RNS Number:5141G
Birse Group PLC
17 December 2004
Date: Embargoed until 7.00am 17 December 2004
Contact: Peter Watson, Chairman
Martin Budden, Group Managing Director
Heather Craven, Group Finance Director
Birse Group plc Telephone: 01302 768078
Sally Lewis
Financial Dynamics Telephone: 0207 831 3113
BIRSE GROUP plc - INTERIM ANNOUNCEMENT SIX MONTHS ENDED 31/10/04
Financial Highlights:-
* Pre-tax pre-exceptional profits* increased to #2.2million (2004:
1.8million).
* Pre-tax profits #917,000 (2004: #1.8million).
* Interim dividend maintained at 0.375p per share.
* Net bank debt #8.7million (2004: net cash #9.5million).
Operational Key Points:-
* Construction Division increases pre-exceptional operating profits to
#1million (2004: #301,000) despite modest demand in some key markets.
* Improvement in Construction result wholly driven by core Engineering
businesses.
* The restructuring of Birse Build progresses broadly according to plan
although uncertainties remain. Operating losses in the period #4.6million
(2004: losses of #4.6million). Investment in the reshaping of Birse Build
a key factor behind cash outflows in the period.
* Plant Hire delivers #1.2million operating profit (2004: #1.7million).
Re-shaping of BPH crawler crane fleet completed.
* Litigation with Citibank set to run on into 2005/2006. Legal and related
costs of #1.3million charged as an exceptional operating item (2004: #nil).
M Budden P G Watson
"With more regular work flows anticipated in some of our more favoured civil
engineering markets we remain on course to drive forward the underlying longer
term performance of the Group and improve the overall quality of the business."
* Pre-tax profits before charging Citibank legal and related costs.
REPORT OF THE DIRECTORS
On the results for the six months ended 31 October 2004
Pre-tax profits of #917,000 compare with #1.8million reported for the
corresponding period last year. The former figure is after charging an
exceptional operating item of #1.3million relating to the continuing litigation
with Citibank. Eliminating the effects of these costs gives rise to a pre-tax
pre-exceptional profit of #2.2million for the period under review. This
represents an increase of #400,000 compared with the six months ended 31 October
2003. This improvement has been achieved despite modest demand in some of our
key markets reflecting the ongoing efficiency gains inherent in the Group's core
operations.
Contracting activities generated a pre-exceptional operating profit of #1million
(2003/2004: #301,000). Civil Engineering maintained the improvement in its
performance reporting an operating profit of #5.6million (2003/2004:
#4.5million). Activity in the rail sector was higher than expected and more
than compensated for a slow start to the year in other areas of infrastructure
works. Birse Build, as forewarned in the Group's 2003/2004 Annual Report,
suffered pre-exceptional losses of #4.6million (2003/2004: #4.6million). We
continue to reduce turnover in that company and re-focus its efforts mainly upon
the local authority education sector. Again as anticipated in the 2003/2004
Annual Report demand from Birse Process's key customers was subdued in
consequence of the cyclical impact of the regulatory price reviews to which the
UK Water Industry is subjected. Plant Hire results fell to an operating profit
of #1.2million (2003/2004: #1.7million) as the weak demand in the non-rail
infrastructure sectors referred to earlier adversely impacted upon the
requirement for crawler cranes and piling hammers. Group Centre costs of
#247,000 (2003/2004: cost of #250,000) reflects the Group's success in
maintaining a lean head office function.
The Group's 2003/2004 Annual Report emphasized the ongoing nature of the
litigation with Citibank and noted that any future costs associated with that
litigation would be written off if and when incurred and charged in the
aggregate as an exceptional operating item. The #1.3million exceptional item
reported relates exclusively to such costs. A more detailed narrative as to the
status of the Citibank litigation is provided further into this report.
The net interest charge of #184,000 follows on from a charge of #62,000 in the
second half of the 2003/2004 financial year. Net bank debt at 31 October 2004
was #8.7million (31 October 2003: net cash of #9.5million). This reflects
mainly the negative impact upon cash flows resulting from the restructuring of
Birse Build and the costs relating to the Citibank litigation.
Construction
Six months ended 31 October Year ended
2004 2003 30 April 2004
Turnover Operating Turnover Operating Turnover Operating
profit* Profit Profit*
#'000 #'000 #'000 #'000 #'000 #'000
Civil Engineering 126,331 5,616 114,554 4,521 241,388 12,601
Building 39,167 (4,606) 62,213 (4,596) 109,583 (8,719)
Process Engineering 20,497 5 20,880 376 60,629 493
185,995 1,015 197,647 301 411,600 4,375
* Before exceptional operating item.
The businesses comprising the Civil Engineering Division that is Birse Civils
Limited, Birse Metro Limited (our dedicated London Underground business) and
Birse Rail Limited experienced contrasting fortunes in the period.
Birse Civils saw its turnover levels fall by #10million (14%) compared with the
corresponding period in 2003/2004. This fall was due to delayed starts in
respect of contracts already won and was not caused by cancelled orders nor an
inability to secure contract awards. The vast majority of activity undertaken
by the company now relates to either framework or early contractor involvement
type contracts. Both forms of working arrangements engage the contractor at the
initiation or concept stage of the project. Hence the path from commencing work
to actually commencing construction is that much longer and more complex
compared with the traditional form of contracting. These projects are therefore
more susceptible to delay factors. Whilst the risk of delay is therefore
greater the overall risk profile of this newer form of contracting is still
vastly superior to the traditional forms. It is also more closely aligned to the
value added customer focused approach of Birse Civils. Activity levels in the
second half are expected to improve as the above mentioned delayed projects
reach the construction phase.
Birse Metro continued to suffer from the lack of market opportunity that has
existed since the private public partnerships took over responsibility for the
maintenance of large parts of the London Underground infrastructure. Compared
with turnover levels experienced in the six months ended 31 October 2003
activity in the period fell by almost sixty per cent. Orders recently secured
however indicate that turnover levels will increase in the second half but only
to a level that supports a break even position. Further penetration of the
market is therefore required to enable the business to return to the levels of
profitability generated in the past.
In contrast Birse Rail increased its turnover in the period by almost #25million
compared with the corresponding period in 2003/2004. Buoyant demand under its
framework contract with Network Rail was supplemented by a significant increase
in the number of enhancement awards many of which had to be completed within
very tight time constraints. It is anticipated that activity will fall in the
second half as Birse Rail, along with the rest of the industry, focuses on the
renewal of long term structures framework arrangements. Significant management
resources have been and will continue to be dedicated to winning this long term
work. This has to be achieved whilst at the same time satisfying day to day
customer expectations.
In the 2003/2004 Annual Report we described the final phase of the restructuring
of Birse Build that had been instigated in that year. We also warned that
because of the costs associated with that reorganization combined with the work
out to completion of low margin and other legacy contracts in the Midlands and
South that Birse Build would continue to incur material losses in 2004/2005.
This is the background to the results of Birse Build now reported. The part of
the business now focused on the local authority education sector in the North
delivered a small operating profit in the period, however, this was outweighed
by the higher than expected losses for the period due to accelerated progress in
completing contracts in the closedown Midlands and South regions. There now
remains only three live contracts in the closedown regions, of which two are
expected to be finished by the end of the current financial year. Thereafter
the focus on these and other contracts completed over the recent years will
switch from operational closure to commercial closure. Although good progress
has been made, until the restructuring of Birse Build is complete and in
particular legacy issues resolved there is further uncertainty for the Group
over the performance of this business. We remain convinced, however, that a
successful restructuring of Birse Build would have a significant impact on the
Group's risk profile.
Birse Process has suffered from 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. Opportunities in the second half from this source
will be fewer than in the first six months of the year. Therefore the company
will be reliant upon its increased number of non-water customers for the
remainder of the year. Given that the water regulatory reviews are now complete
demand moving forward beyond this year will increase. This market improvement,
combined with Birse Process's emerging non-water customers and its specialism in
odour control augur well for the future prospects of the business.
The number of contracts (including Citibank) the subject of litigation or
equivalent proceedings amount to two (2003/2004: one). Included in debtors is
an aggregate value of #7.1million attributable to these two contracts (2003/
2004: #5million). As described in Note 7 in respect of those contracts
recoverability of value remains uncertain.
Plant Hire
Six months ended 31 October Year ended
2004 2003 30 April 2004
Turnover Operating Turnover Operating Turnover Operating
profit profit profit
#'000 #'000 #'000 #'000 #'000 #'000
Crawler Cranes 1,881 491 2,339 874 4,183 1,480
Piling Equipment 323 68 284 61 612 172
Site Accommodation 2,614 608 2,398 773 4,793 884
4,818 1,167 5,021 1,708 9,588 2,536
The high demand for the heavier weight mechanical cranes experienced in the six
months ended 31 October 2003 subsided in the second half of that year and has
all but disappeared in the period now under review. This has led BPH into
accelerating the concentration of its fleet on hydraulic equipment in respect of
which demand remains reliable. Six mechanical machines have been sold overseas
since the period end and another five have been shipped to the Middle East
initially for hire. The number of mechanical cranes therefore remaining in the
fleet and dedicated to the domestic market after these transactions is
insignificant.
Piling returns continue to be held back by the absence of opportunities in the
marine engineering sector, a market in which BPH is pre-eminent. This sector
also represents the best opportunities for combined crawler crane and piling
hammer hires.
The Cabin Company, our site accommodation business, has recovered from a
disappointing performance in the second half of 2003/2004 when operating profits
amounted to #111,000 only.
Commercial Property
Six months ended 31 October Year ended
2004 2003 30 April 2004
Turnover Operating Turnover Operating Turnover Operating
profit profit profit
#'000 #'000 #'000 #'000 #'000 #'000
750 437 - - 305 207
Turnover and profit in the period reflects the crystallization of contingent
consideration arising in respect of contracted sales in prior years. As
previously reported following the sale of all of the company's remaining land in
2002/2003 returns from this aspect of the Group's activities will continue to be
insignificant, spasmodic and restricted exclusively to the type of income
recognized in the period under review.
Citibank Litigation
In the Group's 2003/2004 Annual Report we provided the background to this
litigation which has evolved from an adjudication process which the adjudicator
determined on 24 February 2004.
The details of that adjudicator's decision were published by way of a Stock
Exchange announcement at start of business on 25 February 2004. That
announcement also stated that the adjudicator's decision was open to challenge
but only by reference to arbitration or litigation.
In last year's Annual Report we disclosed that such a challenge had been lodged
with the Technology and Construction Court. Since that time the litigation
process has continued to be managed by that Court. A final hearing is still
expected in the 2005/2006 financial year with a decision thereafter. The Board
of Birse Group plc has been advised that it has realistic prospects in the
litigation of reducing the award made by the adjudicator in the adjudication.
The exceptional operating item in the period of #1.3million (2003/2004: #nil)
reflects the legal and related costs incurred in the period in relation to the
litigation process described. Costs, if and when incurred, in the future will
be written off and where appropriate charged as an exceptional operating item.
The high costs of running this type of extremely complex litigation is one of
the reasons for our preferred option to secure a negotiated full and final
settlement. Whilst a professional dialogue continues between Citibank and
ourselves attempts to reach a resolution have so far failed. It is therefore
important that we continue to take actions that we consider best protect the
position of the Group.
Dividend
An interim dividend of 0.375p per ordinary share (2003: 0.375p) will be paid on
5 May 2005 to shareholders on the register on 8 April 2005.
Outlook
At the year end we reported that the Group was in a position to continue to
improve its underlying performance although uncertainties existed in respect of
the Citibank litigation and for the Group in respect of the Build business.
These uncertainties remain. Progress in withdrawing from the loss making
sectors of the Build market and the consequent restructuring of Birse Build have
in the first half gone broadly to plan. Further progress is expected in the
second half. Therefore with more regular work flows anticipated in some of our
more favoured civil engineering markets we remain on course to drive forward the
underlying longer term performance of the Group and improve the overall quality
of the business.
CONSOLIDATED RESULTS
FOR THE 6 MONTHS ENDED 31 OCTOBER 2004
6 Months 6 Months Year
Ended 31.10.04 Ended Ended
#'000 31.10.03 30.04.04
Note #'000 #'000
Turnover 2 190,070 201,114 417,355
Operating profit before exceptional
operating item 2 2,372 1,759 6,597
Exceptional operating item 3 (1,271) - (4,600)
Operating profit 2 1,101 1,759 1,997
Net interest (184) 26 (36)
Profit on ordinary activities before
taxation 2 917 1,785 1,961
Taxation 4 (183) (357) 912
Profit for the financial period 734 1,428 2,873
Dividends on equity shares 5 (721) (721) (1,924)
Transferred to reserves 13 707 949
Earnings per ordinary share
- basic 6 0.4p 0.7p 1.5p
- diluted 6 0.4p 0.7p 1.5p
Before exceptional item
- basic 6 0.8p 0.7p 3.2p
- diluted 6 0.8p 0.7p 3.2p
The above figures relate exclusively to continuing operations
CONSOLIDATED BALANCE SHEET
AS AT 31 OCTOBER 2004
As at As at As at
31.10.04 31.10.03 30.04.04
Note #'000 #'000 #'000
Fixed Assets
Tangible Assets 15,695 17,501 16,285
Current Assets
Debtors 7 127,913 123,187 139,180
Investments 8,869 8,102 8,620
Cash at bank and in hand 465 12,510 9,171
137,247 143,799 156,971
Creditors: Amounts falling due within one year
Bank loans and overdrafts (10,973) (862) (1,013)
Other creditors (124,427) (140,823) (153,561)
(135,400) (141,685) (154,574)
Net Current Assets 1,847 2,114 2,397
Total Assets less Current Liabilities 17,542 19,615 18,682
Creditors: Amounts falling due after more than one
year
Bank loans and overdrafts (1,026) (1,611) (1,254)
Other creditors (6,342) (8,085) (7,267)
(7,368) (9,696) (8,521)
Provisions for Liabilities and Charges - - -
Net Assets 10,174 9,919 10,161
Capital and Reserves
Called up share capital 19,239 19,239 19,239
Share premium account 93 93 93
Special reserve 308 308 308
Revaluation reserve 607 607 607
Profit and loss account (10,073) (10,328) (10,086)
Shareholders' Funds - equity interest 10,174 9,919 10,161
CONSOLIDATED CASH FLOW STATEMENT
For the 6 months ended 31 October 2004
6 Months 6 Months Year
Ended Ended Ended
31.10.04 31.10.03 30.04.04
#'000 #'000 #'000
Net cash (outflow)/inflow from
operating activities (16,481) 5,602 5,936
Returns on investments and servicing of
finance 174) 26 (36)
Taxation (40) (57) (58)
Capital expenditure and financial
investment (572) (5,428) (7,032)
Dividends paid to equity shareholders (721) (721) (1,924)
Cash outflow before management of
liquid resources and financing (17,988) (578) (3,114)
Management of liquid resources (249) (126) (125)
Financing (230) 462 178
Decrease in cash in the period (18,467) (242) (3,061)
6 Months 6 Months Year
Ended Ended Ended
31.10.04 31.10.03 30.04.04
#'000 #'000 #'000
Reconciliation of operating profit to net cash
(outflow)/inflow from operating activities
Operating profit 1,101 1,759 1,997
Depreciation net of profit on disposal of fixed
assets 1,162 1,255 2,588
Decrease/(increase) in debtors 11,084 11,196 (1,822)
(Decrease)/increase in creditors (29,828) (8,608) 3,173
Net cash (outflow)/inflow from operating
activities (16,481) 5,602 5,936
Analysis of net (debt)/funds
(Bank overdraft)/cash at bank on demand (9,296) 11,990 9,171
Cash at bank on short term deposit - 520 -
Cash at bank on deposit with terms in excess of
seven days 2,855 2,087 2,606
Debt due within one year (1,212) (862) (1,013)
Debt due after one year (1,026) (1,611) (1,254)
Finance leases (147) (249) (348)
Net (debt) / funds at 31 October 2004 (8,826) 11,875 9,162
Reconciliation of cash flows to movements in
net (debt)/funds
Decrease in cash in the period (18,467) (242) (3,061)
Cash (outflow)/inflow from financing 230 (462) (178)
New finance leases and hire purchase contracts - - (177)
Cash outflow from management of liquid
resources 249 126 125
Movement in net (debt)/funds in the period (17,988) (578) (3,291)
Net funds at 1 May 2004 9,162 12,453 12,453
Net (debt) / funds at 31 October 2004 (8,826) 11,875 9,162
NOTES TO THE INTERIM ACCOUNTS
1. Preparation of Interim Accounts
The interim accounts, which relate exclusively to continuing operations, have
been prepared on the basis of the accounting policies set out in the Group's
statutory accounts for the year ended 30 April 2004.
The Group's auditors, Deloitte & Touche LLP, have carried out a review of the
interim accounts, which were approved by the Board of Directors on 17 December
2004, and their report is reproduced on page 15.
The financial information presented is unaudited and does not amount to full
statutory accounts within the meaning of the Companies Act 1985. Full accounts
for the year ended 30 April 2004 upon which Deloitte & Touche gave an
unqualified audit report, have been delivered to the Registrar of Companies and
a statement under section 237(2) of the Companies Act 1985 was not included.
2. Segment Information
6 Months 6 Months Year
Ended Ended Ended
31.10.04 31.10.03 30.04.04
#'000 #'000 #'000
Turnover
Contracting 185,995 197,647 411,600
Plant Hire 4,818 5,021 9,588
Commercial Property 750 - 305
Group Centre - - -
Intra-group (1,493) (1,554) (4,138)
190,070 201,114 417,355
Results
Contracting 1,015 301 4,375
Plant Hire 1,167 1,708 2,536
Commercial Property 437 - 207
Group Centre (247) (250) (521)
Operating profit before exceptional
operating item 2,372 1,759 6,597
Exceptional operating item - Contracting (1,271) - (4,600)
Operating profit 1,101 1,759 1,997
Net interest (184) 26 (36)
Profit on ordinary activities before
taxation 917 1,785 1,961
3. Exceptional Operating Item
6 Months 6 Months Year
Ended Ended Ended
31.10.04 31.10.03 30.04.04
#'000 #'000 #'000
Costs in respect of Citibank Litigation (1,271) - (4,600)
The costs incurred in the period 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 #381,000 (year ended 30
April 2004: #1,380,000)
4. Taxation
The tax (charge)/credit for the period has been calculated by reference to the
projected rate for the full year.
5. Dividends on Equity Shares
An interim dividend of 0.375p per ordinary share (2003: 0.375p) will be paid on
5 May 2005 to shareholders on the register on 8 April 2005.
6. Earnings per Ordinary Share
6 Months 6 Months Year
Ended Ended Ended
31.10.04 31.10.03 30.04.04
#'000 #'000 #'000
The calculation of earnings per ordinary share is
based on:
Earnings for basic and diluted earnings per
ordinary share calculation 734 1,428 2,873
Exceptional item 1,271 - 4,600
Tax on exceptional item (381) - (1,380)
Earnings before exceptional item per ordinary share
calculation 1,624 1,428 6,093
Weighted average number of shares used in earnings
per ordinary share calculation 192,390 192,390 192,390
Adjustment to reflect dilutive shares under option - - -
Weighted average number of shares in diluted earning
per ordinary share calculation 192,390 192,390 192,390
7. Amounts Recoverable on Contracts
Included in debtors is an aggregate value, before provisions, of #7.1million (31
October 2003: #5.0million, 30 April 2004: #7.1million) attributable to
contractual amounts relating to two (31 October 2003: one, 30 April 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 the amounts
attributable to these and other old 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.
Independent review report to Birse Group plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 October 2004 which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 7.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Uncertainty relating to amounts recoverable on contracts
In arriving at our review conclusion we have considered the accuracy of
disclosure made in Note 7 to the financial information concerning uncertainty
relating to amounts recoverable on contracts. In view of the significance of
this uncertainty, we consider it should be brought to your attention. Our
review conclusion is not qualified in this respect.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 2004.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Leeds
17 December 2004
This interim report will be posted to shareholders and copies will be made
available to the public from: The Secretary, Birse Group plc, Humber Road,
Barton on Humber, North Lincolnshire, DN18 5BW.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR TFBATMMJBBLI
Birse (LSE:BIE)
Historical Stock Chart
From Apr 2024 to May 2024
Birse (LSE:BIE)
Historical Stock Chart
From May 2023 to May 2024
