Interim Results
Mears Group PLC
3 September 2001
Mears Group PLC - Interim Results
Chairman's Statement
I am again pleased to announce record profits for the six months ended 30 June
2001.
Profit before tax was up 42% at £1,205,057 compared with £850,115 for the same
period last year and £1,928,479 for the full year ended 31 December 2000. In
the previous half-year turnover included both discontinued and non-recurring
items as a result of Haydon contracts, which the Group declined to renew.
Turnover therefore was up 20% compared to last year on a like for like basis.
Of particular mention is the significant increase in net profit margins, which
have increased to 3.4% from 2.4% in the comparable period last year and from
2.9% in the year ended 31 December 2000. Earnings per share, after the
amortisation of goodwill increased by 29% to 1.82p. (2000: 1.41p). The Board
has declared an interim dividend of 0.20p (2000: 0.15p) payable on 9 November
2001 to shareholders on the register on 19 October 2001.
Trading review
The Group had an excellent first half with trading conditions remaining
buoyant. The Group continues to grow in a controlled manner and is highly
selective when looking for growth opportunities. This has resulted in the
increased net profit margins, which continue to show an upward trend and
underlines the Group's determination to build a long-term business on solid
foundations to deliver profitable and sustained returns for all stakeholders.
I am delighted to confirm the award of a substantial new partnering contract
with Welwyn Hatfield Council. The contract value is £5 million per annum for
an initial eight-year term, an addition of £40 million to our order book,
which now stands at £150 million. This contract is a further demonstration of
the type of contracts now available in the public sector as a result of the '
Best Value' initiative of central Government. The contract is of a true
partnership concept where the Group will work with the client's in house
workforce to provide a wide range of building maintenance services. I hope to
bring news of further contract awards in the near future.
The outlook for the Group has never been stronger, with larger contracts being
awarded for longer periods, providing committed future work and stability for
the workforce.
Review of activities
The Group is structured in such a way that each subsidiary Company has its own
management team headed by an experienced Managing Director. A centralised
administration unit based in Gloucester provides accounting services, human
resources and health and safety support to each subsidiary Company.
The majority of the Group's business continues to be in the provision of
maintenance services to the local authority, social housing and Ministry of
Defence sectors. As can be seen from the contract award mentioned in the
trading review, these sectors provide the Group with long-term contracts with
organisations who are unlikely to encounter financial restrictions in any
periods of economic downturn. The market for the type of facility services the
Group provides is estimated at in excess of £3 billion per annum and growing.
The public sector has changed following the 'Best Value' procurement
initiative with clients buying a service based more upon quality than price.
The Group is ideally placed to benefit from these opportunities.
The Group holds the prestigious Investor in People award and the ISO9002
Quality Management System. These awards are I believe recognition of a quality
approach to both employees and service delivery, which has led to the Group
being further recognised with a number of regional and national awards. The
Group was a recent finalist for the South West Business of the Year award.
Haydon continues to build an excellent reputation as a regional mechanical and
electrical services provider to the private sector. The business has expanded
with an additional regional presence on the South Coast of England, which has
been successful in being awarded contracts in the education sector. Both the
London operation and Chandlers Ford have been very successful in tendering for
quality, profitable contracts and provide the Group with a solid platform for
future growth.
UFD was acquired by the Group in October 1998 and provides vehicle collection
and delivery services to the private sector. Drivers who typically collect
individual vehicles at the end of their lease period deliver around 200,000
vehicles per annum to the retail or vehicle auction markets. UFD holds some of
the larger contracts in the market and is the largest provider of these
services in the UK. UFD have recently strengthened their management team to
expand further the profitable opportunities available.
Strategy
The Group operate a success-based reward environment with bonus and incentive
arrangements in place for trade operatives, administrators and senior
managers. Throughout the Group success is not only encouraged but also
rewarded. Everyone in the Group is encouraged to contribute towards a better
way of working, with initiatives in place, at all levels to eradicate waste
and encourage social responsibility. The recent implementation of a discreet
telephone help line for employees to voice their concerns in an 'off the
record' manner has been highly successful and genuinely helped to placate
early signs of potential problems or lack of effective communications. I
congratulate the Human Resources department for this excellent initiative.
Cash management has continued to produce excellent returns with interest costs
in the period reducing from £144,572 to £55,431. The Group operates,
primarily, in a high volume low margin environment and the control of costs
and the management of cash are vital to the future success of the Group. The
cash flow statement reported herewith is a testimony to the huge commitment
the Group places on cash management.
During the first six months of this year the Group started an initiative to
improve the awareness of the Mears brand name to the wider facility management
sector. I can confirm that the Group has formed Mears Facility Management
Limited with a senior manager who until recently worked for Interserve PLC. He
is to be an equity partner in the new company and is looking to build a
substantial and profitable facility management company. I am delighted that
the Group has been able to attract such quality senior management and I look
forward to reporting the success of this operation in the future.
The Board continues to seek out acquisition opportunities and is looking to
expand the range of facility service provided.
The Board continues to increase the awareness of the Group to the investing
public at large. To that end the Group has committed to an investor management
service in conjunction with the company itruffle, an online investor
communication company, details of which can be found at
mearsgroup@itruffle.com.
I would like to express publicly my most sincere congratulations to all those
involved in the progress of the Group to date and to the ongoing commitment at
all levels, no better example of this commitment is demonstrated by the award
of the Welwyn Hatfield Council contract which is such a substantial and
innovative opportunity. The success of the Group is a reflection of the
commitment of a large number of people. Staff at all levels, are to be
congratulated, in addition excellent support and commitment has been received
from both customers and suppliers. Many sincere thanks to all.
R Holt
Chairman
3 September 2001
Unaudited Interim Profit and Loss Account
For the Six months ended 30 June 2001
6 months to 6 months to Year to 31
30 June December 2000
30 June
2001
2000
Note £ £ £
Turnover 1
Continuing operations 35,224,884 34,981,918 66,944,602
Discontinued operations - 3,430,974 3,735,584
------------ ----------- ------------
35,224,884 38,412,892 70,680,186
Cost of sales (26,801,734) (30,024,608) (55,108,694)
------------ ----------- ------------
Gross profit
Continuing operations 8,423,150 7,792,378 15,837,505
Discontinued operations - 595,906 (266,013)
------------ ----------- ------------
8,423,150 8,388,284 15,571,492
Administrative expenses (7,162,662) (8,058,447) (14,897,151)
Exceptional item - write back of - 664,850 1,558,356
negative goodwill
------------ ----------- ------------
Operating profit
Continuing operations 1,260,488 994,687 2,232,697
Discontinued operations - - -
------------ ----------- ------------
1,260,488 994,687 2,232,697
Net interest (55,431) (144,572) (304,218)
------------ ----------- ------------
Profit on ordinary activities 1,205,057 850,115 1,928,479
before taxation
Tax on profit on ordinary 2 (237,000) (162,000) (139,654)
activities
------------ ----------- ------------
Profit on ordinary activities 968,057 688,115 1,788,825
after taxation
Equity minority interests (2,200) 10,320 (6,749)
------------ ----------- ------------
Profit for the financial period 965,857 698,435 1,782,076
Dividends 3 (106,720) (78,397) (345,448)
------------ ----------- ------------
Profit retained 859,137 620,038 1,436,628
------------ ----------- ------------
Earnings per share 4
Basic 1.82p 1.41p 3.50p
------------ ----------- ------------
Diluted earnings per share 1.65p 1.36p 3.20p
------------ ----------- ------------
Unaudited Consolidated Balance Sheet
As at 30 June 2001
As at As at As at
30 June 30 June 31 December
2000
2001 2000
Note £ £ £
Fixed assets
Intangible assets - positive 2,261,867 2,254,498 2,193,119
goodwill
Intangible assets - negative - (893,506) -
goodwill
Tangible assets 1,099,130 1,012,664 1,060,302
Investments 55,677 19 55,677
------------- ------------ ------------
3,416,674 2,373,675 3,309,098
Current assets
Stocks 1,836,482 4,901,591 1,737,153
Debtors 16,471,212 18,794,944 16,192,676
Cash at bank and in hand 2,656,091 1,241,233 3,596,623
------------- ------------ ------------
20,963,785 24,937,768 21,526,452
Creditors: amounts falling due (18,265,594) (22,646,726) (19,406,859)
within one year
------------- ------------ ------------
Net current assets 2,698,191 2,291,042 2,119,593
------------- ------------ ------------
Total assets less current 6,114,865 4,664,717 5,428,691
liabilities
Creditors: amounts falling due
after more than one year - (500,000) (400,000)
Provisions for liabilities and (6,500) (6,500) (6,500)
charges
------------- ------------ ------------
6,108,365 4,158,217 5,022,191
------------- ------------ ------------
Capital and reserves
Called up share capital 536,102 522,645 525,152
Share premium account 2,382,538 2,135,343 2,163,151
Other reserve (249,898) (249,898) (249,898)
Profit and loss account 3,472,841 1,797,114 2,613,704
------------- ------------ ------------
Equity shareholders' funds 8 6,141,583 4,205,204 5,052,109
Equity minority interests (33,218) (46,987) (29,918)
------------- ------------ ------------
6,108,365 4,158,217 5,022,191
------------- ------------ ------------
Unaudited Consolidated Cash Flow Statement
For the six months ended 30 June 2001
6 months 6 months Year to
to to
31
30 June 30 June December
2000
2001 2000
Note £ £ £
Net cash inflow/(outflow) from operating 5 1,604,211 (636,156) 2,483,465
activities
Returns on investments and servicing of
finance
Interest received 27,838 - 2,237
Interest paid (88,769) (161,918) (323,816)
Finance lease and hire purchase interest - (474) (459)
paid
---------- ---------- ----------
Net cash outflow from returns on (60,931) (162,392) (322,038)
investments and servicing of finance
---------- ---------- ----------
Taxation paid (36,496) (68,383) (266,635)
Capital expenditure
Purchase of tangible fixed assets (208,335) (178,400) (405,817)
Sale of tangible fixed assets 21,376 9,336 67,392
Purchase of investment - - (55,658)
---------- ---------- ----------
Net cash outflow from capital expenditure (186,959) (169,064) (394,083)
---------- ---------- ----------
Acquisitions
Purchase of subsidiary undertakings - (771,110) (771,110)
Net cash acquired with subsidiary - - -
undertakings
---------- ---------- ----------
Net cash outflow from acquisitions - (771,110) (771,110)
---------- ---------- ----------
Equity dividends paid - - (287,455)
Financing
Issue of shares 94,712 51,282 81,597
Repayment of borrowings (600,040) (100,000) (200,000)
Capital element of finance leases and - (19,956) (19,956)
hire purchase rentals
---------- ---------- ----------
Net cash outflow from financing (505,328) (68,674) (138,359)
---------- ---------- ----------
Increase/(decrease) in cash 6 814,497 (1,875,779) 303,785
---------- ---------- ----------
Unaudited Notes to the Financial Statements
For the six months ended 30 June 2001
1 Turnover and profit on ordinary activities before taxation
Turnover and profit on ordinary activities before taxation are attributable to
the following activities carried out entirely within the UK.
Turnover Profit before taxation Net assets
6 months 6 months 6 months 6 months to As at As at
to 30 June to 30 June to 30 June 30 June 2000
30 June 30 June
2001 2000 2001
2001 2000
£ £ £ £ £ £
Maintenance 30,865,169 34,650,150 887,541 688,466 5,196,920 3,628,932
services
Motor vehicle 4,359,715 3,762,742 317,516 161,649 911,445 529,285
distribution
---------- ---------- ---------- -------------- -------- ---------
*35,224,884 *38,412,892 1,205,057 850,115 6,108,365 4,158,217
---------- ---------- ---------- -------------- -------- ---------
* The turnover figure for the 6 months to 30 June 2000 included both
discontinued and non-recurring items as a result of Haydon and Company
contracts, which the Group declined to renew. Turnover has increased during
the 6 months to 30 June 2001 by 20% compared to the previous year, on a like
for like basis.
2 Taxation
The tax charge for the six months ended 30 June 2001 has been based on the
estimated tax rate for the full year before adjustments.
3 Dividends
6 months 6 months
to to
30 June 30 June
2001 2000
£ £
Ordinary shares
- interim dividend of 0.20p (2000: 0.15p) per share payable 106,720 78,397
on 9 November 2001
4 Earnings per share
The calculation of the basic earnings per share is based on the earnings
attributable to the ordinary shareholders divided by the weighted average
number of shares in issue during the period. The calculation of the diluted
earnings per share is based on the basic earnings per share, adjusted to allow
for the issue of shares on the assumed conversion of all dilutive options and
other dilutive potential ordinary shares.
Reconciliation of the earnings and weighted average number of shares used in
the calculations are set out overleaf:
6 months to 30 June 2001 6 months to 30 June 2000
Weighted Weighted
average number average number
of shares Per of shares Per
share share
Earnings amount Earnings amount
£ pence £ pence
Basic
earnings per
share
Profit
attributable
to
ordinary 965,857 52,964,842 1.82p 698,435 49,503,229 1.41p
shareholders
Dilutive
effect of
securities
Options 5,631,378 1,874,963
----------- -----------
Diluted
earnings per
share
Adjusted 965,857 58,596,220 1.65p 698,435 51,378,192 1.36p
earnings
-------- ----------- ------ ------- ----------- --------
5 Net cash inflow/(outflow) from operating activities
6 months to 6 months to Year to
30 June 2001 30 June 2000 December 2000
£ £ £
Operating profit 1,260,488 994,687 2,232,697
Depreciation and amortisation 211,167 (428,155) (1,128,370)
Profit on disposal of fixed assets (1,659) (1,217) (11,406)
(Increase)/decrease in stocks (99,329) (1,619,454) 1,544,984
(Increase)/decrease in debtors (278,536) (469,637) 2,132,631
Increase/(decrease) in creditors 512,080 887,620 (2,287,071)
------------ ------------ ---------------
Net cash inflow/(outflow) from 1,604,211 (636,156) 2,483,465
operating activities
------------ ------------ ---------------
6 Reconciliation of net cash flow to movement in net funds/(debt)
6 months 6 months Year to
to to
December
30 June 30 June 2000
2001 2000
£ £ £
Increase/(decrease) in cash in the period 814,497 (1,875,779) 303,785
Cash outflow from debt financing 600,040 100,000 200,000
Cash outflow from finance leases and hire - 19,956 19,956
purchase contracts
---------- ---------- -----------
Change in net funds resulting from cash flows 1,414,537 (1,755,823) 523,741
and movement in net funds in the period
Net debt at start of period (608,394) (1,132,135) (1,132,135)
---------- ---------- -----------
Net funds/(debt) at end of period 806,143 (2,887,958) (608,394)
---------- ---------- -----------
7 Analysis of changes in net funds
At 1 January 2001 Cash flow At 30 June 2001
£ £ £
Cash at bank and in 3,596,623 (940,532) 2,656,091
hand
Overdrafts (3,104,977) 1,755,029 (1,349,948)
------------------- ----------------- -------------------
491,646 814,497 1,306,143
Debt (1,100,040) 600,040 (500,000)
------------------- ----------------- -------------------
(608,394) 1,414,537 806,143
------------------- ----------------- -------------------
8 Reconciliation of movements in equity shareholder's funds
6 months to 6 months to Year to
30 June 2001 30 June 2000 December 2000
£ £ £
Profit for the financial period 965,857 698,435 1,782,076
Dividends (106,720) (78,397) (345,448)
---------------- ------------- ---------------
859,137 620,038 1,436,628
Issue of shares 230,337 51,282 81,597
---------------- ------------- ---------------
Net increase in equity 1,089,474 671,320 1,518,225
shareholders' funds
Equity shareholders' funds at 5,052,109 3,533,884 3,533,884
start of period
---------------- ------------- ---------------
Equity shareholders' funds at end 6,141,583 4,205,204 5,052,109
of period
---------------- ------------- ---------------
9 Preparation of interim financial information
The interim financial statements have been prepared on a basis consistent with
the accounting policies disclosed in the Annual Report and Accounts for the
year ended 31 December 2000.
The consolidated results for the year ended 31 December 2000 have been
extracted from the financial statements for that year and do not constitute
full statutory accounts for the Group. The Group accounts for the year ended
31 December 2000 received an unqualified audit report and did not include a
statement under section 237 (2) or (3) of the Companies Act 1985 and have been
filed with the Registrar of Companies.
10 Interim financial statements
Further copies of the interim statements are available from the registered
office of Mears Group PLC at The Leaze, Salter Street, Berkeley,
Gloucestershire, GL13 9DB, or on www.mearsgroup.co.uk
End
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