Final Results
Mavinwood PLC
12 March 2008
Mavinwood plc
('Mavinwood' or 'the Company')
Preliminary Announcement
Preliminary results for the year ended 31 December 2007
- Another year of good progress and strong growth
- Profit before tax up 35% to £5.0m (2006: £3.7m)
- Adjusted fully diluted earnings per share up 19%
- Integration delivering results
- Successfully completed acquisitions of Document Control Services
Limited and Peter Cox Limited
- Board strengthened
- Clear strategy for growth
Financial highlights:
2007 2006 Increase
£'000 £'000
Turnover 68,153 42,453 +61%
Adjusted profit before taxation1 12 7,289 5,044 +45%
Profit before taxation 2 5,047 3,751 +35%
Basic earnings per share 0.56p 0.66p
Adjusted fully diluted earnings per share1 2 0.96p 0.81p +19%
1 before amortisation of intangible assets, share based payment charge and
notional interest on contingent consideration
2 after integration costs of £0.3m on acquiring Peter Cox Limited
Kevin Mahoney, Chief Executive of Mavinwood said:
'These are good results with all the key numbers showing healthy increases. On a
like for like basis both divisions, Emergency Repair and Document Handling,
achieved double digit growth in sales and on aggregate 19% increase in operating
profit. Since Mavinwood was launched at the end of 2004 we have made seven
principal acquisitions and built strong positions in our chosen markets. We
accelerated integration plans across the Mavinwood Group in 2007, improving
systems and reducing costs. We also increased capital expenditure in both
divisions to help drive future organic growth. 2008 has started in line with
expectations and we are confident that the investments we made in 2007 will
ensure that we continue our track record of strong organic growth.'
Enquiries:
Mavinwood plc
Kevin Mahoney , Chief Executive 020 7661 9650
Mike Vincent, Finance Director 020 7661 9651
Threadneedle Communications
John Coles 020 7936 9604
Collins Stewart Europe Limited
Adrian Hadden 020 7523 8353
BACKGROUND
Mavinwood was admitted on AIM on 5 November 2004 and is pursuing a buy and build
strategy in the support services sector. The strategy is to acquire and develop
support services businesses which have the potential for growth, either
organically or in combination with other complementary businesses. The focus is
on the Emergency Repair (especially where there is an insured repair) and
Document Handling sectors.
PROFIT BEFORE TAX
The profit before tax for the year ended 31 December 2007 was £5,047,000 (2006:
£3,751,000). However, the Directors believe that an adjusted measure of profit
before tax and earnings per share provides shareholders with a more appropriate
representation of the underlying earnings derived from the Mavinwood Group's
business. The items adjusted for in arriving at that underlying level are as
follows:
2007 2006
£'000 £'000
Emergency Repair 7,152 4,832
Document Handling 3,886 2,459
Central costs (1,439) (969)
Share based payments charge (1,892) (1,039)
Amortisation of intangible fixed assets (288) (96)
-------- --------
Operating profit 7,419 5,187
Net finance costs (2,372) (1,436)
-------- --------
Profit before tax 5,047 3,751
Amortisation of intangible assets 288 96
Share based payments charge 1,892 1,039
Notional interest on contingent consideration 62 158
-------- --------
Adjusted profit before tax 7,289 5,044
======== ========
EMERGENCY REPAIR
2007 2006
£'000 £'000
Sales ANSA, Independent Inspections
and Mono Services * 51,965 34,515
Peter Cox ** 4,232 -
-------- --------
Total 56,197 34,515
======== ========
EBITA*** ANSA, Independent Inspections
and Mono Services * 6,853 4,832
Peter Cox ** 299 -
-------- --------
Total 7,152 4,832
======== ========
* Independent Inspections five and a half months and Mono Services
four months in 2006
** Peter Cox three months in 2007
*** Excluding share based payments charge
The significant increase in sales and profit in this division is principally due
to the fact that Independent Inspections and Mono Services were only included
for part of 2006 compared to a full twelve months in 2007. The 2007 figures
include Peter Cox for three months.
This division includes three businesses which serve principally the insured
repair sector. Approximately 80% of sales in 2007 were to leading insurance
companies and we also service a range of housing associations and commercial
companies. Peter Cox currently carries out little insurance work and most of its
sales leads come from referrals or trade directories.
All four businesses share a common business process which is:
• Take the emergency call from the customer or via an insurer
• Arrange a survey to validate or repudiate the claim and cost out the
repair
• Undertake the repair either by directly employed labour or sub
contractors
ANSA specialises in drainage surveys and repair, Independent Inspections in
flooring surveys and restoration and Mono Services in building fabric surveys
and repairs, often due to water damage.
ANSA, Independent Inspections and Peter Cox are national businesses and Mono
Services is a regional business in the North West.
There is some customer overlap between the businesses but one of our
opportunities moving forward is to offer all our services to a wider range of
customers.
All these businesses operate to high service standards. Examples of customer
satisfaction measures that are monitored on a continuous basis are:
• Response times in terms of contacting a policyholder after they report an
insured event
• Courtesy of staff and customer satisfaction
• Average cost per claim
There are integration benefits to flow between the businesses. A range of
integration projects are underway including:
• Optimising the IT platform across all the operations
• Purchasing initiatives
• Optimising back office functions
• Reviewing marketing opportunities and widening the service offering
As well as good organic growth within the division, we will continue to look for
bolt on acquisitions which would further enhance our offering.
Turning to the highlights within each operation:
ANSA
After a strong start to the year, ANSA's volume of insurance instructions
dropped overall comparing 2007 with calendar 2006. The heavy flooding over the
summer reduced the number of blockages we needed to attend. This wet weather was
then followed by one of the driest autumns on record. This had the effect of
reducing root ingress into the drains. Without the build up of water a number of
householders would not have been aware their drains were blocked. Right at the
year end, December saw a sharp drop in volumes. This pattern was a feature of
the whole drainage industry in the second half of the year.
ANSA did benefit from an improved mix of business with an increased proportion
of larger jobs in 2007.
During January and February 2008, volumes of instructions received from the
insurers have returned back to the levels seen during the first half of 2007.
ANSA has extended its drainage services to a wider range of customers in the
commercial sector. This is still a relatively small part of the ANSA business
but after extensive trialling in 2007 we have national coverage and are growing
a number of regional and national accounts.
Operating profit at ANSA has increased due to an improved mix of business, cost
reductions and productivity gains. Customers have benefited from strong
performance in claims validation, service delivery and cost control. From
October we renewed a contract with one leading insurer and this arrangement will
run for three years.
In February 2007, ANSA acquired ESG Limited, a small drainage contractor for
£0.2m. This acquisition has helped to increase the proportion of repair work
that is being carried out by direct labour as opposed to sub contractors.
ANSA also owned a small business offering Health and Safety training. Revenue in
the first six months of 2007 was £617,000. The trade and assets of this
operation were sold to the training management team on 29 June 2007 at net book
value of £556,000.
INDEPENDENT INSPECTIONS
After suffering through low volumes in the first quarter, a series of cost
reduction and profit improvement initiatives were made. The summer floods were
positive for Independent Inspections as a large number of floor coverings were
destroyed or damaged. New income streams were developed later in the year which
have broadened the base of the business.
MONO SERVICES
Mono Services' sales have increased by approximately one fifth compared to 2006
due to winning new business, helped by the storm damage over the 2006/7 winter
and the summer floods. Some of Mono Services' business has been re-directed via
an insurer's joint venture partner that has caused some disruption to our
operations. This resulted in transition and set up costs that reduced margins
during the year.
The acquisition of Peter Cox with its network of branches and its integration
with Mono Services will enable us to build a national building fabric solution
for insurers.
PETER COX
Peter Cox was acquired on 28 September 2007. It is a national provider of damp
and water proofing, timber preservation and wall stabilisation for property in
the United Kingdom. Peter Cox has a network of 17 branches in England and
Scotland and employs 287 people. Its revenue is generated from yellow pages and
the commercial sector, with at present little or no insurance work. Peter Cox
contributed revenue and operating profit of £4.2 million and £0.3 million in its
first three months. Revenue was 6% up on the comparable period and operating
profit significantly increased.
We have commenced the integration of the back office system of Peter Cox into
the Emergency Repair division very promptly after completion of the acquisition.
This was partly driven by the need to move out of the shared services
environment of the vendor group. The central functions of Peter Cox have been
relocated to the same offices as ANSA and Mono Services, in Oldham. During the
last quarter of 2007 there were double running costs of operating the two
environments plus investment in the IT integration. We estimate the double
running and integration costs incurred by Peter Cox and Mono Services were £0.3
million in aggregate.
EMERGENCY REPAIR SUMMARY
Overall, on a true like for like basis comparing each business with the
comparable period of trading in 2006, sales advanced by 10% and operating profit
by 18%. After a soft end to the year in volume terms the division has bounced
back in the first quarter of 2008.
We have built a division which competes effectively as a claims fulfilment
business to insurance companies. We are integrating the operations under one
divisional management team headed by Steve Watkins and beginning to eliminate
duplication in function across the division. The implementation of one IT
platform across the division will improve efficiency during 2008 and especially
2009. The integration of Peter Cox with Mono Services will be a key initiative
for 2008.
DOCUMENT HANDLING
2007 2006
£'000 £'000
Sales Restore and Wansdyke * 8,934 7,938
Document Control Services ** 3,022 -
-------- --------
Total 11,956 7,938
======== ========
EBITA*** Restore and Wansdyke * 2,808 2,459
Document Control Services ** 1,078 -
-------- --------
Total 3,886 2,459
======== ========
* Wansdyke eleven months in 2006
** Document Control Services nine months in 2007
*** Excluding share based payments charge
RESTORE AND WANSDYKE
Restore and Wansdyke serve a wide range of customers, including law firms,
corporates of varying sizes, financial services companies, councils and health
trusts. Our customers are mostly based in London and the South across to Bristol
and South Wales. The majority of sales are the storage and retrieval of archive
boxes but also individual files and other material such as magnetic media and
film.
Scanning of documents on a selective basis is also offered to clients. Shredding
or pulping of documents at the end of their useful lives is currently
outsourced, although this would form a logical product extension.
The key customer satisfaction measures are:
• % accuracy in retrieving items
• % of items retrieved in accordance with terms of service, such as same
day or next day delivery
We continue to integrate Restore and Wansdyke and the companies share the same
management team. Approximately £0.1m of integration costs have been charged
against Wansdyke's profits in 2007. The Restore operating system of bar coding
is being applied at Wansdyke and the back office functions are increasingly
being integrated. Total employees at Wansdyke have dropped from 75 at February
2006 to 66 at 31 December 2007 by natural wastage as systems have become more
automated.
We operate a combination of freehold and leasehold sites at Wansdyke and Restore
respectively. Due to the absence of rental charges, the return on sales at
Wansdyke is higher than that at Restore.
Having repositioned the business in 2006, Wansdyke's sales grew strongly in
2007, by 10%. We are filling up our underground storage facilities near Bath and
in the first half of 2007 acquired an adjoining underground space of 16 acres
for £0.5m. Once fitted out this space will provide medium term expansion for the
business through to 2013.
Restore suffered from some disruption and dealt with a high volume of archive
box intake but the flow through from this new volume means it is well placed for
2008.
DOCUMENT CONTROL SERVICES (DCS)
We acquired 100% of the share capital of Stapledon Holdings Limited, the parent
company of DCS on 26 March 2007. DCS is a quality national operation scanning
and indexing documents with high intellectual property content. The business has
a blue chip customer base including Network Rail, Highways Agency, The Crown
Estate, oil and gas companies, city councils and property companies. DCS made a
very strong contribution in its first nine months.
DOCUMENT HANDLING SUMMARY
The market for the physical storage of archives continues to grow well in excess
of GDP, with especially strong growth in sectors such as professional services.
Overall, on a true like for like basis comparing each business with a comparable
period of trading in 2006, sales advanced by 11% and operating profit by 21%.
The division is well placed to capitalise on its pipeline of new business while
maximising the utilisation of its freehold space. Restore and Wansdyke are
effectively being run as one business and the appointment of Ed Marshall from
DCS as divisional Chief Executive will help to bind all three operations
together.
CENTRAL COSTS
Central costs have increased from £969,000 to £1,439,000 as we now operate two
much larger divisions compared to 2006.
INTEREST
Net interest payable amounted to £2,372,000 (2006: £1,436,000) as we borrowed to
fund the acquisitions of Mono Services from September 2006 and DCS and Peter Cox
in 2007. Included within the finance cost is £62,000 representing the notional
interest on contingent consideration due on the acquisitions of Independent
Inspections, Mono Services and DCS. The discount rate applied in this
calculation was 7.9%.
TAXATION
The amortisation of intangible assets, the notional interest on the contingent
consideration and the share based payments charge do not attract any tax relief.
Due to these distortions, the reported tax charge is 49% (2006: 32%). The
headline tax rate is significantly higher in 2007 as we have assumed that the
share based payments charge will not attract a tax deduction. In addition, we
have written off the deferred tax asset of £312,000 relating to the share based
payment charge in 2006. However, the underlying tax rate during 2007 was 30%, as
a percentage of adjusted profit before taxation. (2006: 30%).
EARNINGS PER SHARE (EPS)
Basic EPS in 2007 is 0.56p, which compares with 0.66p in 2006. The reason for
the reduction in basic EPS is the absence of tax relief assumed on the share
based payments charge. If we are able to assume tax relief of 30%, the basic EPS
would have been 0.76p. Basic EPS adjusted for the amortisation of intangible
assets, the share based payments charge and the notional interest on the
contingent consideration was 1.11p (2006: 0.90p).
Assuming the exercise of all options and awards under the LTIP plus the
conversion of the convertible A shares at an average price in 2007 of 18.4p
(2006: 13.93p), the fully diluted adjusted EPS becomes 0.96p (2006: 0.81p) an
increase of 19%.
DIVIDENDS
The directors do not recommend a dividend for the year (2006: £nil).
SHARE ISSUES
New equity was issued on two occasions in 2007:
• 5.4 million shares were allotted on 26 March 2007 at 18.5p per share as
part of the consideration for DCS.
• 4.5 million shares were allotted on 16 October 2007 at 20p per share to
the vendors of Mono Services in settlement of contingent consideration due.
The balance of £0.1 million was settled in cash.
ACQUISITIONS
External Services Group Limited (ESG), a drainage sub contractor to ANSA, was
acquired on 2 February 2007 for cash of £206,000.
DCS was acquired for an initial sum of £1.3 million, including £1 million in
Mavinwood shares. In addition, debt of £4.8 million was repaid. Contingent
consideration of up to £2 million is also payable in cash linked to the growth
in EBITA above £0.93 million for the year ending 30 June 2008. The full £2m is
payable assuming EBITA reaches £1.23 million.
Peter Cox Limited was acquired for an initial sum of £6 million. Contingent
consideration of £1,050,000 was also paid on 21 February 2008 linked to the
achievement of EBITA for the year ended 30 November 2007.
BALANCE SHEET
Net assets increased to £50,613,000 in the year reflecting the profit before tax
for the year of £5,047,000 plus the share issues to part fund the acquisition of
DCS and the contingent consideration for Mono Services. Intangible assets
relating to the acquisitions at 31 December 2007 was £70,634,000 (2006:
£58,823,000).
Property, plant and equipment totalled £12,220,000 (2006: £10,826,000)
principally comprising the freehold underground storage facilities at Wansdyke
but also computer systems, storage racking and vehicles.
Operating working capital (excluding cash) amounted to a net £7,967,000 at 31
December 2007. Net debt at 31 December 2007 totalled £30,917,000 (2006:
£17,649,000) after deferred financing costs of £357,000 (2006: £310,000).
Interest cover in the year was 4.1 times.
Due to Independent Inspections' slow start in the first half of 2007, the
Directors consider it unlikely that the business will make the hurdles to
trigger earn out payments to the vendor in respect of 2007 and 2008 so these
amounts of £4m have been written back to opening intangible assets.
CASH FLOW
The net cash inflow from operating activities before investing and financing
activities was £1,430,000 (2006: £2,793,000). This inflow is after taking
account of an outflow of £4.6m on working capital. We expect an outflow as the
business expands and would have expected this to be around £2.1 million.
However, working capital increased due to a number of other factors:
• £1.1 million due to the re-direction of work for a large insurer via a
joint venture management company and other changes in Mono Services'
business model
• £0.5 million due to reducing the number of sub-contractors in ANSA and
bringing more work in house
The above factors are permanent changes in the size of our working capital. In
addition, we have suffered from other slippages in our Document Handling
business and in Emergency Repair as some of our larger customers took longer to
settle during 2007. A large portion of this amount of £0.9 million has been
recouped since the year end.
Capital expenditure totalled £2,683,000 (2006: £1,168,000). Two major projects
accounted for £1 million of the expenditure. £0.5 million was spent acquiring
further underground storage at Wansdyke and a similar amount was spent on the
first phase of the major IT project in Emergency Repair. This project integrates
the finance and operating systems of Peter Cox and Mono and helps build the IT
platform for the entire Emergency Repair division.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
We have adopted IFRS with effect from 1 January 2006. Comparative figures for
the year ended 31 December 2006 have been presented. The principal differences
relates to the write back of goodwill amortisation in 2006 and providing full
deferred taxation on the property at Wansdyke and other intangibles.
OUTLOOK
The Mavinwood Group ended the year with two well established divisions and a
current market capitalisation in excess of £70 million. Integration benefits are
coming through in the two divisions as well as good underlying organic growth.
After a few months of lower than normal volumes at the end of 2007, particularly
in drainage, the Emergency Repair business has started 2008 well with
instructions back to their early 2007 levels. The Document Handling industry
continues to grow strongly in 2008 and our business is well placed within the
industry.
We plan to add further complementary businesses to both divisions on a selective
basis and given the cash generative qualities of the Group, there is scope over
time to acquire further businesses for cash.
Kevin Mahoney
Chief Executive Officer 12 March 2008
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2007
Year ended Year ended
Note 31 December 31 December
2007 2006
£'000 £'000
Continuing operations
REVENUE 1 68,153 42,453
Cost of sales (41,771) (26,200)
---------- -----------
Gross profit 26,382 16,253
Administrative expenses (18,963) (11,066)
---------- -----------
OPERATING PROFIT 7,419 5,187
Finance income 106 82
Finance costs (2,478) (1,518)
---------- -----------
PROFIT BEFORE TAX 5,047 3,751
Income tax expense 2 (2,463) (1,195)
---------- -----------
PROFIT FOR THE YEAR 2,584 2,556
========== ===========
ATTRIBUTABLE TO
EQUITY HOLDERS OF THE
COMPANY 2,584 2,556
========== ===========
EARNINGS PER SHARE (PENCE)
Basic 3 0.56p 0.66p
========== ===========
Diluted 3 0.48p 0.59p
========== ===========
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
For the year ended 31 December 2007
Share capital Share premium Share based Retained Total
payments earnings Equity
reserve
£'000 £'000 £'000 £'000 £'000
Balance at 1
January 2006 383 26,459 85 16 26,943
Profit for the
year - - - 2,556 2,556
------- ------- -------- -------- ---------
383 26,459 85 2,572 29,499
Issue of
shares during
the financial
year 120 14,255 - - 14,375
Issue costs - (654) - - (654)
Share based
payments
charge - - 1,017 - 1,017
------- ------- -------- -------- ---------
Balance at 31
December 2006 503 40,060 1,102 2,572 44,237
======= ======= ======== ======== =========
Balance at 1
January 2007 503 40,060 1,102 2,572 44,237
Profit for the
year - - - 2,584 2,584
------- ------- -------- -------- ---------
503 40,060 1,102 5,156 46,821
Issue of
shares on
acquisition of
DCS (note 4) 5 995 - - 1,000
Contingent
consideration
in respect of
Mono Services 4 896 - - 900
Share based
payments
charge - - 1,892 - 1,892
------- ------- -------- -------- ---------
Balance at 31
December 2007 512 41,951 2,994 5,156 50,613
======= ======= ======== ======== =========
CONSOLIDATED BALANCE SHEET
At 31 December 2007
31 December 31 December
2007 2006
£'000 £'000
ASSETS
NON-CURRENT ASSETS
Intangible assets 70,634 58,823
Property, plant and
equipment 12,220 10,826
Investments 556 -
Deferred tax asset 179 8
--------- ----------
83,589 69,657
--------- ----------
CURRENT ASSETS
Inventories 381 311
Trade and other receivables 23,140 13,369
Cash and cash equivalents 1,108 1,850
--------- ----------
24,629 15,530
--------- ----------
--------- ----------
TOTAL ASSETS 108,218 85,187
--------- ----------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (15,554) (11,114)
Bank loans and overdrafts (4,337) (3,600)
Other financial liabilities (45) (109)
Current tax liabilities (1,229) (1,969)
Provisions (3,698) (500)
--------- ----------
(24,863) (17,292)
--------- ----------
NET CURRENT LIABILITIES (234) (1,762)
--------- ----------
NON-CURRENT LIABILITIES
Bank loans and overdrafts (27,643) (15,790)
Deferred tax liability (5,099) (3,985)
Provisions - (3,883)
--------- ----------
(32,742) (23,658)
--------- ----------
NET ASSETS 50,613 44,237
========= ==========
EQUITY
Share capital 512 503
Share premium account 41,951 40,060
Share based payments reserve 2,994 1,102
Retained earnings 5,156 2,572
--------- ----------
ATTRIBUTABLE TO
EQUITY HOLDERS OF THE COMPANY 50,613 44,237
========= ==========
CONSOLIDATED CASH FLOW
For the year ended 31 December 2007
Year ended Year ended
Note 31 December 31 December
2007 2006
£'000 £'000
CASH INFLOW FROM OPERATING ACTIVITIES
Continuing operations
Profit for the year 2,584 2,556
Depreciation of property, plant and
equipment 843 833
Amortisation of intangible assets 288 96
Finance costs recognised in profit
and loss 2,372 1,436
Income tax expense recognised in
profit and loss 2,463 1,195
Share based payments charge 1,892 1,039
Gain on sale or disposal of
property, plant and equipment (33) (54)
Movements in working capital
Change in inventories 12 59
Change in trade and other
receivables (5,945) (2,570)
Change in trade and other
payables 1,311 142
-------- -------
CASH GENERATED FROM OPERATING
ACTIVITIES 5,787 4,732
Finance costs (1,681) (1,037)
Investment income 106 82
Income taxes paid (2,782) (984)
-------- -------
NET CASH GENERATED FROM
OPERATING ACTIVITIES 1,430 2,793
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of property,
plant and equipment 101 845
Purchases of property, plant and
equipment (2,287) (1,089)
Purchases of applications
software (396) (79)
Acquisition of subsidiaries net
of cash acquired 4 (6,988) (24,432)
Contingent consideration (106) (1,075)
-------- --------
NET CASH FLOWS USED IN
INVESTING ACTIVITIES (9,676) (25,800)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (2,000) (3,500)
Repayment of indebtedness
acquired (4,794) (881)
New bank loans raised 14,300 18,043
Deferred financing costs (192) (268)
Increase in bank overdrafts 337 -
Net proceeds from issue of
shares - 11,346
Finance lease principal
repayments (147) (687)
-------- --------
NET CASH GENERATED IN
FINANCING ACTIVITIES 7,504 25,833
-------- --------
NET (DECREASE) / INCREASE IN
CASH AND CASH EQUIVALENTS (742) 1,013
Cash and cash equivalents at start of year 1,850 837
-------- --------
CASH AND CASH EQUIVALENTS AT
THE END OF YEAR 5 1,108 1,850
======== ========
NOTES TO THE PRELIMINARY ANNOUNCEMENT
Mavinwood plc and its subsidiaries specifically focus on Emergency Repair and
Document Handling. The Group operates in the UK. During the year, the Group
acquired control of External Services Group, a drainage services company,
Document Control Services, a value added scanning company and Peter Cox, a damp
course, water damage and timber treatment services company.
The Company is a public limited company incorporated and domiciled in the United
Kingdom.
These financial statements were authorised for issue by the board of directors
on 12 March 2008.
BASIS OF PREPARATION
The financial information has been prepared using the recognition and
measurement principles of IFRS.
The financial information is presented in pounds sterling, prepared on a
historical cost basis and, unless otherwise stated, rounded to the nearest
thousand. The financial information set out in this announcement is abridged and
does not constitute statutory accounts for the year ended 31 December 2007 but
is derived from those draft financial statements. The financial information is
not audited. The statutory accounts for the year ended 31 December 2007 will be
finalised on the basis of the financial information presented by the directors
in this preliminary announcement and will be delivered to the Registrar of
Companies following the Company's annual general meeting.
The financial information contained in the preliminary announcement of results
has been prepared on the basis of the accounting policies as outlined in the
interim announcement made on 12 September 2007. This announcement also published
the results for the year ended 31 December 2006 as reported under International
Financial Reporting Standards.
The comparative financial information for the year ended 31 December 2006 was
derived from information extracted from the annual report and accounts for that
period, which was prepared under UK GAAP and which has been filed with the UK
Registrar of Companies. The auditors have reported on those UK GAAP accounts,
their report was unqualified and did not contain statements under sections 237
(2) or (3) of the Companies Act 1985.
1 SEGMENTAL ANALYSIS
For management purposes, the Group is organised into two main segments,
Emergency Repair and Document Handling. The business segment is the primary
segment. All trading of the Group is undertaken within the United Kingdom and
the Company has no foreign operations. The secondary segment based on geography
is solely the United Kingdom. Segment assets include goodwill, property, plant
and equipment, inventory, debtors and operating cash. Central assets include
investments, deferred tax and head office assets. Segment liabilities comprise
operating liabilities. Central liabilities include income tax, corporate
borrowings and head office liabilities. Capital expenditure comprises additions
to computer software, property, plant and equipment and includes additions
resulting from acquisitions through business combinations. Segment assets and
liabilities are allocated between segments on an actual basis.
Year ended Year ended
31 December 31 December
2007 2006
£'000 £'000
REVENUE
The revenue was derived from the Group's
principal activities in the UK as follows:
Emergency Repair 56,197 34,515
Document Handling 11,956 7,938
--------- ----------
68,153 42,453
========= ==========
RESULTS
The profit after tax was derived from the
Group's principal activities in the UK as
follows:
Emergency Repair 7,152 4,832
Document Handling 3,886 2,459
Central costs (1,439) (969)
Share based payments charge (1,892) (1,039)
Amortisation of intangible assets (288) (96)
--------- ----------
Operating profit 7,419 5,187
Net finance cost (2,372) (1,436)
--------- ----------
Profit before tax 5,047 3,751
Income tax expense (2,463) (1,195)
--------- ----------
Profit after tax 2,584 2,556
========= ==========
2007 2006
£'000 £'000
Segmental assets:
Emergency Repair 71,433 59,326
Document Handling 36,533 25,620
Central 252 241
--------- ----------
Total 108,218 85,187
Segmental liabilities:
Emergency Repair (14,297) (13,422)
Document Handling (5,004) (5,071)
Central (38,304) (22,457)
--------- ----------
Total (57,605) (40,950)
Segmental net assets:
Emergency Repair 57,136 45,904
Document Handling 31,529 20,549
Central (38,052) (22,216)
--------- ----------
Total 50,613 44,237
========= ==========
Property, plant and equipment additions 2,287 1,059
Amortisation of intangible assets 288 96
Depreciation of property, plant and equipment 843 833
========= ==========
2 TAXATION
Year ended Year ended
31 December 31 December
2007 2006
£'000 £'000
Current tax:
UK corporation tax on profits for the
year 2,245 1,571
Adjustments in respect of previous
periods (187) (11)
---------- ---------
Total current tax 2,058 1,560
---------- ---------
Deferred tax:
Current year 405 (365)
---------- ---------
Total deferred tax 405 (365)
---------- ---------
Total tax charge 2,463 1,195
========== =========
The charge for the year can be reconciled to the profit per the Consolidated
Income Statement as follows:
Year ended Year ended
31 December 31 December
2007 2006
£'000 £'000
Profit on ordinary activities before tax 5,047 1,589
---------- ---------
Profit on ordinary activities multiplied
by the rate of corporation tax of 30% 1,514 1,125
Effects of:
Expenses not deductible for tax purposes 95 70
Tax relief not recognised on share based
payments charge 574 -
Tax losses not utilised 19 2
Effect of different tax rate used for
deferred tax (23) -
Adjustments in respect of current income
tax of previous years (187) 1
Adjustments in respect of deferred
income tax of previous years 471 (3)
---------- ---------
Total tax charge as reported in the
Consolidated Income Statement 2,463 1,195
========== =========
The effective tax rate is 49% due to the distortion caused by the non
deductibility of the amortisation of intangible assets, the notional interest on
the contingent consideration and the share based payments charge. After
adjusting for these the effective rate becomes 30% (2006: 30%).
3 EARNINGS PER ORDINARY SHARE
Basic earnings per share have been calculated on the profit after taxation for
the year and the weighted average number of ordinary shares in issue during the
year.
Adjusted earnings per share which are before amortisation of intangible assets,
share based payments charge and notional interest on contingent consideration
have been presented in addition to the basic earnings per share since, in the
opinion of the directors, this provides shareholders with a more appropriate
representation of the underlying earnings derived from the Group's businesses.
Year ended Year ended
31 December 31 December
2007 2006
No. of shares No. of shares
Weighted average number of shares in
issue 457,684,786 388,920,578
========= =========
£'000 £'000
Profit after taxation on ordinary
activities 2,584 2,556
Adjustments
Share based payments charge 1,892 1,039
Tax effect 312 (312)
Amortisation of intangible assets 288 96
Tax effect (36) (26)
Notional interest on contingent
consideration 62 158
--------- ---------
Adjusted earnings 5,102 3,511
========= =========
Basic earnings per ordinary share 0.56p 0.66p
========= =========
Adjusted basic earnings per ordinary
share (before goodwill amortisation,
share based payments charge and notional
interest on contingent consideration) 1.11p 0.90p
========= =========
No. of shares No. of shares
Weighted average number of shares in
issue 457,684,786 388,920,578
Convertible 'A' Shares, Share Options
and awards under the LTIP 76,521,253 44,082,349
--------- ---------
Weighted average fully diluted number of
shares in issue 534,206,039 433,002,927
========= =========
Fully diluted earnings per ordinary
share 0.48p 0.59 p
========= =========
Adjusted fully diluted earnings per
ordinary share (before goodwill
amortisation, share based payments
charge and notional interest on
contingent consideration) 0.96p 0.81 p
========= =========
The diluted earnings per share are the basic earnings per share adjusted for the
dilutive effect of the conversion into fully paid shares of the outstanding
share options and awards under the LTIP. They are also adjusted for the
conversion of the A shares into ordinary shares at a price of 18.4p, being the
average price per ordinary share in the year ended 31 December 2007 (2006:
13.93p).
4 ACQUISITIONS
On 2 February 2007, 100% of the share capital of External Services Group Limited
(ESG), a drainage sub contractor to ANSA, was acquired for cash of £206,000.
Book value at Fair value Fair value at
acquisition adjustment acquisition
External Services Group Limited
(ESG) £'000 £'000 £'000
Inventories 14 - 14
Debtors 214 - 214
Creditors (166) - (166)
Taxation (12) - (12)
Finance leases (27) - (27)
--------- ---------- ----------
Net assets acquired 23 - 23
========= ==========
Goodwill capitalised 183
----------
Consideration 206
==========
Satisfied by:
Cash to vendors 206
==========
The goodwill of £0.2 million represents the value attributable to new business
and the assembled and trained workforce.
On 26 March 2007, the Company acquired 100% of the share capital of Stapledon
Holdings Limited, the parent company of Document Control Services Limited (DCS)
for an initial sum of £1.3 million which was satisfied by cash of £0.3million
and the issue of 5,405,405 ordinary shares in Mavinwood plc at an issue price of
18.5p at mid market value. Contingent consideration of up to £2 million is also
payable in cash linked to the growth in EBITA for the year ending 30 June 2008.
The full £2 million is payable assuming EBITA reaches £1.23 million.
Book value at Fair value Fair value at
acquisition adjustment acquisition
Stapledon Holdings Limited £'000 £'000 £'000
Intangible assets - 2,901 2,901
Property, plant and equipment 104 - 104
Debtors 916 - 916
Creditors (342) - (342)
Taxation (147) (812) (959)
Cash 6 - 6
Finance leases (56) - (56)
--------- ---------- ----------
Net assets acquired 481 2,089 2,570
========= ==========
Goodwill capitalised 5,588
----------
Consideration 8,158
==========
Satisfied by:
Cash to vendors 291
Loans repaid 4,794
Share issues 1,000
Discounted contingent
consideration 1,777
Related costs of acquisition 296
----------
8,158
==========
The goodwill of £5.6 million represents the value attributable to new business
and the assembled and trained workforce. The intangible asset fair value
adjustment has been made to recognise the value attributable to existing
customer relationships, the trade name, technology and software. Deferred tax at
28% has been provided on the value of the intangible assets.
On 28 September 2007, the Company acquired 100% of the share capital of Peter
Cox Limited for an initial consideration of £6.4 million.
Book value at Fair value Fair value at
acquisition adjustment acquisition
Peter Cox Limited £'000 £'000 £'000
Intangible assets - 1,079 1,079
Property, plant and equipment 224 - 224
Inventories 68 68
Debtors 3,007 - 3,007
Creditors (1,560) - (1,560)
Deferred taxation 559 (302) 257
Cash 745 - 745
Long term liabilities (656) - (656)
--------- ---------- ----------
Net assets acquired 2,387 777 3,164
========= ==========
Goodwill capitalised 5,232
----------
Consideration 8,396
==========
Satisfied by:
Cash to vendors 6,350
Deferred consideration 400
Contingent consideration 1,050
Related costs of acquisition 596
----------
8,396
==========
The deferred consideration of £0.4 million and contingent consideration of £1.0
million were paid on 3 January 2008 and 21 February 2008 respectively. The
goodwill of £5.2m represents the value attributable to the assembled and trained
workforce. The intangible asset fair value adjustment has been made to recognise
the value attributable to existing customer relationships and the trade name.
Deferred tax at 28% has been provided on the value of the intangible assets.
Post acquisition profits ESG DCS Peter Cox
£'000 £'000 £'000
====== ====== ======
Profit before tax
since acquisition included in the Consolidated
Income Statement 185 1,073 299
====== ====== ======
If the acquisitions had been completed on the first day of the financial year,
Group revenues for the year would have been £81,477,000 and Group profit before
tax would have been £5,257,000.
The total consideration paid for Group acquisitions during the year was £16.8
million, which was satisfied as follows:
ESG DCS Peter Cox Total
£'000 £'000 £'000 £'000
Cash to vendors 206 291 6,350 6,847
Loans repaid - 4,794 - 4,794
Related costs of acquisition - 296 596 892
Contingent consideration not yet due - 1,777 1,450 3,227
Issue of shares to vendors - 1,000 - 1,000
------ ------- ------ ------
206 8,158 8,396 16,760
====== ======= ====== ======
5 ANALYSIS OF NET DEBT
The movement in net debt is analysed as follows
2007 2006
£'000 £'000
At 1 January (17,649) (4,335)
Net cash generated from operating activities 1,430 2,760
Net cash flows used in investing activities (9,676) (25,833)
Repayment of indebtedness acquired (4,794) (881)
Net proceeds from issue of shares - 11,346
Finance leases acquired (83) (621)
Payment of deferred financing costs (192) (268)
Other 47 183
-------- --------
At 31 December (30,917) (17,649)
======== ========
Analysis of net debt
Cash at bank and in hand 1,108 1,850
Bank loans due within one year (4,337) (3,600)
Bank loans due after one year (28,000) (16,100)
Finance leases due within one year (45) (109)
Deferred financing costs 357 310
-------- --------
(30,917) (17,649)
======== ========
END
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