RNS Number:8492O
Birse Group PLC
14 July 2005
Date: Embargoed until 7.00am 14 July 2005
Contact: Peter Watson, Chairman Telephone: 01302 768078
Martin Budden, Group Managing Director
Gerry Roche, Group Finance Director
Birse Group plc
Sally Lewis Telephone: 020 7831 3113
Financial Dynamics
BIRSE GROUP plc - PRELIMINARY ANNOUNCEMENT
Birse Group plc, the construction and plant hire group today announces
preliminary results for the year ended 30 April 2005.
Financial Highlights:-
- Pre-tax pre-exceptional profits* #3.3million (2004: #6.6million).
- Pre-tax profits #370,000 (2004: #2million).
- Final dividend maintained at 1p per share.
- Net debt #20.2million (2004: Net cash #9.5million).
* Pre-tax profits before charging Citibank legal and related costs.
Operational Highlights:-
- Delayed contract starts defer production to future periods. As a result
Construction Division pre-exceptional operating profits fall to
#2.6million (2004: #4.4million).
- Record construction order book at #507million (2004: #467million) led by
Core Engineering businesses.
- The restructuring of Birse Build progresses broadly according to plan
although uncertainties remain. Pre-exceptional operating losses within
the year reduced to #7million (2004: losses of #8.7million).
- Litigation with Citibank to continue. Legal and related costs of
#2.9million (2004: #4.6million) charged as an exceptional operating item.
- Investment in the re-shaping of Birse Build, Citibank litigation costs
and contract start delays key factors behind cash outflows in the period.
- Sale of The Cabin Company Limited completed after the year end. Net
proceeds #5.3million, profit on disposal #1million.
"In our core engineering operations the transition to new customer procurement
practices has suppressed production volumes in the year and also reduced demand
for the hire of heavy duty plant. This lost production will however be
recovered in future periods. Therefore, with record order and enquiry levels in
our core operations combined with the quality of contract awards secured in the
year we continue to add impetus to the Group's underlying forward momentum."
M Budden P G Watson
CHAIRMAN'S STATEMENT
Results
Pre-tax profits of #370,000 compare with #2million reported in 2003/2004. Both
figures are materially affected by the costs relating to the Citibank
Litigation. In the year such costs totalled #2.9million (2003/2004:
#4.6million). Eliminating the effects of these exceptional operating items
gives rise to a pre-tax pre-exceptional profit of #3.3million compared with a
corresponding profit of #6.6million in 2003/2004.
Contracting profits at this level fell by #1.7million and Plant Hire by
#1.1million reflecting suppressed activity in the second half particularly in
the civil engineering sector. Higher average borrowings led to an increase in
the net interest charge of #552,000. These reversals were partially mitigated
by a small increase in the profits attributable to our curtailed Commercial
Property activities.
Contracting activities in the aggregate generated a pre-exceptional operating
profit of #2.6million (2003/2004: #4.4million). Civil Engineering's performance
was held back in the second half as operating profits for the year fell to
#8.5million (2003/2004: #12.6million) despite record order book levels.
Deferred contract starts meant that production planned for 2004/2005 has now
been re-scheduled for the current year. Furthermore and in common with the
sector, opportunities in rail were limited as the industry focused on the
selection of contracting partners for the next five years. In this regard the
Civil Engineering Division was particularly successful when two framework awards
were confirmed by Network Rail on 22 February 2005. Network Rail announced that
Birse Rail had been awarded two five year Framework Contracts, one in relation
to its existing arrangements in the Midlands, the other, a new appointment in
the North West. Both contracts commenced on 1 April 2005 and Network Rail has
projected a combined turnover of #45million in the first year of operation.
Pre-exceptional losses at Birse Build fell to #7million (2003/2004: #8.7million)
as we continue to reduce turnover (2004/2005: #61million, 2003/2004:
#110million) and re-focus our efforts mainly upon the local authority education
sector.
Birse Process increased its reported profits to #1.1million from #493,000 in
spite of lower levels of turnover (2004/2005: #40million, 2003/2004: #61million)
reflecting the ever increasing maturity of that business. Plant Hire results
fell to an operating profit of #1.4million (2003/2004: #2.5million) as weak
demand in the civil engineering sector adversely impacted upon the results
achieved by BPH Equipment. The Group's other plant hire business, The Cabin
Company Limited, was sold subsequent to the year end. This transaction is
commented upon in more detail below. Group Centre costs increased in line with
inflation to #541,000 (2003/2004: #521,000).
The Group's 2004/2005 interim report and the circular to shareholders in
connection with the sale of The Cabin Company Limited emphasised the ongoing
nature of the Citibank Litigation. In accordance with our stated policy the
costs associated with that litigation are written off if and when incurred and
charged in the aggregate as an exceptional operating item. The reported
#2.9million (2003/2004: #4.6million) exceptional item relates exclusively to
such costs. A more detailed commentary as to the status of the Citibank
Litigation is provided in the Review of Operations.
The net interest charge of #588,000 compares with #36,000 in 2003/2004. Net
bank debt at 30 April 2005 was #20.2million (30 April 2004: net cash of
#9.5million). This reflects mainly the negative impact upon cash flows
resulting from the restructuring of Birse Build, the costs relating to the
Citibank Litigation and the relatively low level of production in the Civil
Engineering Division at that time.
The Cabin Company Limited
The sale of the business and certain assets of The Cabin Company was completed
on 9 May 2005 after a resolution passed by Shareholders at an extraordinary
general meeting held on the same day. The background to and the reasons for the
disposal were set out in a document sent to Shareholders dated 22 April 2005.
In summary, this transaction enabled the Group to realise value in respect of a
business that had reached its full potential under our ownership. The net
proceeds raised of #5.3million and the resultant profit on disposal of #1million
before tax will be accounted for in 2005/2006. The net proceeds of the disposal
will be used primarily to reduce debt.
Dividend
The Board is recommending a final dividend of 0.625p per ordinary share (2003/
2004: 0.625p) maintaining the total dividend for the year at 1p per ordinary
share. Subject to the approval of shareholders at the Annual General Meeting
the final dividend is payable on 4 November 2005 to shareholders appearing on
the register at the close of business on 7 October 2005.
The Board
On 23 May 2005 the Board announced the appointment of Gerry Roche, Phil Harris
and Andrew Church as Group Finance Director, Group Strategic Human Resources
Director and Group Legal Director and Company Secretary respectively. At the
same time it was announced that Heather Craven was leaving the Group.
I take this opportunity to welcome Gerry, Phil and Andrew to the Board and also
to thank Heather for her efforts during what was a transitional period for the
Group. These appointments will provide the Board with a broader base of
specialist skills and place us in a better position to respond positively to
market opportunities as they arise. I am particularly pleased that the Board
has been strengthened by way of internal appointments given the strategic
importance that we place upon the development of our own managers.
Outlook
The Group continues to improve the overall quality of its business although it
remains exposed to the uncertainties existing in respect of the Citibank
Litigation and for the Group in respect of the Build business. Our strategic
withdrawal from the loss making sectors of the Build market and the consequent
restructuring of Birse Build have to date gone broadly to plan. In our core
engineering operations the transition to new customer procurement practices has
suppressed production volumes in the year and also reduced demand for the hire
of heavy duty plant. This lost production will, however, be recovered in future
periods. Therefore, with record order and enquiry levels in our core operations
combined with the quality of contract awards secured in the year we continue to
add impetus to the Group's underlying forward momentum.
GROUP MANAGING DIRECTOR'S REVIEW AND REVIEW OF OPERATIONS
Overview
It is encouraging that we were able to maintain our forward momentum in a year
when the uncertainties faced by the Group were compounded by the impact of
changing customer procurement practices. As referred to in the circular to
Shareholders relating to the sale of The Cabin Company the businesses most
affected were our Civil Engineering operations and BPH Equipment Limited. The
combination of early contractor involvement initiatives, regulatory reviews,
protocols relating to the award of long term framework contracts and public
private partnership arrangements impacted directly on the infrastructure, water,
rail and London Underground markets respectively. These procurement practices
are to be applauded as they lead to more efficient and value enhancing
contracting. It does mean, however, that the contractor is exposed to more
uncertainty as to when production starts under the contracts concerned and
therefore, when income is generated. When each of the customer procurement
approaches referred to occur at the same time production is severely disrupted.
This is essentially the situation faced by the Group during 2004/2005.
Whilst production levels were affected in our Civil Engineering Division this
production is not lost but merely deferred to future periods. Consequently for
this reason the year under review is regarded as a low base for activity levels
in Birse Civils Limited, Birse Rail Limited, Birse Water Limited, Birse Process
Engineering Limited and Birse Metro Limited. Each company had its turnover
suppressed by way of one or more of the procurement approaches referred to
above. These businesses are expected to benefit in the future from the
successes secured in the year under review.
Since BPH Equipment hire plant almost exclusively into the civil engineering
market demand for its products particularly in the second half has been at its
lowest for some five years. Moving forward it is also expected to improve from
this low base.
It is against this background that the pre-tax pre-exceptional profits reported
of #3.3million (2003/2004: #6.6million) should be viewed. The fall in profits
of #3.3million in the year derives from Contracting (#1.7million), Plant Hire
(#1.1million) and interest (#552,000) net of a small improvement in Commercial
Property (#174,000). The Contracting shortfall includes a #4.1million fall in
profits attributable to Civil Engineering and an improvement in the aggregate
results of the Build business and Process Engineering of #2.4million. The fall
in Plant Hire profits relates exclusively to BPH Equipment Limited.
Although production outputs in our core Civil Engineering businesses have
suffered in this period it is important to note that we have remained focused on
customers and markets which match with our competencies. We remain driven by
the principles embodied within our strategy. It is through matching customers
with competencies that we have achieved notable successes in the year, which
will stand the Group in good stead for the future. In particular Birse Rail was
awarded two five year framework contracts and Birse Civils has secured numerous
early contractor involvement and framework type contracts with government bodies
and local authorities. We have remained focused on understanding the
requirements of our customers and refused to be distracted by attempting to
utilise short term spare production capacity with work for one off customers
that does not fit with our capabilities. Our experience is that such a course
of action inevitably leads to disappointment. The other main strategic action
implemented in the year was the sale of the business and certain assets of The
Cabin Company Limited (completed on 9 May 2005). This was a business that under
the Group's ownership had reached its full potential. Consequently we were no
longer the best parent and therefore we sold the business in order to deliver
maximum value for shareholders. This was achieved with a sale to a new parent
who is in a position to continue the development of the business and also the
development of the management that went with the company whilst at the same time
realising good value for the Group. This transaction is also a good example of
the Group's abilities to build businesses and hence shareholder value, since The
Cabin Company Limited only commenced trading in 2002.
As was the case in the previous year all of the strategically important
achievements outlined above have been delivered at a time when senior management
had the additional challenge of managing the Citibank Litigation. A more
detailed narrative upon the status of that litigation is provided subsequently.
Given the high costs associated with this complex case and its importance we
continue to take action that the Directors consider best protects the position
of the Group.
We remain unconditionally committed to undertaking business only in a manner
that protects the safety of everyone associated with our operations. In this
respect we support our supply chain through training and audits. We also strive
to transfer best practice learning from operators engaged not only in our own
market place but also from other industries.
We continue to be driven by and reap the benefits of a strict application of our
strategy. In last year's annual report we stated that strategy is ten per cent
design and ninety percent implementation. Much implementation has been achieved
in the year the financial benefit of which will follow. It is, therefore, with
this progress in mind that we continue to view the future positively.
CONSTRUCTION
2005 2004
Turnover Operating profit* Turnover Operating profit*
#'000 #'000 #'000 #'000
Civil Engineering 231,555 8,485 241,388 12,601
Building 61,046 (7,021) 109,583 (8,719)
Process Engineering 40,265 1,165 60,629 493
332,866 2,629 411,600 4,375
Analysed between:-
First Half 185,995 1,015 197,647 301
Second Half 146,871 1,614 213,953 4,074
332,866 2,629 411,600 4,375
* Before exceptional operating item
Civil Engineering
Birse Civils Limited, Birse Metro Limited (a dedicated London Underground
business) and Birse Rail Limited collectively comprise the Civil Engineering
Division. Each business reported a fall back in results compared with the
previous year with Birse Metro actually loss making, as each business to one
degree or another operated below optimum production capacity levels as contract
start ups were delayed and therefore income generation suppressed. Birse Civils
Limited saw its turnover fall by #16million (12%) and Birse Metro by #10million
(50%). Whilst Birse Rail over the year increased its turnover by #15million
(18%) this was derived from a #25million increase in the first half less a
#10million fall in the second. Collectively therefore these businesses,
particularly in the second half, traded well below optimum production capacity
levels.
As explained in the interim statement the vast majority of activity undertaken
by Birse Civils now relates either to framework or early contractor involvement
type contracts. Both forms of working arrangements engage the contractor at the
initiation or concept stage of the project thereby reducing its overall risk
profile. However, the path from commencing work to starting construction is
that much longer and more complex. The start of the production phase of these
projects is therefore susceptible to delay compared with traditional forms of
contracting. These delay factors have a direct impact on income generation.
This is only a timing issue not a permanent problem as production lost in one
year will be recovered in future periods. This is the scenario faced by Birse
Civils. At 31 May 2005 its order book stood at an all time high at #297million
which represents two and a half times the activity in 2004/2005. More
importantly the nature of this work is compatible with the value added customer
focused approach embedded in Birse Civils.
Birse Metro's activity levels fell to the lowest in its history as market
opportunities since the private public partnerships took over responsibility for
the maintenance of large parts of the London Underground infrastructure were
sparse particularly in the first half. As a result for the majority of the year
Birse Metro traded at a loss. Encouragingly it has achieved at least breakeven
in each of the last three months of the year as order intakes and production
increased. Already the value of the company's order book for 2005/2006 exceeds
the turnover delivered in the whole of the year under review. However, order
intakes are still irregular and further penetration of the market is required
for reliable work flows to be generated and a return to the level of
profitability experienced in the past.
In the first half Birse Rail increased its activity levels compared with the
corresponding period in 2003/2004 as buoyant demand under its framework contract
with Network Rail was supplemented by a significant increase in the number of
enhancement awards. As anticipated activity fell away in the second half as
Birse Rail, along with the rest of the industry, focused on the renewal of long
term structures framework arrangements. Very significant management resources
were invested in winning this long term work. We were rewarded on 22 February
2005 when Network Rail announced that Birse Rail had been awarded two five year
framework contracts, one in relation to its existing arrangements in the
Midlands, the other, a new appointment in the North West. Both contracts
commenced on 1 April 2005 and early indications are that the combined turnover
of #45million projected by Network Rail in the first year of operation will
materialise. In parallel with the work done in securing these contracts Birse
Rail has had to implement certain organisational and management changes so that
it has the appropriate capabilities to meet the changing procurement practices
to be implemented by Network Rail. It is Network Rail's intention to introduce
more competition for work it lets outside its framework arrangements. The
changes made are so that Birse Rail can compete for and deliver this work in the
manner determined by its customer. It is important for Birse Rail moving
forward that it not only embeds these changes into its day to day operations but
also, and more importantly, that it remains focused on its customers'
requirements and alert to any changing needs that they might have as they arise.
Building
The final phase of the restructuring of Birse Build was described in last year's
review. That restructuring continues to progress in line with our expectations.
The withdrawal from those sectors of the market where Birse Build was unable
to generate reliable returns is evidenced by the fall in turnover from
#110million in 2003/2004 to the #61million now reported. Further reductions are
expected in 2005/2006. Previously we have stated that because of the costs
associated with the reorganisation of the business combined with the work out to
completion of low margin and other legacy contracts in the Midlands and the
South that Birse Build would incur material losses. Losses in the year at
#7million are #1.7million down on the previous year. With regard to the wind
down of those contracts in the Midlands and South of the three remaining live at
the year end only one is expected to continue to any material extent into 2005/
2006. The focus thereafter on these and other contracts completed over the
recent years will switch from operational closure to commercial closure. The
costs of supporting these legacy issues and the ongoing reorganisation costs
combined with the low margins on work out projects means that we expect Birse
Build to continue to incur material losses in 2005/2006. Therefore, there is
uncertainty for the Group in relation to the performance of Birse Build. On a
more positive note that part of the business based in the North focusing on the
local education authority sector continues to trade profitably albeit at low
levels.
Process Engineering
At the half year it was reported that Birse Process had suffered subdued demand
from its key water customers as a result of the cyclical impact of the
regulatory price reviews to which the UK Water Industry is subjected.
Furthermore opportunities in water in the second half would be fewer than the
first. This proved to be the case. It is therefore all the more creditable
that in these circumstances Birse Process was able to report an increase in
profits to #1.1million (2003/2004: #493,000). This improved performance is
reflective of the higher value engineering led design and construct proposition
offered by the business and the consequent increase in the number of non water
customers. With markets previously the domain of others now opening up to Birse
Process and given the completion of the water regulatory reviews market
opportunities in 2005/2006 are expected to increase and prospects improve for a
business that is of increasing strategic importance to the Group.
Order Book
At the end of May 2005 secured workload on a consolidated basis stood at
#507million (31 May 2004: #467million). Excluding Build orders secured workload
at the same date was #477 million (31 May 2004: #400million) which further
illustrates the extent that foundations have been put in place in 2004/2005 for
the benefit of future years.
Amounts Recoverable on Contracts
Included in debtors at 30 April 2005 is an aggregate value of #7.1million (2004:
#7.1million) attributable to two (2004: two) contracts which at that time
remained the subject of arbitration or equivalent proceedings. As described in
Note 8 in respect of those contracts recoverability of value remains uncertain.
Citibank Litigation
The background to this litigation was provided in the interim report and further
details given in the circular to shareholders dated 22 April 2005 in respect of
the disposal of the business and certain assets of The Cabin Company Limited.
In summary, this litigation is sourced in an adjudication process which the
adjudicator determined on 24 February 2004. That determination awarded Citibank
#2.1million against its claim for approximately #16million.
A challenge to the adjudicator's decision was subsequently lodged with the
Technology and Construction Court. A final hearing is set to commence in
October 2005 with a decision thereafter. The Directors have been advised that
the Group has realistic prospects in the litigation of reducing the award of
#2.1million made by the adjudicator in the adjudication.
The exceptional operating item in the period of #2.9million (2003/2004:
#4.6million) reflects the legal and related costs incurred in the period in
relation to the litigation process described. Costs, if and when incurred, will
continue to be written off and where appropriate charged as an exceptional
operating item.
We are acutely aware of and business sensitive to the high costs associated with
running this type of extremely complex litigation. To date attempts to secure a
negotiated full and final settlement have failed. Appropriate channels of
communication with Citibank are in place so that a dialogue can be maintained.
It is important however that we continue to take actions that we consider best
protect the position of the Group.
PLANT HIRE
2005 2004
Turnover Operating profit Turnover Operating profit
#'000 #'000 #'000 #'000
Crawler Cranes 3,122 464 4,183 1,480
Piling Equipment 621 6 612 172
Site Accommodation 5,161 947 4,793 884
8,904 1,417 9,588 2,536
Analysed between:-
First Half 4,818 1,167 5,021 1,708
Second Half 4,086 250 4,567 828
8,904 1,417 9,588 2,536
The Crawler Crane and Piling Equipment operations trade as divisions of BPH
Equipment Limited and our Site Accommodation business operated as The Cabin
Company Limited
Crawler Cranes and Piling Equipment
Crawler cranes and piling equipment are mainly hired into the civil engineering
construction market. Furthermore by the nature of the activities to which such
plant relates demand at the start of contracts is high and diminishes thereafter
as projects come out of the ground. As explained in respect of our own Civil
Engineering activities a multitude of market factors have been in play in 2004/
2005 which collectively have severely depressed demand for BPH's products. In
consequence market conditions have been as depressed as at anytime in the last
five years. However, as the general civil engineering market re-engages and
contract start ups increase, plant utilisation levels will quickly improve.
The market conditions experienced in the year also illustrate the importance of
concentrating investment in BPH's crawler crane fleet on hydraulic machines
since demand for mechanical cranes has all but disappeared. During the year BPH
accelerated the restructuring of its fleet with the sale of six mechanical
machines overseas and the shipping of five others to the Middle East for hire.
Site Accommodation
The sale of the business and certain assets of The Cabin Company Limited was
completed on 9 May 2005. The disposal raised net proceeds of #5.3million and
gave rise to a profit on disposal of #1million. Given that the sale was
completed shortly after the year end its financial consequences will be
incorporated in and benefit the accounts prepared for 2005/2006.
COMMERCIAL PROPERTY
2005 2004
Turnover Operating profit Turnover Operating profit
#'000 #'000 #'000 #'000
926 381 305 207
Analysed between:-
First Half 750 437 - -
Second Half 176 (56) 305 207
926 381 305 207
Turnover and profit in the year reflects the crystallisation of contingent
consideration less related costs arising in respect of contracted sales in prior
years.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the Year Ended 30 April 2005
2005 2004
#'000 #'000
Note
Turnover 1 340,523 417,355
Cost of sales:
Ordinary trading (314,102) (384,140)
Exceptional operating item 2 (2,928) (4,600)
(317,030) (388,740)
Gross profit 23,493 28,615
Administrative expenses (22,535) (26,618)
Operating profit 1 958 1,997
Net interest (588) (36)
Profit on ordinary activities before
taxation 1 370 1,961
Taxation 3 - 912
Profit for the financial year 370 2,873
Dividends on equity shares 4 (1,924) (1,924)
(Withdrawn from)/transferred
to reserves (1,554) 949
Earnings per ordinary share
- basic 5 0.2p 1.5p
- diluted 5 0.2p 1.5p
- before exceptional items
- basic 5 1.3p 3.2p
- diluted 5 1.3p 3.2p
The above figures relate exclusively to continuing operations.
There is no material difference between the results disclosed and the results on
an unmodified historical cost basis.
CONSOLIDATED BALANCE SHEET
As at 30 April 2005
2005 2004
Note #'000 #'000
Fixed Assets
Tangible assets 14,644 16,285
Current Assets
Debtors 8 115,046 139,180
Investments 10,420 8,620
Cash at bank - 9,171
125,466 156,971
Creditors: Amounts falling due within one year 125,212 154,574
Net Current Assets 254 2,397
Total Assets Less Current Liabilities 14,898 18,682
Creditors: Amounts falling due after more than one year (6,291) (8,521)
Net Assets 8,607 10,161
Capital and Reserves
Called up share capital 19,239 19,239
Share premium account 93 93
Special reserve 308 308
Revaluation reserve 607 607
Profit and loss account (11,640) (10,086)
Shareholders' Funds - equity interest 8,607 10,161
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2005
Note 2005 2005 2004 2004
#'000 #'000 #'000 #'000
Net cash (outflow)/inflow from operating
activities 7 (27,843) 5,936
Returns on investments and servicing of
finance
Interest received 140 206
Interest paid (496) (185)
Interest element of finance lease rentals and
hire purchase contracts (77) (57)
Net cash outflow from returns on investments
and servicing of finance (433) (36)
Taxation
UK Corporation tax paid (165) (58)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,700) (3,841)
Increase in current asset investments - (3,374)
Sale of tangible fixed assets 2,535 183
Net cash inflow/(outflow) from investment
activities 835 (7,032)
Dividends paid to equity shareholders (1,924) (1,924)
Cash outflow before management of liquid
resources and financing (29,530) (3,114)
Management of liquid resources
Movements in cash deposits with terms in
excess of seven days (1,800) (125)
Net cash outflow from management of liquid
resources (1,800) (125)
Financing
Loan advances 405 1,224
Loan repayments (995) (901)
Capital element of finance lease rentals and
hire purchase contracts (144) (145)
Net cash (outflow)/inflow from financing (734) 178
Decrease in cash in the year (32,064) (3,061)
NOTES TO THE PRELIMINARY ANNOUNCEMENT OF RESULTS
For the year ended 30 April 2005
1. Segment information
(a) Turnover and results: Turnover Operating profit
2005 2004 2005 2004
#'000 #'000 #'000 #'000
Contracting 332,866 411,600 2,629 4,375
Plant Hire 8,904 9,588 1,417 2,536
Commercial Property 926 305 381 207
Group Centre - - (541) (521)
Intra-group (2,173) (4,138) - -
340,523 417,355 3,886 6,597
Exceptional operating item - Contracting (2,928) (4,600)
Operating profit 958 1,997
Net interest (588) (36)
Profit on ordinary activities before taxation 370 1,961
(b) Net assets: 2005 2004
#'000 #'000
Contracting 9,970 (19,207)
Plant Hire 10,882 11,978
Commercial Property 1,302 1,383
Group Centre (337) (210)
21,817 (6,056)
Unallocated net assets (13,210) 16,217
8,607 10,161
The above analysis reflects the segments by which the Group is managed. All
turnover arises from work performed within the United Kingdom.
2005 2004
#'000 #'000
Unallocated net assets comprise:
Current asset investments 10,420 8,620
Bank current and loan balances (24,570) 6,904
Obligations under finance leases and hire purchase contracts (266) (348)
Corporation tax - (40)
Deferred taxation 3,130 3,005
Dividends payable on equity shares (1,924) (1,924)
(13,210) 16,217
Cash at bank excludes bank deposits with terms in excess of seven days. Those
balances are included as current asset investments.
Net assets for each segment represents non-interest bearing operating assets
less non-interest bearing operating liabilities.
2. Exceptional operating item
2005 2004
#'000 #'000
Costs in respect of Citibank Litigation (2,928) (4,600)
The costs incurred in the year represent the legal and associated costs in
respect of the ongoing litigation with Citibank. During the year ended 30 April
2004 the exceptional charge comprised a provision of #2.1million in respect of
the adjudicator's award together with the related legal and associated costs of
#2.5million.
The tax credit attributable to the exceptional item is #878,000 (2004: #1,380,000).
3. Taxation 2005 2004
#'000 #'000
Corporation tax
United Kingdom corporation tax at 30% on profits
of the year - (40)
Under provision for prior years (125) (5)
(125) (45)
Deferred tax
Timing differences, origination and reversal (221) 964
Adjustments to estimated recoverable amounts of
deferred tax assets arising in previous years 346 (7)
125 957
Tax credit on profit on ordinary activities - 912
The corporation tax charge for the year is below the expected rate of 30% - the
differences are explained below:
2005 2004
#'000 #'000
Profit on ordinary activities before tax 370 1,961
Expected tax charge at 30% (111) (588)
Expenses not deductible for tax purposes (92) (128)
Tax losses 716 432
Capital allowances in excess of depreciation (764) (782)
Other timing differences 251 1,026
Current year corporation tax - (40)
Deferred taxation
At 1 May 2004 3,005
Profit and loss account 125
At 30 April 2005 3,130
The amounts of deferred taxation assets provided and unprovided in the accounts
at the rate of 30% (2004: 30%) are:-
Provided Unprovided
2005 2004 2005 2004
#'000 #'000 #'000 #'000
Tax losses 499 1,500 2,530 4,043
Capital allowances 1,888 1,324 - -
Other short term timing differences 743 181 841 -
3,130 3,005 3,371 4,043
The deferred tax assets recognised are based upon an estimate of timing
differences that will reverse in the foreseeable future after taking into
account the historical performance of group businesses.
4. Dividends on equity shares 2005 2004
#'000 #'000
Interim: 0.375p per ordinary share (2004: 0.375p) 721 721
Final proposed: 0.625p per ordinary share (2004: 0.625p) 1,203 1,203
1,924 1,924
The interim dividend was paid on 5 May 2005. Subject to the approval of
shareholders at the Annual General Meeting the final dividend will be paid on 4
November 2005 to shareholders appearing on the register at the close of business
on 7 October 2005.
2005 2004
5. Earnings per ordinary share #'000 #'000
The calculation of earnings per ordinary share is based on:
Earnings for basic and diluted earnings per ordinary share calculation 370 2,873
Exceptional item 2,928 4,600
Tax on exceptional item (878) (1,380)
Earnings before exceptional item per ordinary share calculation 2,420 6,093
Weighted average number of shares used in basic earnings per ordinary share
calculation 192,390 192,390
Dilutive effect of options - -
Weighted average number of shares used in diluted earnings per ordinary
share calculation 192,390 192,390
6. Net (bank debt)/cash at bank 2005 2004
#'000 #'000
Net cash at bank comprises:
Cash at bank - on demand - 9,171
- on deposit with terms in excess of seven days 4,406 2,606
Bank loans and overdraft:
Due within one year (23,946) (1,013)
Due after one year (624) (1,254)
(20,164) 9,510
Cash at bank on deposit with terms in excess of seven days is included within
current asset investments.
7. Reconciliation of operating profit to net cash (outflow)/inflow from
operating activities
2005 2004
#'000 #'000
Operating profit 958 1,997
Depreciation 2,486 2,646
Loss/(profit) on disposal of tangible fixed assets 47 (58)
Decrease/(increase) in debtors 23,027 (1,822)
(Decrease)/increase in creditors (54,361) 3,173
Net cash (outflow)/inflow from operating activities (27,843) 5,936
8. Debtors
Included in debtors is an aggregate value of #7.1million (2004: #7.1million)
attributable to contractual amounts relating to two (2004: two) contracts which
are the subject of arbitration or equivalent proceedings. In consequence of the
losses suffered on contracts subject to litigation in previous years the
Directors have reconsidered the recoverability of these contracts. Whilst the
Directors believe that they are justified in concluding that these amounts will
be realised, the Directors acknowledge that there remains uncertainty. However,
it is not possible to quantify the effects.
9. Financial information
The financial information incorporated in this announcement does not constitute
full statutory accounts within the meaning of the Companies Act 1985. Full
accounts for the year ended 30 April 2004 upon which Deloitte & Touche LLP have
given an unqualified audit report have been filed with the Registrar of
Companies. Full accounts for the year ended 30 April 2005 upon which Deloitte &
Touche LLP have given an unqualified audit report will be filed with the
Registrar of Companies in due course. Neither report contained statements under
Section 237(2) or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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