Interim Results
Renew Holdings PLC
06 June 2006
Renew Holdings plc
('Renew' or the 'Group')
Interim Results for the six months ended 31 March 2006
Renew, the specialist construction services business, today announces a strong
improvement in cash backed profits for the period and a strengthened order book.
Financial Highlights
• Turnover from ongoing operations of £162m (2005: £165m)
• Cash backed operating profit of £1.4m (2005: £0.7m)
• Profit before tax of £1.8m (2005: £0.1m)
• Earnings per share of 3.01p (2005: 0.25p)
• Interim dividend of 0.4p (2005: nil)
Operational Highlights
• No exceptionals, legacy contract provisions reconfirmed
• Results reflect growing impact of new management control
mechanisms in place
• Increased order book of £226m in specialist sectors
• Appointment of Group Finance Director
• Acquisition of PPS Electrical strengthening presence in
Nuclear sector
Roy Harrison, Chairman, commented:
'The Group continues to make progress, benefiting from its focus on the core
market sectors in which it has particular skills and experience. This is
reflected in the order book, which is growing both in terms of quality and
scale. Trading into the second half has been satisfactory and gives the Board
confidence that this progress will be sustained for the full year.'
6 June 2006
Enquiries:
Renew Holdings plc Tel: 020 7522 3200
Brian May, Chief Executive
John Samuel, Finance Director
College Hill Tel: 020 7457 2020
Matthew Gregorowski
Mark Garraway
CHAIRMAN'S STATEMENT
Introduction
The performance during the first half of the year is in line with the Board's
expectations. The Group continues to make progress, benefiting from its focus
on the core market sectors in which it has particular skills and experience.
Brian May is providing the experience and leadership missing over recent years
and has quickly restored the confidence of our staff, providing clear direction
and support.
At the end of last year the Board expressed its confidence that the legacy
contract exposures which have so negatively impacted the Group's results over
the past two years were fully provided for and were consistent with the expected
level of cash recoverable from those contracts. It is the Board's view that
this is still the case and robust procedures are in place to manage risk. There
are no exceptional items in these results.
Results and dividend
Group turnover from ongoing operations for the six months ended 31 March 2006
was £162.4m (2005: £165.1m) and operating profit for the period was £1.4m (2005:
£0.7m). These results reflect the growing impact of the management control
mechanisms established last year to focus on lower risk contracts. Profit
before tax was £1.8m (2005: £0.1m). Earnings per share were 3.01p (2005: 0.25p).
Shareholders' funds have increased by 13% since last year end and now stand at
£5.4m. Cash balances at 31 March were £8.2m.
In accordance with the progressive policy indicated last year, the Board is
declaring an interim dividend of 0.4p per share (2005: nil) to be paid on 7 July
2006 to shareholders on the register as at 16 June 2006.
Acquisition
The Group is pleased to announce that it has acquired PPS Electrical Limited, an
electrical contractor specialising in asset support for the nuclear sector, for
a cash consideration of £650,000. This acquisition will significantly
strengthen the Group's capability as a multi-disciplined site contractor for the
nuclear industry. The acquisition is expected to be modestly earnings enhancing.
Board
As we announced at the time of our trading update in March, on 1 May John Samuel
joined the Board as Group Finance Director and Philip Underwood stepped down
from the Board to concentrate on running VHE Construction and Shepley Engineers.
Outlook
The Board is satisfied by the progress being made throughout the Group. Trading
into the second half gives the Board confidence that this progress will be
sustained for the full year.
Roy Harrison, Chairman
6 June 2006
CHIEF EXECUTIVE'S REVIEW
Review of operations
I am pleased to report further progress in the first half of the year, with
Group turnover from ongoing operations of £162.4m and corresponding cash backed
operating profit of £1.4m. The majority of the Group's turnover is now being
generated from longer-term framework agreements and negotiated contracts,
improving the quality of earnings while strengthening relationships with key
clients.
Since my last review, the Group has continued to strengthen its risk management
processes, particularly in the area of contract selectivity. The Group's order
book at 31 March of this year was £226m, of which approximately 70% is repeat
business. 75% of new orders booked in the first half fall within our core
specialist areas of activity, and this proportion is expected to increase as the
Group continues to pursue this strategy.
None of the Group's activities has been loss making in the period. Performance
in the Land Remediation, Nuclear, Social Housing and Retail sectors has been
encouraging with over 50% of the Group's new orders generated in the first half
of the year being achieved in these areas. For example, in Social Housing,
Allenbuild is now working with five of the top six housing associations in the
UK. Genesis Housing Group, part of the Gentect Housing consortium of which
Allenbuild is a member, was also awarded the highest allocation of funds (£139m)
to help deliver 84,000 new homes over the next two years as part of the
Government's £3.9bn investment in the National Affordable Housing Programme.
In the half year, the Group won a £15.5m pre-sold project to develop over 92,000
sq.ft of office, production and warehousing facilities on a six-acre site in
Lancashire. Following the identification and purchase of the site by the Group,
VHE Construction carried out remediation works on the brownfield site and
Allenbuild is delivering the construction works, which are due to complete in
November. This is an excellent example of the benefits of offering our clients
integrated services through our portfolio of businesses.
Net cash outflow from operating activities was £8.5m. This was in line with the
Group's budget and the Group anticipates an improved cash position at the year
end. The net outflow includes an increase in stock and work in progress of £4.7m
on the development site in Lancashire. This contract is separately funded by a
£4m loan which is not included as an operating cash inflow. This loan is
expected to increase as the project progresses and will be repaid from the
proceeds of the sale. During the first half of the year, the realisation of
surplus property assets has continued with the sale of a London property for
book value and the repayment of the associated debt. Further realisations are
anticipated in the second half of the year.
Acquisition
The Group has completed the acquisition of PPS Electrical Limited, a privately
owned electrical contractor based in Barrow-in-Furness, specialising in the area
of nuclear work. PPS will become a subsidiary of Shepley Engineers Limited
establishing the combined business as the largest mechanical and electrical
contractor on the Sellafield site and strengthening Shepley's capabilities as a
multi-disciplined site contractor for the nuclear industry. The acquisition
price is £650,000 which will be met from the Group's existing cash resources.
In the year ended 31 December 2005, PPS recorded sales of £3.3m and a profit
before taxation of £121,000. Net assets were £375,000.
Prospects
The order book is growing in both quality and scale and in our chosen specialist
markets. These offer good opportunities for growth and profitability, while the
overall risk profile of the Group is much improved. I am pleased with the
progress the Group is making towards delivering reliable and growing profits.
Brian May, Chief Executive
6 June 2006
Group profit and loss account
for the six months ended
31 March 2006
Notes Six months Six months Year ended
ended ended
31 March 31 March 30 September
2006 2005 2005
Restated
Unaudited Unaudited Audited
£000 £000 £000
Turnover: Group and share of joint 179,363 227,320 457,750
ventures
Less share of joint ventures' (1,150) (2,113) (2,714)
turnover
Ongoing operations 162,442 165,111 330,113
Discontinuing operations 1 15,771 20,641 39,052
Total continuing operations 178,213 185,752 369,165
Discontinued operations 1 - 39,455 85,871
Group turnover 178,213 225,207 455,036
Cost of sales (including exceptional 1 (160,613) (204,995) (437,409)
items)
Gross profit 17,600 20,212 17,627
Administrative expenses (including 1 (16,210) (19,497) (37,689)
exceptional items)
Other operating income - - 53
Group operating profit /(loss) 1,390 715 (20,009)
Income from joint ventures - - -
Ongoing operations before 1,390 1,355 2,687
exceptionals
Exceptional items 1 - (2,220) (19,845)
Ongoing operations after 1,390 (865) (17,158)
exceptionals
Discontinuing operations 1 - (2,142) (8,351)
Total continuing operations 1,390 (3,007) (25,509)
Discontinued operations 1 - 3,722 5,500
Total operating profit/(loss) before 1,390 715 (20,009)
interest, including share of joint
ventures
Profit on disposal of subsidiary 1 - - 22,300
companies
Profit on ordinary activities before 1,390 715 2,291
interest
Interest receivable 569 328 921
Interest payable (661) (656) (1,597)
Other finance income / (charges) - 505 (240) (440)
FRS 17 pension
Profit on ordinary activities before 1,803 147 1,175
taxation
Taxation on profit on ordinary 3 - - 899
activities
Profit for the period 1,803 147 2,074
Basic and diluted earnings per share 4 3.01p 0.25p 3.46p
Basic and diluted earnings / (loss) 4 3.01p (5.95p) (42.76p)
per share on continuing operations
Proposed dividend 5 0.40p - 0.20p
group statement of total recognised gains and losses
for the six months ended
31 March 2006
Notes Six months Six months Year ended
ended ended
31 March 31 March 30 September
2006 2005 2005
Restated
Unaudited Unaudited Audited
£000 £000 £000
Profit for the period 1,803 147 2,074
Exchange movements in reserves 64 (67) (171)
Net movements relating to defined 2 (1,126) (103) (2,222)
benefit pension scheme
Total recognised gains and losses 741 (23) (319)
since last annual report
Group balance sheet
at 31 March 2006
Six months Six months Year ended
ended ended
Notes 31 March 31 March 30 September
2006 2005 2005
Restated
Unaudited Unaudited Audited
£000 £000 £000
Fixed assets
Intangible assets: Goodwill 4,450 4,753 4,602
Tangible assets 14,663 16,169 14,930
Investments - 30 -
Investments in joint ventures:
Loans to joint ventures 439 444 438
Share of gross assets 8,361 9,495 9,704
Share of gross liabilities (4,805) (4,905) (5,276)
3,995 5,034 4,866
23,108 25,986 24,398
Current assets
Stocks and work in progress 6 13,651 16,574 9,573
Debtors:
due after more than one year 5,850 8,252 5,751
due within one year 73,655 87,698 72,836
Current asset investments - assets 3,182 7,375 6,089
held for resale
Cash at bank and in hand 8,194 9,823 13,590
104,532 129,722 107,839
Creditors: amounts falling due 6 (109,608) (134,122) (115,020)
within one year
Net current liabilities (5,076) (4,400) (7,181)
Total assets less current 18,032 21,586 17,217
liabilities
Creditors: amounts falling due
after more than one year
Long-term debt (8,363) (8,363) (8,363)
Other creditors (4,252) (6,066) (4,058)
Net assets excluding pension 5,417 7,157 4,796
liability
Pension liability 2 - (2,065) -
Net assets 5,417 5,092 4,796
Share capital 5,990 5,990 5,990
Share premium account 5,893 5,893 5,893
Capital redemption reserve 3,896 3,896 3,896
Revaluation reserve 73 489 73
Profit and loss account (10,435) (11,176) (11,056)
Equity shareholders' funds 7 5,417 5,092 4,796
Group cash flow statement
for the six months ended
31 March 2006
Notes Six months Six months Year ended
ended ended
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Restated
Audited
£000 £000 £000
Net cash outflow from operating activities 8 (8,538) (21,849) (25,338)
Returns on investments and servicing of
finance
Net interest paid (92) (218) (676)
Taxation - - -
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (507) (659) (640)
Proceeds on sale of tangible fixed assets 58 142 225
Proceeds on sale of current asset 2,907 -
investments -
Loans repaid by joint venture 871 155 200
3,329 (362) (215)
Acquisitions and disposals
Proceeds from sale of subsidiaries and - - 21,343
businesses
Proceeds from sale of shared equity loans - 1,894 1,894
Cash disposed on disposal of subsidiaries - - (3,380)
and businesses
- 1,894 19,857
Equity dividends paid to shareholders (120) -
-
Cash outflow before financing (5,421) (20,535) (6,372)
Financing
Short term development funding 6 3,953 - -
Movement in short-term borrowings (3,600) 3,600 3,600
Finance lease payments (328) (240) (623)
25 3,360 2,977
Decrease in cash during the period (5,396) (17,175) (3,395)
Notes to the Accounts
Note 1: Discontinued / discontinuing operations & exceptional items
(a) Discontinued and discontinuing operations
Discontinued operations and the profit on disposal of subsidiary companies in
2005 relate to the activities of Bullock Construction Limited which was sold on
16 September 2005.
Discontinuing operations in the periods relate to the activities of YJL
Construction (excluding YJL Infrastructure) and a division of Britannia Joinery
Limited, which were in the process of being closed down. These activities were
shown as discontinuing as they did not meet the definition of discontinued as
defined by FRS3.
(b) Operating exceptional items
The operating profit/(loss) in the prior periods included the following amounts
that the Directors regarded as exceptional because of their value and nature,
but which did not fall to be recorded as non-operating exceptional items under
the requirements of FRS 3.
Six months ended 31 Six months ended 31 Year ended 30 September
March 2006 March 2005 2005
Unaudited Unaudited Audited
Ongoing Discon-tinuing Ongoing Discon-tinuing Ongoing Discon-tinuing
£'000 £'000 £'000 £'000 £'000 £'000
Reduction in pension deficit (i) - - - - 3,650 -
following settlements of
liabilities
Cost of incentives to members (i) - - - - (1,111) -
connected to the settlements - - - - 2,539 -
Contract losses on specific (ii) - - (1,875) (1,024) (15,437) (4,758)
problem contracts incepted in
prior years
Impairment of fixed assets (iii) - - - - (1,749) -
and current asset investments
Redundancy and reorganisation (iv) - - (345) (864) (454) (1,289)
costs
Other non-recurring costs (v) - - - - (4,744) -
Discontinuing activities (vi) - - - (254) - (2,045)
operating loss pre
exceptional costs
Closure costs (vi) - - - - - (259)
- - (2,220) (2,142) (19,845) (8,351)
(i) Defined benefit pension scheme
During the year ended 30 September 2005 the Directors made a number of offers to
deferred members of the scheme to transfer their entitlements under the defined
benefit scheme to a defined contribution arrangement and a number of offers to
pensioners of the scheme to buy out certain benefits attributable under the
scheme. The figure recorded above shows the movement on the FRS17 actuarial
deficit relating to these transfers and the costs reflect the sums paid to
facilitate these transfers.
(ii) Contract losses
During the year ended 30 September 2005, the Group suffered a number of
contractual issues that related to contracts procured during or before 2002/2003
where the difficulties relating to these contracts were not identified in the
prior period or became more apparent in the year ended 30 September 2005 as
negotiations to resolve the contract terms progressed.
(iii) Impairment of fixed assets and current asset investments
Provision was made in the year ended 30 September 2005 against the carrying
value of three properties to reflect their market value as at 30 September 2005.
(iv) Redundancy and reorganisation costs
During the year ended 30 September 2005 a number of exceptional costs, which
primarily related to redundancies, were incurred as a result of reorganisations
within the Group which did not constitute a fundamental reorganisation as
defined by FRS 3. In the period to 30 September 2005 these costs related to the
reorganisation of Allenbuild and the closure of YJL Construction.
(v) Other non-recurring costs
During the year ended 30 September 2005, the Group incurred £4.7m of
non-recurring costs in respect of the resolution of legacy non-contract issues.
(vi) Discontinuing activities and closure costs
The losses of the discontinuing operations were included as part of the
exceptional items in 2005. In addition, provision was made for the remaining
costs of closure of YJL Construction's contracting division.
Note 2: Defined benefit pension scheme
As at 30 September 2005, the FRS 17 valuation, prepared by Barnett Waddingham,
Consulting Actuaries, showed a surplus of £1,628,000, which was not recorded as
an asset in the accounts in accordance with the requirements of FRS 17 as there
was, and is, no expectation that the surplus will result in a reduction in
contributions or a refund from the scheme. No updating FRS 17 valuation has
been performed for these interim accounts and the Directors consider that the
position shown at 30 September 2005 should be maintained in the accounts at 31
March 2006.
As the balance sheet position of the pension scheme has been maintained at £nil
during the period all contributions have been shown as part of the movements in
the Group Statement of Total Recognised Gains and Losses.
Note 3: Taxation on profit on ordinary activities
Six months Six months Year ended
ended ended
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Audited
£000 £000 £000
Current tax:
UK corporation tax on profits for the period - - -
Adjustments in respect of previous periods - - 1
- - 1
Foreign tax - - -
Total current tax - - 1
Deferred tax - - 898
Taxation credit on profit on ordinary - - 899
activities
The Group and Company have unused tax losses available to carry forward against future taxable
profits, although a significant element of these losses relates to activities which are not
forecast to generate the level of profits needed to utilise these losses. A deferred tax asset
of £1,474,000 has been recognised to the extent considered reasonable by the Directors and
included in Debtors: due within one year. This is in respect of losses where recovery can be
reasonably expected within twelve months of the balance sheet date. The amount has been
maintained at the same level as 30 September 2005.
Note 4: Earnings per share
Six months ended Year ended
Earnings 2006 EPS Earnings 2005 EPS Earnings 2005 EPS
31 March 31
Weighted March
average Weighted 31 March
number of average Weighted
shares number of average
shares number of
shares
£'000 '000 Pence £'000 '000 Pence £'000 '000 Pence
Basic and diluted 1,803 59,899 3.01 147 59,899 0.25 2,074 59,899 3.46
earnings per share
Basic and diluted 1,803 59,899 3.01 799 59,899 1.33 2,584 59,899 4.31
earnings per share on
continuing operations pre
exceptional items
Basic and diluted - 59,899 - (4,362) 59,899 (7.28) (28,196) 59,899 (47.07)
earnings / (loss) per
share on exceptional
items
Basic and diluted 1,803 59,899 3.01 (3,563) 59,899 (5.95) (25,612) 59,899 (42.76)
earnings / (loss) per
share on continuing
operations after
exceptional items
Basic and diluted - 59,899 - 3,710 59,899 6.19 27,686 59,899 46.22
earnings per share on
discontinued operations
There are no options with a dilutive effect.
The earnings on discontinued operations, for the year ended 30 September 2005,
includes the profit on the sale of Bullock Construction Ltd of £22,300,000.
Basic and diluted earnings per share for both net profit and profit from
continuing operations have been disclosed in accordance with the requirements of
FRS 22 (Earnings per share) which will be applicable for the Group for the year
ending 30 September 2006.
Note 5: Dividends
The proposed interim dividend is 0.4p per share (2005 interim: nil, 2005 final paid: 0.2p).
This will be paid out of the Company's available distributable reserves to shareholders on
the register on 16 June 2006, payable on 7 July 2006. This dividend has not been accrued in
the six months ended 31 March 2006, in accordance with the requirements of FRS 21 (Events
after the balance sheet date) and FRS 25 (Financial instruments: disclosure and
presentation), both of which will be applied by the Group in respect of the accounts for the
year ending 30 September 2006, and have therefore been treated as applicable for these
interim accounts. These standards require that dividends payable are recorded only when
paid and are shown as a movement in equity rather than as a charge to profit. An adjustment
has been made to restate the accounts for the year ended 30 September 2005 and to account
for the proposed dividend of £120,000 as a movement through reserves in the current period.
Note 6: Development funding
Included in Creditors: amounts falling due within one year is £3,953,000 which relates to a short
term loan taken out to fund a development. The loan is secured by a first charge on a development
property which is included in stock and work in progress at its cost to date of £4,702,000. The
property on this development is being constructed by the Group under normal contractual terms. A
binding agreement to sell the building on completion of the construction has been signed with an
independent third party which has lodged an amount of £2.0m in escrow. In accordance with the
Group's normal accounting policies, profit is being recognised on the construction element of the
contract but profit on the development aspect of the contract will only be recorded on sale.
Note 7: Reconciliation of movements in Group shareholders' funds
Six months Six months Year ended
ended ended
31 March 31 March 30 September
2006 2005 2005
Restated
Unaudited Unaudited Audited
£000 £000 £000
Profit for the period 1,803 147 2,074
Dividends (120) - -
1,683 147 2,074
Other recognised net gains and losses for the year (1,062) (170) (2,393)
Share issue - - -
Share buyback - - -
Net movement on shareholders' funds 621 (23) (319)
Opening shareholders' funds 4,796 5,115 5,115
Closing shareholders' funds 5,417 5,092 4,796
Note 8: Net cash outflow from operating activities
Six months Six months Year ended
ended ended
31 March 31 March 30 September
2006 2005 2005
Unaudited Unaudited Audited
£000 £000 £000
Operating profit/(loss) 1,390 715 (20,009)
Depreciation 735 1,380 2,657
Amortisation of subsidiary goodwill 152 152 303
Profit on sale of fixed assets (19) (50) (78)
Impairment of fixed assets - - 450
Impairment of current asset investments - - 1,299
Increase in stocks and work in progress (4,078) (7,933) (932)
(Increase)/decrease in operating debtors and (918) 7,228 7,705
prepayments
Decrease in creditors and accruals (5,243) (22,167) (12,952)
Decrease in pension deficit - (625) (3,552)
Cash contributions to defined benefit scheme (621) (643) (1,457)
Profit on sale of shared equity loans - (412) (412)
Foreign exchange and other non-cash movements 64 506 1,640
Net cash outflow from operating activities (8,538) (21,849) (25,338)
Note 9: Basis of preparation
(a) The accounts for the six months ended 31 March 2006 and the equivalent
period in 2005 have not been audited or reviewed by the Company's auditors.
They have been prepared on a going concern basis in accordance with
applicable accounting standards consistent with the accounting policies set
out in the 2005 Annual Report, as updated for the adoption of FRS 21 (Events
after the balance sheet date), FRS 22 (Earnings per share), and FRS 25
(Financial Instruments : disclosure and presentation). The interim report
was approved by the Directors on 5 June 2006.
(b) The abridged information in this statement relating to the year ended 30
September 2005 is derived from full accounts upon which the auditors issued
an unqualified opinion and which did not contain a statement under S237(2)
of the Companies Act 1985 and which have been delivered to the Registrar of
Companies.
(c) The Group continues to have net current liabilities at the period end and
has incurred a cash outflow during the period. The Directors are satisfied
that the Group has adequate resources to continue in operational existence
for the foreseeable future.
This interim statement is being sent to all shareholders and is also available upon request from the
Company Secretary, Renew Holdings plc, 39 Cornhill, London EC3V 3NU, or via the website
www.renewholdings.com
This information is provided by RNS
The company news service from the London Stock Exchange
Tuesday, 14th May 2024
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