RNS Number:1385U
Montpellier Group PLC
13 January 2004
MONTPELLIER GROUP PLC
("Montpellier" or the "Group")
Preliminary results for the year ended 30 September 2003
Montpellier is a construction and property Group listed on the Alternative
Investment Market
Financial Highlights
* Group turnover of #434m (2002: #445m)
* Profit before tax of #4.7m (2002: #4.9m)
* Profit after tax of #5.7m (2002: #5.2m)
* Basic earnings per share of 7.27p (2002: 7.25p)
* Strong cash at bank position at year end of over #20m
* Total dividend for the year of 1.65p, an increase of 50%
Significant Group restructuring
* Successful sale of Investment Division
* Sale of non-core, underperforming construction businesses
* Procedural and management changes in Construction Division
implemented
Commenting on the results, Paul Sellars, Group Managing Director, said:
"While the results for the year are a little disappointing, we have now
completed the restructuring of the business, which is wholly focused on
construction with revenue continuing to be generated from our property
interests.
"We have initiated significant procedural and management changes which should
result in improved performance going forward. The newly strengthened Board is
confident that the platform is now in place to grow the business in line with
the Group's strategy."
13 January 2004
ENQUIRIES:
Montpellier Group Tel: 020 7522 3200
Paul Sellars, Group Managing Director
College Hill Tel: 020 7457 2020
Matthew Gregorowski
CHAIRMAN'S STATEMENT
This has been a year of restructuring for the Group. The Construction Division
has performed below expectations with problems experienced in certain operating
companies. Changes in management and controls have now been implemented. Since
the year-end the Investment Division has been sold leaving the new management
team to focus on the core construction business. Cash remains strong with #20.1m
in the bank at 30 September 2003 (2002: #6.4m) boosted by further property
disposals. The Group continues to manage its pension liability and is confident
of a long-term resolution of this issue. Dividend for the full year is 1.65p per
share, an increase of 50% over last year.
Financial Review
Turnover for the year was #434m (2002: #445m). Profit before tax for the year
was #4.7m (2002: #4.9m) and profit after tax was #5.7m (2002: #5.2m).
Basic earnings per share for the year were 7.27p (2002: 7.25p).
Dividend
The Board has carefully considered the future dividend strategy for the Group.
It believes that a healthy sustainable dividend forms an important part of the
future return to shareholders, and is confident that strong dividend growth can
be maintained, in line with trading performance.
A final dividend of 1.15p per Ordinary Share will be paid to shareholders on the
Register on the 13 February 2004 payable on the 12 March 2004. This, together
with the interim dividend of 0.5p, gives a total dividend for the year of 1.65p,
an increase of 50% over last year.
Sale of Investment Division
On 16 September I wrote to you outlining the terms under which it had been
agreed to sell the Investment Division to Browallia for a consideration of #4.1m
of cash and Loan Notes and the purchase for cancellation by Montpellier of 20
million Montpellier shares, owned by Browallia, at 40p per share.
Whilst the Investment Division had been successfully established as a profit
centre, your Board considered that the inherent risks and unpredictable timing
of the returns from its investments were incompatible with the Group's
objectives of delivering consistent and sustainable growth in earnings and
dividends to shareholders. It was felt that disproportionate cash and
management resource was committed to the Investment Division, and that the
diversity of the Group's investments in other quoted companies was also
restricting its ability to develop a wider following within the investment
community.
The Board therefore determined that Montpellier should focus its resources on
improving the profitability and growth of its core construction business, and
managing its property assets in the UK and the USA. In its new form, Montpellier
sits comfortably within the Construction Sector of quoted companies.
The transaction was approved by shareholders on 20 October 2003. As a result,
Browallia's shareholding has reduced from approximately 51% to approximately
34%. This change should also contribute to the desired broadening of the
Group's shareholder base.
Construction Division
The YJL Construction Division had a disappointing result, reporting an operating
profit for the period of #3.0m (2002: #5.8m).
The decline in profitability was due to a number of problem contracts in the YJL
Construction, Allenbuild Midlands and Allenbuild North East operating
subsidiaries. The Board has reviewed these contracts and consider that the
problems stemmed from the initial acceptance of work and pricing process that
lead to ongoing difficulties in contract performance. To prevent such problems
in the future, management changes have been introduced in certain companies as
considered necessary.
Turnover of #434m (2002: #445m) was down slightly on the previous year in line
with the strategy of reducing the Group's exposure to large residential
construction projects.
The Group has made provision for the costs of settling two central London
residential contracts, and I am glad to report that since the year end these two
disputes have been resolved with no further provisions required. The Group is
also engaged in an arbitration claim in respect of another central London
residential development. Management is confident of a successful outcome on the
total claim, which will ensure full recovery of amounts recorded in the accounts
- although settlement is not likely before the end of 2004.
Losses were also sustained in certain smaller subsidiaries, acquired or started
during the past three years. Four of these unprofitable and non-core enterprises
have been divested, and the Group has also sold its 30% shareholding in McLaren
Construction for its book value. These businesses are shown as discontinuing in
the results for the year.
The established businesses continued to develop satisfactorily and profitably,
assisted by a planned increase in publicly funded work. These businesses have
strong niche positions in their respective markets, and have good growth
prospects at satisfactory margins. In particular Bullock, Walter Lilly, VHE and
Britannia have continued to build their businesses and are projecting further
growth in both turnover and margins.
Roger Feast, the Chief Executive of the Construction Division, left the Group on
31 October 2003 and Paul Sellars, Group Managing Director, assumed direct
responsibility for the Construction Division with new regional responsibilities
vested in John Gaffney, Managing Director of Bullock Construction and Philip
Underwood, Managing Director of VHE who have been appointed to the Group Board.
Their many years' experience in the construction sector will significantly
strengthen the management of the Construction Division.
The results in the past year were undoubtedly a setback for the Group's core
Construction Division as a whole, which did not achieve the level of return that
was planned. Your Board believes that the management restructuring and improved
controls already implemented will result in enhanced future performance, in line
with the Group's long-term strategy.
Property Division - UK
Good progress has continued in the disposal of property assets, including the
sale, in excess of book value, of 38 acres of land in South Yorkshire which was
acquired with the VHE business. Two pre-let office schemes in Wigan and Leeds
have been sold. A distribution depot pre-let to DHL in Perth, Scotland has also
been sold.
The history of cash collections on mortgage debtors combined with the increasing
value of the underlying mortgaged property portfolio enabled the Group to
release provisions of #1.1m in this year (2002: #1.2m) whilst maintaining a
reasonable provisioning policy against mortgage debtor exposure.
America
The American land development business has performed well during the year with
further profits of #3.5m recognised through the release of provisions that are
no longer required on the basis of expected future cashflows. It is pleasing to
see that after many years of investment the potential of the land portfolio is
steadily being realised, with real benefits to future cash-flow and profits
expected, although the Group continues to maintain a reasonable level of
provisions to reflect the long-term nature of the realisation of the land
portfolio.
Two significant planning consents have been achieved. The first, at Center 9500
in Maryland, where consent has been received for a Seniors development adjoining
Route 95. The entire site is now under contract and the first receipt of funds
should be in November 2004. The second, at the Tilghman Island waterside
development on the Chesapeake Bay where consent has been granted for a further
54 residential units which will form the third phase of this prestigious and
valuable development. The first phase was completed in 2002 and the majority of
the second phase has now also been sold.
Cash
As at the year end the Group cash at bank position was #20.1m (2002: #6.4m). The
net cash funds at the year end were #5.0m (2002: net borrowings #2.8m). Strong
cash management continues to be a cornerstone of the Group's future strategy.
Pensions
In common with many other long established businesses the Group has a
substantial final salary scheme. Management has worked very closely with the
Trustees over recent years to manage the Group's exposure to the scheme. The
Group closed scheme membership to new employees several years ago. A further
decision was taken in 2001 to close the scheme to all active members other than
those retiring within five years.
The Group continues to account for pension costs in accordance with SSAP24. The
last SSAP24 valuation was carried out in March 2000. The Board took the view
that the next valuation should take place at 30 September 2003 in line with the
Group's accounting date. The 30 September 2003 SSAP24 evaluation shows a deficit
of #34.2m compared to the March 2000 deficit of #6.6m. Using similar assumptions
the FRS17 valuation as at the same date shows a deficit of #33.2m (September
2002: deficit #7.8m).
The movements in both the SSAP24 and FRS17 deficits are principally due to the
combined effect of a downward movement in asset values following the trend of
stock markets in the period, lower interest rates and increasing liability
dictated by updated mortality rates.
The rules of the defined benefit scheme provide that the Group is only obligated
to fund the scheme to the level required by the minimum funding requirement
(MFR) regulations. As at March 2003 the scheme actuary has calculated an MFR
deficit of #8.6m on the scheme assets of #113m. The MFR deficit is being paid
in accordance with MFR requirements and scheme rules over a period of 10 years,
with #1m being paid in 2003.
The total pensions charge for the year was #4.5m (2002: #2.5m) of which #2.8m
was in respect of the defined benefit scheme. This includes an appropriate
charge to reflect the spreading of the 30 September 2003 SSAP24 deficit in
accordance with the requirements of that standard.
It is the view of the Board that the short-term measurement of pension scheme
assets and liabilities, and the accounting for pensions under either SSAP24 or
FRS17, is inconsistent with the long-term relationship between the Group and the
pension scheme. The Board continues to work actively to reduce the Group's
exposure to the pension scheme and these actions combined with the recent upward
movements in stock markets and the current upward pressure on interest rates are
expected to reduce the pensions deficit in future periods.
Employees
On behalf of the Board I would like to take the opportunity to thank all
Montpellier Group employees for their dedication and hard work during the past
year.
Board Of Directors
Shortly after the year-end under review, there were significant changes to the
Group Board.
Roger Feast, Chief Executive of the YJL Construction Division, resigned from the
Board on 3 October 2003, in order to pursue his negotiations for the purchase of
three small businesses from the Group. Mr Feast subsequently left the Group on
31 October.
John Gaffney, (53) Managing Director of Bullock Construction, was appointed to
the Board on 3 October 2003, with additional responsibility for the Midland
companies.
Philip Underwood, (50) Managing Director of the VHE Group, was appointed to the
Board on 3 October 2003, with additional responsibility for the Northern
companies.
Roy Harrison, (56) a former Chief Executive of Tarmac plc, was appointed to the
Board on 19 November 2003 as a non-executive Director. Mr Harrison chairs the
Audit Committee and is a member of the Remuneration and Nominations Committees.
Arnold Wagner, OBE, (54) Director, Human Resources at Smiths Group plc, was
appointed to the Board on 19 November 2003 as a non-executive Director. Mr
Wagner chairs the Remuneration and Nominations Committees, and is a member of
the Audit Committee.
I am delighted to welcome the four new Directors to the Group Board, to which
they will contribute much experience.
Outlook
The Group is now a focused construction business supported by profits and cash
flows generated from its property assets. Although 2003/2004 will be a
challenging year for the new management team, I am confident that they will
succeed in realising the potential of the Group's businesses and assets.
Our strategy is to concentrate on improving the profitability of our core
businesses. We have the financial resources and the management team to acquire
further specialist and well established construction businesses, and shall
continue to seek new opportunities to strengthen the Group.
Cedric Scroggs
CHAIRMAN
Group Profit & Loss Account
Notes Total Total
For the year ended 30 September 2003 2002
#000 #000
Turnover: Group ongoing operations and share of joint ventures 425,283 441,240
Less share of joint ventures' turnover (2,473) (2,621)
Ongoing operations 422,810 438,619
Discontinuing operations 11,246 6,616
Total continuing operations 434,056 445,235
Discontinued operations 0 0
Group turnover 434,056 445,235
Cost of sales (399,776) (409,306)
Gross profit 34,280 35,929
Administrative expenses (36,675) (32,584)
Other operating income 5,477 756
Group operating profit 3,082 4,101
Income from joint ventures 0 0
Share of associates' profit / (loss) 521 (426)
Recognition of goodwill on associates 1,191 1,251
Ongoing operations (454) 5,981
Discontinuing operations (1,407) (1,815)
Total continuing operations (1,861) 4,166
Discontinued operations 6,655 760
Total operating profit before interest, including share of joint 4,794 4,926
ventures and associates
Share of associates' exceptional profits 1 1,222 0
Loss on disposal of discontinued operations 1 (335) 0
Profit on ordinary activities before interest 5,681 4,926
Bank interest receivable 639 703
Interest payable (1,076) (639)
Share of associates' interest payable (561) (139)
Profit on ordinary activities before taxation 4,683 4,851
Taxation receivable on ordinary activities 2 1,123 393
Share of associates' taxation payable 2 (93) (30)
Profit for the financial year before minority interests 5,713 5,214
Minority interests 0 (147)
Profit for the financial year 5,713 5,067
Dividends 3 (1,077) (862)
Retained profit for the financial year 4,636 4,205
Basic earnings per Ordinary Share 4 7.27p 7.25p
Diluted earnings per Ordinary Share 4 7.19p 7.13p
Group Statement of Total Recognised Gains & Losses
Total Total
For the year ended 30 September 2003 2002
#000 #000
Profit for the financial year 5,713 5,067
Exchange movements in reserves (96) (63)
Prior year adjustment (FRS19 implementation) 0 82
Total gains recognised since last annual report 5,617 5,086
There are no material differences between the profit as reported and on an unmodified historical cost basis.
Group Balance Sheet
At 30 September 2003 2003 2002
#000 #000
Restated
Fixed assets
Intangible assets: Goodwill 5,209 5,811
Tangible assets 18,963 19,226
Investments 32 30
Investments in joint ventures:
Loans to joint 1,811 526
ventures
Share of gross 17,983 18,832
assets
Share of gross (11,469) (12,136)
liabilities
8,325 7,222
Investments in associated undertakings 0 8,295
32,529 40,584
Current assets
Stocks and work in progress 13,460 22,868
Debtors: due after more than one year 14,297 10,340
Debtors: due within one year 85,020 81,748
Current asset investments 17,283 6,488
Cash at bank and in hand 20,144 6,446
150,204 127,890
Creditors: amounts falling due in less than one year (129,255) (117,142)
Net current assets 20,949 10,748
Total assets less current liabilities 53,478 51,332
Creditors: amounts falling due after more than one
year
Long-term debt (8,363) (8,363)
Other creditors (4,685) (8,635)
Provisions for liabilities and (1,500) 0
charges
(14,548) (16,998)
Net assets 38,930 34,334
Capital and reserves
Share capital 7,881 7,838
Share premium account 5,795 5,782
Revaluation reserve 73 73
Capital reserve 1,846 1,846
Profit and loss account 23,335 18,795
Equity shareholders' funds 38,930 34,334
Group Cash Flow Statement
Total Total
For the year ended 30 September 2003 2002
#000 #000
Net cash inflow from operating activities 4,700 6,520
Returns on investments and servicing of finance
Interest received 1,203 181
Interest paid (1,439) (276)
(236) (95)
Taxation
Net corporation tax received/ (paid) 569 (332)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (1,840) (2,526)
Payments to acquire current asset investments (6,082) (5,517)
Payments to acquire other investments (2) 0
Proceeds on sale of tangible fixed assets 285 1,184
Proceeds on sale of current asset investments 2,196 491
Loans (advanced to)/ repaid by joint venture (212) 830
(5,655) (5,538)
Acquisitions and disposals
Payments to acquire subsidiary undertakings and 0 (11,740)
connected assets
Cash acquired on acquisition of subsidiaries 0 532
Payments to acquire associated undertakings (251) (3,571)
Receipt from sale of associate 9,467 0
9,216 (14,779)
Equity dividends paid to shareholders (865) (1,001)
Cash inflow/(outflow) before use of liquid resources and financing 7,729 (15,225)
Management of liquid resources
Decrease in liquid resources 1,890 2,883
Financing
Issue of share capital 56 4
Acquisition of own shares 0 0
Movement in short-term borrowings 6,110 (5,168)
Movement in long-term borrowings 0 7,973
Finance lease payments (197) (440)
5,969 2,369
Increase / (decrease) in cash during the year 15,588 (9,973)
1. EXCEPTIONAL ITEMS
2003 2002
#000 #000
Share of Associates' exceptional profits 1,222 0
Loss on disposal of discontinued operations (335) 0
The share of associates' exceptional profits represents the Group's share of the
profits on the sale of subsidiary undertakings, fixed asset investments or other
fixed assets by the associates.
The loss on disposal of discontinued operations represents the excess of the
carrying value of the Group's investment in associate undertakings over the
proceeds received on the disposal of the investment division to Browallia that
was approved by the shareholders on 20 October 2003.
2. TAXATION
2003 2002
#000 #000
Current tax:
UK corporation tax on profits of the year 0 32
Adjustments in respect of previous periods 369 317
369 349
Foreign tax 10 5
Total current tax 379 354
Deferred tax 744 39
Group taxation 1,123 393
Share of associates' tax (93) (30)
Taxation receivable on profit on ordinary 1,030 363
activities
3. DIVIDENDS
2003 2002
Pence Pence
Interim dividend 0.50 0.50
Final dividend 1.15 0.60
Total dividend 1.65 1.10
#000 #000
Interim 395 392
Final 682 470
Total dividend 1,077 862
4. EARNINGS PER SHARE
2003 2002
Weighted Weighted
average number average number
Earnings of shares EPS Earnings of shares EPS
#000 000s Pence #000 000s Pence
FRS14 Basis
Basic earnings per share 5,713 78,589 7.27 5,067 69,893 7.25
Dilutive effect of options 0 891 (0.08) 0 1,137 (0.12)
Diluted earnings per share 5,713 79,481 7.19 5,067 71,030 7.13
5. PRELIMINARY STATEMENT
This preliminary statement, which has been agreed with the auditors, was
approved by the Board on 12 January 2004. It is not the Group's statutory
accounts. The statutory accounts for the year ended 30 September 2002 have been
delivered to the Registrar of Companies and received an audit report which was
unqualified and did not contain statements under s237(2) of the Companies Act
1985. The statutory accounts for the year ended 30 September 2003 have not yet
been approved, audited or filed.
This information is provided by RNS
The company news service from the London Stock Exchange
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