RNS Number:5445I
Maclellan Group PLC
11 March 2003
MACLELLAN GROUP PLC
Preliminary announcement of results for the year ended 31 December 2002
CHAIRMAN'S STATEMENT
Results
I am pleased to be able to report a strong set of results for the year ended 31
December 2002 which confirm that the Group has continued to make excellent
progress during 2002. This progress and the prospects of the Group now enable
the Board to recommend the payment of a 0.5 pence dividend to ordinary
shareholders which, if approved, will be paid on 1 July 2003.
The highlights of the results for the year are:
* Turnover from continuing operations increased by 52% to #129.2 million
(2001: #85.3 million).
* Profit before exceptional items, goodwill amortisation and taxation
increased by 55% to #4.3 million (2001: #2.7million).
* Profit before tax increased by 31% to #2.6 million (2001: #2.0
million).
* Underlying earnings per share increased by 44% to 4.6 pence (2001: 3.2
pence).
* FRS14 basic earnings per share increased by 29% to 2.7 pence (2001: 2.1
pence).
* Period end gearing of net debt as a percentage of total shareholders'
funds was 9.3% (2001: 7.8%) with net interest covered 16 times by
operating profit from continuing operations before goodwill
amortisation and exceptional items (2001: 8 times).
Acquisitions and Disposals
We completed the acquisition of Broadreach Group Limited on 13 May 2002 for a
total consideration of #19.7 million. Also during 2002 we sold our entire
shareholding interests in our Portuguese subsidiary, MacLellan Internacional
Limitada, and Jordan Site Management Services Limited, for a combined total
consideration of #0.7 million.
Operational Review
The Group now has two operating divisions which both trade under the MacLellan
name and draw on a common central support infrastructure. The new MacLellan
Cleaning and Support Services Division was announced on 1 July 2002 and it
complements the activities of the MacLellan Integrated Services Division. The
new name was announced alongside a new look and brand which has given us a more
modern and professional appearance in the marketplace.
Both trading divisions have national operating coverage and the process of
centralising support functions at Redditch has been successfully completed.
Operating margins, before goodwill amortisation and exceptional items, increased
to 3.2% (2001: 2.4%) as a result of both the centralisation of support functions
and margin improvement on existing contracts.
Net cash inflow from operating activities during the year was #6.6 million. The
Group's net debt increased during 2002 by #2.2 million mainly as a result of the
effects of acquiring Broadreach which included the assumption of #4.4 million of
its bank overdraft at the date of acquisition.
We continued to win major new contracts in 2002 with the largest wins being in
the commercial and retail sectors. The pipeline for new work is very healthy and
contracts won in 2002 will provide continued organic growth for 2003 and beyond.
We were voted the Facilities Management Company of the Year by our peers at the
Premises and Facilities Management Magazine Awards which were held in London in
November 2002. This is a reflection of the quality and hard work of our
management and employees and I would, on behalf of the Board, like to thank all
of them for their efforts in 2002.
Strategy
We have since 1998 consistently pursued a strategy of increasing the Group's
presence in the outsourced business services market and, after six acquisitions
and four disposals, we are now able to say that we are solely an Integrated
Facilities and Support Services Provider. This activity encompasses the
provision of integrated business and asset management services for the non-core
business activities of our customers in selected commercial, manufacturing,
retail and public sectors. We believe in the benefits of self performance and
this factor is a key differentiator in the market sectors in which we operate.
The Board's view is that the Group can continue its current growth pattern
without the need for further sizeable acquisitions. However, we remain
ambitious and now seek to strengthen our total service capability which will
require both internal investment and small bolt on acquisitions.
The Board
Alan Howarth, who is currently Chairman of Royal Surrey County Hospital NHS
Trust, has agreed to join the Board as a non-executive director and we look
forward to receiving the benefits of the outsourcing experience which he gained
during his time as Managing Director of Compass Management Consulting. Brian
North, who had been a non-executive director since August 1989, resigned from
the Board on 8 October 2002 and I thank him for his contribution and support to
the Group during that time. We are delighted to be retaining the services of
Graham Lockyer as a non-executive director following the successful completion
of the sale of the whole of our engineering services businesses.
Outlook
The Board is confident that its strategy will continue to deliver healthy
turnover and profit growth and that 2003 will be another successful year.
A L R Morton
Chairman
11 March 2003
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
(restated - refer note 2)
Before Goodwill Before Goodwill
goodwill & & goodwill & &
exceptional exceptional exceptional exceptional
items items Total items items Total
#000 #000 #000 #000 #000 #000
Turnover
Continuing
operations:
Existing
operations 100,361 - 100,361 85,261 - 85,261
Acquisitions 28,881 - 28,881 - - -
------------ ------------ ------------ ------------ ------------ ------------
129,242 - 129,242 85,261 - 85,261
Discontinued
operations 12,296 - 12,296 39,062 - 39,062
------------ ------------ ------------ ------------ ------------ ------------
141,538 - 141,538 124,323 - 124,323
Cost of sales (123,156) - (123,156) (111,419) - (111,419)
------------ ------------ ------------ ------------ ------------ ------------
Gross profit 18,382 - 18,382 12,904 - 12,904
Administrative
expenses:
Goodwill
amortisation - (1,580) (1,580) - (727) (727)
Other (13,841) (734) (14,575) (9,879) - (9,879)
------------ ------------ ------------ ------------ ------------ ------------
(13,841) (2,314) (16,155) (9,879) (727) (10,606)
Operating profit
Continuing
operations:
Existing
operations 2,941 (1,443) 1,498 2,377 (727) 1,650
Acquisitions 1,655 (871) 784 - - -
------------ ------------ ------------ ------------ ------------ ------------
4,596 (2,314) 2,282 2,377 (727) 1,650
Discontinued
operations (55) - (55) 648 - 648
------------ ------------ ------------ ------------ ------------ ------------
4,541 (2,314) 2,227 3,025 (727) 2,298
Exceptional
items:
Profit/(loss) on
disposal of
discontinued
operations - 707 707 - (2,200) (2,200)
Utilisation of
prior period
provision - - - - 2,200 2,200
------------ ------------ ------------ ------------ ------------ ------------
- 707 707 - - -
Net interest (288) - (288) (283) - (283)
------------ ------------ ------------ ------------ ------------ ------------
Profit/(loss) on
ordinary
activities
before taxation 4,253 (1,607) 2,646 2,742 (727) 2,015
------------ ------------ ------------ ------------
Tax on profit on
ordinary activities (804) (892)
------------ ------------
Profit for the
financial year 1,842 1,123
Dividends -
including
non-equity (388) -
------------ ------------
Retained profit
for the
financial year 1,454 1,123
------------ ------------
Earnings
per share
(note 3)
Underlying 4.6p - 3.2p -
FRS14 basic - 2.7p - 2.1p
FRS14 diluted - 2.6p - 2.0p
------------ ------------ ------------ ------------
The above figures are stated on an historical cost basis.
GROUP BALANCE SHEET
AT 31 DECEMBER 2002
2002 2001
(restated)
#000 #000
Fixed assets
Intangible assets 37,241 15,428
Tangible assets 6,274 3,769
Investments 1,852 2,850
------------ ------------
45,367 22,047
------------ ------------
Current assets
Stocks 393 386
Debtors 24,113 23,885
Cash at bank and in hand 2,324 3,771
------------ ------------
26,830 28,042
------------ ------------
Creditors: Amounts falling due within one
year
Borrowings (3,111) (2,321)
Other creditors (23,312) (21,297)
------------ ------------
(26,423) (23,618)
------------ ------------
Net current assets 407 4,424
------------ ------------
Total assets less current liabilities 45,774 26,471
Creditors: Amounts falling due after more
than one year
Borrowings (3,173) (3,253)
------------ ------------
Net assets 42,601 23,218
------------ ------------
Capital and reserves
Called up share capital 4,291 3,271
Share premium account 35,319 18,405
Other reserves 204 204
Profit and loss account 2,787 1,338
------------ ------------
Total shareholders' funds 42,601 23,218
------------ ------------
Analysis of shareholders' funds
Equity 40,601 21,218
Non-equity 2,000 2,000
------------ ------------
Total shareholders' funds 42,601 23,218
------------ ------------
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
(restated)
#000 #000
Profit for the financial year 1,842 1,123
Currency adjustments offset in reserves (5) (7)
------------ ------------
Total recognised gains for the year 1,837 1,116
------------
Prior year adjustment (refer note 2) 1,171
------------
Total gains recognised since last annual
report 3,008
------------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
(restated)
#000 #000
Profit for the financial year 1,842 1,123
Dividends (388) -
------------ ------------
1,454 1,123
Ordinary shares issued including premium
(net of expenses) 17,934 1,153
Currency adjustments (5) (7)
------------ ------------
Net increase in shareholders' funds 19,383 2,269
Opening shareholders' funds (originally
#22.047 million before adding prior
year adjustment of #1.171 million) 23,218 20,949
------------ ------------
Closing shareholders' funds 42,601 23,218
------------ ------------
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2002
Note 2002 2001
#000 #000
Net cash inflow from operating activities A 6,566 9,630
Returns on investments and servicing of
finance
Interest received 172 13
Investment income 32 -
Interest paid (286) (317)
Interest element of finance lease payments (105) (26)
------------ ------------
Net cash outflow from returns on investments
and servicing of finance (187) (330)
------------ ------------
Taxation (413) (162)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (947) (2,227)
Disposal of tangible fixed assets 672 1,416
Redemption of shares in unquoted company 75 50
Disposal of shares in quoted company 984 -
------------ ------------
Net cash inflow/(outflow) from capital
expenditure and financial investment 784 (761)
------------ ------------
Acquisitions and disposals E
Purchase of subsidiary undertakings (1,490) (3,369)
Cash balances acquired with subsidiary
undertakings (4,357) (509)
Additional consideration on acquisitions
made in prior year - (5)
Disposal of subsidiary undertakings (240) (306)
Cash balances disposed with subsidiary
undertakings (119) -
------------ ------------
Net cash outflow from acquisitions and
disposals (6,206) (4,189)
------------ ------------
Net cash inflow before financing 544 4,188
Financing
Ordinary shares issued 39 258
Expenses incurred in issue of ordinary shares D (238) -
Loans due within one year:
- increases in term debt - 1,090
- repayments in year (1,000) (400)
Loans due after one year:
- increases in term debt - 3,163
Capital element of finance lease payments (792) (162)
------------ ------------
Net cash (outflow)/inflow from financing (1,991) 3,949
------------ ------------
(Decrease)/increase in cash in the year C (1,447) 8,137
------------ ------------
NOTES TO THE GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2002
A. RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
2002 2001
#000 #000
Operating Activities
Operating profit 2,227 2,298
Amortisation 1,580 755
Depreciation 1,593 1,213
Profit on disposal of tangible fixed assets (75) (106)
Profit on disposal of investments (22) -
Investment income (32) -
Exchange differences (9) (5)
(Increase)/decrease in stocks (233) 361
Decrease in debtors 237 3,927
Increase in creditors 1,300 1,187
------------ ------------
Net cash inflow from operating activities 6,566 9,630
------------ ------------
B. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2002 2001
#000 #000
(Decrease)/increase in cash in the year (1,447) 8,137
Net cash flow from changes in debt 1,792 (3,691)
Issue of loan notes - (981)
New finance lease agreements (1,829) (184)
Finance leases acquired with subsidiary
undertakings (792) (11)
Finance leases disposed with subsidiary
undertakings 119 37
------------ ------------
Movement in net debt in the year (2,157) 3,307
Net debt at beginning of year (1,803) (5,110)
------------ ------------
Net debt at end of year (3,960) (1,803)
------------ ------------
C. ANALYSIS OF CHANGES IN NET DEBT DURING THE YEAR
At Other Debt of At
31 December Cash non-cash acquisitions/ 31 December
2001 flow changes disposals 2002
#000 #000 #000 #000 #000
Cash at bank and
in hand 3,771 (1,447) - - 2,324
------------ ------------ ------------ ------------ ------------
Debt due within
one year (2,071) 1,000 (1,241) - (2,312)
Debt due after
one year (3,163) - 1,241 - (1,922)
Finance lease
agreements
- within one year (250) 792 (982) (359) (799)
- after one year (90) - (847) (314) (1,251)
------------ ------------ ------------ ------------ ------------
(5,574) 1,792 (1,829) (673) (6,284)
------------ ------------ ------------ ------------ ------------
(1,803) 345 (1,829) (673) (3,960)
------------ ------------ ------------ ------------ ------------
D. MAJOR NON-CASH TRANSACTIONS
During the year the Group entered into finance lease arrangements in respect of
assets with a total capital value of #1,829,000. Part of the consideration for
the acquisition of Broadreach Group Limited was by way of shares, #10 million of
which the vendors placed with third parties; the costs of this placing were
borne by the Group. The consideration for the disposal of subsidiary
undertakings comprised deferred consideration. Further details of acquisitions
and disposals are set out in note E below.
E. ACQUISITIONS AND DISPOSALS
On 13 May 2002 the Group acquired the entire issued share capital of Broadreach
Group Limited and its subsidiary undertakings. The acquisition has been
accounted for using acquisition accounting principles. The net assets of the
businesses acquired have been adjusted to bring accounting policies into line
with those adopted by the Group and to state these at their fair values to
recognise recoverability of debtors and certain onerous contractual commitments
and the related tax effect. The summary of net assets acquired is as follows:
Net assets Alignment of
on accounting Fair value Fair value
acquisition policies adjustments acquired
#000 #000 #000 #000
Tangible fixed assets 2,268 (153) - 2,115
Investments 27 - - 27
Stocks 182 (178) - 4
Debtors 4,092 (64) (275) 3,753
Taxation 267 118 320 705
Creditors (4,206) - (917) (5,123)
Finance leases (792) - - (792)
Cash balances (4,357) - - (4,357)
------------ ------------ ------------ ------------
(2,519) (277) (872) (3,668)
------------ ------------ ------------
Goodwill 23,393
------------
Consideration 19,725
------------
Satisfied by:
Shares issued 18,133
Cash paid 1,124
Acquisition expenses 468
------------
19,725
------------
The acquired businesses have been integrated into the existing businesses of the
Group and, consequently, it is not practicable to separately identify the cash
flows, cost of funds or capital expenditure of the acquired businesses. The
results of these businesses in the period prior to acquisition showed turnover
of #7.7 million, operating loss before acquisition adjustments of #347,000, a
loss after interest but before acquisition adjustments and taxation of #430,000
and a loss after taxation but before acquisition adjustments of #242,000. In
the 48 week period to 3 March 2002 the business recorded a loss after taxation
of #173,000.
There have been no changes to the fair values previously reported in relation to
prior year acquisitions.
The disposals of MacLellan Internacional Limitada ("MILda") and Jordan Site
Management Services Limited ("JSMS") were completed on 13 July 2002 and 6
December 2002 respectively. The summary of net assets sold is as follows:
MILda JSMS Total
#000 #000 #000
Tangible fixed assets 167 21 188
Stocks - 230 230
Debtors 2,464 1,736 4,200
Creditors (1,746) (3,119) (4,865)
Finance leases (119) - (119)
Cash balances - 119 119
------------ ------------ ------------
766 (1,013) (247)
------------ ------------
Profit on disposal 707
------------
Proceeds 460
------------
Comprising:
Deferred consideration 700
Costs of disposal (240)
------------
460
------------
The deferred consideration in respect of the JSMS disposal is receivable by
instalments or by a single payment on or before 6 December 2005 and, in the
event of non-payment by the due date, the Group may subscribe for preference
shares in JSMS Site Management Services Limited (the immediate holding company
of JSMS) to the value of the deferred consideration that remains unpaid. The
Group has taken an investment in JSMS Site Management Services Limited which is
held within fixed asset investments at cost and currently provides short term
funding on commercial banking terms to JSMS Site Management Services Limited.
NOTES
1. SEGMENTAL ANALYSIS
Continuing 2002
Existing Acquisitions Discontinued Total
#000 #000 #000 #000
Turnover 100,361 28,881 12,296 141,538
Cost of sales
- normal (88,657) (23,518) (10,981) (123,156)
------------ ------------ ------------ ------------
Gross profit 11,704 5,363 1,315 18,382
Administrative expenses
- normal (8,763) (3,708) (1,370) (13,841)
- goodwill amortisation (836) (744) - (1,580)
- exceptional restructuring and
rebadging expenses (607) (127) - (734)
------------ ------------ ------------ ------------
Operating profit 1,498 784 (55) 2,227
------------ ------------ ------------ ------------
Continuing 2001
Existing Acquisitions Discontiuned Total
#000 #000 #000 #000
Turnover 85,261 - 39,062 124,323
Cost of sales
- normal (76,586) - (34,833) (111,419)
------------ ------------ ------------ ------------
Gross profit 8,675 - 4,229 12,904
Administrative expenses
- normal (6,298) - (3,581) (9,879)
- goodwill amortisation (727) - - (727)
------------ ------------ ------------ ------------
Operating profit 1,650 - 648 2,298
------------ ------------ ------------ ------------
2002 2001
#000 #000
Turnover
Geographical market analysis by origin:
UK 138,342 119,533
Rest of Europe 3,196 4,790
------------ ------------
141,538 124,323
------------ ------------
Geographical market analysis by destination:
UK 138,342 119,220
Rest of Europe 3,196 5,103
------------ ------------
141,538 124,323
------------ ------------
The Group's main activities in the provision of integrated specialist facilities
management services comprise one business segment. Further analysis of
operating profit and net operating assets by geographical area is not provided
as the Directors are of the opinion that such disclosure would be prejudicial to
the interests of the trading companies within the Group.
2. TAXATION
2002 2001
#000 #000
UK corporation tax at 30% (2001: 30%)
- charge on results for the year 270 29
- adjustment in respect of prior period (43) -
Deferred tax
- origination and reversal of timing differences 981 813
- adjustment in respect of prior period (404) -
Overseas taxation - 50
------------ ------------
804 892
------------ ------------
Financial Reporting Standard No 19: Deferred Tax (FRS 19) became effective for
accounting periods ending on or after 23 January 2002. Under this new standard,
which has been adopted this year, the Group is required to recognise deferred
tax as a liability or asset if transactions or events giving rise to an
obligation to pay more tax in the future, or a right to pay less tax in the
future, have occurred by the balance sheet date. Previously, the Group applied
the partial provision rules set out in SSAP15 whereby provision for deferred tax
was made only in respect of timing differences which were expected with
reasonable probability to result in a tax liability within the foreseeable
future; deferred tax assets were not recognised. The prior period effect of
providing for deferred tax under FRS 19 has been treated as a prior year
adjustment and reflected through reserves; comparative financial information has
been restated as necessary.
In accordance with FRS 19, deferred tax is provided for in full on all timing
differences and is calculated, without applying discount factors, at the average
tax rates expected to apply in the periods in which timing differences are
expected to reverse. Deferred tax assets are recognised to the extent that, in
the view of the Directors, there are expected to be appropriate taxable profits
within the foreseeable future from which the asset can be deducted.
3. EARNINGS PER SHARE
The earnings per share calculation has been based on the weighted average number
of shares in issue during the period of 67,942,504 (undiluted) and 71,117,809
(diluted) (2001: 54,091,574 and 56,733,679 respectively). The FRS14 basic and
diluted earnings per share have been calculated on the profit attributable to
ordinary shareholders of #1,833,000 (2001: #1,123,000) which is the profit for
the financial year less the proposed preference dividend of #9,000 (2001: #nil).
The Directors consider that a more appropriate measure of the performance of
the Group excludes, principally, the effect of goodwill which is a non-cash
item. This measure, the underlying earnings per share (formerly shown as '
Headline'), has been calculated on the above profit attributable to ordinary
shareholders adjusted for exceptional items, profit on disposal of tangible
fixed assets, goodwill amortisation and related tax effect.
The calculations of earnings per share can be reconciled as follows:
2002 2001
(restated)
pence pence
FRS14 basic 2.7 2.1
Effect of
- exceptional items (0.3) -
- profit on disposal of tangible fixed assets (0.1) (0.2)
- goodwill amortisation 2.3 1.3
------------ ------------
Underlying basis 4.6 3.2
------------ ------------
Fully diluted earnings per share has been calculated on profits and shares in
issue which have been adjusted to take account of future issues of ordinary
shares in respect of the convertible preference shares and options issued under
the Company's share option and sharesave schemes.
4. DIVIDEND
If approved at the Annual General Meeting, the dividends of 0.5 pence per
ordinary share and 0.175 pence per preference share will be paid on 1 July 2003
to shareholders on the register on 6 June 2003.
5. POST BALANCE SHEET EVENT
Since the balance sheet date an outstanding claim has been settled and the Group
has received the sum of #1.25 million before costs.
6. FINANCIAL INFORMATION
The financial information set out above does not constitute statutory accounts
as defined in Section 240 of the Companies Act 1985. The financial information
for the year ended 31 December 2002 has been extracted from the statutory
accounts on which the auditors have issued an unqualified audit report and which
will be delivered to the Registrar of Companies in due course.
The financial information for the year ended 31 December 2001 has been extracted
from the statutory accounts for that year with an adjustment for the effects of
implementing FRS19; the auditors gave an unqualified report on the financial
statements for that year and the full accounts have been delivered to the
Registrar of Companies.
7. ANNOUNCEMENT
Copies of this announcement are available from the registered office of the
company: Enterprise House, Chamber Court, Castle Street, Worcester WR1 3AD.
Enquiries:
John R Foley Trevor Bass
Chief Executive Financial PR Consultant
MacLellan Group plc Tel: 020-7067-0700
Tel: 01905 744400
Mobile: 07785 333480
Stephen R Shipley
Finance Director
MacLellan Group plc
Tel: 01905 744400
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