TIDMNSR
RNS Number : 9414W
Nestor Healthcare Group PLC
06 August 2009
?
Nestor Healthcare Group plc
Half year results for the six months ended 5th July 2009
Results summary
+------------------------------------------+---------------+------------+
| | 2009 | 2008 |
+------------------------------------------+---------------+------------+
| Revenue | GBP74.7m | GBP84.5m |
+------------------------------------------+---------------+------------+
| Operating profit excluding Carewatch | GBP4.4m | GBP4.0m |
+------------------------------------------+---------------+------------+
| Carewatch trading profits | - | GBP2.2m |
+------------------------------------------+---------------+------------+
| Net interest | (GBP0.5m) | (GBP2.4m) |
+------------------------------------------+---------------+------------+
| Profit before tax before exceptional | GBP3.9m | GBP3.8m |
| charges* | | |
+------------------------------------------+---------------+------------+
| Profit before tax | GBP3.0m | GBP3.4m |
+------------------------------------------+---------------+------------+
| Basic earnings per share | 2.4p | 2.2p |
+------------------------------------------+---------------+------------+
| Interim dividend per share | 0.5p | nil |
+------------------------------------------+---------------+------------+
* Profit before tax before exceptional charges in the above results summary is
stated before loss on disposal, fair value adjustments relating to derivative
contracts and (in 2008) redundancy costs.
* The Group's ongoing businesses continued to make progress in the first half,
evident in the improved profitability of Social Care and contract wins in
Primary Care.
* The Social Care business delivered profits up GBP0.2m to GBP4.3m (2008: GBP4.1m)
with an improved margin of 8.2% (2008: 7.7%) on revenue 2% down at GBP52.0m
(2008: GBP52.9m) as Local Authority spending in some areas remained constrained.
Operating efficiencies and cost savings have been achieved in support services
and the branches. Goldsborough / Medico volumes were down in the first quarter
but up in the second helped by a new contract in Hackney. Care worker
recruitment is no longer an inhibitor to growth. Country Cousins and Patricia
White's performed in line with last year.
* The Primary Care business produced profits of GBP1.7m (2008: GBP1.9m) on
revenues of GBP22.7m (2008: GBP25.3m) as, as expected, two out-of-hours
contracts expired and before five "Darzi" schemes under the government's
extended access programme have begun to contribute. Three centres opened in July
with two more expected to open this year and early next. The profit benefit will
largely arise from 2010 onwards. Tender activity continues at a high level
across a wide range of opportunities for the independent sector.
* Cash flow from operations was GBP3.4m (2008: GBP7.1m). Closing net borrowings
were reduced to GBP16.9m (year-end 2008: GBP19.0m).
* The Group is paying an interim dividend of 0.5p per share (2008: nil).
Commenting on the outlook, John Rennocks, Chairman, said:
"In Social Care the recent growth in volume at Goldsborough / Medico is
encouraging after a lengthy period of volume reduction as the business has
rationalised its network and focused on efficiency and profitability. I expect
this steady growth to continue, although constraints on Local Authority spending
and the possible impact of the recession on private clients may restrict the
rate of progress. The current results of Primary Care are modest but in line
with our expectations at this stage. The prospects in the medium and long term
for this business are increasingly positive and the opening of our first three
GP/Walk in centres is a significant step forward. Primecare is well positioned
to build upon its record of excellent service in its existing and new contracts
as it develops its reputation and contacts with the key decision makers in
PCTs."
+---------------------------+---------------------------+---------------------------+
| Enquiries: | | |
+---------------------------+---------------------------+---------------------------+
| John Rennocks | Martin Ellis | Hannah Dean |
+---------------------------+---------------------------+---------------------------+
| Chairman | Finance Director | Citigate Dewe Rogerson |
+---------------------------+---------------------------+---------------------------+
| Tel: 01784 221600 | Tel: 01784 221600 | Tel: 020 7638 9571 |
+---------------------------+---------------------------+---------------------------+
Interim management report
Introduction
The Group's results for the six months to 5th July 2009 are in line with
management expectations reported at the time of the Interim Management Statement
in May 2009.
In October 2008, the Group completed the disposal of its Social Care franchise
business, Carewatch. The gain on sale and the trading profits of Carewatch are
identified separately in the comparatives below.
Excluding Carewatch, operating profits increased by 10% to GBP4.4m with
continuing steady progress in Social Care. As anticipated, Primary Care profits
are slightly down on the previous year following the loss of two out-of-hours
contracts. However the business has successfully extended all of its current
contracts, opened three "Darzi" centres with two more due to open this year and
next, and continues to be presented with opportunities for more profitable
growth in the future.
Earnings per share were 2.4p (2008: 2.2p). The directors have declared an
interim dividend of 0.5p (2008: nil).
Results summary for the six months to 5th July 2009
+-------------------------------------------+-------------+-------------+-------------+
| | 2009 | 2008 | 2008 |
| | Half year | Half year | Full year |
+-------------------------------------------+-------------+-------------+-------------+
| | | | |
+-------------------------------------------+-------------+-------------+-------------+
| Revenue | GBP74.7m | GBP84.5m | GBP163.3m |
+-------------------------------------------+-------------+-------------+-------------+
| Operating profit: | | | |
+-------------------------------------------+-------------+-------------+-------------+
| Excluding Carewatch | GBP4.4m | GBP4.0m | GBP9.5m |
+-------------------------------------------+-------------+-------------+-------------+
| Carewatch operating profit | - | GBP2.2m | GBP3.3m |
+-------------------------------------------+-------------+-------------+-------------+
| Exceptional charges | - | (GBP0.9m) | (GBP7.5m) |
+-------------------------------------------+-------------+-------------+-------------+
| | GBP4.4m | GBP5.3m | GBP5.3m |
+-------------------------------------------+-------------+-------------+-------------+
| | | | |
+-------------------------------------------+-------------+-------------+-------------+
| (Loss)/gain on sale of Carewatch | (GBP0.3m) | - | GBP31.1m |
+-------------------------------------------+-------------+-------------+-------------+
| Net interest | (GBP0.5m) | (GBP2.4m) | (GBP3.9m) |
+-------------------------------------------+-------------+-------------+-------------+
| Fair value (loss)/profit relating to | (GBP0.6m) | GBP0.5m | (GBP2.1m) |
| derivative contracts | | | |
+-------------------------------------------+-------------+-------------+-------------+
| Profit before tax | GBP3.0m | GBP3.4m | GBP30.4m |
+-------------------------------------------+-------------+-------------+-------------+
| Profit after tax | GBP2.7m | GBP2.5m | GBP30.4m |
+-------------------------------------------+-------------+-------------+-------------+
| Basic earnings per share | 2.4p | 2.2p | 26.9p |
+-------------------------------------------+-------------+-------------+-------------+
The segmental analysis below illustrates the trading performance of Social Care
and Primary Care. In order to improve accountability at divisional level and
accelerate cost reductions, the majority of expenses previously treated as
corporate have now been transferred under the management of the two business
segments. Core Head Office costs (such as the Board, central finance and
treasury operations and the costs entailed in operating as a plc) have been
separately identified and are disclosed below. Previous year comparatives have
been restated to match the revised method of reporting.
Segmental analysis of revenue and operating profit before exceptional charges
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| | 2009 Half year | 2008 Half year | 2008 Full year |
+--------------------+----------------------+----------------------+-----------------------+
| | Revenue | Operating | Revenue | Operating | Revenue | Operating |
| | | profit | | profit | | profit |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| Social Care | GBP52.0m | GBP4.3m | GBP52.9m | GBP4.1m | GBP104.5m | GBP8.5m |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| Primary Care | GBP22.7m | GBP1.7m | GBP25.3m | GBP1.9m | GBP49.3m | GBP4.3m |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| | | | | | | |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| Corporate costs | | (GBP1.6m) | | (GBP2.0m) | | (GBP3.3m) |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| | | | | | | |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| Carewatch | - | - | GBP6.3m | GBP2.2m | GBP9.5m | GBP3.3m |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| | | | | | | |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
| Totals | GBP74.7m | GBP4.4m | GBP84.5m | GBP6.2m | GBP163.3m | GBP12.8m |
+--------------------+----------+-----------+----------+-----------+-----------+-----------+
Further analysis of the above information is contained within note 2 of the
condensed financial statements.
Social Care
Our Social Care businesses provide community services, primarily homecare, to
local authorities and private patients through a network of over 100 branches
throughout the UK.
Social Care profits have increased by GBP0.2m compared to last half year, on
slightly reduced revenue. Goldsborough / Medico's volumes in the first quarter
were down on the previous year as the business continued to rationalise its
branch network and withdraw from unprofitable activity. The second quarter has
seen volume growth both over the first quarter and compared to the previous
year, in part due to the commencement of a new contract in Hackney. Tender
activity has been relatively quiet in recent months as Local Authority spending
remains constrained. However there is considerable variability in Authorities'
funding positions, which continues to generate local opportunities for our
business. The economic environment and increasing levels of unemployment have
led to an increase in applications for care work; again there are significant
regional variations, but care worker recruitment is not now an inhibitor to
growth.
Social Care's profit margin has increased from 7.7% to 8.2% and has benefited
from the consolidation of branches as well as improvements in operating
efficiencies and reductions in the costs of support services.
The combined profitability of our two private homecare providers, Country
Cousins and Patricia White's, is in line with last year, with no obvious signs
that the recession is yet having a material impact. Patricia White's has been
affected by the deaths of a number of clients who had been requiring intensive
support, but new client wins are encouraging. Country Cousins has had an
excellent first half with revenue and profits ahead of last year.
Primary Care
Primary Care provides general practitioner out-of-hours and other primary care
services to Primary Care Trusts (PCTs), secure institutions and police forces.
Primary Care's first half operating profit of GBP1.7m shows a small reduction
from the previous year, but is ahead of management's expectations. The shortfall
compared to 2008 is due to the loss of out-of-hours contracts last year and in
the later months of this first half year when, as anticipated, two PCT contracts
were terminated. This will cause second half profits for Primary Care to be
lower than those achieved in the first half. However all other Primary Care
contracts, including out-of-hours, which were due to be renewed in 2009, have
been extended by a minimum of twelve months. This excellent outcome provides the
business with a solid base from which it can continue to develop its new
services and extend its business relationships.
We reported at the year-end that our Primecare business had been selected as
preferred bidder for five "Darzi" schemes under the government's extended access
programme, which comprise walk-in centres, health centres and GP practices and
are awarded for a five-year term. Each contract is expected on average to
generate approximately GBP1m of revenues per annum dependent on utilisation, and
the majority have guaranteed levels of income built in. Three of the centres
have opened in July, with a fourth scheduled for the autumn. The final scheme
will probably not open until early 2010, having been delayed by the PCT
encountering property planning issues. The profit contribution from these
schemes will be limited in 2009 but they represent an important first step for
Primecare, as well as other independent providers, to participate in the revised
approach to these services. Primecare continues to tender for a small number of
additional "Darzi" schemes including a number in London, where the tendering
exercise commenced later than the rest of the country, and for a number of
schemes which failed to award a contract following the first round of tendering.
More generally, tender activity continues at a high level but the business is
being selective as to the opportunities it pursues. Nevertheless the number of
traditional out-of-hours, police and prison tenders is such that the full
complement of business development resource, recruited in late 2007, has been
retained.
Whilst the profit contribution of Primary Care will be relatively modest in the
short term, the Board is encouraged by the improved approach by management in
developing long-term relationships with PCT decision makers, which we believe
will deliver improved returns in future years.
Derivative contracts
Prior to the disposal of Carewatch in October 2008, the Group's net debt
totalled approximately GBP55m. In 2007, the Group entered into hedging
arrangements fixing GBP60m of its borrowing in a range of interest rates between
4.5% and 7.0%. At 31st December 2008, cancellation of the contracts would have
required a payment of GBP2.6m. Continued reductions in rates have led to an
increase in this liability to GBP2.8m, after having made payments totalling
GBP0.4m in the first half. The two derivative contracts expire in October and
November 2010, when their value will be nil. Should interest rates continue at
the current very low levels this would lead to further, significant cash
payments over the lives of the contracts.
Cash flow
Cash generated from operations totalled GBP3.4m (2008: GBP7.1m). Debtor days
outstanding have reduced to 36 days, compared to 39 days at the end of 2008 and
at the same time last year. The Group continues to make additional contributions
to its defined benefit pension schemes, which totalled GBP1.3m in the first half
(2008: GBP2.0m). Despite this, the total of pension deficits has increased from
GBP8.7m at the end of 2008 to GBP11.8m. Based upon latest valuations, actuarial
losses were incurred both on assets, GBP1.3m, and on liabilities, GBP3.0m; the
latter arising chiefly because of a lower rate being used to discount future
obligations. The final dividend for 2008 of 1.5p per share was paid to
shareholders in June 2009 at a total cost of GBP1.7m. Closing net borrowings at
the half year were GBP16.9m (year end 2008: GBP19.0m).
Taxation
The tax charge for the period was GBP0.4m (2008: GBP1.0m). The current tax
charge of GBP0.9m represents 29.6% of the profit before tax, this percentage
being an estimate of the full year tax rate (2008: 28.2%). A tax credit of
GBP0.5m has also been recognised in respect of prior years.
Dividends
The directors have declared a dividend of 0.5p per share (cost GBP564,000),
which will be accounted for in the second half of the year. This will be paid on
9th October 2009 to shareholders on the register on 11th September 2009. No
interim dividend was paid in 2008 as, at the time the Board considered the
matter, the sale of Carewatch had still to be completed.
Bank facilities
The Group's banking facilities are due to expire in December 2009 and
discussions have already commenced with banks with regard to their renewal. The
trading performance of the Group, the significant strengthening of the balance
sheet and the quality of current banking relationships enable the Board to be
confident that the renewal will be completed in good time and on satisfactory
terms.
Risks and uncertainties
The principal risk factors which could materially affect the Group's business,
financial condition and/or results of operations were described on pages 22 and
23 of the Annual Report and Accounts for 2008. The principal risk factors which
have been identified are as follows: loss of revenue and profits from contracts
with Primary Care Trusts or Local Authorities; competition; technological
innovation; the regulatory environment; the need to procure suitably qualified
staff; loss of reputation; funding and going concern and pension scheme
deficits.
In the opinion of the directors, there has been no material change in these risk
factors in the first six months of the current year, and neither is there
expected to be any material change in them in the second six months.
Related party transactions
The Group's related party transactions are as set out on page 56 of the Annual
Report and Accounts for 2008. There have been no material changes to the nature
of the Group's related party transactions in the six month period to 5th July
2009.
Chief Executive role
Since the end of April 2008, in addition to my duties as non-executive Chairman,
I have fulfilled the role of Chief Executive on a part-time basis. Given the
current stage of the Group's development and the satisfactory first half year's
trading, the Board has decided to continue with this approach until such time as
the development of the Group justifies the appointment of a full-time Chief
Executive.
Swine flu
Both Primary Care and Social Care, in common with most other businesses, face
the possibility of short-term staff shortages due to the swine flu outbreak,
although the extent of any disruption can be mitigated by the flexibility of the
working hours of our staff and our extensive employee databases. The outbreak
also represents an opportunity for our Primary Care business to provide much
needed support to its current base of PCTs and a number of discussions are
currently being held.
Outlook
In Social Care the recent growth in volume at Goldsborough / Medico is
encouraging, after a lengthy period of volume reduction as the business
rationalised its network and focused on efficiency and profitability. I expect
this steady growth to continue, although constraints on Local Authority spending
and the possible impact of the recession on private clients may restrict the
rate of progress. The current results of Primary Care are modest but in line
with our expectations at this stage. The prospects in the medium and long term
for this business are increasingly positive and the opening of our first three
GP/Walk in centres is a significant step forward. Primecare is well positioned
to build upon its record of excellent service in its existing and new contracts
as it develops its reputation and contacts with the key decision makers in the
PCTs.
John Rennocks
Chairman and Chief Executive
6th August 2009
Directors' responsibilities
This interim report is the responsibility of, and has been approved by, the
directors of the Company. It complies with the requirement laid down within the
Disclosure and Transparency Rules ("DTR") of the UK's Financial Services
Authority to prepare a half yearly management and financial report.
The directors confirm that, to the best of their knowledge:
* the condensed set of financial statements within has been prepared consistent
with IAS 34 "Interim Financial Reporting", as issued by the IASB and endorsed
and adopted by the European Union; and
* the interim management report includes a fair review of the information required
by: DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the remaining six
months of the year; and DTR 4.2.8R of the Disclosure and Transparency Rules,
being related party transactions that have taken place in the first six months
of the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in the
related party transactions described in the 2008 Annual Report.
The directors of Nestor Healthcare Group plc are listed in the Nestor Healthcare
Group Annual Report for the year ended 31st December 2008. A list of current
directors is also maintained on the Nestor Healthcare Group plc website:
www.nestorplc.co.uk.
On behalf of the Board
John Rennocks
Chairman and Chief Executive
Martyn Ellis
Finance Director
6th August 2009
+--------------------------------+------+--------------+-------------+------------+
| Condensed Group income statement (unaudited) | | |
+------------------------------------------------------+-------------+------------+
| for the six months ended 5th July | | | |
| 2009 | | | |
+---------------------------------------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+--------------------------------+------+--------------+-------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+--------------------------------+------+--------------+-------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+--------------------------------+------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
| Revenue | | 74,748 | 84,465 | 163,289 |
+--------------------------------+------+--------------+-------------+------------+
| Cost of sales | (49,560) | (54,219) | (104,727) |
+---------------------------------------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
| Gross profit | 25,188 | 30,246 | 58,562 |
+---------------------------------------+--------------+-------------+------------+
| Administrative expenses | (20,788) | (24,937) | (53,270) |
+---------------------------------------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
| Operating profit | 4,400 | 5,309 | 5,292 |
+---------------------------------------+--------------+-------------+------------+
| Other (losses)/gains - disposal of | (259) | - | 31,056 |
| operations | | | |
+---------------------------------------+--------------+-------------+------------+
| Finance income | 126 | 573 | 238 |
+---------------------------------------+--------------+-------------+------------+
| Finance expense | (1,235) | (2,461) | (6,233) |
+---------------------------------------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
| Profit before taxation | | 3,032 | 3,421 | 30,353 |
+--------------------------------+------+--------------+-------------+------------+
| Tax expense | (357) | (966) | (1) |
+---------------------------------------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
| Profit for the period | 2,675 | 2,455 | 30,352 |
+---------------------------------------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
| Earnings per 10p share | | | |
+---------------------------------------+--------------+-------------+------------+
| Basic | | 2.37p | 2.18p | 26.90p |
+--------------------------------+------+--------------+-------------+------------+
| Diluted | | 2.36p | 2.18p | 26.90p |
+--------------------------------+------+--------------+-------------+------------+
| | | | | |
+--------------------------------+------+--------------+-------------+------------+
+---------+---------------------------------+-------------+------------+------------+
| Condensed Group statement of comprehensive income (unaudited) | |
+----------------------------------------------------------------------+------------+
| for the six months ended 5th July 2009 | | | |
+-------------------------------------------+-------------+------------+------------+
| | | | | |
+---------+---------------------------------+-------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+---------+---------------------------------+-------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------+---------------------------------+-------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+---------+---------------------------------+-------------+------------+------------+
| | | | | |
+---------+---------------------------------+-------------+------------+------------+
| Profit for the period | 2,675 | 2,455 | 30,352 |
+-------------------------------------------+-------------+------------+------------+
| Other comprehensive income: | | | |
+-------------------------------------------+-------------+------------+------------+
| Actuarial losses arising in defined | (4,303) | (1,994) | (5,783) |
| benefit pension schemes | | | |
+-------------------------------------------+-------------+------------+------------+
| Current tax credit | - | - | 979 |
+-------------------------------------------+-------------+------------+------------+
| Deferred taxation credit arising on | 1,205 | 558 | 640 |
| actuarial losses | | | |
+-------------------------------------------+-------------+------------+------------+
| | | | | |
+---------+---------------------------------+-------------+------------+------------+
| Total comprehensive (loss)/income for the | (423) | 1,019 | 26,188 |
| period | | | |
+---------+---------------------------------+-------------+------------+------------+
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| Condensed Group statement of changes in equity (unaudited) | | | |
+-----------------------------------------------------------------------+----------+-----------+---------+
| for the six months ended 5th July 2009 | | | | | | |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| | | | Share | Share | | Retained | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| | | Share | premium | payment | Other | (losses)/ | Total |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| | | Capital | account | reserve | reserves | earnings | equity |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| | | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| At 1st January 2008 | 11,284 | 71,439 | 931 | 864 | (37,270) | 47,248 |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| Total comprehensive income for the six | - | - | - | - | 1,019 | 1,019 |
| month period | | | | | | |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| Dividends payable to equity | - | - | - | - | (1,128) | (1,128) |
| shareholders | | | | | | |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| Increase in share payment reserve | - | - | 149 | - | - | 149 |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| At 4th July 2008 and 5th July 2008 | 11,284 | 71,439 | 1,080 | 864 | (37,379) | 47,288 |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| Total comprehensive income for the six | - | - | - | - | 25,169 | 25,169 |
| month period | | | | | | |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| Increase in share payment reserve | - | - | 307 | - | - | 307 |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| At 31st December 2008 and 1st January | 11,284 | 71,439 | 1,387 | 864 | (12,210) | 72,764 |
| 2009 | | | | | | |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| Total comprehensive loss for the six | - | - | - | - | (423) | (423) |
| month period | | | | | | |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| Dividends payable to equity | - | - | - | - | (1,693) | (1,693) |
| shareholders | | | | | | |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| Increase in share payment reserve | - | - | 341 | - | - | 341 |
+-----------------------------------------+---------+---------+---------+----------+-----------+---------+
| | | | | | | | |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
| At 5th July 2009 | 11,284 | 71,439 | 1,728 | 864 | (14,326) | 70,989 |
+--------------------+--------------------+---------+---------+---------+----------+-----------+---------+
+------------------------------------------+--+------------+------------+------------+
| Condensed Group balance sheet (unaudited) | | |
+----------------------------------------------------------+------------+------------+
| as at 5th July 2009 | | | |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+------------------------------------------+--+------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+------------------------------------------+--+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Non-current assets | | | |
+---------------------------------------------+------------+------------+------------+
| Goodwill | | 92,803 | 96,462 | 92,798 |
+------------------------------------------+--+------------+------------+------------+
| Other intangible assets | 48 | 291 | 111 |
+---------------------------------------------+------------+------------+------------+
| Property, plant and equipment | 2,020 | 2,946 | 2,449 |
+---------------------------------------------+------------+------------+------------+
| Deferred tax assets | 4,702 | 3,292 | 3,758 |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Non-current assets | | 99,573 | 102,991 | 99,116 |
+------------------------------------------+--+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Current assets | | | |
+---------------------------------------------+------------+------------+------------+
| Trade and other receivables | 24,719 | 26,516 | 23,980 |
+---------------------------------------------+------------+------------+------------+
| Derivative financial instruments | - | 40 | - |
+---------------------------------------------+------------+------------+------------+
| Current tax asset | 462 | - | 2,204 |
+---------------------------------------------+------------+------------+------------+
| Cash and cash equivalents | 6 | 275 | 75 |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Current assets | | 25,187 | 26,831 | 26,259 |
+------------------------------------------+--+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Current liabilities | | | |
+---------------------------------------------+------------+------------+------------+
| Borrowings - bank overdrafts | (1,856) | (4,407) | (2,091) |
+---------------------------------------------+------------+------------+------------+
| Borrowings - bank loans | (15,000) | - | (17,000) |
+---------------------------------------------+------------+------------+------------+
| Derivative financial instruments | (2,786) | - | (2,552) |
+---------------------------------------------+------------+------------+------------+
| Trade and other payables | (15,037) | (19,149) | (14,694) |
+---------------------------------------------+------------+------------+------------+
| Current tax liabilities | - | (372) | - |
+---------------------------------------------+------------+------------+------------+
| Employment benefit liabilities | (2,430) | (2,430) | (2,430) |
+---------------------------------------------+------------+------------+------------+
| Property provisions | (1,442) | (1,205) | (1,148) |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Current liabilities | (38,551) | (27,563) | (39,915) |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Net current liabilities | (13,364) | (732) | (13,656) |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Total assets less current liabilities | | 86,209 | 102,259 | 85,460 |
+------------------------------------------+--+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Non-current liabilities | | | |
+---------------------------------------------+------------+------------+------------+
| Borrowings - bank loans | - | (50,000) | - |
+---------------------------------------------+------------+------------+------------+
| Claims in respect of clinical incidents | (3,276) | - | (3,350) |
+---------------------------------------------+------------+------------+------------+
| Employment benefit liabilities | (9,404) | (3,832) | (6,291) |
+---------------------------------------------+------------+------------+------------+
| Property provisions | (2,540) | (1,139) | (3,055) |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Non-current liabilities | (15,220) | (54,971) | (12,696) |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Net assets | | 70,989 | 47,288 | 72,764 |
+------------------------------------------+--+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Equity | | | | |
+------------------------------------------+--+------------+------------+------------+
| Called up share capital | 11,284 | 11,284 | 11,284 |
+---------------------------------------------+------------+------------+------------+
| Share premium account | 71,439 | 71,439 | 71,439 |
+---------------------------------------------+------------+------------+------------+
| Share payment reserve | 1,728 | 1,080 | 1,387 |
+---------------------------------------------+------------+------------+------------+
| Other reserves | 864 | 864 | 864 |
+---------------------------------------------+------------+------------+------------+
| Retained losses | (14,326) | (37,379) | (12,210) |
+---------------------------------------------+------------+------------+------------+
| | | | | |
+------------------------------------------+--+------------+------------+------------+
| Equity shareholders' funds | | 70,989 | 47,288 | 72,764 |
+------------------------------------------+--+------------+------------+------------+
+-----------+----------------------------------+-------------+------------+------------+
| Condensed Group cash flow statement (unaudited) | | |
+------------------------------------------------------------+------------+------------+
| for the six months ended 5th July 2009 | | | |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+-----------+----------------------------------+-------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+-----------+----------------------------------+-------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+-----------+----------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Operating activities | | | |
+----------------------------------------------+-------------+------------+------------+
| Cash generated from operations | 3,422 | 7,105 | 10,920 |
+----------------------------------------------+-------------+------------+------------+
| Interest paid | (689) | (2,486) | (4,130) |
+----------------------------------------------+-------------+------------+------------+
| Interest received | 126 | 2 | 15 |
+----------------------------------------------+-------------+------------+------------+
| Income taxes repaid/(paid) | 1,646 | (231) | (1,247) |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Net cash generated from operating activities | 4,505 | 4,390 | 5,558 |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Investing activities | | | |
+----------------------------------------------+-------------+------------+------------+
| Purchase of property, plant and equipment | (162) | (129) | (336) |
+----------------------------------------------+-------------+------------+------------+
| Purchase of businesses and subsidiary | (225) | (425) | (784) |
| undertakings | | | |
+----------------------------------------------+-------------+------------+------------+
| Disposal of operations | (259) | - | 35,642 |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Net cash (used in)/generated from investing | (646) | (554) | 34,522 |
| activities | | | |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Financing activities | | | |
+----------------------------------------------+-------------+------------+------------+
| Equity dividends paid to shareholders | (1,693) | - | (1,128) |
+----------------------------------------------+-------------+------------+------------+
| Decrease in loans from banks | (2,000) | (4,000) | (37,000) |
+----------------------------------------------+-------------+------------+------------+
| Decrease in bank overdrafts | (235) | (97) | (2,413) |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Net cash used in financing activities | (3,928) | (4,097) | (40,541) |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Net decrease in cash and cash equivalents | (69) | (261) | (461) |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Cash and cash equivalents at the beginning | 75 | 536 | 536 |
| of the period | | | |
+----------------------------------------------+-------------+------------+------------+
| Net decrease in cash and cash equivalents | (69) | (261) | (461) |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
| Cash and cash equivalents at the end of the | 6 | 275 | 75 |
| period | | | |
+----------------------------------------------+-------------+------------+------------+
| | | | | |
+-----------+----------------------------------+-------------+------------+------------+
Notes to the condensed financial statements
for the six months ended 5th July 2009
1. Basis of preparation
The unaudited interim condensed financial statements for the six months ended
5th July 2009 have been prepared in accordance with International Accounting
Standard 34 "Interim Financial Reporting" (IAS 34) and have been prepared on the
basis of International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS) and Interpretations (SICs and IFRICs) which have been
adopted by the European Commission for use in the European Union (collectively
"Adopted IFRS").
The financial information contained within the interim statement does not
constitute statutory accounts as defined in section 435 of the Companies Act
2006 and should be read in accordance with the Annual Report and Accounts for
the year ended 31st December 2008. A copy of the statutory accounts for the year
ended 31st December 2008 has been delivered to the Registrar of Companies. The
auditors' report on those accounts was not qualified, did not include a
reference to any matters to which the auditors drew attention by way of emphasis
without qualifying their report, and did not contain statements under section
237(2) or (3) of the Companies Act 1985.
The Annual Report is available on the Group's website: www.nestorplc.co.uk; and
on request from the Company's registered office.
Except as noted below, the accounting policies and methods of computation
adopted in the preparation of the unaudited interim financial statements are
consistent with the policies applied by the Group in its consolidated financial
statements for the year ended 31st December 2008. In the current year the Group
has adopted IFRS 8 "Operating Segments", Amendments to IAS 23 "Borrowing Costs",
Amendments to IFRS 2 "Share-based Payment: Vesting Conditions and
Cancellations", Amendments to IAS 1 "Presentation of Financial Statements: A
Revised Presentation", Amendments to IAS 32 and IAS 1 "Puttable Financial
Instruments and Obligations Arising on Liquidation", Amendments to IFRS 1 and
IAS 27 "Cost of an Investment in a subsidiary, jointly-controlled entity or
associate", IFRIC 15 "Agreements for the Construction of Real Estate", IFRIC 16
"Hedges of a net investment in a foreign operation" and "Improvements to IFRS".
None of these have had a material impact on the results or financial position of
the Group.
The following interpretations were issued by the IFRIC and IASB before 5th July
2009, but are not effective for the 2009 year end:
IAS 27 (amended) "Consolidated and Separate Financial Statements"
IAS 39 (amended) "Financial Instruments: Recognition and Measurement - Eligible
Hedged Items"
IFRS 3 (revised) "Business Combinations"
IFRIC 17 "Distribution of non-cash Assets to Owners".
Estimates and judgements
The preparation of accounts in accordance with Adopted IFRS requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the accounts and the reported amounts of revenues and
expenses during the reported period. These estimates are based on historical
experience and various other assumptions that management and directors believe
are reasonable under the circumstances, the results of which form the basis for
making judgements about the carrying value of assets and liabilities that are
not readily apparent from other sources. Areas comprising critical judgements
that may significantly affect the Group's earnings and financial position are
bad debt provisioning, valuation of intangibles including goodwill, tax
enquiries, provisions for pensions, income taxes, property related items, claims
arising from clinical incidents and share-based payments.
2. Segmental information
In the current year, the Group has adopted IFRS 8 "Operating Segments". This has
led to the re-presentation of the comparative segmental information to comply
with the requirements of this standard. For reporting purposes, the Group's
results for the period ended 5th July 2009 have been analysed between Social
Care and Primary Care. In the year to 31st December 2008, a third reportable
segment, Carewatch, was sold.
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are reviewed regularly by the chief
operating decision makers in order to allocate resources to the segment and to
assess its performance. Reportable segment profit represents operating profit
earned by each segment. Corporate expenses have been allocated to operating
segments on a specific basis where possible. Where not possible, no allocation
has been made. This is the measure reported to the chief operating decision
makers.
The operational analysis of revenue and operating profit is as follows:
+-----------------------------------------------+--+--+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+-----------------------------------------------+-----+--------------+------------+------------+
| Reportable external revenue by operating segment | | | |
+--------------------------------------------------+-----------------+------------+------------+
| Social Care | 51,990 | 52,919 | 104,532 |
+--------------------------------------------------+-----------------+------------+------------+
| Primary Care | 22,758 | 25,254 | 49,304 |
+--------------------------------------------------+-----------------+------------+------------+
| Carewatch | | - | 6,292 | 9,453 |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| Total Group revenue | 74,748 | 84,465 | 163,289 |
+--------------------------------------------------+-----------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+-----------------------------------------------+-----+--------------+------------+------------+
| Reportable profit by operating segment | | | |
+--------------------------------------------------+-----------------+------------+------------+
| Social Care | 4,257 | 4,065 | 8,528 |
+--------------------------------------------------+-----------------+------------+------------+
| Primary Care | 1,740 | 1,899 | 4,250 |
+--------------------------------------------------+-----------------+------------+------------+
| Carewatch | | - | 2,153 | 3,337 |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| Total profit for reportable operating segments | 5,997 | 8,117 | 16,115 |
+--------------------------------------------------+-----------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+-----------------------------------------------+-----+--------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+-----------------------------------------------+-----+--------------+------------+------------+
| Profit for the period | | | |
+--------------------------------------------------+-----------------+------------+------------+
| Total profit for reportable operating segments | 5,997 | 8,117 | 16,115 |
+--------------------------------------------------+-----------------+------------+------------+
| Unallocated corporate expenses | (1,597) | (2,808) | (10,823) |
+--------------------------------------------------+-----------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| Group operating profit | 4,400 | 5,309 | 5,292 |
+--------------------------------------------------+-----------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| Other (losses)/gains - disposal of operations | (259) | - | 31,056 |
+--------------------------------------------------+-----------------+------------+------------+
| Finance income | 126 | 573 | 238 |
+--------------------------------------------------+-----------------+------------+------------+
| Finance expense | (1,235) | (2,461) | (6,233) |
+--------------------------------------------------+-----------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| Profit before taxation | 3,032 | 3,421 | 30,353 |
+--------------------------------------------------+-----------------+------------+------------+
| Tax expense | (357) | (966) | (1) |
+--------------------------------------------------+-----------------+------------+------------+
| | | | | |
+-----------------------------------------------+-----+--------------+------------+------------+
| Profit for the period | 2,675 | 2,455 | 30,352 |
+-----------------------------------------------+--+--+--------------+------------+------------+
In the year to 31st December 2008, unallocated corporate expenses included an
amount of GBP2,607,000 in relation to onerous lease obligations on properties no
longer occupied by the Group. As these properties were no longer used in the
trade of either the Social Care or Primary Care businesses, it is not considered
appropriate to allocate these costs to either operating segment.
During the year to 31st December 2008, a provision of GBP3,458,000 was set up in
relation to claims in respect of two clinical incidents. These claims, whilst
they do arise out of the Primary Care business, relate to incidents that took
place in 2001 and 2004. Due to the age of these claims, it is not considered
appropriate to allocate this cost to the Primary Care segment operating profit.
In the year to 31st December 2008, termination costs in relation to the outgoing
Chief Executive, Stephen Booty, and a number of other individuals were charged,
totalling GBP1,426,000. These termination costs were incurred as part of an
internal restructuring exercise and have not been allocated to either the Social
Care or Primary Care operating segments. Of these costs GBP851,000 was charged
in the six month period to 4th July 2008.
+-----------+----------------------------------+------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+-----------+----------------------------------+------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+-----------+----------------------------------+------------+------------+------------+
| Reportable segment assets | | | |
+----------------------------------------------+------------+------------+------------+
| Social Care | 65,324 | 64,982 | 64,578 |
+----------------------------------------------+------------+------------+------------+
| Primary Care | 52,864 | 53,621 | 53,193 |
+----------------------------------------------+------------+------------+------------+
| Carewatch | | - | 5,335 | - |
+-----------+----------------------------------+------------+------------+------------+
| | | | | |
+-----------+----------------------------------+------------+------------+------------+
| Total assets for reportable segments | 118,188 | 123,938 | 117,771 |
+----------------------------------------------+------------+------------+------------+
| | | | | |
+-----------+----------------------------------+------------+------------+------------+
| | | | | |
+-----------+----------------------------------+------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+-----------+----------------------------------+------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+-----------+----------------------------------+------------+------------+------------+
| Assets | | | | |
+-----------+----------------------------------+------------+------------+------------+
| Total assets for reportable segments | 118,188 | 123,938 | 117,771 |
+----------------------------------------------+------------+------------+------------+
| Unallocated corporate assets | 6,572 | 5,884 | 7,604 |
+----------------------------------------------+------------+------------+------------+
| | | | | |
+-----------+----------------------------------+------------+------------+------------+
| Total Group assets | 124,760 | 129,822 | 125,375 |
+----------------------------------------------+------------+------------+------------+
| | | | | |
+-----------+----------------------------------+------------+------------+------------+
| Total Group assets comprises total non-current assets together with total |
| current assets. |
+-----------+----------------------------------+------------+------------+------------+
3. Finance income and expense
+---------+---------------------------------------+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+---------+---------------------------------------+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------+---------------------------------------+--------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+---------+---------------------------------------+--------------+------------+------------+
| Finance income | | | |
+-------------------------------------------------+--------------+------------+------------+
| Bank interest receivable | - | 2 | 15 |
+-------------------------------------------------+--------------+------------+------------+
| Other interest receivable | 126 | - | - |
+-------------------------------------------------+--------------+------------+------------+
| Net finance credit on defined benefit pension | - | 110 | 223 |
| schemes | | | |
+-------------------------------------------------+--------------+------------+------------+
| Fair value gain relating to interest rate | - | 461 | - |
| derivative contracts | | | |
+-------------------------------------------------+--------------+------------+------------+
| | | | | |
+---------+---------------------------------------+--------------+------------+------------+
| Total finance income | 126 | 573 | 238 |
+-------------------------------------------------+--------------+------------+------------+
| | | | | |
+---------+---------------------------------------+--------------+------------+------------+
| | | | | |
+---------+---------------------------------------+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+---------+---------------------------------------+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------+---------------------------------------+--------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+---------+---------------------------------------+--------------+------------+------------+
| Finance expense | | | |
+-------------------------------------------------+--------------+------------+------------+
| Unwinding of discount in property provisions | (135) | (79) | (160) |
+-------------------------------------------------+--------------+------------+------------+
| Net finance charge on defined benefit pension | (209) | - | - |
| schemes | | | |
+-------------------------------------------------+--------------+------------+------------+
| Interest payable on bank loans and overdrafts | (299) | (2,382) | (3,942) |
+-------------------------------------------------+--------------+------------+------------+
| Fair value loss relating to interest rate | (592) | - | (2,131) |
| derivative contracts | | | |
+-------------------------------------------------+--------------+------------+------------+
| | | | | |
+---------+---------------------------------------+--------------+------------+------------+
| Total finance expense | (1,235) | (2,461) | (6,233) |
+---------+---------------------------------------+--------------+------------+------------+
4. Taxation
Tax expense recognised in the financial statements comprises UK corporation tax
charges or credits together with deferred tax charges or credits.
The total tax expense of GBP357,000 comprises current tax of GBP897,000,
together with a tax credit of GBP540,000 in respect of prior years. The current
tax expense of GBP897,000 represents 29.6% (2008: 28.2%) of the profit before
taxation. This tax rate is based on an estimate of the tax rate that will apply
to the full year results.
5. Earnings per share
Basic earnings per 10p share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the period.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares. The Group has only one category of potentially dilutive ordinary shares:
those share options granted to employees where the exercise price is less than
the average market price of the Company's ordinary shares during the period. In
the first half of 2009 a total of 2,068,860 options that had been granted in
2009 qualified under this test. The calculated effect of this on diluted
earnings per share is to add a further 384,000 shares into the denominator of
the calculation as shown in the table below.
No shares were issued in the six month period to 5th July 2009, with the number
of shares in issue therefore remaining unchanged throughout the period at
112,844,209.
The weighted average number of shares used in the calculations is set out below:
+---------------------------------------------+--+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+---------------------------------------------+--+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------------------------------------------+--+--------------+------------+------------+
| | | thousands | thousands | thousands |
+---------------------------------------------+--+--------------+------------+------------+
| Weighted average number of shares - in issue | 112,844 | 112,844 | 112,844 |
+------------------------------------------------+--------------+------------+------------+
| Dilutive effect of options | 384 | - | - |
+------------------------------------------------+--------------+------------+------------+
| | | | | |
+---------------------------------------------+--+--------------+------------+------------+
| Weighted average number of shares - diluted | 113,228 | 112,844 | 112,844 |
+------------------------------------------------+--------------+------------+------------+
| | | | | |
+---------------------------------------------+--+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+---------------------------------------------+--+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------------------------------------------+--+--------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+---------------------------------------------+--+--------------+------------+------------+
| Earnings being the net profit attributable to | 2,675 | 2,455 | 30,352 |
| equity holders | | | |
| of the parent company | | | |
+------------------------------------------------+--------------+------------+------------+
| | | | | |
+---------------------------------------------+--+--------------+------------+------------+
| Earnings | | 2,675 | 2,455 | 30,352 |
+---------------------------------------------+--+--------------+------------+------------+
| | | | | |
+---------------------------------------------+--+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+---------------------------------------------+--+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------------------------------------------+--+--------------+------------+------------+
| | | pence | pence | pence |
+---------------------------------------------+--+--------------+------------+------------+
| Earnings per share - basic | 2.37p | 2.18p | 26.90p |
+------------------------------------------------+--------------+------------+------------+
| Dilutive effect of options | (0.01p) | - | - |
+------------------------------------------------+--------------+------------+------------+
| | | | | |
+---------------------------------------------+--+--------------+------------+------------+
| Earnings per share - diluted | 2.36p | 2.18p | 26.90p |
+---------------------------------------------+--+--------------+------------+------------+
6. Dividends
The final dividend for 2008 was 1.5p per 10p share, costing GBP1,693,000. This
was approved by shareholders at the Annual General Meeting on 1st May 2009, and
was paid on 5th June 2009 to those shareholders on the register on 8th May 2009.
The directors have declared an interim dividend of 0.5p per 10p share, costing
GBP564,000 which will be accounted for in the second half of the year. This will
be paid on 9th October 2009 to shareholders on the register on 11th September
2009. In 2008, no interim dividend was declared or paid.
7. Disposals
On 3rd October 2008, the Group completed the sale of the trade and assets of the
Carewatch franchise business to a third party for a consideration finally
determined at GBP36,726,000. At the same time the Group sold to the same party,
the entire share capital of Carewatch Care Services Limited, a dormant company,
for a consideration of GBP52,000.
+------------+---------------------------+------------+-----------+------------+
| | | As at | Cash | As at |
| | | | flows | |
+------------+---------------------------+------------+-----------+------------+
| | | 31.12.2008 | in 2009 | 05.07.2009 |
+------------+---------------------------+------------+-----------+------------+
| | | GBP000 | GBP000 | GBP000 |
+------------+---------------------------+------------+-----------+------------+
| Cash flows in respect of disposal of | | | |
| business | | | |
+----------------------------------------+------------+-----------+------------+
| Total consideration | 37,000 | (222) | 36,778 |
+----------------------------------------+------------+-----------+------------+
| | | | | |
+------------+---------------------------+------------+-----------+------------+
| Total cash flow in respect of disposal | 37,000 | (222) | 36,778 |
| | | | |
+----------------------------------------+------------+-----------+------------+
| | | | | |
+------------+---------------------------+------------+-----------+------------+
| Profit on disposal is computed as | | | |
| follows: | | | |
+----------------------------------------+------------+-----------+------------+
| | | | | |
+------------+---------------------------+------------+-----------+------------+
| | | GBP000 | GBP000 | GBP000 |
+------------+---------------------------+------------+-----------+------------+
| Net assets | | | | |
+------------+---------------------------+------------+-----------+------------+
| Property, plant and equipment | 35 | - | 35 |
+----------------------------------------+------------+-----------+------------+
| Goodwill | | 2,906 | - | 2,906 |
+------------+---------------------------+------------+-----------+------------+
| Trade and other receivables | 2,240 | - | 2,240 |
+----------------------------------------+------------+-----------+------------+
| Trade and other payables | (595) | - | (595) |
+----------------------------------------+------------+-----------+------------+
| | | | | |
+------------+---------------------------+------------+-----------+------------+
| Net assets of Carewatch | 4,586 | - | 4,586 |
+----------------------------------------+------------+-----------+------------+
| | | | | |
+------------+---------------------------+------------+-----------+------------+
| Total consideration | 37,000 | (222) | 36,778 |
+----------------------------------------+------------+-----------+------------+
| Disposal expenses | (1,358) | (37) | (1,395) |
+----------------------------------------+------------+-----------+------------+
| | | | | |
+------------+---------------------------+------------+-----------+------------+
| Consideration net of expenses | 35,642 | (259) | 35,383 |
+----------------------------------------+------------+-----------+------------+
| | | | | |
+------------+---------------------------+------------+-----------+------------+
| Profit on disposal | 31,056 | (259) | 30,797 |
+------------+---------------------------+------------+-----------+------------+
Cash flows in 2009 represent finalisation adjustments. No further adjustments or
cash flows are now expected.
8. Derivative financial instruments
Counterparties to the financial instruments entered into by the Group are major
international financial institutions with high long term credit ratings. The
Group monitors its credit exposure to its counterparties via their credit
ratings (where applicable) and through its policy thereby limiting its exposure
to any one party to ensure that they are within Board approved limits and that
there are no significant concentrations of credit risk.
At 5th July 2009 the Group has entered into interest rate derivative contracts
to hedge its exposure to changes in interest rates. These contracts are classed
as derivative financial instruments. They are initially recognised at fair value
at the date each contract is entered into and are subsequently remeasured to
their fair value at each balance sheet date. The resultant gain or loss is
recognised within the income statement within finance income or expense. Hedge
accounting has not been applied. This practice is considered to be consistent
with the requirements of IAS 39 "Financial instruments: Recognition and
Measurement".
Market prices or quotations are not available for the particular derivative
contracts that the Group has entered into. In the absence of any such market
valuations, fair values have been obtained by taking the settlement values
advised at each balance sheet date by the respective counterparty banks.
At 5th July 2009 the Group has entered into two such contracts with a combined
notional value of GBP60,000,000. One, for a notional sum of GBP45,000,000, has
the effect of restricting LIBOR rates on that level of borrowings to a range
between 4.50% and 7.00%, whilst the other, for a notional sum of GBP15,000,000,
has the effect of restricting LIBOR rates on that level of borrowings to a range
between 4.85% and 7.00%. Under the terms of both contracts, the actual
three-month LIBOR rate at defined quarterly strike dates is compared with both
floor and cap levels; if this actual rate is either below the floor or above the
cap, a cash payment will then be triggered. This cash payment, made three months
after each quarterly strike date, is payable by the Group if the actual rate
were below the floor, or to the Group if the rate were above the cap, calculated
by applying the interest rate shortfall or excess for one quarter to the
notional contracted borrowing. No such payments were made or received in the
year ended 31st December 2008. In the six months to 5th July 2009, payments of
GBP358,000 were made. No payment is due if actual three-month LIBOR is within
the range of the respective floor and cap at the strike date. The contract for
the notional sum of GBP45,000,000 expires in November 2010 whilst that for the
notional sum of GBP15,000,000 expires one month earlier in October 2010.
At 5th July 2009 the combined fair value of the two contracts, as advised by the
respective counterparty banks, was minus GBP2,786,000; this negative fair value
has been accounted for within current liabilities. At 31st December 2008 the
fair value of the same two contracts had been minus GBP2,552,000. The movement
in the fair value of the liability, after accounting for the above cash payments
of GBP358,000, amounts to GBP592,000, which has been charged to finance expense
in the period.
Prior to completion of the disposal of the Carewatch business on 3rd October
2008, the GBP60,000,000 notional borrowings of the two contracts were at most
times similar to the overall level of actual net borrowings held by the Group.
The contracts therefore provided a hedge against the effect of interest rate
movements on the Group's actual borrowings, although the precise effectiveness
of this was tempered to some extent by the contracts being referenced to
three-month LIBOR rates whereas interest rates payable on actual borrowings are
linked to either bank base rates or one-month LIBOR rates, both of which are
generally lower. However, since the Carewatch disposal which realised initial
gross cash consideration of GBP37,000,000 before expenses, actual Group
borrowings have been significantly reduced. This differential could have been
eliminated or reduced at any time since then by a cash settlement, paid to one
or both of the banks, thereby cancelling a sufficient proportion of the
contracts to bring the continuing notional borrowing broadly into line with
actual or projected actual borrowings. Any cash settlement to be made would have
been equivalent to the then fair value of the cancelled contract, which should
in turn have been equivalent to the respective discounted net present value of
the projected quarterly cash payments that would have arisen had the contracts
continued.
No such cancellation was effected in the period between 3rd October 2008 and 5th
July 2009, notwithstanding the general policy adopted of not using any financial
instrument to enter into what could be regarded as speculative positions. In the
opinion of the directors, it would not have been, and still is not, in the
interests of the Group to have to settle the associated cash payments required.
9. Employment benefit liabilities
The actuarial deficits on the Group's two defined benefit pension schemes total
GBP11,834,000. A reconciliation of the movement between the beginning and end of
each period is as follows:
+---------+------------------------------------+--------------+------------+------------+
| | | Six months | Six months | Year to |
| | | to | to | |
+---------+------------------------------------+--------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------+------------------------------------+--------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+---------+------------------------------------+--------------+------------+------------+
| At the start of the period | 8,721 | 6,372 | 6,372 |
+----------------------------------------------+--------------+------------+------------+
| Contributions paid | (1,476) | (2,220) | (3,658) |
+----------------------------------------------+--------------+------------+------------+
| Current service cost | 77 | 226 | 447 |
+----------------------------------------------+--------------+------------+------------+
| Finance charge/(credit) | 209 | (110) | (223) |
+----------------------------------------------+--------------+------------+------------+
| Actuarial loss | 4,303 | 1,994 | 5,783 |
+----------------------------------------------+--------------+------------+------------+
| | | | | |
+---------+------------------------------------+--------------+------------+------------+
| Total liability at the end of the period | 11,834 | 6,262 | 8,721 |
+----------------------------------------------+--------------+------------+------------+
| | | | | |
+---------+------------------------------------+--------------+------------+------------+
| | | | | |
+---------+------------------------------------+--------------+------------+------------+
| Liabilities estimated to be settled after | 9,404 | 3,832 | 6,291 |
| more than one year | | | |
+----------------------------------------------+--------------+------------+------------+
| Liabilities estimated to be settled within | 2,430 | 2,430 | 2,430 |
| one year | | | |
+----------------------------------------------+--------------+------------+------------+
| | | | | |
+---------+------------------------------------+--------------+------------+------------+
| Total liability at the end of the period | 11,834 | 6,262 | 8,721 |
+---------+------------------------------------+--------------+------------+------------+
The factors affecting the increase in the combined deficits from GBP8,721,000 at
31st December 2008 to GBP11,834,000 at 5th July 2009 were the actuarial loss of
GBP4,303,000 plus other net increases of GBP90,000, offset by deficit reduction
payments made of GBP1,280,000.
10. Property provisions
The Group has a number of properties that are either vacant or sublet at a
discount. Provision has been made in these cases for onerous lease costs taking
into account estimates of the length of time properties will be vacant (net of
any potential sublease income where this can be estimated with a high degree of
probability), together with any dilapidation costs and other costs associated
with the termination or disposal of leases. In determining the provision for
vacant properties, the cash flows have been discounted using the Group's
weighted average cost of capital. The estimates used in determining the
appropriate level of provision represent management's best view of likely market
conditions after taking external advice. Actual activity may differ from these
estimates due to the effect of changes in the property market or subsequent
business decisions. These differences may have a material impact on the
provisions established for these matters.
Provision has also been made in respect of lease dilapidation obligations
relating to properties that continue to be occupied.
The composition of the property provision is as follows:
+---------+--------------------------------------+------------+------------+------------+
| | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------+--------------------------------------+------------+------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+---------+--------------------------------------+------------+------------+------------+
| Relating to vacant or sublet properties: | | | |
+------------------------------------------------+------------+------------+------------+
| Onerous lease provision | 2,023 | 989 | 2,351 |
+------------------------------------------------+------------+------------+------------+
| Dilapidations | 786 | 200 | 720 |
+------------------------------------------------+------------+------------+------------+
| | | | | |
+---------+--------------------------------------+------------+------------+------------+
| Relating to vacant or sublet properties | 2,809 | 1,189 | 3,071 |
+------------------------------------------------+------------+------------+------------+
| Relating to properties that continue to be | 1,173 | 1,155 | 1,132 |
| occupied | | | |
+------------------------------------------------+------------+------------+------------+
| | | | | |
+---------+--------------------------------------+------------+------------+------------+
| Total provisions at the end of the period | 3,982 | 2,344 | 4,203 |
+------------------------------------------------+------------+------------+------------+
| | | | | |
+---------+--------------------------------------+------------+------------+------------+
| Analysed as: | | | |
+------------------------------------------------+------------+------------+------------+
| Provisions estimated to be settled after more | 2,540 | 1,139 | 3,055 |
| than one year | | | |
+------------------------------------------------+------------+------------+------------+
| Provisions estimated to be settled within one | 1,442 | 1,205 | 1,148 |
| year | | | |
+------------------------------------------------+------------+------------+------------+
| | | | | |
+---------+--------------------------------------+------------+------------+------------+
| Total provisions at the end of the period | 3,982 | 2,344 | 4,203 |
+---------+--------------------------------------+------------+------------+------------+
11. Claims in respect of clinical incidents
By the nature of the operations carried out by the Primary Care business
segment, the Group from time to time receives notification of clinical incidents
which could conceivably lead to claims for damages being made against the Group
on the grounds of negligence or other reasons. In the majority of cases such
incidents, having been notified, do not in fact lead to a claim being made. Even
if claims are made, they may be laid against parties other than the Group. In
any event, even if claims are ultimately laid against the Group, they will
generally be covered by the Group's insurers subject only to relatively minor
excesses. Nonetheless it is possible that in certain circumstances the Group
could face a material liability when presented with such claims. Time lags
between an original incident and a claim being submitted could typically be long
so at any point in time the likelihood of the Group facing such a liability may
be difficult to assess.
At 5th July 2009 and 31st December 2008, there were two such claims outstanding
where, in the opinion of directors, it was more likely than not that a liability
will fall on the Group. The claims arose from incidents that took place in 2001
and 2004. In one case, any liability that does arise would be shared with a
third party. Assessment of the likely eventual liabilities that may arise from
these two claims is difficult for the reasons set out above. Nonetheless at 31st
December 2008, having taken appropriate external advice, directors concluded
that the most likely outcome, out of a wide range of possible outcomes, was that
an eventual liability of GBP3,350,000 would fall on the Group for the two claims
combined. A provision was accordingly made for this amount. In the six month
period to 5th July 2009, an amount of GBP74,000 has been utilised against this
provision. No further charges have been made to the income statement in this
period. The provision as at 5th July 2009 therefore amounts to GBP3,276,000.
12. Share capital
The total number of 10p ordinary shares in issue, and also the number of total
voting rights, was 112,844,209 at both 1st January 2009 and 5th July 2009.
13. Notes to the cash flow statement
+---------+----------------------------------+------+--------------+------------+------------+
| | | | Six months | Six months | Year to |
| | | | to | to | |
+---------+----------------------------------+------+--------------+------------+------------+
| | | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------+----------------------------------+------+--------------+------------+------------+
| | | | GBP000 | GBP000 | GBP000 |
+---------+----------------------------------+------+--------------+------------+------------+
| Reconciliation of profit to cash generated from | | | |
| operations | | | |
+---------------------------------------------------+--------------+------------+------------+
| Profit for the period | | 2,675 | 2,455 | 30,352 |
+--------------------------------------------+------+--------------+------------+------------+
| | | | | | |
+---------+----------------------------------+------+--------------+------------+------------+
| Adjustments for: | | | | |
+--------------------------------------------+------+--------------+------------+------------+
| Tax expense | | 357 | 966 | 1 |
+--------------------------------------------+------+--------------+------------+------------+
| Finance income | | (126) | (573) | (238) |
+--------------------------------------------+------+--------------+------------+------------+
| Finance expense | | 1,235 | 2,461 | 6,233 |
+--------------------------------------------+------+--------------+------------+------------+
| Share-based payments | | 341 | 149 | 456 |
+--------------------------------------------+------+--------------+------------+------------+
| Amortisation of intangible assets | | 63 | 194 | 374 |
+--------------------------------------------+------+--------------+------------+------------+
| Depreciation of property, plant and | | 592 | 738 | 1,411 |
| equipment | | | | |
+--------------------------------------------+------+--------------+------------+------------+
| (Gain)/loss on sale of property, plant and | | (1) | 3 | (1) |
| equipment | | | | |
+--------------------------------------------+------+--------------+------------+------------+
| Loss/(gain) on sale of operations | | 259 | - | (31,056) |
+--------------------------------------------+------+--------------+------------+------------+
| | | | | | |
+---------+----------------------------------+------+--------------+------------+------------+
| Changes in working capital: | | | | |
+--------------------------------------------+------+--------------+------------+------------+
| (Increase)/decrease in trade and other | | (739) | 3,033 | 3,329 |
| receivables | | | | |
+--------------------------------------------+------+--------------+------------+------------+
| Increase/(decrease) in trade and other | | 595 | (222) | 1,597 |
| payables | | | | |
+--------------------------------------------+------+--------------+------------+------------+
| Decrease in provisions | | (1,829) | (2,099) | (1,538) |
+--------------------------------------------+------+--------------+------------+------------+
| | | | | | |
+---------+----------------------------------+------+--------------+------------+------------+
| Cash generated from operations | | 3,422 | 7,105 | 10,920 |
+--------------------------------------------+------+--------------+------------+------------+
| | | | | | |
+---------+----------------------------------+------+--------------+------------+------------+
| | | | Six months | Six months | Year to |
| | | | to | to | |
+---------+----------------------------------+------+--------------+------------+------------+
| | | | 05.07.2009 | 04.07.2008 | 31.12.2008 |
+---------+----------------------------------+------+--------------+------------+------------+
| | | | GBP000 | GBP000 | GBP000 |
+---------+----------------------------------+------+--------------+------------+------------+
| Reconciliation of net cash flow to movement in | | | |
| net debt | | | |
+---------------------------------------------------+--------------+------------+------------+
| Decrease in cash and cash equivalents | | (69) | (261) | (461) |
+--------------------------------------------+------+--------------+------------+------------+
| Decrease in loans from banks | | 2,000 | 4,000 | 37,000 |
+--------------------------------------------+------+--------------+------------+------------+
| Decrease in bank overdrafts | | 235 | 97 | 2,413 |
+--------------------------------------------+------+--------------+------------+------------+
| | | | | | |
+---------+----------------------------------+------+--------------+------------+------------+
| | | | 2,166 | 3,836 | 38,952 |
+---------+----------------------------------+------+--------------+------------+------------+
| Net debt at the beginning of the period | | (19,016) | (57,968) | (57,968) |
+--------------------------------------------+------+--------------+------------+------------+
| | | | | | |
+---------+----------------------------------+------+--------------+------------+------------+
| Net debt at the end of the period | | (16,850) | (54,132) | (19,016) |
+---------+----------------------------------+------+--------------+------------+------------+
14. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. The Group had no material transactions with other related parties during
the period.
There have been no material changes to the nature of the related party
transactions as described in the last Annual Report.
15. Announcements
This announcement is being sent to all shareholders and is available at the
Company's registered office: Allen House, Station Road, Egham, Surrey, TW20 9NT,
and on the Company's website: www.nestorplc.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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