TIDMLAKE
RNS Number : 5204S
Lakehouse plc
26 June 2018
26 June 2018
Lakehouse plc, the compliance and energy support services
group
Unaudited Interim Results for the six months ended 31 March 2018
(H1 FY18)
Construction and Property Services divisions exit provides
platform for Group to focus on continuing growth businesses:
Compliance and Energy Services
Bob Holt, Chairman of Lakehouse plc commented:
"I am pleased to report a good set of results for the period
from our continuing businesses: Compliance and Energy Services.
As highlighted previously, it was our strategic intention to
exit from Construction and Property Services and I am delighted to
announce today that we have signed heads of agreement to sell those
activities. The businesses, which comprise the original Lakehouse
core activities plus the acquired business Fosters, are being
acquired by a team of sector specialists and I believe that without
the constraints of a Plc environment, they will be successful.
I am delighted therefore to confirm that the Group now has two
operating divisions in Compliance and Energy Services. Both
businesses are sector specialists, broadly non-cyclical apart from
seasonal demands, but most importantly, predictable, profitable and
cash generative.
We were particularly pleased to secure the Welsh Government
Arbed 3 programme of energy management for GBP55m. The scheme
mirrors our contract for the Scottish Government and again provides
continuous revenue and profit for a five year period."
Overview of financial performance within core businesses:
Compliance and Energy services
Ø Revenue from continuing operations grew by 3% to GBP91.1m (H1
FY17: GBP88.0m)
Ø Underlying EBITA(1) from continuing operations grew by 65% to
GBP2.7m (H1 FY17: GBP1.6m)
Ø Underlying EBITA(1) margins were 2.9% (H1 FY17: 1.8%)
Ø Underlying pre-tax profit(2) of GBP1.9m (H1 FY17: GBP0.8m)
Ø Group loss before tax from continuing operations GBP0.5m (H1
FY17: GBP3.9m), after amortisation of acquisition intangibles of
GBP2.2m (H1 FY17: GBP5.3m) and finance expenses of GBP0.7m (H1
FY17: GBP0.8m).
Ø Losses from discontinued operations of GBP11.8m (H1 FY17:
profit of GBP0.2m) resulting from the impairment exercise
undertaken as part of the preparation of these activities for sale
and reflect management conservatism in assessing fair value.
Ø Loss per share from continuing operations of 0.2p (H1 FY17:
2.1p).
Ø Balance sheet remains robust, with net debt of GBP14.2m (31
March 2017: GBP24.7m) at the end of our peak seasonal working
capital period.
Key performance indicators (from the continuing operations of
Compliance and Energy Services):
Ø High bidding success rate led to contract wins in the period
valued at GBP100m contributing to an order book of GBP396m,
representing growth of 7% on the comparative period (31 March 2017:
GBP369m).
Ø Our number of frameworks stood at 258 (31 March 2017: 251),
with a value of GBP1.1bn (31 March 2017: GBP1.0bn), representing a
7% rise on the comparative period.
Outlook:
Ø We are making excellent progress and the underlying
performance of Compliance and Energy Services were strong.
Ø The recent acquisition of Just Energy provides a low key and
low risk entry point into the private sector gas market.
Ø In terms of the outlook, we expect trading from continuing
operations for the full year will remain in line with management
expectations.
Enquiries
Lakehouse Financial Public Relations
Bob Holt, Chairman, 07778 798816 Camarco
Michael McMahon, Chief Operating Ginny Pulbrook
Officer
Jeremy Simpson, Chief Financial Officer Tom Huddart
Telephone: 020 3961 5236 Telephone: 020 3757
4992
Stockdale Securities
Andy Crossley
Antonio Bossi
Telephone: 020 7601 6100
Notes to editors
Lakehouse is a leading compliance and energy support services
group that performs critical functions in homes, public and
commercial buildings, with a focus on clients in the UK public
sector and regulated markets. Services are delivered through two
divisions: Compliance and Energy Services.
The Group was founded in 1988 and is headquartered in London. It
currently employs some 2,000 staff from 23 offices across the
UK.
Definitions
1. EBITA is earnings before interest, tax and amortisation of
acquisition intangibles. Underlying EBITA is defined as operating
profit before deduction of exceptional and other items, as outlined
in Note 3 and on the face of the Condensed Consolidated Statement
of Comprehensive Income. Underlying EBITA is the same as "Operating
profit before exceptional and other items" on the face of the
Condensed Consolidated Statement of Comprehensive Income, but used
as terminology in light of being a key performance measurement for
management in the Group.
2. As set out in the Condensed Consolidated Statement of
Comprehensive Income, other underlying numbers are stated before
exceptional and other items (discussed further in Note 3).
Underlying profit after tax and underlying earnings per share are,
where relevant, stated net of an imputed tax charge.
CHAIRMAN'S STATEMENT
I am pleased to report a good set of results for the period from
our continuing businesses of Compliance and Energy Services.
As highlighted previously, it was our strategic intention to
exit from Construction and Property Services and I am delighted to
announce today that we have signed heads of agreement to exit from
those activities. The businesses, which comprise the original
Lakehouse core activities plus the acquired business Fosters, are
being acquired by a team of sector specialists and I believe that
without the constraints of a Plc environment, they will be
successful.
I am delighted therefore to confirm that the Group now has two
operating divisions in Compliance and Energy Services. Both
businesses are sector specialists, broadly non cyclical, apart from
seasonal demands, but most importantly, predictable, profitable and
cash generative.
I look forward to updating all stakeholders of the completion of
this transaction and our future corporate development
Revenues from continuing operations grew 3% to GBP91.1m (H1
FY17: GBP88.0m). Underlying EBITA grew significantly by 65% to
GBP2.7m (H1 FY17: GBP1.6m) and operating profits of GBP0.2m
represented a reversal on the GBP3.1m loss in H1 FY17. Net debt was
GBP14.2m (2017:GBP24.7m) at the end of the period, where our cash
conversion is seasonally low.
We were particularly pleased to secure the Welsh Government
Arbed 3 programme of energy management for GBP55m. The scheme
mirrors our contract for the Scottish Government and provides
continuous revenue and profit for a five year period.
Elsewhere our Compliance businesses have performed well in what
is seasonally the part of the year where weather tends to dictate
the amount of work required, especially within our gas
activities.
In light of the process in place to divest those parts of the
Group which have given undue uncertainty in the last two years, the
Board felt it prudent not to pay an interim dividend at this
time.
We were particularly sad to see Andrew Harrison leave the Board
recently. Andrew had joined the Board initially to represent the
founder Steve Rawlings and following Steve's sad death, Andrew
represented the wider Rawlings family's interests.
I arrived in the Group to implement change when the Group was in
a difficult position following a number of profit warnings. The
management team have embraced significant change in what has been a
difficult period with a number of headwinds. Michael McMahon and
his team have performed excellently in demanding circumstances and
I believe that the Group is now well placed to deliver growth and
profitability with a positive attitude.
OPERATIONAL REVIEW
Compliance (61% of continuing Group revenue / H1 FY17: 58%)
Compliance: six months ended 31 2018 2017 Change
March
Revenue (GBPm) 56.1 51.8 8%
----- ----- --------
Underlying EBITA (GBPm) 2.4 2.9 -17%
----- ----- --------
Underlying EBITA margin 4.2% 5.5% -130pts
----- ----- --------
The Compliance division provides planned and responsive
maintenance, installation and repair services predominantly to
local authority and housing association clients, in the areas of
domestic and commercial gas, fire and electrical, water and air
hygiene and lifts. These services cover clients' social housing and
public building assets, as well as industrial and commercial
properties. Gas services comprise some three quarters of the
division and we believe we continue to represent the largest player
in this fragmented and typically localised market.
We are typically paid for service and repair work on a fixed
price basis evenly through the year. The gas and lifts businesses
(which make up more than 80% of the division's annual revenues)
have more call-outs during colder months, resulting in higher
labour and materials costs, meaning that we are far more profitable
and cash generative in the warmer months when call-out rates are
lower and those same engineers can be deployed in works that
attract further income. As a result, a significant proportion of
the division's annual profit continues to arise during the second
half of the financial year.
The division showed strong year on year revenue growth of 8% to
GBP56.1m (H1 FY17: GBP51.8m), driven by new contract wins and
increasing regulatory demands in the sector. Underlying EBITA fell
17% to GBP2.4m (H1 FY17: GBP2.9m). We adopt a conservative approach
to contract mobilisation, expensing costs immediately and as a
result, we saw an impact on profitability in the first half as a
major national contract went live and we had to build an associated
management infrastructure. This was compounded slightly by the
unseasonal weather in late February / early March, which resulted
in a higher level of responsive callouts and lower planned
servicing work than normal for the time of year. We expect a more
normal level of profitability to be restored in the second
half.
The division continued its excellent track record on new wins
during the period, including a GBP9m three year gas service and
repair contract with LB Havering, a 10 year GBP8.4m lift
maintenance programme with RB Greenwich, a five year GBP4.3m gas
service and repair contract with Guildford BC, a 10 year GBP5m
domestic heating programme with Hanover HA, a four year GBP2.1m gas
programme with Leeds Federation and fire remediation framework wins
with Paragon HA, the Reallies Partnership and the South East
Consortium.
The outlook for our Compliance businesses remains strong,
underpinned by the increased number of frameworks to which the
division has been appointed and a trading environment pushing
towards greater levels of regulation, which provides a stimulus in
demand for our compliance services expertise.
Energy Services (39% of continuing Group revenue / H1 FY17:
42%)
Energy Services: six months ended 2018 2017 Change
31 March
Revenue (GBPm) 36.6 36.9 (1)%
----- ----- -------
Underlying EBITA (GBPm) 1.6 1.3 27%
----- ----- -------
Underlying EBITA margin 4.4% 3.4% 100pts
----- ----- -------
Energy Services provides a range of energy efficiency services
for social housing and private homes through two businesses:
-- Everwarm provides insulation and heating, renewable
technologies and electrical vehicle charging points. Everwarm also
uses these services to deliver carbon emissions savings for energy
companies, enabling them to meet their legislative targets. The
insulation operations are driven by seasonal influences, as we are
unable to render or use fixing glue necessary for insulation at
temperatures below three degrees. As a result, we typically
experience a far larger number of productive working days in
summer, compared to winter months, with the result that the
business sees higher revenues and margins in H2 each year.
-- Providor is a leading national installer of smart meters
(operating as a meter asset manager and meter operator), working
for several "big six" and challenger utilities, who are required to
install smart meters in every home in England, Wales and Scotland.
There are more than 26 million homes for the energy suppliers to
access, with the goal of every home being offered a smart meter by
2020. The national smart metering programme has been beset by
delays, not least the advent of next generation "SMETS 2" meters,
for which the mandated implementation deadline has slipped further
from July to October 2018 since we announced our 2017 results on 23
January 2018.
Revenue was GBP36.6m in the period, 1% down on the comparative
period, reflecting a seasonally-influenced reduced level of
external wall insulation installations ("EWIs"), offset by an
increase in meter installation work. EBITA improved 27% to GBP1.6m
(H1 FY17: GBP1.3m), due to a reduction of losses in our smart
metering operations, offset in part by the volume impact from the
aforementioned volume reductions in insulation (which we expect to
pick up in the second half).
As we have previously highlighted, there have been continued
delays to the national smart meter roll-out and indeed, there are
further derogations permitting the installation of older SMETS1
meters between October 2018 and January 2019. This has adversely
impacted anticipated installation volumes, compounding the
challenges we outlined in our September 2017 annual report. This is
having a general ongoing impact on engineer efficiency, and we took
the prudent decision to review pricing or withdraw from certain
contracts. As such, we continue to manage our smart metering
contracts responsibly and provide strong and secure employment for
our engineers. Whilst uncertainty remains in the smart metering
market, costs will continue to rise and it is incumbent on all
stakeholders in the national smart meter roll out programme to
agree an achievable timetable with consistent volumes, if costs are
not to rise further. Clearly this will influence further
progression in our metering business moving forward.
Carbon prices remained largely stable during the period. The
Scottish Government's flagship Home Energy Efficiency Programme for
Scotland ("HEEPS") continued to perform well in the first half,
which brings a diversified installation portfolio, focusing on
central heating, boiler improvements and other energy efficiency
installation measures.
We were delighted to announce in May 2018 the successful award
of the Arbed 3 programme by the Welsh Government, a GBP55m three
year area-based scheme which will target improvements to over 6,000
homes in areas throughout Wales, where households are more likely
to be living in severe fuel poverty. The contract, with runs for a
minimum three year period, with the opportunity of two one year
extensions, was Everwarm's key strategic target. This takes us into
a new Country, whilst capitalising on our existing expertise, and
will be delivered by a joint venture with the Energy Saving
Trust.
Other notable successes during the period included Renfrewshire
(GBP10.1m over four phases of varied energy efficiency work) and
Glasgow City EWI (GBP2.3m), both won under the new Scotland Excel
framework. In addition, we saw an extension to ongoing EWI work for
Fife (GBP6m) and new Clackmannanshire commercial work (GBP0.4m), a
further non-domestic win following successful delivery of
comparable North Ayrshire work during the period.
The above figures exclude the contribution of Orchard Energy,
which was sold in September 2017 and therefore classified under
discontinued activities in the comparative data.
Acquisition
Following the period end, Lakehouse completed the acquisition of
Just Energy Solutions Ltd ("JES"), further details of which are
outlined in note 13. JES is a private sector heating and renewables
specialist, providing services for large energy companies,
retailers and private householders. JES complements the current
activities of the Group's three gas compliance businesses, which
together provide national coverage with public sector clients and
also bridges to our smart metering operations in Providor, which
operates in the private sector. JES offers us a further route into
the private sector for compliance and energy services and a means
of delivering procurement opportunities to take JES outside its
core home counties market. JES is also the country's leading
provider of solar buyback services (as recently covered in the
Financial Times on 5 April), which offers additional opportunity
for growth.
The acquisition represents a further step in Lakehouse's growth
strategy as the Group continues to expand its geographic breadth
and range of service offerings.
New wins and order book
The Board is encouraged that high bidding success rates continue
to be achieved by the Group. Contract wins in the period totalled
GBP100m (some 10% higher than in-period revenues), contributing to
a period-end order book of GBP396m. This represented a 7%
improvement on the comparative period (31 March 2017: GBP369m) and
excludes the GBP55m Arbed 3 win announced shortly after the period
end. The order book remains strong across our continuing business
lines as we continue to focus on securing contracts with long term
visibility and robust value.
Our number of frameworks stood at 258 (31 March 2017: 251), with
a value of GBP1.1bn (31 March 2017: GBP1.0bn), representing a 7%
rise on the comparative period.
FINANCIAL REVIEW
The Operational Review provides a detailed overview of our
trading performance during the period. This Financial Review
therefore covers other aspects of the Income Statement, Cash Flows
and the Balance Sheet.
Trading overview
Revenues from continuing operations grew by 3% to GBP91.1m (H1
FY17: GBP88.0m), driven by the mobilisation of the new contracts
secured by Compliance in 2017. Underlying EBITA from continuing
operations grew 65% to GBP2.7m (H1 FY17: GBP1.6m), through a
combination of performance improvements and the benefits of the
cost reduction exercise conducted undertaken over the past 18
months. Operating profits of GBP0.2m represented a reversal on the
GBP3.1m loss in H1 FY17.
Central costs halved to GBP1.3m (H1 FY17: GBP2.5m), reflecting
reductions to central departments, as we moved to empower
businesses locally.
Underlying pre-tax profit was GBP1.9m (H1 FY17: GBP0.8m). Losses
before tax from continuing operations were GBP0.5m (H1 FY17:
GBP3.9m) and losses after tax from continuing operations were
GBP0.3m (H1 FY17: GBP3.3m), resulting in losses per share from
continuing operations of 0.2p (H1 FY17: 2.1p).
Discontinued activities and impairment
Losses from discontinued operations amounted to GBP11.8m (H1
FY17: profit of GBP0.2m), which included an asset impairment
review, further details of which are contained in note 5. The
period reflected a significant improvement in the performance of
Property Services, which saw a pleasing return to operational
stability, if not profitability. Construction was impacted by a
number of project delays, so whilst the business remained
profitable at an underlying trading level, it performed below
expectations in the period. Both businesses have strong orderbooks
that we believe will stand them well for the future under new
ownership. The comparative period included the results of Property
Services, Construction and Orchard Energy, which was sold in
September 2017.
Exceptional items
Net exceptional items in the period amounted to a small cost of
GBP0.2m (H1 FY17: income of GBP0.6m), reflecting some small legacy
clean-ups. Further details are provided in note 3.
Amortisation of acquisition intangibles
When Lakehouse acquires businesses, the estimated value of their
intangible assets (such as customer contracts and non-compete
undertakings from vendors) is recognised on the Group's Balance
Sheet. These acquisition intangibles are then amortised over their
expected useful lives, estimated at between four and six years. We
exclude this amortisation charge from our calculation of adjusted
EBITA as the Board believes the underlying operating performance of
our business is better understood before such costs.
Amortisation of acquisition intangibles was GBP2.2m during the
period (H1 FY17: GBP5.3m) with the decrease of GBP3.1m reflecting
the fact that we have taken amortisation charges in prior periods,
meaning we are amortising a reduced base of intangible assets.
Finance expense
Finance expense is the interest charged on our debt facilities
and the unwinding of the discount applied to deferred consideration
on acquisitions. The expense in the first half was GBP0.7m (H1
FY17: GBP0.8m).
This expense includes a non-operating sum of GBP0.1m (H1 FY17:
GBP0.1m) relating to the unwinding of discounts on deferred
consideration due in respect of acquisitions.
Tax
The effective tax rate for the period was 21%, compared with a
statutory rate of corporation tax of 19%. We expect a full year
effective tax rate of 21%.
Earnings per share
Losses from continuing operations for the period were GBP0.3m
(H1 FY17: loss of GBP3.3m). Based on the weighted average number of
shares in issue during the period of 157.5m, this resulted in basic
losses per share from continuing operations of 0.2p (H1 FY17: loss
per share of 2.1p). Total losses per share (including discontinued
operations) were 7.7p (H1 FY17: 2.0p).
Cash conversion
Underlying operating cash conversion from continuing operations
represented an inflow of GBP0.7m (H1 FY17 restated: GBP3.5m). This
in part reflected the higher than expected outturn for the year to
30 September 2017, where we identified our normalised year-end debt
position would have been some GBP10m higher (including activities
since discontinued). The Board calculates underlying operating cash
conversion as cash generated from continuing operations, plus
exceptional cash expenses, divided by underlying EBITA from
continuing operations, to provide a consistent comparison of
underlying cash generation (further details are outlined in notes 3
and 11).
Operating cash outflow in the period was GBP10.9m (H1 FY17:
GBP1.1m). We saw a poor performance in the Construction business,
which underpinned an outflow from discontinued operations in the
period of GBP9.8m (H1 FY17: GBP3.8m); we are confident this can be
addressed by a potential purchaser in managing the business for
cash for a short period.
On a steady state basis, we expect to continue to target an
average annual underlying operating cash conversion of 80% over the
long term.
Net debt and banking facilities
At 31 March 2018, the Group had net debt of GBP14.2m (31 March
2017: GBP24.7m), comprising cash and other items of GBP3.8m (31
March 2017: GBP0.3m), together with an GBP18m drawing (31 March
2017: GBP25m) under our revolving credit facility, out of a total
facility of GBP25m. Net debt reflects GBP1.2m in acquisition
expenditure in the period, all relating to deferred consideration
payments.
A sum of GBP0.6m remained on the balance sheet in relation to
deferred consideration at 31 March 2018 (31 March 2017: GBP2.5m),
which would be payable within one year if the relevant conditions
are met.
Statement of financial position
The principal items in our Balance Sheet are goodwill,
intangible assets, debt and working capital.
31-Mar 31-Mar 30-Sep
2018 2017 2017
GBPm GBPm GBPm
Goodwill and intangibles 49.3 64.3 51.4
Tangible and other 1.5 6.7 5.6
------- ------- -------
Fixed assets 50.8 71.0 57.0
------- ------- -------
Current assets 69.8 79.3 70.4
Net cash and equivalents 3.6 0.1 25.9
Current liabilities -66.1 -71.2 -71.8
------- ------- -------
Net current assets 7.3 8.2 24.5
------- ------- -------
Non-current liabilities -2.2 -6.5 -4.1
Debt -17.8 -24.8 -27.2
------- ------- -------
Net assets 38.1 47.9 50.2
------- ------- -------
Net current assets (excluding
cash) 3.7 8.1 -1.4
Net current assets excluding cash were GBP3.7m (31 March 2017:
GBP8.1m). We continued to control tightly our use of working
capital during the first half but as discussed above, the
Construction business consumed cash due to a number of ongoing
account settlements, together with the aforementioned strong end to
the year ending 30 September 2017, which had a GBP10m impact.
As at 31 March 2018, we held provisions of GBP2.3m (31 March
2017 GBP4.7m; 30 September 2017: GBP4.0m). Some GBP0.2m was
utilised in in the period in relation to resolving the ongoing
matters to which the provisions pertain, in line with management
expectations and a further GBP1.5m reclassified to liabilities held
for sale. Further details are set out in Note 10.
Risks
The Board considers strategic, financial and operational risks
and identifies actions to mitigate those risks. Key risks and their
mitigation were disclosed on pages 26 to 29 of the Annual Report
for the year ended 30 September 2017.
We continue to manage a number of potential risks and
uncertainties - many of which are common to other similar
businesses including claims and disputes - which could have a
material impact on short and longer term performance.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2018
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 September
31 March 31 March 2017
2018 2017
Notes GBP'000 GBP'000 GBP'000
Continuing Operations
Revenue 2 91,058 88,030 181,496
Cost of sales (79,038) (78,239) (154,530)
Gross profit 12,020 9,791 26,966
Other operating expenses (9,152) (8,276) (20,358)
Share of results of joint venture (213) 90 786
Operating profit before exceptional
and other items 2,655 1,605 7,394
Exceptional costs 3 (616) (326) (2,127)
Exceptional income - other 3 373 921 1,624
Exceptional income - profit on
disposal of subsidiary 3 - - 5,402
Amortisation of acquisition intangibles 3 (2,186) (5,254) (10,495)
---------------
Operating profit / (loss) 2 226 (3,054) 1,798
Finance expense (727) (818) (1,985)
Investment income - 34 16
Loss before tax 2 (501) (3,838) (171)
Profit/(loss) before tax 3
Taxation 4 173 571 934
(Loss) / profit for the period
attributable to the equity holders
of the Group from continuing operations (328) (3,267) 763
------------- --- ------------- --- ---------------
Discontinued operations
(Loss) / profit for the period
from discontinued operations (11,826) 184 (753)
------------- --- ------------- --- ---------------
(Loss) / profit for the period
attributable to the equity holders
of the Group (12,154) (3,083) 10
============= === ============= === ===============
(Loss) / earnings per share from
continuing operations
Basic 7 (0.2)p (2.1)p 0.5p
Diluted 7 (0.2)p (2.1)p 0.5p
======= ======= =====
Total (loss) / earnings per share
from continuing and discontinued
operations and attributable to
the equity holders of the Group
Basic 7 (7.7)p (2.0)p 0.0p
Diluted 7 (7.7)p (2.0)p 0.0p
======= ======= =====
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 March 2018
As at
As at As at 30 September
31 31 2017
March March
2018 2017
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Non-current assets
Goodwill 42,169 47,626 42,169
Other intangible assets 7,093 16,692 9,233
Property, plant and equipment 1,271 2,622 1,905
Interest in joint venture 226 1,027 1,196
Trade and other receivables - 2,148 456
Deferred tax asset - 897 2,085
50,759 71,012 57,044
------------ ------------ --------------
Current assets
Inventories 4,296 7,443 4,490
Amounts due from customers under
construction contracts - 3,308 6,269
Trade and other receivables 41,471 68,523 59,129
Corporation tax receivable - 20 551
Assets held for sale 5 24,138 - -
Cash and cash equivalents 9 3,730 302 26,129
------------ ------------ --------------
73,635 79,596 96,568
------------ ------------ --------------
Total assets 124,394 150,608 153,612
------------ ------------ --------------
Current liabilities
Amounts due to customers under
construction contracts - 630 1,786
Trade and other payables 41,434 68,197 69,178
Finance lease obligations 9 131 230 182
Provisions 10 218 2,358 893
Liabilities held for sale 5 24,183 - -
Income tax payable 256 - -
------------ ------------ --------------
66,222 71,415 72,039
------------ ------------ --------------
Net current assets 7,413 8,181 24,529
------------ ------------ --------------
Non-current liabilities
Trade and other payables - 4,201 973
Loans and borrowings 8,9 17,750 24,523 27,077
Finance lease obligations 9 89 224 144
Deferred tax liability 172 - -
Provisions 10 2,073 2,308 3,137
20,084 31,256 31,331
------------ ------------ --------------
Total liabilities 86,306 102,671 103,370
------------ ------------ --------------
Net assets 38,088 47,937 50,242
============ ============ ==============
Equity
Called up share capital 15,753 15,753 15,753
Share premium account 25,314 25,314 25,314
Share-based payment reserve 776 776 776
Own shares (290) (290) (290)
Merger reserve 20,067 20,067 20,067
Retained earnings (23,532) (13,683) (11,378)
Equity attributable to equity
holders of the Company
Equity attributable to equity
holders of the Company 38,088 47,937 50,242
============ ============ ==============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 March 2018
Attributable to the equity holders
of the Group
Share-based
Share payment
Share premium reserve Own shares Merger Retained Total
capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2016 15,753 25,314 776 (290) 20,067 (10,600) 51,020
Loss for the period - - - - - (3,083) (3,083)
At 31 March 2017 15,753 25,314 776 (290) 20,067 (13,683) 47,937
Profit for the
period - - - - - 3,093 3,093
Dividends paid - - - - - (788) (788)
At 30 September 2017 15,753 25,314 776 (290) 20,067 (11,378) 50,242
========== ========== ============ ============= ========== =========== =========
Loss for the period - - - - - (12,154) (12,154)
At 31 March 2018 15,753 25,314 776 (290) 20,067 (23,532) 38,088
======= ======= ==== ====== ======= ========= =========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 March 2018
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 September
31 March 31 March 2017
2018 2017
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash (used in) / generated from
operations 11 (10,892) (1,139) 13,373
Interest paid (443) (505) (1,385)
Interest received 1 31 3
Taxation 132 1,286 655
Net cash (used in) / generated
from operating activities (11,202) (327) 12,646
------------- ------------- ---------------
Cash flows from investing activities
Payment of deferred consideration
on prior year acquisitions (1,246) (2,588) (2,588)
Sale of shares in subsidiary,
net of cash disposed of - - 12,044
Purchase of property, plant and
equipment (235) (494) (909)
Purchase of intangible assets (150) (202) (462)
Sale of property and equipment 42 102 153
Net cash (used in) / generated
from investing activities (1,589) (3,182) 8,238
------------- ------------- ---------------
Cash flows from financing activities
Dividend paid to shareholders - - (788)
(Repayments) of / proceeds from
bank borrowings (9,500) 4,000 6,500
Repayments to finance lease creditors (106) 68 (60)
Finance issue costs (2) (186) (336)
Net cash (used in) / generated
from financing activities (9,608) 3,882 5,316
------------- ------------- ---------------
Net (decrease) / increase in cash
and cash equivalents (22,399) 373 26,200
Cash and cash equivalents at beginning
of the period 26,129 (71) (71)
Cash and cash equivalents at end
of the period 3,730 302 26,129
============= ============= ===============
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 31 March 2018
1. Basis of preparation
The results presented in this report are unaudited and have been
prepared in accordance with the recognition and measurement of
International Financial Reporting Standards (`IFRS') as adopted by
the EU that are expected to be applicable to the financial
statements for the year ending 31 September 2018 and on the basis
of the accounting policies to be used in those financial
statements. The figures for the year ended 31 September 2017 are
extracted from the statutory accounts of the group for that period.
The condensed consolidated financial statements do not include all
the information and disclosures required in the annual financial
statements and should be read in conjunction with the Group's
annual financial statements, being the statutory financial
statements for Lakehouse plc, as at 30 September 2017, which have
been prepared in accordance with IFRS as adopted by the European
Union.
The condensed consolidated financial statements for the six
months ended 31 March 2018 do not comprise statutory accounts
within the meaning of Section 434 of the Companies Act 2006.
Statutory accounts for the year ended 30 September 2017 have been
approved by the Board of Directors and delivered to the Registrar
of Companies. These accounts, which contained an unqualified audit
report under Section 495, did not include a reference to any
matters to which the auditor drew attention by way of emphasis of
matter and did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006.
Significant accounting policies
The accounting policies adopted in the preparation of the
condensed consolidated financial statements are consistent with
those that are expected to be applicable to the financial
statements for the year ending 31 September 2018.
Seasonality
The Group has seasonal influences in specific areas. The
Compliance division experiences higher activity levels in gas and
lift services in colder weather, leading to higher working capital
requirements and lower profitability in winter, with the opposite
in the summer. Within Energy Services it is not possible to render
walls or use fixing glue at temperatures below three degrees
centigrade, nor perform cladding work in high winds. As such,
weather has an influence on this business, meaning that the Group
has to plan to increase capacity during warmer and more settled
periods to compensate for time lost during colder ones. This
typically works to the benefit of the second half of the financial
year, at the expense of the first half.
2. Operating segments
The Board of Directors has determined an operating management
structure aligned around the two core activities of the Group, with
the following operating segments applicable:
-- Compliance
-- Energy Services
All revenue and profit is derived from operations in the United
Kingdom only.
The following is an analysis of the Group's revenue and
Underlying EBITA by reportable segment:
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 September
31 March 31 March 2017
2018 2017
GBP'000 GBP'000 GBP'000
Revenue
Compliance 56,075 51,767 104,319
Energy Services 36,571 36,910 78,960
Total segment revenue 92,646 88,677 183,279
Inter-segment elimination (1,588) (647) (1,783)
------------- ------------- ---------------
Revenue from external customers 91,058 88,030 181,496
============= ============= ===============
Inter-segment trading comprises services provided by the
Compliance segment for the Property Services segment (reported
within discontinued operations) and are charged at prevailing
market prices.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the six months ended 31 March 2018
2. Operating segments (continued)
Reconciliation of Underlying EBITA to loss before taxation
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 September
31 March 31 March 2017
2018 2017
GBP'000 GBP'000 GBP'000
Underlying EBITA by segment
Compliance 2,365 2,853 7,986
Energy Services 1,599 1,256 4,015
Central costs 1 (1,309) (2,504) (4,607)
------------- ------------- ---------------
Total underlying EBITA 2,655 1,605 7,394
Exceptional costs (616) (326) (2,127)
Exceptional income 373 921 1,624
Amortisation of acquisition intangibles (2,186) (5,254) (10,495)
Profit on disposal of Orchard - - 5,402
Operating profit / (loss) 226 (3,054) 1,798
Finance costs (727) (818) (1,985)
Investment income - 34 16
Loss before taxation (501) (3,838) (171)
============= ============= ===============
1 Central costs are those costs that are not allocated directly
in support of a segment and comprise certain group service
functions.
3. Exceptional and other items, including amortisation of acquisition intangibles
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 September
31 March 31 March 2017
2018 2017
GBP'000 GBP'000 GBP'000
Acquisition costs - 14 14
Restructuring, EGM and other costs 344 312 2,113
Total exceptional costs 344 326 2,127
Release of deferred consideration (101) (921) (1,624)
Profit on sale of Orchard (Holdings)
UK Limited - - (5,402)
------------- ------------- ---------------
Total exceptional items 243 (595) (4,899)
------------- ------------- ---------------
Amortisation of acquisition intangible
assets 2,186 5,254 10,495
------------- ------------- ---------------
2,429 4,659 5,596
Unwinding discount of deferred consideration 55 140 238
------------- ------------- ---------------
Total exceptional and 'other items' 2,484 4,799 5,834
============= ============= ===============
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the six months ended 31 March 2018
3. Exceptional and other items, including amortisation of acquisition intangibles (continued)
Exceptional and other items in the period reduced the Group's
profit before tax by GBP2.5m and related to the following
items:
Exceptional items
Restructuring EGM and other costs of GBP0.3m (2017: GBP0.3m)
reflects small number of legacy clean-up and restructuring costs
during the period amounting to GBP0.6m, net of GBP0.3m of
associated accruals being released against those sums.
Release of deferred consideration of GBP0.1m (2017: GBP0.9m)
reflects the settlement of certain deferred consideration sums at a
level lower than expectations.
Amortisation of acquisition intangibles
Amortisation of acquisition intangibles was GBP2.2m for the
period (2017: GBP5.3m); with the GBP3.1m reduction reflecting the
fact that we have taken amortisation charges in prior periods,
meaning we are amortising a reduced base of intangible assets.
Unwinding discount of deferred consideration
Unwinding discount of deferred consideration of GBP0.1m (2017:
GBP0.1m) reflects the present value of deferred sums, discounted at
a post-tax rates of between 2.2% and 8.5%, due on outstanding
payments for acquisitions.
Accounting treatment
The costs discussed above are considered non-trading because
they are not part of the underlying trading of the Group and (aside
from amortisation of acquisition intangibles and unwinding discount
of deferred consideration) are not expected to recur year to
year.
4. Taxation
The income tax charge for the six months ended 31 March 2018 is
calculated based upon the effective tax rates expected to apply to
the Group for the full year of 21% (2017: 14%).
5. Discontinued operations
Losses from discontinued operations amounted to GBP11.8m (H1
FY17: profit of GBP0.2m) on associated revenues of GBP41.3m (H1
FY17: GBP61.8m). The associated cash outflow for the period was
GBP9.8m, discussed also in note 11. At 31 March 2018, assets held
for sale were GBP24.1m and liabilities held for sale were
GBP24.2m.
Discontinued activities represent the Group's Construction and
Property Services divisions (the "Activities"), with the
comparative period also including Orchard Energy, which was sold in
September 2017. In determining the classification of the Activities
as discontinued at 31 March 2018, the Board had regard to the
conditions that needed to be met under IFRS5 "Non-current Assets
Held for Sale and Discontinued Operations". As the result of a sale
process, the Board is engaged in active discussions with a
potential purchaser, having signed heads of terms as at the date of
this report. The Board is committed to the exit from the Activities
and expects this to be completed within 12 months.
In classifying the Activities as discontinued, we are required
to consider their balance sheets for potential impairment. The key
items of net asset value relate to unbilled sums and deferred tax,
with the balance of working capital sums being financially neutral.
"Unbilleds" are a key feature of the construction industry and
their settlement often involves protracted negotiations; their
valuation therefore involves management judgement as to the likely
outcome. Such an approach however reflects the ability of the Group
to influence directly those discussions and in determining the
lower of carrying amount and fair value less cost to sell in
accordance with IFRS5, we took account of the loss of direct
control over those negotiations, once ownership of the Activities
passes to a third party. Although any buyer will be legally
required to use best endeavors to collect such sums, the impairment
calculation made a conservative estimate of their likely outcome
and will be reviewed accordingly in the event of a sale taking
place prior to year end. By the same measure, utilisation of the
deferred tax asset is dependent on future profitability of the
Activities, so was similarly impaired; the balance will also
reviewed at year end.
6. Dividends
The proposed final dividend for the year ended 30 September 2017
of 0.5 pence per share amounting to GBP0.8m and representing a
total dividend of 0.5 pence for the full year (2016: 1.5 pence per
share), was paid on 6 April 2018 to the shareholders on the
register at the close of business on 2 March 2018.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the six months ended 31 March 2018
7. (Losses) / earnings per share
The calculation of the basic and diluted (losses)/earnings per
share is based on the following data:
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 September
31 March 31 March 2017
2018 2017
Number Number Number
Weighted average number of ordinary
shares for the purposes of basic loss
/ earnings per share 157,527,103 157,527,103 157,527,103
Diluted
Effect of dilutive potential ordinary
shares:
Share options 6,803,308 6,221,895 6,354,933
------------- ------------- -----------------
Weighted average number of ordinary
shares for the purposes of diluted loss
/ earnings per share 164,330,411 163,748,998 163,882,036
============= ============= =================
(Loss) / earnings for the purpose of
basic and diluted earnings per share
being net loss attributable to the owners
of the Company from continuing operations
(GBP'000) (328) (3,267) 763
Basic (loss) / earnings per share (0.2)p (2.1)p 0.5p
Diluted (loss) / earnings per share (0.2)p (2.1)p 0.5p
Total (loss) / earnings for the purpose
of underlying earnings per share being
underlying net profit attributable to
the owners of the Company (GBP'000) (12,154) (3,083) 10
Basic (loss) / earnings per share (7.7)p (2.0)p 0.0p
Diluted (loss) / earnings per share (7.7)p (2.0)p 0.0p
============= ============= =================
The number of shares in issue at 31 March 2018 was
157,527,103.
The weighted average number of Ordinary shares in issue during
the year excludes those accounted for in the own shares
reserve.
8. Loans and borrowings
31 31 30 September
March March 2017
2018 2017
GBP'000 GBP'000 GBP'000
Bank loans and credit facilities at
amortised cost:
Current - - -
Non-current 17,750 24,523 27,077
-------- -------- --------------
17,750 24,523 27,077
Maturity analysis of bank loans and
credit facilities falling due:
In one year or less, or on demand - - -
Between one and two years 17,750 24,523 27,077
Between two and five years - - -
After more than five years - - -
-------- -------- --------------
17,750 24,523 27,077
-------- -------- --------------
Following the sale of Orchard Energy in September 2017, we
requested that RBS reduce our RCF from GBP35m to GBP25m, with an
effective date of 2 October 2017. We also agreed an extension with
RBS of the facility from December 2018 to February 2019.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the six months ended 31 March 2018
9. Net debt
31 31 30 September
March March 2017
2018 2017
GBP'000 GBP'000 GBP'000
Cash and cash equivalents / (overdraft) 3,730 302 26,129
Bank loans and credit facilities (17,750) (24,523) (27,077)
Finance lease obligations (220) (454) (326)
------------- ------------- --------------
(14,240) (24,675) (1,274)
============= ============= ==============
10. Provisions
Legal and
other
GBP'000
At 1 April 2017 4,666
Disposal of Orchard (Holdings)
UK Limited (130)
Additional provision 1,209
Utilised in the period (1,715)
---------
At 30 September 2017 4,030
Reclassified to liabilities
held for sale (1,497)
---------
At 30 September 2017 (restated) 2,533
Utilised in the period (242)
---------
At 31 March 2018 2,291
=========
Current provisions 218
=========
Non-current provisions 2,073
=========
Legal and other
Legal and other costs relate to property dilapidation
obligations, potential contract settlement costs and other
potential legal and regulatory settlement costs. These are expected
to result in an outflow of economic benefit over the next one to
three years. Some GBP0.2m was utilised in in the period in relation
to resolving the ongoing matters to which the provisions
pertain.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the six months ended 31 March 2018
11. Cash (used in) / generated from operations
Audited
Unaudited Unaudited year ended
six months six months 30 September
ended ended 2017
31 March 31 March
2018 2017
GBP'000 GBP'000 GBP'000
Operating profit / (loss) 226 (3,054) 1,798
Adjustments for:
Depreciation 477 672 1,261
Amortisation of intangible assets 2,369 5,457 10,931
Impairment of tangible fixed assets - - 394
Profit on disposal of property, plant
and equipment (38) (76) (107)
Profit on disposal of subsidiary - - (5,402)
Changes in working capital:
Inventories (828) (2,256) 697
Amounts owed by customers under construction
contracts (2,660) (147) (3,108)
Amounts owed to customers under construction
contracts (531) (60) 1,096
Trade and other receivables (2,515) (4,234) 6,533
Trade and other payables (5,911) 2,826 458
Provisions (416) (500) (1,136)
Adjustment of (loss) / profit from
discontinued operations (1,065) 233 (42)
Cash (used by) / generated from operations (10,892) (1,139) 13,373
------------- ------------- --------------
Underlying operating cash conversion
calculation*
Cash (used by) / generated from operations (10,892) (1,139) 13,373
Exceptional and other cash costs paid
in the period 1,768 832 1,882
Cash impact of net change in working
capital from discontinued operations* 9,785 3,838 (2,182)
------------- --------------
Underlying cash generated from continuing
operations* 661 3,531 13,073
------------- --------------
Underlying operating profit from continuing
operations, before exceptional items
and amortisation of acquisition intangibles* 2,655 1,605 7,394
Underlying operating cash conversion
from continuing operations %* 25% 220% 177%
------------- ------------- --------------
* The comparative figures have been restated for the purposes of
comparison.
Exceptional and other costs in the period relate to the cash
impact of exceptional and other items disclosed in Note 3.
12. Related party transactions
There have been no material changes to the related party
balances disclosed in the Group's Annual Report and Accounts 2017
and there have been no related party transactions that have
materially affected the financial position or performance of the
Group in the six months to 31 March 2018.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the six months ended 31 March 2018
13. Post balance sheet events
Just Energy Solutions Limited
On 15 May 2018 the Group acquired the entire share capital of
Just Energy Solutions Limited. The initial consideration was
GBPnil, with an estimated deferred consideration of GBP0.5m,
payable based on future earnings of the business and across the
first and second anniversaries of completion.
Due to the proximity of the acquisition date to the interim
reporting deadline it has not been practical to perform a
provisional fair value assessment of the assets acquired and the
liabilities assumed.
The last unaudited company accounts to 30 April 2017, under FRS
102, showed the following results;
GBP'000
Revenue 5,716
--------
Loss before tax (140)
Taxation 75
--------
Loss for the period (65)
--------
Net assets 288
--------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PGUUWQUPRGQA
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