m | | --- | --- | | Balance as at 1 October 2023 | 4.8 | | Changes from financing cash flows | | | Payment of lease liabilities | (3.8) | | Total changes from financing cash flows | (3.8) | | Other changes – liability related | | | Finance cost (not included in exceptional items) | 0.2 | | Finance cost (included in exceptional items) | 2.8 | | Additions | 41.7 | | Modifications | 0.4 | | Total liability related other changes | 45.1 | | Balance as at 30 September 2024 | 46.1 | | | Lease liabilities £m | | --- | --- | | Balance as at 1 October 2022 | 5.0 | | Changes from financing cash flows | | | Payment of lease liabilities | (1.1) | | Total changes from financing cash flows | (1.1) | | Other changes – liability related | | | Finance cost | 0.2 | | Modifications | 0.7 | | Total liability related other changes | 0.9 | | Balance as at 30 September 2023 | 4.8 | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ## 28. Deferred taxation | | Accelerated capital allowances £m | Share-based payments £m | Other £m | Total £m | | --- | --- | --- | --- | --- | | Deferred taxation liabilities/(assets) | | | - | | | At 30 September 2022 | 0.3 | (0.2) | - | 0.1 | | Charged/(credited) to the statement of comprehensive income | (0.2) | 0.1 | (0.1) | (0.2) | | At 30 September 2023 | 0.1 | (0.1) | (0.1) | (0.1) | | Charged/(credited) to the statement of comprehensive income | 2.8 | - | 0.1 | 2.9 | | At 30 September 2024 | 2.9 | (0.1) | - | 2.8 | Victoria Plum has carried forward corporation losses of £4.4m, a deferred tax asset has not been recognised in relation to these losses as it is not expected that Victoria Plum will have future taxable profits to use these losses against. ## 29. Share capital | | 2024 £m | 2023 £m | | --- | --- | --- | | Allotted, called up and fully paid | | | | 326,334,279 ordinary shares of 0.1p (2023: 325,227,984 ordinary shares of 0.1p) | 0.3 | 0.3 | ## 30. Own shares held The Employee Share Option Trust purchases shares to fund the Share Incentive Plan. On 27 July 2024, the third anniversary of the Share Incentive Plan share award, the shares vested. At 30 September 2024, the trust held 472,248 (2023: 635,504) ordinary shares with a book value of £432 (2023: £636). The market value of these shares as at 30 September 2024 was £0.5 million (2023: £0.6 million). | | Number of shares | £ | | --- | --- | --- | | ESOT shares reserve | | | | Own shares held at 30 September 2023 | 635,504 | 635 | | Dividend shares transferred in | 3,725 | 4 | | Sale/transfers out | (166,981) | (167) | | Own shares held at 30 September 2024 | 472,248 | 472 | ## 31. Share-based payments The Group operates four share plans being a Share Incentive Plan ("SIP"), a Deferred Bonus Plan ("DBP"), a Long-Term Incentive Plan ("LTIP") and a Sharesave scheme ("SAYE"). In addition, both prior to and following Admission to AIM in June 2021, the Group awarded shares to the Chair and certain members of Key Management which had restrictions placed against them that bring the awards into the scope of IFRS 2. These schemes are referred to as the Management Incentive Plan ("MIP"), A ordinary shares and Restricted Share Awards ("RSAs"). All share-based incentives carry a service condition. Such conditions are not taken into account in the fair value of the service received. The fair value of services received in return for share-based incentives is measured by reference to the fair value of share-based incentives granted. A Black-Scholes pricing model has been used where appropriate to calculate the fair value of share-based incentives with market conditions. Sensitivity analysis has been performed in assessing the fair value of the share-based incentives. There are no changes to key assumptions that are considered by the Directors to be reasonably possible, which give rise to a material difference in the fair value of the share-based incentives. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 129 --- # Notes to the consolidated financial statements continued ## 31. Share-based payments continued The total charge in the year was £3.1 million (2023: £3.9 million) with a Company charge of £0.8 million (2023: £1.3 million). This included associated NI at 13.8% (2023: 13.8%), which management expected at the year end date to be the prevailing rate when the awards are exercised, and apprenticeship levy at 0.5%, based on the share price at the reporting date. | | 2024 £m | 2023 £m | | --- | --- | --- | | Share Incentive Plan | 0.2 | 0.3 | | Restricted Share Awards | 1.3 | 2.2 | | Deferred Bonus Plans | 0.8 | 0.7 | | Long Term Incentive Plans | 0.3 | 0.2 | | Sharesave schemes | 0.1 | 0.1 | | Total IFRS 2 charge | 2.7 | 3.5 | | NI and apprenticeship levy on applicable schemes | 0.4 | 0.4 | | Total charge | 3.1 | 3.9 | ## Share Incentive Plan The Group operates a SIP scheme that was made available to all eligible employees following Admission to AIM in June 2021. On 27 July 2021, all eligible employees were awarded free shares valued at £3,600 each based on the closing share price on 26 July 2021 of £2.67. A total of 635,504 shares were awarded under the scheme, subject to a three-year service period. On 27 July 2024, the third anniversary of the award, the shares vested for those employees that have remained in employment to this date. The SIP awards have been valued using the Black-Scholes model and the resulting share-based payments charge spread evenly over the vesting period. The SIP shareholders were entitled to dividends over the vesting period. No performance criteria were applied to the vesting of SIP shares. Fair value at the grant date was measured to be £2.67. | | 2024 number | 2023 number | | --- | --- | --- | | Outstanding at 1 October | 347,037 | 426,974 | | Sales / transfers out | (178,504) | – | | Dividend shares transferred in | 3,725 | 15,084 | | Forfeited | (44,484) | (95,021) | | Outstanding at 30 September | 127,774 | 347,037 | The total charge in the year, included in operating profit, in relation to these awards was £0.2 million (2023: £0.3 million). The Company charge for the year was £nil (2023: £nil). ## A ordinary shares On 15 April 2020 (the grant date), 845 A ordinary shares in VIPSO Ltd, the former ultimate parent company, were issued at a price of £0.10 per share which was the nominal value of the shares. Of the 845 shares issued, 800 of the A ordinary shares were issued to the existing shareholders by way of bonus issue so as not to dilute their existing holding. These 800 shares are considered outside the scope of IFRS 2, on the basis that these shareholders did not receive any additional value for their shares. The remaining 45 A ordinary shares were awarded to certain members of Key Management (together the "A ordinary shareholders"). In order to realise value from the shares awarded, a participant must remain employed until an 'Exit' event is achieved. The equity value on 'Exit' must also be in excess of the equity hurdle which has been set at £130 million. The 'Exit' requirement is a non-market performance vesting condition and the hurdle amount is considered to be a market-based performance condition. On 27 May 2021, the Group undertook a reorganisation, through which the A ordinary shareholders exchanged their shares for an equivalent value in Victorian Plumbing Group plc. After all of the steps relating to the reorganisation were executed, the A ordinary shareholders had exchanged their 45 A ordinary shares in VIPSO Ltd for 7,222,969 ordinary shares in Victorian Plumbing Group plc. The share-for-share exchange does not represent a modification of the award under IFRS 2 as the value of the award, and the related service and performance conditions, remained unchanged. 130 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information On 11 June 2021, the A ordinary shareholders entered into a deed, which became effective on Victorian Plumbing Group plc’s Admission to AIM, to modify the terms of the award. The performance condition was no longer relevant since an ‘Exit’ event had already occurred. The service condition for the A ordinary shareholders was modified so as to restrict the number of shares that vested on Admission. On 22 June 2021, Victorian Plumbing Group plc was admitted to AIM, which was an ‘Exit’ event under the terms of the award. On Admission, 1,059,369 shares vested. The deed agreed to by the A ordinary shareholders took effect. | | 2024 Number | 2023 Number | | --- | --- | --- | | Outstanding at 1 October | 4,930,880 | 5,547,240 | | Vested | (924,540) | (616,360) | | Outstanding and unvested at 30 September | 4,006,340 | 4,930,880 | The total charge in the year, included in operating profit, in relation to these awards was Enil (2023: Enil). The Company charge for the year was Enil (2023: Enil). The share awards outstanding at 30 September 2024 have a weighted average remaining vesting period of 1.4 years (2023: 2.1 years). ## Management Incentive Plan An Executive Director was awarded share options under the MIP prior to Admission. On 2 December 2020, VIPSO Ltd (the former ultimate parent company of the Group) awarded eight nil-cost ordinary share options and nine nil-cost A ordinary share options under the MIP. All of the options awarded were to vest on the earlier of an ‘Exit’ event or three years from the date of grant. Options would be forfeited if the employee left the Group before the options vested, unless under exceptional circumstances. On 27 May 2021, the Group undertook a reorganisation, through which the options granted under the MIP were converted to be options over ordinary shares and ordinary deferred shares in Victorian Plumbing Group plc. After all of the steps relating to the reorganisation were executed, the participant of the MIP had exchanged their eight ordinary shares and zero A ordinary shares in VIPSO Ltd for 3,219,948 ordinary share options in Victorian Plumbing Group plc. The exchange does not represent a modification of the award under IFRS 2 as the value of the award, and the related service and performance conditions, remained unchanged. On 11 June 2021, the MIP participant entered into a deed, which became effective on Victorian Plumbing Group plc’s Admission to AIM, to modify the terms of the award. All the options converted when the performance condition was satisfied (i.e., on Admission) resulting in the participant being awarded ordinary shares. However, 30% of the shares remained restricted and subject to a service condition (the “restricted shares”). The restricted shares were to be forfeited if the employee left the Group before the vesting date, unless under exceptional circumstances. On 22 June 2021, Victorian Plumbing Group plc was admitted to AIM, which was an ‘Exit’ event under the terms of the award. The deed agreed to by the MIP participants took effect. On Admission, the options converted to 3,219,948 ordinary shares and 2,253,964, or 70%, of those shares vested at an average price of £2.62. | | 2024 Number | 2023 Number | | --- | --- | --- | | Outstanding at 1 October | 386,394 | 676,189 | | Vested | (386,394) | (289,795) | | Outstanding and unvested at 30 September | – | 386,394 | The market value per ordinary share for the restricted shares awarded under the MIP that vested in the year was £0.92. The total charge in the year, included in operating profit, in relation to these awards was Enil (2023: Enil). The Company charge for the year was Enil (2023: Enil). ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 131 --- # Notes to the consolidated financial statements continued ## 31. Share-based payments continued ### Restricted Share Awards The Chair and certain members of Key Management have been granted RSAs. The RSAs do not have a performance condition attached to them but the extent to which they vest depends on a service condition being satisfied. The restricted shares are forfeited if the employee leaves the Group before the vesting date, unless under exceptional circumstances. | Grant date | Share price at grant date £ | Employee contribution per share | Vesting period (years) | Risk-free rate % | Dividend yield % | Non-vesting condition % | Fair value per restricted share | | --- | --- | --- | --- | --- | --- | --- | --- | | 22/06/2021 | 2.62 | £0.001 | 5.0 | - | - | - | 2.62 | | 22/06/2021 | 2.62 | £0.001 | 4.0 | - | - | - | 2.62 | | 05/09/2022 | 0.41 | nil | 2.0 | - | - | - | 0.48 | The number of restricted shares outstanding at 30 September 2024 was as follows: | | 2024 Number | 2023 Number | | --- | --- | --- | | Outstanding at 1 October | 2,276,004 | 3,043,547 | | Vested | (767,542) | (767,543) | | Outstanding and unvested at 30 September | 1,508,462 | 2,276,004 | The market values per ordinary share for restricted shares that vested in the year were £0.92 and £1.01. The RSAs outstanding at 30 September 2024 have a weighted average remaining vesting period of 1.2 years. The total charge in the year, included in operating profit, in relation to these awards was £1.3 million (2023: £2.2 million). The Company charge for the year was £0.5 million (2023: £0.9 million). ## Deferred Bonus Plan The Group operates a DBP for the ELT and certain key employees. It is both a cash bonus plan and a discretionary employee share plan under which a proportion of a participant's annual bonus is deferred into an award over shares. Awards under the plan are contingent on the satisfaction of pre-set internal targets relating to financial and operational objectives. An option will be granted following determination of performance against targets, with 40% of the award vesting immediately, 30% after one year and 30% after two years. Awards are potentially forfeitable during that period should the employee leave employment. During the year, the Group made awards over 2,998,636 ordinary shares under the DBP scheme, subject to the satisfaction of certain performance criteria to be determined by the Remuneration Committee. The fair value of the award was determined to be £0.89, being the average market value of a share on 30 September 2023 and 30 November 2023. | | 2024 Number | 2023 Number | | --- | --- | --- | | Outstanding at 1 October | 4,660,836 | 1,893,219 | | Options granted in the year | 2,998,636 | 4,418,641 | | Forfeited | (2,375,186) | (1,486,025) | | Vested | (990,228) | (164,999) | | Outstanding at 30 September | 4,294,058 | 4,660,836 | The total charge in the period, included in operating profit, in relation to these awards was £0.8 million (2023: £0.7 million). The Company charge for the period was £nil (2023: £nil). 132 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Long Term Incentive Plan The Group operates a LTIP for the Executive Directors. The extent to which awards vest will depend upon the satisfaction of the Group's financial and operational performance in the financial year of the award date. The 2022 LTIP awards are subject to performance conditions based on adjusted EPS (75% of award) and absolute Total Shareholder Return ("Absolute TSR") (25% of award). Awards vest three years after grant subject to EPS and Absolute TSR performance conditions, with a two-year post-vesting holding period applying. Performance conditions on this scheme have not been met and post year end the options lapsed. The 2023 and 2024 LTIP awards are subject to performance conditions based on adjusted EPS (100% of award). Awards vest three years after grant subject to EPS performance conditions, with a two-year post-vesting holding period applying. On 12 January 2024, the Group awarded 827,236 options under the LTIP scheme. The fair value for the EPS element of the award at £0.86 was based on the share price at the grant date. | | 2024 Number | 2023 Number | | --- | --- | --- | | Outstanding at 1 October | 1,118,497 | 323,472 | | Options granted in the year | 827,236 | 870,168 | | Options lapsed in the year | - | (75,143) | | Outstanding at 30 September | 1,945,733 | 1,118,497 | The total charge in the year, included in operating profit, in relation to these awards was £0.3 million (2023: £0.2 million). The Company charge for the period was £0.3 million (2023: £0.2 million). # Sharesave scheme The Group operates a SAYE scheme for all employees under which employees are granted an option to purchase ordinary shares in the Company at up to 20% less than the market price at invitation, in three years' time, dependent on their entering into a contract to make monthly contributions into a savings account over the relevant period. Options are granted and are linked to a savings contract with a term of three years. These funds are used to fund the option exercise. No performance criteria are applied to the exercise of Sharesave options. The assumptions used in the measurement of the fair value at grant date of the Sharesave plan are as follows: | Grant date | Share price at grant date £ | Exercise price £ | Expected volatility % | Option life years | Risk-free rate % | Dividend yield % | Non-vesting condition % | Fair value per option | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 30/03/2022 | 0.51 | 0.57 | 67 | 3.17 | 1.42 | 0 | 0 | 0.22 | | 30/03/2023 | 0.79 | 0.68 | 69 | 3.17 | 3.52 | 1.39 | 0 | 0.40 | | 30/03/2024 | 0.79 | 0.67 | 59 | 3.17 | 3.92 | 1.77 | 0 | 0.36 | Expected volatility is estimated by considering the historical 3.17 year volatility of the FTSE AIM retailers. | | 2024 Number of share options | 2023 Number of share options | | --- | --- | --- | | Outstanding at 1 October | 533,973 | 443,747 | | Options granted in the year | 194,042 | 211,539 | | Options lapsed in the year | (131,534) | (121,313) | | Outstanding at 30 September | 596,481 | 533,973 | | Exercisable at 30 September | - | - | The total charge in the year, included in operating profit, in relation to these awards was £0.1 million (2023: £0.1 million). The Company charge for the period was £nil (2023: £nil). ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 133 --- # Notes to the consolidated financial statements continued ## 32. Cash generated from operating activities | Cash flows from operating activities | 2024 £m | 2023 £m | | --- | --- | --- | | Profit before taxation for the financial year | 9.0 | 15.6 | | Adjustments for: | | | | Amortisation of intangible assets | 3.1 | 2.3 | | Depreciation of property, plant and equipment | 0.5 | 0.6 | | Depreciation of right-of-use assets | 3.3 | 0.9 | | Depreciation capitalised during the fit-out of the DC | (2.2) | – | | Share-based payments (including associated NI) | 3.1 | 3.9 | | Finance income | (1.0) | (0.6) | | Finance costs (excluding exceptional items) | 0.4 | 0.3 | | Exceptional items recognised within finance costs | 2.8 | – | | Exceptional items recognised within administrative expenses | 8.2 | 0.8 | | Adjusted EBITDA | 27.2 | 23.8 | | Fair value loss on financial derivatives | 0.9 | 0.3 | | Increase in inventories | (0.5) | (0.3) | | Increase in receivables | (1.1) | (0.3) | | Decrease in payables | (4.1) | (3.7) | | Cash generated from operating activities before exceptional items | 22.4 | 19.8 | | Free cash flows (non-GAAP measure) | 2024 £m | 2023 £m | | --- | --- | --- | | Cash generated from operating activities before exceptional items | 22.4 | 19.8 | | Repayment of lease liabilities (excluding exceptional items) | (1.3) | (1.1) | | Purchase of intangible assets (excluding exceptional items) | (3.5) | (2.8) | | Purchase of property, plant and equipment (excluding exceptional items) | (0.2) | (0.2) | | VAT not yet recovered on exceptional items | 1.2 | 0.4 | | Free cash flows | 18.6 | 16.1 | | Adjusted EBITDA | 27.2 | 23.8 | | Operating cash conversion | 68% | 68% | VAT not yet recovered on assets under construction relates to timing differences on warehouse transformation expenditure. ## 33. Pension commitments The Group operates a defined contribution scheme for its employees. The assets of the scheme are held separately from the Group in an independently administered scheme. The pension cost represents contributions payable by the Group to the fund totalling £0.4 million (2023: £0.3 million). Included within creditors is £0.2 million of contributions payable to the fund at 30 September 2024 (2022: £0.1 million). ## 34. Related party transactions Radcliffe Property Management Limited (“RPM”) is considered a related party as this is a company which has a common director. The following amounts show arm’s length transactions and balances with RPM: | | 2024 £m | 2023 £m | | --- | --- | --- | | Amounts owed by the Company to RPM | 0.3 | 0.1 | | Lease payments made by the Company | 0.7 | 0.6 | 134 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information Amounts outstanding with RPM at each reporting date are interest free, unsecured and repayable on demand. The Company has not recognised a provision for expected credit losses in respect of the amounts owed to the Company from related parties, nor have any balances been written off. During the year, the Company agreed to lease additional property owned by Mark Radcliffe on an arm's length basis. The value of these transactions was <£0.1m in 2024 (2023: <£0.1m). Other transactions with related parties are as follows: | | 2024 £m | 2023 £m | | --- | --- | --- | | Dividends paid by the Group to: | | | | M Radcliffe | 2.3 | 5.0 | | N Radcliffe | 0.5 | 1.0 | | C Radcliffe | 0.1 | 0.3 | | Other Key Management personnel | 0.1 | 0.1 | ## 35. Subsidiaries At 30 September 2024, the subsidiaries of the Group are as follows: | Subsidiary undertakings | Country of incorporation | Principal activity | Class of shares held | Percentage owned by the parent | Percentage owned by the Group | | --- | --- | --- | --- | --- | --- | | VIPSO Ltd | England and Wales | Holding company | Ordinary, A ordinary | 100% | 100% | | Victorian Plumbing Ltd | England and Wales | Online retailing of bathroom furniture and accessories | Ordinary | – | 100% | | VIPSO Trading Ltd | England and Wales | Dormant | Ordinary | – | 100% | | AHK Designs Ltd | England and Wales | Online retailing of bathroom furniture and accessories | Ordinary | – | 100% | The registered office of all subsidiaries is 1 Sustainability Way, Farington Moss, Leyland, United Kingdom, PR26 6TB. ## 36. Guarantees On 18 December 2024, the Group entered into a new three-year RCF with HSBC, replacing the £10m RCF which was due to expire in December 2025. The new RCF has total commitments of £30 million. The Group has provided a cross-guarantee by way of a debenture dated 7 June 2021 as security for the facility. ## 37. Events after the reporting period In August 2024, the decision was taken by the Group for Victoria Plum to cease trading and from November 2024, the Victoria Plum website was redirected to Victorian Plumbing. Victoria Plum will be treated as a discontinued operation in accordance with IFRS 5 'Non-current assets held for sale and discontinued operations' in the financial year ending 30 September 2025. On 18 December 2024, the Group entered into a new three-year RCF with HSBC, replacing the £10m RCF which was due to expire in December 2025. The new RCF has total commitments of £30 million. The Group has provided a cross-guarantee by way of a debenture dated 7 June 2021 as security for the facility. The RCF remains undrawn at the date of this report. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 135 --- # Company balance sheet at 30 September 2024 | | Note | 2024 £m | 2023 £m | | --- | --- | --- | --- | | Fixed assets | | | | | Investments | 5 | 328.1 | 326.2 | | Deferred tax asset | 9 | 0.3 | 0.2 | | | | 328.4 | 326.4 | | Current assets | | | | | Debtors | 6 | 0.8 | 1.0 | | Cash and cash equivalents | | - | 0.1 | | | | 0.8 | 1.1 | | Total assets | | 329.2 | 327.5 | | Creditors: amounts falling due within one year | 7 | (1.0) | (1.0) | | Net current assets | | (0.2) | 0.1 | | Net assets | | 328.2 | 326.5 | | Capital and reserves | | | | | Called-up share capital | 10 | 0.3 | 0.3 | | Share premium | | 11.2 | 11.2 | | Capital redemption reserve | | 0.1 | 0.1 | | Retained earnings | | 316.6 | 314.9 | | Total equity | | 328.2 | 326.5 | As permitted by Section 408 of the Companies Act 2006, an entity profit and loss account is not included as part of the published consolidated financial statements of Victorian Plumbing Group plc. The profit for the financial period dealt with in the financial statements of the parent company was £3.7 million (2023: £4.9 million). The financial statements were approved by the Board of Directors on 14 January 2025 and authorised for issue. Daniel Barton Chief Financial Officer Victorian Plumbing Group plc Registered number: 13379554 ![img-118.jpeg](img-118.jpeg) VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Company statement of changes in equity for the period ended 30 September 2024 | | Note | Share capital £m | Share premium £m | Capital redemption reserve £m | Retained earnings £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | | At 1 October 2022 | | 0.3 | 11.2 | 0.1 | 317.0 | 328.6 | | Comprehensive income | | | | | | | | Profit for the period | | - | - | - | 4.9 | 4.9 | | Transactions with owners | | | | | | | | Share-based payments | | - | - | - | 3.5 | 3.5 | | Tax impact of employee share schemes | | - | - | - | 0.1 | 0.1 | | Dividends paid | | - | - | - | (10.6) | (10.6) | | Total transactions with owners recognised directly in equity | | - | - | - | (7.0) | (7.0) | | At 30 September 2023 | | 0.3 | 11.2 | 0.1 | 314.9 | 326.5 | | Comprehensive income | | | | | | | | Profit for the period | | - | - | - | 3.7 | 3.7 | | Transactions with owners | | | | | | | | Dividends paid | | - | - | - | (4.8) | (4.8) | | Share-based payments | | - | - | - | 2.8 | 2.8 | | Total transactions with owners recognised directly in equity | | - | - | - | (2.0) | (2.0) | | At 30 September 2024 | | 0.3 | 11.2 | 0.1 | 316.6 | 328.2 | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 137 --- # Notes to the Company financial statements ## 1. General information Victorian Plumbing Group plc is a public limited company, which is listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The address of the registered office is 1 Sustainability Way, Farington Moss, Leyland, England, PR26 6TB. ## 2. Accounting policies The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied throughout the period. ### 2.1 Basis of preparation of financial statements The Company financial statements of Victorian Plumbing Group plc have been prepared in compliance with United Kingdom Accounting Standards, including FRS 102 and the Companies Act 2006. The Company financial statements have been prepared under the historical cost convention, modified for the revaluation of certain financial instruments. The Company financial statements have been prepared in sterling (£), which is the functional and presentational currency of the Company, and have been rounded to the nearest hundred thousand (£0.1 million) except where otherwise indicated. As permitted by Section 408 of the Companies Act 2006, an entity profit and loss account is not included as part of the published consolidated financial statements of Victorian Plumbing Group plc. The profit for the financial period dealt with in the financial statements of the parent company was £3.7m (2023: £4.9m). As the Company is included in the consolidated financial statements and is considered to be a qualifying entity under FRS 102 paragraphs 1.8 to 1.12, the following exemptions have been applied: - no separate parent company cash flow statement with related notes have been included; - no share-based payment disclosures have been made; - no financial instruments have been disclosed; and - Key Management personnel compensation has not been included a second time. Amounts paid to the Company's auditor in respect of the statutory audit were £50,000 (2023: £50,000). The charge was borne by Victorian Plumbing Limited, a subsidiary company, and not recharged. ### 2.2 Going concern The Directors have used the going concern principle on the basis that the current profitable financial projections and facilities of the consolidated Group will continue in operation up to 28 February 2026. Further details can be found within note 1 to the consolidated financial statements. ### 2.3 Investments Investments in subsidiaries are held at cost, less any provision for impairment. Annually, the Directors consider whether any events or circumstances have occurred that could indicate that the carrying amount of fixed asset investments may not be recoverable. If such circumstances do exist, a full impairment review is undertaken to establish whether the carrying amount exceeds the higher of net realisable value or value in use. If this is the case, an impairment charge is recorded to reduce the carrying value of the related investment. Where equity-settled share-based payments are granted to the employees of subsidiary companies, the fair value of the award is treated as a capital contribution by the Company and the investment in subsidiaries is adjusted to reflect this capital contribution. ### 2.4 Share premium The amount subscribed for the ordinary shares in excess of the nominal value of these new shares is recorded in share premium. Costs that directly relate to the issue of ordinary shares are deducted from share premium net of corporation tax. ### 2.5 Shares held by the Employee Share Option Trust Shares in the Company held by the ESOT are included in the balance sheet at cost as a deduction from equity. VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ## 2.6 Current and deferred taxation UK corporation tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred on the balance sheet date. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all evidence available, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried-forward tax losses and from which the future reversal of underlying timing differences can be deducted. Deferred tax is measured at the average rates that are expected to apply in the periods in which the timing differences are expected to reverse based on the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on an undiscounted basis. ## 2.7 Financial instruments The Company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments. ### a) Financial assets Basic financial assets, including trade and other receivables and cash and bank balances, are initially recognised at transaction price (unless the arrangement constitutes a financing transaction) and are subsequently carried at amortised cost using the effective interest method. Financial assets that constitute a financing transaction are measured at the present value of the future receipts discounted at a market rate of interest. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment. At the end of each reporting period, financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset's original effective interest rate. The impairment loss is recognised in profit or loss. If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss. Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party, or (c) despite having retained some significant risks and rewards of ownership, control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions. ### b) Financial liabilities Basic financial liabilities, including trade and other payables, bank loans and loans from fellow Group companies are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method. ## 2.8 Dividends The Company recognises a liability to pay a dividend when the distribution is authorised and the distribution is no longer at the discretion of the Company. In accordance with UK company law, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 139 --- # Notes to the Company financial statements continued ## 2.9 Pensions ### Defined contribution pension plan Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. ## 3. Judgements in applying accounting policies and key sources of estimation uncertainty The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. There are no areas in the Company financial statements involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements. ## 4. Directors' remuneration The Company has no employees other than the Directors. Full details of the Directors' remuneration and interests are set out in the Directors' Remuneration Report on pages 80 to 86. ## 5. Investments | | 2024 £m | 2023 £m | | --- | --- | --- | | At beginning of the period | 326.2 | 323.9 | | Additions | 1.9 | 2.3 | | At 30 September 2024 | 328.1 | 326.2 | Subsidiary undertakings are disclosed within note 33 to the consolidated financial statements. The annual impairment review concluded that no impairment was required as the market capitalisation of the Group exceeded the carrying value of investments. ## 6. Debtors | | 2024 £m | 2023 £m | | --- | --- | --- | | Amounts owed by Group undertakings | 0.8 | 1.0 | | | 0.8 | 1.0 | Amounts owed by Group undertakings are non-interest-bearing, unsecured and have no fixed date of repayment. ## 7. Creditors: amounts falling due within one year | | 2024 £m | 2023 £m | | --- | --- | --- | | Trade payables | 0.1 | 0.1 | | Other taxation and social security | 0.2 | 0.2 | | Accruals | 0.6 | 0.7 | | Corporation tax payable | 0.1 | - | | | 1.0 | 1.0 | 140 VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information ## 8. Financial instruments | | 2024 £m | 2023 £m | | --- | --- | --- | | Financial assets | | | | Financial assets measured at amortised cost | 0.8 | 1.0 | | Financial liabilities | | | | Financial liabilities measured at amortised cost | 0.7 | 0.8 | Financial assets that are debt instruments measured at amortised cost comprise amounts owed by Group undertakings. Financial liabilities measured at amortised cost comprise trade payables, refund liability, other payables and accruals. The Directors consider that the carrying amount of trade and other payables/trade receivables approximates to their fair value. ## 9. Deferred taxation | | 2024 £m | 2023 £m | | --- | --- | --- | | Deferred taxation assets | | | | At beginning of the period | 0.2 | 0.1 | | Credited to the statement of comprehensive income | 0.1 | 0.1 | | Total deferred taxation asset | 0.3 | 0.2 | ## 10. Share capital | | 2024 £m | 2023 £m | | --- | --- | --- | | Allotted, called up and fully paid | | | | 326,334,279 ordinary shares of 0.1p (2023: 325,227,984 ordinary shares of 0.1p) | 0.3 | 0.3 | ## 11. Own shares held | | Number of shares | £ | | --- | --- | --- | | ESOT shares reserve | | | | Own shares held at 30 September 2023 | 635,504 | 635 | | Dividend shares transferred in | 3,725 | 4 | | Sale/transfers out | (166,981) | (167) | | Own shares held at 30 September 2024 | 472,248 | 472 | ## 12. Share-based payments For details of the Company's share-based payments during the period, see note 31 of the consolidated financial statements. ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 141 --- # Notes to the Company financial statements continued ## 13. Pension commitments The Company operates a defined contribution scheme for its employees. The assets of the scheme are held separately from the Company in an independently administered scheme. The pension cost represents contributions payable by the Company to the fund totalling £18,064 (2023: £12,750). Outstanding contributions payable to the fund at 30 September 2024 were £8,517 (2023: £2,450). ## 14. Related parties During the period, a management charge of £2.0 million (2023: £2.5 million) was raised to Victorian Plumbing Limited in respect of services rendered. At the period end, balances outstanding with Group undertakings were £0.8 million and £nil (2023: £1.0 million and £nil), respectively, for debtors and creditors, as set out in notes 6 and 7. 142 . VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information # Unaudited five-year record | | Absolute | | | | | Year on year | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2020 | 2021 | 2022 | 2023 | 2024 | 2021 | 2022 | 2023 | 2024 | | Income statement | | | | | | | | | | | Revenue | 208.7 | 268.8 | 269.4 | 285.1 | 295.7 | 29% | -% | 6% | 4% | | Cost of sales | (116.7) | (138.3) | (148.4) | (150.5) | (147.9) | (19%) | (7%) | (1%) | (2%) | | Gross profit | 92.0 | 130.5 | 121.0 | 134.6 | 147.8 | 42% | (7%) | 11% | 10% | | Underlying operating costs | (66.0) | (90.4) | (101.5) | (110.8) | (120.6) | (37%) | (12%) | (9%) | (9%) | | Other operating income | 0.2 | - | - | - | - | (100%) | N/A | N/A | N/A | | Adjusted EBITDA | 26.2 | 40.1 | 19.5 | 23.8 | 27.2 | 53% | (51%) | 22% | 14% | | Depreciation and amortisation | (2.2) | (3.0) | (3.5) | (3.8) | (4.7) | (36%) | (17%) | (9%) | (24%) | | Share-based payments | - | (7.7) | (3.9) | (3.9) | (3.1) | N/A | 49% | -% | 20% | | Exceptional items recognised in administrative expenses | - | (9.4) | - | (0.8) | (8.2) | N/A | 100% | (100%) | N/A | | Operating profit | 24.0 | 20.0 | 12.1 | 15.3 | 11.2 | (17%) | (40%) | 26% | (27%) | | Finance income | - | - | - | 0.6 | 1.0 | - | - | - | 60% | | Finance costs | (0.3) | (0.3) | (0.3) | (0.3) | (0.4) | - | - | 200% | (33%) | | Exceptional items recognised in Finance costs | - | - | - | - | (2.8) | N/A | N/A | N/A | N/A | | Profit before tax | 23.7 | 19.7 | 11.8 | 15.6 | 9.0 | (17%) | (40%) | 32% | (42%) | | Taxation | (4.0) | (5.4) | (2.6) | (3.8) | (3.5) | (35%) | (52%) | (46%) | 8% | | Profit after tax | 19.7 | 14.3 | 9.2 | 11.8 | 5.5 | (27%) | (36%) | 28% | (57%) | | Adjusted EPS | 7.4 | 11.0 | 4.5 | 4.7 | 5.5 | 49% | (59%) | 20% | 17% | | Adjusted profit before tax | 23.7 | 36.8 | 15.7 | 20.3 | 23.1 | 55% | (57%) | 29% | 14% | | Adjusted profit before tax % | 11% | 14% | 6% | 7% | 8% | 3ppts | (8ppts) | 1ppt | 1ppt | | Adjusted profit after tax | 19.7 | 29.5 | 12.4 | 15.4 | 17.3 | 59% | (58%) | 26% | 5% | Margin | Gross profit margin | 44% | 49% | 45% | 47% | 50% | 4ppts | (4ppts) | 2ppts | 3ppts | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Adjusted EBITDA margin | 13% | 15% | 7% | 8% | 9% | 2ppts | (8ppts) | 1ppt | 1ppt | Cash flow | Cash | 10.5 | 32.7 | 45.5 | 46.4 | 11.2 | +22.2 | +12.8 | +0.9 | (35.2) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Free cash flows | 27.6 | 32.6 | 14.3 | 16.1 | 18.6 | 18% | (56%) | 13% | 22% | | Operating cash conversion (%) | 105% | 81% | 73% | 68% | 68% | (24ppts) | (8ppts) | (5ppts) | - | KPIs | Total orders ('000) | 776 | 906 | 880 | 932 | 1,022 | 17% | (3%) | 6% | 9% | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Average order value (£) | 269 | 297 | 306 | 306 | 290 | 10% | 3% | -% | (5%) | | Marketing as % of revenue | 25% | 26% | 28% | 28% | 27% | 1ppt | (2ppts) | -ppts | (1ppt) | | Net (liabilities)/assets | 13.0 | 30.8 | 44.0 | 48.8 | 49.3 | +17.8 | +13.2 | +4.8 | +0.5 | | Dividend per share – ordinary | N/A | N/A | 1.1p | 1.4p | 1.6p | N/A | N/A | 27% | 15% | | Dividend per share – special | N/A | N/A | 1.7p | N/A | N/A | N/A | N/A | (100%) | N/A | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 --- # Glossary – Alternative Performance Measures In accordance with the Guidelines on APMs issued by the European Securities and Markets Authority ("ESMA"), the Directors have adopted various APMs to provide the Group's stakeholders with additional information on the performance of the business. These measures are not defined by IFRS and therefore may not be directly comparable with other companies' APMs, and they are not intended to be a substitute for, or superior to, IFRS measures. The Group's APMs are consistent with those used internally and are used to enhance the comparability of information between reporting periods by adjusting for non-underlying items, to aid understanding of the Group's performance. The key APMs used by the Group are as follows: | APM | Definition | Reconciliation | | | | --- | --- | --- | --- | --- | | Adjusted basic earnings per share ("EPS") | Adjusted basic earnings per share is defined as adjusted profit after tax divided by the weighted average number of shares in issue. | | 2024 | 2023 | | | | Profit after tax (£m) | 5.5 | 11.8 | | | Adjusted profit after tax is defined as net income before exceptional items and IFRS 2 share-based payments, and after adjusting for the tax impact of those items. | Exceptional items (£m) | 11.0 | 0.8 | | | | Share-based payments (£m) | 3.1 | 3.9 | | | | Tax effect (£m) | (2.3) | (1.1) | | | | Total adjusted profit for the year (£m) | 17.3 | 15.4 | | | | Weighted average issued share capital | 302,424,169 | 284,604,317 | | | | Adjusted basic EPS | 5.9 | 5.4 | | Adjusted diluted EPS | Adjusted diluted earnings per share is defined as adjusted profit after tax divided by the total issued share capital. Adjusted profit after tax is defined as net income before exceptional items and IFRS 2 share-based payment, and after adjusting for the tax impact of those items. | | 2024 | 2023 | | | | Total adjusted profit for the year (£m) | 17.3 | 15.4 | | | | Issued share capital | 326,334,279 | 325,227,984 | | | | Adjusted diluted EPS | 5.3 | 4.7 | | Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA") | Adjusted EBITDA is defined as operating profit before depreciation, amortisation, exceptional items and IFRS 2 share-based payments. | | 2024 £m | 2023 £m | | | | Operating profit | 11.2 | 15.3 | | | | Depreciation | 1.6 | 1.5 | | | | Amortisation | 3.1 | 2.3 | | | | Exceptional items | 8.2 | 0.8 | | | | Share-based payments | 3.1 | 3.9 | | | | Adjusted EBITDA | 27.2 | 23.8 | | Adjusted EBITDA margin | Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue. | | 2024 | 2023 | | | | Revenue (£m) | 295.7 | 285.1 | | | | Adjusted EBITDA (£m) | 27.2 | 23.8 | | | | Adjusted EBITDA margin | 9% | 8% | | Adjusted operating profit | Adjusted operating profit is defined as operating profit before exceptional items and IFRS 2 share-based payments. | | 2024 £m | 2023 £m | | | | Operating profit | 11.2 | 15.3 | | | | Exceptional items | 8.2 | 0.8 | | | | Share-based payments | 3.1 | 3.9 | | | | Adjusted operating profit | 22.5 | 20.0 | | Adjusted profit before tax | Adjusted profit before tax is defined as adjusted EBITDA less finance income/(cost), depreciation and amortisation. | | 2024 £m | 2023 £m | | | | Adjusted EBITDA | 27.2 | 23.8 | | | | Finance income/(cost) | 0.6 | 0.3 | | | | Depreciation | (1.6) | (1.5) | | | | Amortisation | (3.1) | (2.3) | | | | Adjusted profit before tax | 23.1 | 20.3 | VICTORIAN PLUMBING GROUP PLC --- Strategic Report Corporate Governance Financial Statements Additional Information | Average order value | Average order value is defined as revenue divided by total orders in the period. | | 2024 | 2023 | | --- | --- | --- | --- | --- | | | | Revenue (£m) | 295.7 | 285.1 | | | | Total orders ('000) | 1,022 | 932 | | | | Average order value (£) | 290 | 306 | | Adjusted PBT margin | Adjusted PBT margin is defined as adjusted PBT as a percentage of revenue. | | 2024 | 2023 | | | | Revenue (£m) | 295.7 | 285.1 | | | | Adjusted PBT | 23.1 | 20.3 | | | | Adjusted PBT margin | 8% | 7% | | Exceptional items | Exceptional items are defined as those that are one-off in nature or non-operating and need to be disclosed separately by virtue of their size or incidence. They may include, but are not limited to, restructuring costs, acquisition-related costs, costs of implementing new systems, impairment of assets and income from legal or insurance settlements. | | 2024 £m | 2023 £m | | | | Exceptional items | 11.0 | 0.8 | | Free cash flow | Free cash flow is cash generated from operating activities before exceptional items and taxation, less routine capital expenditure and cash flows relating to leases. | | 2024 £m | 2023 £m | | | | Cash generated from operating activities | 22.4 | 19.8 | | | | Repayment of lease liabilities | (1.3) | (1.1) | | | | Purchase of intangible assets (non-exceptional) | (3.5) | (2.8) | | | | Purchase of property, plant and equipment (non-exceptional) | (0.2) | (0.2) | | | | VAT not recovered on exceptional spend | 1.2 | 0.4 | | | | Free cash flow | 18.6 | 16.1 | | Gross profit margin | Gross profit margin is defined as gross profit as a percentage of revenue. | | 2024 | 2023 | | | | Revenue (£m) | 295.7 | 285.1 | | | | Gross profit | 147.8 | 134.6 | | | | Gross profit margin | 50% | 47% | | Operating cash conversion % | Operating cash conversion % is defined as cash generated from operating activities before exceptional items and taxation, less non-exceptional capital expenditure and cash flows relating to leases ("free cash flow"), as a percentage of adjusted EBITDA. | | 2024 £m | 2023 £m | | | | Free cash flow | 18.6 | 16.1 | | | | Adjusted EBITDA | 27.2 | 23.8 | | | | Cash conversion | 68% | 68% | | Separately disclosed items | Significant items of income and expense that do not relate to the trading of the Group are disclosed separately. Examples of such items are exceptional items and share-based payment charges. | | 2024 £m | 2023 £m | | | | Separately disclosed items: | | | | | | Share-based payments | 3.1 | 3.9 | | | | Exceptional items | 11.0 | 0.8 | | Underlying costs | Underlying costs are defined as administrative expenses before depreciation and amortisation, exceptional items and share-based payments. | | 2024 £m | 2023 £m | | | | Marketing | 85.4 | 79.2 | | | | People costs excl share-based payments | 24.7 | 19.7 | | | | Property costs | 4.8 | 6.3 | | | | Other overheads | 5.7 | 5.6 | | | | Underlying costs | 120.6 | 110.8 | ANNUAL REPORT AND FINANCIAL STATEMENTS 2024 145 --- # Advisers ## Registered office and headquarters 1 Sustainability Way Farington Moss Leyland PR26 6TB Web: www.victorianplumbingplc.com Consumer site: www.victorianplumbing.co.uk Investor relations: ir@victorianplumbing.co.uk ## Shareholder enquiries Our registrars will be pleased to deal with any questions regarding your shareholdings. ## Registrar - Equiniti Limited - Aspect House - Spencer Road - Lancing - West Sussex - BN99 6DA Tel: 0371 384 2030 (Overseas +44 371 384 2030) Lines open 8:30am to 5:30pm Mon-Fri, excluding public holidays in England and Wales. Email: customer@equiniti.com ## Joint stock brokers - Barclays Bank plc - 5 The North Colonnade - Canary Wharf - London - E14 4BB - Canaccord Genuity Limited - 88 Wood Street - London - EC2V 7QR ## Nominated adviser - Houlihan Lokey - 1 Curzon Street - London - W1J 5HD ## Financial PR adviser - FTI Consulting LLP - 200 Aldersgate - Aldersgate Street - London - EC1A 4HD ## Auditor - Ernst & Young LLP - 1 More London Place - London - SE1 2AF VICTORIAN PLUMBING GROUP PLC --- The production of this report supports the work of the Woodland Trust, the UK's leading woodland conservation charity. Each tree planted will grow into a vital carbon store, helping to reduce environmental impact as well as creating natural havens for wildlife and people. JPM JPM@NDA JPM@NDA JPM@NDA JPM@NDA --- ![img-119.jpeg](img-119.jpeg) ![img-120.jpeg](img-120.jpeg) ![img-121.jpeg](img-121.jpeg) Victorian plumbing co.uk Victorian Plumbing Group plc 1. Burnaby, W. & Co. 2. Aptington, W. & Co. 3. England 4. P.O. Box 100 5. Aptington, W. & Co. 6. Aptington, W. & Co. 7. Aptington, W. & Co. ![img-122.jpeg](img-122.jpeg)