Interim Results
Inspace Plc
06 September 2005
Press Release 6 September 2005
Inspace plc
('Inspace' or 'the Company')
Interim Results for the six months ended 30 June 2005
Inspace plc (AIM:INSP), the property based support services business that has
established itself as one of the UK's leading social housing repair and
maintenance providers, announces its Interim Results for the six months ended 30
June 2005.
Highlights
• Turnover on continuing operations up 64 per cent to £70.8 million
(2004: £43.3 million)
• Operating profit on continuing operations up 70 per cent to £3.57 million
(2004: £2.1 million)
• Diluted earnings per share up 71 per cent to 3.94 pence (2004: 2.31 pence)
• Order book now exceeding £450 million and extending as far as 2020
• Net cash of £3.6 million
• All debt settled on flotation
• Shareholder funds increased from £0.9 million to £13.6 million
Commenting on the Results, Colin Enticknap, Executive Chairman of Inspace plc,
said: 'We are pleased with the way the first half year has unfolded. Interim
results are just ahead of expectation, forward order books have reached record
levels, and our people have coped well with the transition to operating in the
AIM environment.
'With a clear strategy, scaleable infrastructure and empowered culture, we
should now be well placed to build upon these early achievements, and to move
forward with confidence to the next stage of our development.'
For further information:
Inspace plc
Colin Enticknap, Executive Chairman Tel: +44 (0) 1462 678 910
colin.enticknap@inspace.co.uk www.inspace.co.uk
Seymour Pierce
Mark Percy, Corporate Finance Tel: +44 (0) 20 7107 8000
markpercy@seymourpierce.com www.seymourpierce.com
Media enquiries:
Abchurch
Henry Harrison-Topham Tel: +44 (0) 20 7398 7700
henry.ht@abchurch-group.com www.abchurch-group.com
Chairman's statement
Overview
The first half of 2005 has naturally been a unique period in the development of
the business, and one that we can now look back upon with a reasonable degree of
satisfaction.
We have seen the successful implementation of a number of structural changes;
the de-merger of the business from our previous parent company; the
establishment of a new Board with appropriate non-executive representation; the
creation of a new executive management team along with strong functional support
and independent systems and procedures; and, most notably, the flotation of the
business on the AIM Market of the London Stock Exchange.
Any one of these events might easily have distracted us from day to day
operations, but our people rose to these short term challenges with their
characteristic energy and enthusiasm and, through their determined effort, we
have continued to achieve controlled turnover growth, to deliver sustainable
levels of profit, and to generate positive cash. Just as importantly, we have
continued to strengthen our order book, so important if we are to drive future
growth and further enhance the quality of our earnings.
Financial Highlights
Turnover on continuing operations grew substantially by 64% to reach £70.8
million.
Comparable operating profit grew by 70%, reaching £3.57 million and representing
a return of 5.0%. Interest payable exceeded that received by £0.12 million due
to charges incurred prior to flotation. Consequently, profit on ordinary
activities before taxation was £3.45 million.
Having settled outstanding debt from the funds raised at flotation, half year
cash sat at a healthy £3.6 million with no borrowings. Enforcing strict cash
management principles remained a priority during the period, which helped to
improve our cash conversion rate to 61%.
These factors combined to effect a dramatic improvement in our balance sheet.
With net current assets of £12.7 million and shareholders' funds of £13.6
million, we can now demonstrate enhanced covenant strength as we continue to
pursue substantial projects to build our order book.
Our order book has continued to grow with the successful acquisition of social
housing contracts, in chronological order, for Richmond upon Thames Churches
Housing Trust, for Basildon District Council, for the Corporation of London, and
most recently, for the London Borough of Hammersmith & Fulham. Assuming that
projects run for their full term, our order book has now reached £450 million,
which represents an increase of 61% upon this time last year.
Dividend
The encouraging first half performance has allowed the Board to declare an
interim dividend of 0.933p per share, payable to those Shareholders on the
register on 24 May 2005, and 0.161p per share payable to those on the register
on 16 September 2005, consistent with the interim dividend policy outlined in
the AIM Admission document. Both interim dividends will be paid on 14 October
2005.
Operational Performance
Our portfolio strategy brings important benefits and we saw evidence of this in
the first half year, as all parts of our business made important contributions
to group profit.
Inspace Partnerships, which maintains and improves social housing stock,
justified its position as our primary growth driver. We saw its proportion of
continuing group turnover grow from 17% in 2002, to 24% in 2003 and to 35% in
2004. As expected, that trend has continued during the first half of 2005, and
has now reached 42%, helped in part by additional Decent Homes revenues secured
from Barnsley and Colchester local authorities, in both instances off the back
of well performing repair and maintenance contracts. Encouraging levels of
performance based revenues, typical under our partnering contracts, kept
operating margins up at 6.4%.
Inspace Maintain and Inspace Environment, which jointly maintain corporate and
public sector real estate, also delivered encouraging performances. Both
continued to build relationships with their key customers; those perceived to
offer higher volumes and more robust spend patterns. Barclays, Premier Travel
Inn, HBOS and Whitbread Restaurants remain prime corporate examples. Royal Mail
and Suffolk County Council represent public sector equivalents. Turnover, which
represented 44% of the group's total, delivered operating margins of 4.3%,
slightly lower than this time last year reflecting our first half investment in
Inspace Environment, where we have strengthened its board and relocated its head
office ahead of its planned expansion.
Inspace Complete, our design led interiors business, achieved good growth in the
period, primarily as a result of increased public sector activity on the
government's Job Centre refurbishment programme. With 14% of the group's
turnover falling within this business, we were satisfied to see operating
margins at 3.6%, particularly bearing in mind that this part of our business is
able to generate working capital.
People
I have already mentioned the exceptional performances delivered by our people,
far too many to mention individually, whose considerable efforts have been
greatly appreciated. I must also express my personal gratitude to Andrew Telfer,
who was instrumental in ensuring our successful AIM listing, and also to Duncan
Forbes and his supporting MDs; Gerry Graville, Karim Khan and Mick Williamson,
for their unstinting commitment and professional leadership during what has
naturally been a critical period.
Whilst there have been many changes for us all to embrace as we have travelled
down the flotation path, cultural shift has thankfully not been one of them. The
culture, philosophy and self imposed controls inherited from Willmott Dixon have
stood up well to the more rigorous requirements demanded of AIM companies, and
will provide us with a good platform for the future.
Future Prospects
We have had an encouraging first six months, but we are not complacent; there is
much more for us to do if we are to meet our aspirations for the rest of this
year and create the right context for growth in 2006 and beyond.
Our focus will remain divided between serving social housing landlords on the
one hand, and serving corporate and public sector real estate clients on the
other.
In social housing terms, the challenge for the remainder of this year will be to
effectively mobilise the teams who will deliver the four recently secured
projects. Experience tells us that the quality of service delivery, and the
resultant level of both customer satisfaction and performance related incentive
payments, are hugely dependant upon decisions taken at the very outset.
Alongside this priority, we must also remain focussed upon our tracking list,
which contains over £1 billion of schemes meeting our target profile, nurturing
in particular those relationships which will provide the tender opportunities to
satisfy our new workload demands for 2006.
In corporate and public sector terms, our short term challenge will be
technology related. During the next six months, we must complete the development
phase of our software systems replacement programme, which is expected to
provide important medium term service and efficiency improvements to Inspace
Maintain, Inspace Environment and Inspace Complete, ahead of the implementation
phase scheduled for next year. Assembling the balance of our base work load
requirement for 2006 will, naturally, also remain an important second half year
priority.
Summary
It is easy to forget that the business has only existed as a stand alone entity
since the beginning of this year. Much has been achieved since; a successful
flotation on AIM, encouraging first half results, a growing order book, and the
assembly of an experienced and balanced top team with a pragmatic understanding
of short term priorities and clear, ambitious plans for the future. We hope that
Shareholders will share the Board's satisfaction with our early achievements as
a stand alone business, and our confidence that with the potential offered by
our markets and the quality inherent in our people, we offer the prospect to do
better still.
Colin Enticknap
Executive Chairman
6 September 2005
Group Profit and Loss Account
Unaudited Unaudited Audited
half year half year year ended
30 Jun 2005 30 Jun 2004 31 Dec 2004
Notes £'000 £'000 £'000
Turnover
Continuing operations 2 70,815 43,256 101,731
Discontinued operations 2 - 5,541 5,541
_________ __________ __________
70,815 48,797 107,272
Cost of sales (54,341) (36,900) (79,615)
_________ _________ _________
Gross profit 16,474 11,897 27,657
Administrative expenses (12,903) (9,909) (21,407)
_________ _________ _________
Operating profit
Continuing operations 2 3,571 2,100 6,362
Discontinued operations 2 - (112) (112)
_________ _________ _________
3,571 1,988 6,250
Net interest payable and similar (126) - -
charges
__________ __________ __________
Profit on ordinary activities before 3,445 1,988 6,250
taxation
Tax on profit on ordinary activities 3 (1,082) (635) (1,965)
__________ __________ __________
Profit for the financial period 2,363 1,353 4,285
Dividends* 4 - (1,350) (4,275)
__________ __________ __________
Retained profit for the financial 2,363 3 10
period
_________ _________ _________
Earnings per share 5 4.04 3.01 8.82
Fully diluted earnings per share 5 3.94 2.31 7.32
_________ _________ _________
*Half year 30 June 2004 on a proforma basis
Group Balance Sheet
Unaudited Unaudited Audited
half year half year year ended
30 Jun 2005 30 Jun 2004 31 Dec 2004
Notes £'000 £'000 £'000
Fixed assets
Tangible assets 899 615 579
_________ _________ _________
Current assets
Stocks 6 913 1,295 721
Debtors 7 32,594 19,018 24,314
Cash and bank balances 3,648 35 37
_________ _________ _________
37,155 20,348 25,072
Creditors: amounts falling due within 8 (24,469) (20,028) (24,398)
one year
_________ _________ _________
Net current assets 12,686 320 674
_________ _________ _________
13,585 935 1,253
_________ _________ _________
Capital and reserves
Called up share capital 1,343 927 1,125
Share premium 9,864 - 113
Capital redemption reserve 3 - -
Profit and loss account 2,375 8 15
_________ _________ _________
9 13,585 935 1,253
_________ _________ _________
Group Cash Flow Statement
Unaudited Unaudited Audited
half year half year year ended
30 Jun 2005 30 Jun 2004 31 Dec 2004
Notes £'000 £'000 £'000
Cash flow from operating activities 10 2,168 2,379 3,657
Returns on investments and servicing of (126) - -
finance
Taxation paid (484) (324) (1,742)
Capital expenditure and financial (498) (143) (312)
investment
Equity dividends paid (4,275) (1,900) (1,900)
_________ _________ _________
Cash flow before use of liquid (3,215) 12 (297)
resources and financing
Financing 6,826 - 311
_________ _________ _________
Increase in cash 3,611 12 14
_________ _________ _________
Reconciliation of net cash flow to
movement in net funds
Increase in cash 3,611 12 14
_________ _________ _________
Opening net funds 37 23 23
_________ _________ _________
Closing net funds 3,648 35 37
_________ _________ _________
Notes to the Financial Statements
1. Basis of preparation
The interim financial information for the six months to 30 June 2005 has been
prepared on the basis of the accounting policies applied in the Group's
statutory accounts for the year to 31 December 2004 as set-out in the AIM
Admission document prepared for the Group's flotation on AIM. The Directors
expect those accounting policies to apply to the accounts for the year to 31
December 2005. The half year information has not been audited and does not
represent statutory accounts. The information shown for the year to 31 December
2004 has been extracted from the AIM Admission document.
2. Segmental analysis
Unaudited Unaudited Audited
half year half year year ended
30 Jun 2005 30 Jun 2004 31 Dec 2004
£'000 £'000 £'000
Turnover
Analysis by class of business:
Social housing maintenance 29,482 14,354 35,154
Corporate and public sector maintenance 31,105 27,761 56,885
Interior design, installation and furnishing 10,228 1,141 9,692
Discontinued activities - 5,541 5,541
_________ _________ _________
70,815 48,797 107,272
_________ _________ _________
Operating profit
Analysis by class of business:
Social housing maintenance 1,873 1,077 2,552
Corporate and public sector maintenance 1,334 1,407 3,195
Interior design, installation and furnishing 364 (384) 615
Discontinued activities - (112) (112)
_________ _________ _________
3,571 1,988 6,250
_________ _________ _________
3. Taxation
The taxation charge for the period has been calculated based on the estimated
tax rate for the year of 31.40%.
4. Dividends
An interim dividend of 0.933p per ordinary share will be paid to the
shareholders on the register at 24 May 2005 (57,876,783 shares), representing 5/
6ths of the total interim dividend, and an interim dividend of 0.161p per
ordinary share will be paid to the shareholders on the register at 16 September
2005 (67,136,042 shares), representing 1/6th of the total interim dividend. Both
payments will be made on 14 October 2005.
5. Earnings per share
Earnings per share have been calculated by dividing the profit on ordinary
activities of £2.363 million (June 2004: £1.353 million; December 2004: £4.285
million) by 58,532,666 shares (June 2004: 45,000,000 shares; December 2004:
48,584,462 shares) being the weighted average number of ordinary shares in issue
during the year.
The fully diluted earnings per share is based on 59,952,559 ordinary shares
(June 2004: 58,549,950 shares; December 2004: 58,549,950 shares) having taken
into account the dilutive effect of shares which have been made available to
employees under existing incentive schemes.
Unaudited Unaudited Audited
half year half year year ended
30 Jun 2005 30 Jun 2004 31 Dec 2004
£'000 £'000 £'000
6. Stocks
Stock of raw materials 277 296 265
Work in progress 636 999 456
_________ _________ _________
913 1,295 721
_________ _________ _________
7. Debtors
Trade debtors 16,849 8,739 9,889
Prepayments 1,568 807 492
Accrued income 6,987 3,881 5,676
Deferred tax 13 17 13
Amounts recoverable on contracts 7,177 5,574 8,244
_________ _________ _________
32,594 19,018 24,314
_________ _________ _________
8. Creditors
Trade creditors 12,292 7,829 10,849
Due to Willmott Dixon Limited - 5,520 3,143
Payments on account 1,727 2,245 1,333
Corporation tax 1,082 635 484
Other taxes and social security 4,127 - -
Accruals 5,241 2,449 4,314
Proposed dividends - 1,350 4,275
_________ _________ _________
24,469 20,028 24,398
_________ _________ _________
9. Reconciliation of movements in equity
shareholders' funds
Profit for the financial period 2,363 1,353 4,285
Dividends* - (1,350) (4,275)
_________ _________ _________
2,363 3 10
Call on share capital 531 - 311
Capital redemption (3) - -
_________ _________ _________
2,891 3 321
Issue of shares 10,054 - -
Costs associated with issue of shares (613) - -
_________ _________ _________
Net proceeds from issue of shares 9,441 - -
_________ _________ _________
Movement in equity shareholders' funds 12,332 3 321
Opening shareholders' funds 1,253 932 932
_________ _________ _________
Closing shareholders' funds 13,585 935 1,253
_________ _________ _________
*Half year 30 June 2004 on a proforma basis
Inspace plc floated on AIM on 26 May 2005 and issued 9,259,259 additional
ordinary shares. During the period 678,096 ordinary shares were also issued
under share incentive schemes.
A call on share capital was also made during the period in respect of 1,201,402
shares issued under share incentive schemes. 1,351,263 partly called shares were
also re-purchased and cancelled by the Company.
10. Cash flows Unaudited Unaudited Audited
half year half year year ended
30 Jun 2005 30 Jun 2004 31 Dec 2004
£'000 £'000 £'000
Reconciliation of operating profit to net cash
inflow from operating activities
Operating profit on ordinary activities before 3,571 1,988 6,250
interest and taxation
Depreciation 180 151 305
Loss on sale of fixed assets - - 34
Decrease/(increase) in stock, work in progress and
amounts recoverable on long term contracts
875 (3,279) (5,379)
(Increase)/decrease in debtors (9,344) 2,551 376
Increase in payments on account 394 1,414 502
Increase/(decrease) in trade and other creditors 6,492 (446) 1,569
_________ _________ _________
Net cash inflow from operating activities 2,168 2,379 3,657
_________ _________ _________
Analysis of change of net funds
Opening cash and bank balances 37 23 23
Increase in cash 3,611 12 14
_________ _________ _________
Closing net funds 3,648 35 37
_________ _________ _________
- Ends -
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