RNS Number:2901Q
Maclellan Group PLC
30 September 2003
MACLELLAN GROUP PLC
INTERIM REPORT FOR THE HALF YEAR TO 30 JUNE 2003
Chairman's Statement
I am pleased to report a strong set of results producing substantially increased
turnover, profits and earnings per share during the half year to 30 June 2003.
The highlights of the results for the half year are:
* Turnover from continuing operations increased by 24% to #74.85 million
(half year to 30 June 2002: #60.2 million);
* Profit before exceptional items, goodwill amortisation and taxation
increased by 54% to #2.34 million (2002: #1.52 million);
* Underlying earnings per share increased by 35% to 2.3 pence (2002: 1.7
pence);
* Operating profit margin improved to 3.3% (2002: 2.6%);
* Interest cover of 20 times (2002: 17 times) with period end gearing of
net debt to total shareholders' funds of 12% (2002: 15%).
During the period, an outstanding claim was settled resulting in an exceptional
credit (net of costs) of #0.88 million. This contributed to a profit before tax
of #2.22 million (2002: #0.95 million) resulting in an FRS14 basic earnings per
share of 2.1p (2002: 0.8p).
Dividend
It is the Board's policy at this stage in the Group's development to recommend
only an annual dividend and, therefore, no interim dividend is declared.
Operational Review
Our business continues to grow organically. We started contracts for a number of
new customers during the period including Continental Teves, NHS Trust
Portsmouth, New Covent Garden Market Authority and the Department of Health. We
also gained further work from a number of established customers such as
Sainsburys, Dupont and Avesta Polarit.
Our operating profit margin has grown to 3.3% and this continues to be an area
of focus for us. We believe that operating margin growth is mainly a function of
contract longevity, increased size and the broadening of the range of self
performed facilities services delivered to our customers. We have identified
further opportunities for operational efficiencies and the second half of 2003
will see our operating divisions brought closer together so that our customers
have the opportunity to use whatever services they require from our one service
provider approach.
Cashflow generated from operations amounted to #0.79 million (2002: #1.66
million) because of a substantial reduction in creditors which occurred at the
June period end as part of the Group's normal working capital cycle. The
decrease in group cash balances of #1.4 million arose principally from
borrowings assumed on the acquisition of Tasker (U.K.) Limited.
Acquisitions
We acquired the entire issued share capital of Tasker (U.K.) Limited on 18 June
2003 for an initial consideration of #400,000 with further consideration payable
dependent upon the achievement of agreed earn out targets up to a maximum of #2
million. Tasker (U.K.) Limited is a national window cleaning business and was
purchased to increase our national coverage. Tasker's operations are now
integrated within the MacLellan Specialist Services Division.
Our acquisition policy has twin objectives: the extension of the range of self
performed services available to our customers and the effective penetration of
new markets on a national scale.
Strategy
The Group has grown substantially since its formation in April 2000 in terms of
turnover, profits and employee numbers. The Board remains committed to its
strategy of growing both organically and through appropriate acquisition by
focusing on self performed facilities services provided from a "one company"
structure. In support of this strategy we are further strengthening our
management team through development and training courses and continuing to
streamline our administrative systems in order to provide a solid platform for
planned future growth.
Outlook
The Board remains confident that 2003 will be a successful year and that its
current strategy will continue to deliver further healthy turnover and profit
growth.
A L R Morton
Chairman
30 September 2003
GROUP PROFIT AND LOSS ACCOUNT
Half year to 30 June 2003
(unaudited) Half year 12 months
Before to to
goodwill Goodwill 30 31
and and June December
exceptional exceptional 2002 2002
items items Total (unaudited) (audited)
#'000 #'000 #'000 #'000 #'000
Turnover
Continuing operations 74,730 - 74,730 60,164 129,242
Acquisitions 120 - 120 - -
--------- --------- --------- --------- ---------
74,850 - 74,850 60,164 129,242
Discontinued operations - - - 1,807 12,296
--------- --------- --------- --------- ---------
74,850 - 74,850 61,971 141,538
Cost of Sales (66,329) - (66,329) (55,092) (123,156)
--------- --------- --------- --------- ---------
Gross Profit 8,521 - 8,521 6,879 18,382
Administrative Expenses
Goodwill amortisation - (1,001) (1,001) (568) (1,580)
Exceptional items (note 2) - 881 881 - (734)
Other (6,065) - (6,065) (5,264) (13,841)
--------- --------- --------- --------- ---------
(6,065) (120) (6,185) (5,832) (16,155)
Operating Profit
Continuing operations
Existing 2,446 (995) 1,451 1,141 2,282
Acquisitions 10 (6) 4 - -
--------- --------- --------- --------- ---------
2,456 (1,001) 1,455 1,141 2,282
Discontinued operations - 881 881 (94) (55)
--------- --------- --------- --------- ---------
2,456 (120) 2,336 1,047 2,227
Exceptional items - profit on
disposal of discontinued
operations - - - - 707
Interest (119) - (119) (95) (288)
--------- --------- --------- --------- ---------
Profit/(loss) on ordinary
activities before taxation 2,337 (120) 2,217 952 2,646
--------- ---------
Tax on profit on ordinary
activities (note 3) (624) (459) (804)
--------- --------- ---------
Profit on ordinary activities
after taxation 1,593 493 1,842
Dividends - including non-equity
(note 4) - - (388)
--------- --------- ---------
Retained profit for the financial
period 1,593 493 1,454
--------- --------- ---------
Earnings per share (note 5)
Underlying 2.3p 1.7p 4.6p
FRS 14 basic 2.1p 0.8p 2.7p
FRS 14 diluted 2.0p 0.8p 2.6p
--------- --------- ---------
GROUP BALANCE SHEET
30 30 31
June June December
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Fixed assets
Intangible assets 39,835 38,052 37,241
Tangible assets 6,369 6,417 6,274
Investments 1,752 1,915 1,852
--------- --------- ---------
47,956 46,384 45,367
--------- --------- ---------
Current assets
Stocks 601 391 393
Debtors 23,105 25,780 24,113
Cash at hand and in hand 883 51 2,324
--------- --------- ---------
24,589 26,222 26,830
--------- --------- ---------
Creditors: Amounts falling due within one year
Borrowings (3,361) (2,946) (3,111)
Other creditors (20,043) (24,883) (23,312)
--------- --------- ---------
(23,404) (27,829) (26,423)
--------- --------- ---------
Net current assets/(liabilities) 1,185 (1,607) 407
--------- --------- ---------
Total assets less current liabilities 49,141 44,777 45,774
Creditors: Amounts falling due after more than one year
Borrowings (2,910) (3,162) (3,173)
--------- --------- ---------
Net assets 46,231 41,615 42,601
--------- --------- ---------
Capital and reserves
Called up share capital 4,295 4,212 4,291
Shares to be issued 2,000 1,250 -
Share premium account 35,352 34,128 35,319
Other reserves 204 204 204
Profit and loss account 4,380 1,821 2,787
--------- --------- ---------
Total shareholders' funds 46,231 41,615 42,601
--------- --------- ---------
Analysis of shareholders' funds
Equity 44,231 39,615 40,601
Non-equity 2,000 2,000 2,000
--------- --------- ---------
46,231 41,615 42,601
--------- --------- ---------
GROUP STATEMENT OF CASH FLOWS
Half year Half year 12 months
to 30 to 30 to 31
June June December
2003 2002 2002
(unaudited) (unaudited) (audited)
Note #'000 #'000 #'000
Net cash inflow from operating activities A 787 1,660 6,566
Returns on investments and servicing of finance
Interest received 75 66 172
Investment income - - 32
Interest paid (127) (82) (286)
Interest element of finance lease payments (73) - (105)
--------- --------- ---------
Net cash outflow from returns on investments and
servicing of finance (125) (16) (187)
Taxation (28) (5) (413)
Capital expenditure and financial investment
Purchase of tangible and intangible fixed assets (474) (700) (947)
Disposal of tangible fixed assets 6 4 672
Redemption of shares in unquoted company 100 - 75
Disposal of shares in quoted company - 983 984
--------- --------- ---------
Net cash (outflow)/inflow from capital expenditure
and financial investment (368) 287 784
Acquisitions and disposals D
Purchase of subsidiary undertakings - (669) (1,490)
Cash balances acquired with subsidiary undertakings (1,499) (4,358) (4,357)
Disposal of subsidiary undertakings - - (240)
Cash balances disposed with subsidiary undertakings - - (119)
--------- --------- ---------
Net cash outflow from acquisitions and disposals (1,499) (5,027) (6,206)
--------- --------- ---------
Net cash (outflow)/inflow before financing (1,233) (3,101) 544
Financing
Ordinary shares issued 37 19 39
Expenses incurred in issue of ordinary shares - - (238)
Loans due within one year:
- increases in term debt 1,178 - -
- repayments in period (1,668) (358) (1,000)
Loans due after one year:
- increases in term debt 617 - -
Capital element of finance lease payments (372) (280) (792)
--------- --------- ---------
Net cash outflow from financing (208) (619) (1,991)
--------- --------- ---------
Decrease in cash in the period B,C (1,441) (3,720) (1,447)
--------- --------- ---------
NOTES TO THE GROUP STATEMENT OF CASH FLOWS
A. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Half year Half year 12 months
to 30 to 30 to 31
June June December
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Operating activities
Operating profit 2,336 1,047 2,227
Amortisation 1,001 568 1,580
Depreciation 988 609 1,593
Profit on disposal of tangible fixed assets (4) (21) (75)
Profit on disposal of investments - - (22)
Investment income - - (32)
Exchange differences - (10) (9)
(Increase)/decrease in stocks (173) 57 (233)
Decrease in debtors 1,860 1,861 237
(Decrease)/increase in creditors (5,221) (2,451) 1,300
--------- --------- ---------
Net cash inflow from operating activities 787 1,660 6,566
--------- --------- ---------
B. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half year Half year 12 months
to 30 to 30 to 31
June June December
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Decrease in cash in the period (1,441) (3,720) (1,447)
Net cash flow from changes in debt 245 639 1,792
New finance lease agreements (151) (381) (1,829)
Finance leases acquired with subsidiary undertakings (81) (792) (792)
Finance leases disposed with subsidiary undertakings - - 119
--------- --------- ---------
Movement in net debt in the period (1,428) (4,254) (2,157)
Net debt at beginning of period (3,960) (1,803) (1,803)
--------- --------- ---------
Net debt at end of period (5,388) (6,057) (3,960)
--------- --------- ---------
C. ANALYSIS OF CHANGES IN NET DEBT DURING THE PERIOD
At 31 At 30
December Other June
2002 Cash non-cash Acquired 2003
(audited) flow changes debt (unaudited)
#'000 #'000 #'000 #'000 #'000
Cash at bank and in hand 2,324 (1,441) - - 883
Debt due within one year (2,312) 490 (619) - (2,441)
Debt due after one year (1,922) (617) 619 - (1,920)
Finance lease agreements
- within one year (799) 372 (435) (58) (920)
- after one year (1,251) - 284 (23) (990)
--------- --------- --------- --------- ---------
(6,284) 245 (151) (81) (6,271)
--------- --------- --------- --------- ---------
(3,960) (1,196) (151) (81) (5,388)
--------- --------- --------- --------- ---------
D. ACQUISITION
On 18 June 2003 the Group acquired the entire issued share capital of Tasker
(U.K) Limited. The acquisition is being accounted for using acquisition
accounting principles. The acquisition summary, with net liabilities (including
bank borrowings of #1,499,000) at their provisional fair values, is as follows:
#'000
Net liabilities on acquisition (1,117)
Goodwill 3,595
---------
Consideration 2,478
---------
Satisfied by:
Earn out consideration 2,000
Cash payable 400
Acquisition expenses 78
---------
2,478
---------
The earn out consideration may be settled, at the Company's option, in cash or
shares and will be determined by reference to the level of earnings from the
business during a maximum four year earn out period.
NOTES TO THE INTERIM REPORT
1. Accounting Policies
The financial information contained in this document does not constitute
statutory accounts within the meaning of s240 of the Companies Act 1985 (as
amended). The figures for the half year ended 30 June 2003 are prepared on the
basis of the accounting policies set out in the Group's financial statements for
the twelve months ended 31 December 2002; this interim report is unaudited. The
results for the twelve months ended 31 December 2002 are abridged from the full
Group financial statements for that period upon which the auditors gave an
unqualified report; the full accounts have been delivered to the Registrar of
Companies.
2. Exceptional Items
Exceptional items comprise:
Half year Half year 12 months
to 30 to 30 to 31
June June December
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Claim settlement (net of costs) 881 - -
Restructuring and rebadging expenses - - (734)
--------- --------- ---------
881 - (734)
--------- --------- ---------
3. Tax on profit on ordinary activities
The tax charge for the half year ended 30 June 2003 is based on the effective
tax rate which it is estimated will apply on earnings for the full year.
4. Dividends
No interim dividend has been declared. In 2002 there was no interim dividend
and the proposed final dividend was 0.5 pence per ordinary share and 0.175 pence
per preference share.
5. Earnings per share
The calculation of earnings per share is based on the weighted average number of
shares in issue during the period as follows:
Undiluted Fully diluted
30 June 2003 75,819,904 79,016,181
31 December 2002 67,942,504 71,117,809
30 June 2002 60,528,353 63,965,879
The fully diluted shares comprise the weighted average number of shares in issue
adjusted to take account of future issues of ordinary shares in respect of the
convertible preference shares and options under the Company's share option
schemes and share save schemes. The FRS14 basic and diluted earnings per share
have been calculated on the profit attributable to ordinary shareholders of
#1,593,000 (2002: June #493,000; December #1,833,000). 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 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 the related tax
effect.
The calculations of earnings per share can be reconciled as follows:
Half year Half year 12 months
to 30 to 30 to 31
June June December
2003 2002 2002
pence pence pence
FRS14 basic 2.1 0.8 2.7
Effect of:
- exceptional items (1.1) - (0.3)
- profit on disposal of tangible fixed assets - - (0.1)
- goodwill amortisation 1.3 0.9 2.3
--------- --------- ---------
Underlying basis 2.3 1.7 4.6
--------- --------- ---------
6. Reconciliation of movements in Group shareholders' funds
Half year Half year 12 months
to 30 to 30 to 31
June June December
2003 2002 2002
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Profit for the financial period 1,593 493 1,842
Dividends - - (388)
--------- --------- ---------
1,593 493 1,454
Ordinary shares issued including premium (net of
expenses) 37 16,664 17,934
Movement in ordinary shares to be issued 2,000 1,250 -
Currency adjustments - (10) (5)
--------- --------- ---------
Net increase in shareholders' funds 3,630 18,397 19,383
Opening shareholders' funds 42,601 23,218 23,218
--------- --------- ---------
Closing shareholders' funds 46,231 41,615 42,601
--------- --------- ---------
7. Approval
This interim report was approved by a committee of the Board of Directors on 30
September 2003. This report is being sent to shareholders and is available from
the Company's registered office: Enterprise House, Chamber Court, Castle Street,
Worcester WR1 3AD and website: www.maclellan-group.plc.uk.
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