Interim Results
Scott Wilson Group plc
12 December 2007
12 December 2007
SCOTT WILSON GROUP PLC
Interim Results for the 26 week period ended 28 October 2007
Scott Wilson Group plc, ("Scott Wilson" or "the Group"), the international
consultancy offering integrated professional services in the transportation,
property, environmental and natural resources sectors, today reports its interim
results for the 26 week period ended 28 October 2007.
Financial summary
2007/2008 2006/2007 Change
Revenue including share of joint ventures £153.1m £113.2m +35%
Group revenue £146.9m £108.6m +35%
Operating profit £9.6m £7.1m +35%
Adjusted* operating profit £11.0m £7.2m +53%
Adjusted* operating margin 7.2% 6.3% +14%
Adjusted* basic earnings per share 10.2p 7.6p +34%
Basic earnings per share 9.0p 7.6p +18%
Diluted earnings per share 8.5p 7.4p +15%
Interim dividend 1.2p 1.0p +20%
Highlights
• Another period of significant growth with performance continuing to
exceed the five-year strategic plan
• Record order book of £280m, providing good visibility through the
second half of the year and beyond
• Two acquisitions completed during the period further improve the
Group's diversity and balance; integration of 2006 acquisitions on track and
continuing to deliver significant operating synergies
• Medium term growth targets upgraded: operating margin of at least 10
per cent by 2013; EPS growth of 15 per cent per annum
• Sean Cummins appointed as Group Finance Director on 1 October 2007
* The Directors believe that the presentation of adjusted operating
profit, adjusted operating margin, adjusted profit before tax and adjusted
earnings per share assists with the understanding of the performance of the
Group.
• Adjusted operating profit is operating profit adjusted for the impact
of amortisation of business combination intangibles, changes in the fair
value of derivative financial instruments and the Group's share of taxation
in relation to joint ventures.
• Adjusted operating margin is adjusted operating profit expressed as a
percentage of revenue including share of joint ventures.
• Adjusted profit before taxation is profit before taxation adjusted
for the impact of amortisation of business combination intangibles, changes
in the fair value of derivative financial instruments and the Group's share
of taxation in relation to joint ventures.
• Adjusted earnings per share is earnings per share adjusted for the
impact amortisation of business combination intangibles and changes in the
fair value of derivative financial instruments.
Reconciliations of these measures to operating profit, operating margin, profit
before tax and earnings per share are set out in notes 6 and 13 to the condensed
consolidated financial statements.
Geoff French, Chairman of Scott Wilson commented:
"This has been another period of significant growth for Scott Wilson, during
which we have continued to take full advantage of strong market conditions and
reap the rewards of the strategic acquisitions we have made. The important
project wins, in both our domestic and international business, during the first
half of the year demonstrate the increasing diversity of the Group, both in
terms of geography and market sectors. The combination of our broader service
offering with a record order book and continuing high demand means that we are
confident we will deliver results in line with full year expectations"
Contact Details
Scott Wilson Group plc www.scottwilson.com
Geoff French, Chairman 01256 310 200
Sean Cummins, Finance Director 07825 797962
Lak Siriwardene, Head of Communications 07824 311762
Financial Dynamics
Charlie Armitstead/ Charlotte Whitley 020 7269 7291
Notes to editors:
Scott Wilson Group plc, with nearly 6,000 members of staff, is an international
consultancy offering integrated professional services in the transportation,
property, environment and natural resources sectors.
The Group has doubled in size over the past few years and from its UK
headquarters currently controls a worldwide network of 80 offices, of which 40
are in the UK. The main international centres are located in China, Hong Kong,
India, SE Asia, the Middle East, Eastern Europe and Southern Africa.
The trading activities of the Group are managed through five geographical
Divisions: UK Central, UK South, Scotland & Ireland, UK Railways and
International. Through these geographical Divisions, the Group is able to draw
on a wide range of technical skills to provide integrated solutions to the four
principal industry market sectors.
Growth has been achieved both organically and by acquisition. Recent
acquisitions have helped to enhance the Group's presence in strategically
important market sectors. The Group's growing skill base provides clients with
holistic but tailor made solutions.
There have been a significant number of high profile contract wins. These
include the Waverley Railway Project, Lancashire Waste, Airdrie Bathgate Rail
Link, East London Line, London Crossrail, Three Counties Alliance, Combe Down
Mine Stabilisation, Bahrain Islands Developments and the Central and Ionia Odos
Motorways in Greece.
Chairman's Statement
Introduction
These results show the continuing strong progress that Scott Wilson has made
during the first half of this year. Once again we have achieved organic revenue
growth of over 10 per cent by taking advantage of the supportive conditions that
continue in all our main market sectors. This growth has been complemented by
acquisitions which have further enhanced the balance of our business and reduced
the risk of over-dependence on any single sector or sub sector. The additional
skills we have brought into the Group mean that we are now better placed to meet
demand and win business in a more diverse range of market sectors.
We have also achieved a further improvement in adjusted* operating profit
margins, in particular in the International division, which has achieved our
initial management target of 5 per cent and where we see good opportunities for
future growth. Increasingly we are able to mobilise our staff around the world
to assist in the successful delivery of projects for our clients.
Results
The results for the first six months of the year are significantly ahead of the
same period last year. Revenues, including our share of joint ventures,
increased by 35 per cent to £153.1m (2007: £113.2m) of which 25 per cent arose
from recent acquisitions and the balance of 10 per cent was continuing organic
growth. Revenues, excluding joint ventures, increased from £108.6m to £146.9m.
Adjusted* operating profit improved to £11.0m, an increase of more than 50 per
cent compared to the corresponding period last year. Adjusted* operating margin
increased from 6.3 per cent to 7.2 per cent.
Adjusted* basic earnings per share were 10.2p representing 34 per cent growth.
Net borrowings increased in the period to £18.3m, primarily due to the normal
seasonal increase in working capital. We expect to see some improvement in the
second half, notwithstanding a higher level of capital expenditure and a
recommencement of tax payments in the UK.
Dividend
In line with our progressive dividend policy, the Board has declared an interim
dividend of 1.2 pence per share (2007: 1.0 pence) to be paid on 22 February 2008
to Ordinary shareholders on the register on 25 January 2008.
New Project Wins
A number of major new project wins were secured in the first half of the year
helping to grow our order book by £23m keeping it at record levels. Our ability
to win high profile projects in both our domestic market and internationally,
highlights our broader reach and the increased diversity of our business model.
The committed order book now stands at a record £280m. Project wins have
included the Central Motorway in Greece, the Three Counties Alliance in England,
the Waverley Railway Project and the Airdrie-Bathgate Rail Re-opening in
Scotland. We have also been re-appointed to Network Rail's Multifunctional
Technical Framework. Funding for Crossrail in London was confirmed by the
Government in October 2007. This is a project we have been involved with for
the last eighteen months and further work should follow the successful passage
of the enabling Bill through Parliament.
Acquisitions
In May 2007 we acquired DCL Consulting Engineers Ltd, a leading building
services consultancy in South West England with headquarters in Plymouth. In
July 2007 the acquisition of McLay Collier significantly enhanced our capability
in the Property sector in Central Scotland. These acquisitions and those made
last year are integrating very well and are continuing to deliver significant
operating synergies.
We continue to seek opportunities to supplement our strong organic growth with
selective acquisitions that satisfy our strategic criteria. We have adequate
committed bank facilities to support our growth ambitions.
Strategic Targets
The Board met recently to review the Group's strategic targets through to 2013.
In addition to pursuing a growth strategy that aims to make Scott Wilson one of
the top 5 engineering consultants in the UK, the Board agreed that the targets
are to maintain organic revenue growth of at least 10 per cent per annum, to
target an operating margin of 10 per cent overall by 2013 and, consistent with
these targets, to deliver earnings per share growth of 15 per cent per annum.
Board of Directors
Our appointment of Sean Cummins as Group Finance Director on 1 October 2007
added further FTSE 250 experience to our Board and was a clear demonstration of
our significant growth ambitions.
Employees
We now have over 5,900 staff, up from 5,500 at the end of April 2007 and from
around 4,000 at the time of our flotation in March 2006. It is the skills,
qualities and range of expertise of those staff that define Scott Wilson: they
remain critical to our continuing development. We recruited a record number of
graduates, 150, over the last year and we are enhancing our programmes to
attract, retain and develop key members of staff.
On behalf of the Board I am delighted to record our thanks to all members of
staff for their outstanding contributions and their essential part in the
delivery of these record results.
Outlook
We continue to experience strong demand in all our main markets which, combined
with the benefits of our recent acquisitions, new project wins and a record
order book, should help ensure that this is another year of strong progress for
the Group. The Board remains confident that Scott Wilson will deliver results in
line with full year expectations.
Business Review
UK and Ireland
The UK and Ireland markets remain buoyant in all our principal sectors. Our
order book remains very strong, as do pipeline opportunities, providing good
visibility for the remainder of the financial year and beyond.
The acquisitions completed in 2006-2007 have integrated well and are delivering
results ahead of expectations. The benefits of cross-selling and access to new
markets and clients both geographically and within business sub-sectors are
being delivered.
• UK Central Division continued to deliver improved financial performance
with revenue including share of joint ventures increasing by 32.2 per cent
to £43.1m while adjusted* operating profit increased by 24.0 per cent to
£3.6m with an adjusted* operating margin of 8.4 per cent.
UK Central is the centre for roads procurement for the Highways Agency (HA) for
both new build and management, which continue to produce revenues in line with
forecast, as current major projects enter their more intensive phases. Recent
confirmation by the government of its commitment to maintaining high levels of
expenditure on transport including highways infrastructure projects with which
we are connected, particularly the M1 widening, reinforces the Group's
confidence in this market. The Division also has a strong presence in the
property and environment sectors, both public and privately sponsored, enhanced
by the acquisition of DGP International Ltd. That acquisition has enabled the
Group to enter the emerging private waste management market with a significant
project win in Lancashire and preferred bidder position in Manchester alongside
blue chip operators. The Division also secured a landmark commission, the Three
Counties Alliance - Derbyshire, Nottinghamshire and Leicestershire - a prototype
term contract for outsourcing of technical services for the three County Council
Authorities. This win puts the Group in a leading position for future contracts
procured in this way.
• UK South Division has considerably improved its financial performance with
revenue increasing by 84.5 per cent to £39.8m and adjusted* operating profit
increasing by 115.3 per cent to £3.3m with an adjusted* operating margin of
8.2 per cent.
UK South performance has improved significantly over the last 18 months and the
Division is now operating at sustainable margins. The Division's offering was
significantly enhanced with the acquisition of Cameron Taylor Group last year
making the Division a strong player in the property sector. This also brought a
large private sector component, particularly in the South of England where
markets remain particularly robust, balancing the public/private client base and
providing significant added breadth in property sub-sector markets. In addition,
the Division has a wide portfolio of term contracts in the sector. Collectively,
this has provided confidence that we are spreading our service offering over a
wider property market, thus addressing and mitigating risk and offsetting
uncertainties surrounding individual market segments. Two good examples of key
property projects are the Innovate Building (awarded the highest BREEAM score of
87.6 per cent and therefore the most sustainable and 'green' building in the UK)
and The University of Plymouth's nine storey Faculty of Arts, the Rowland
Levinsky Building.
• Scotland & Ireland Division maintained delivery of improvements in
financial performance with revenue increasing by 79.8 per cent to £14.5m
while the adjusted* operating profit increased by 76.1 per cent to £1.2m
with an adjusted* operating margin of 8.2 per cent.
Scotland & Ireland continues to have a strong presence in the roads markets
sponsored by the Scottish Executive, the Roads Services Northern Ireland and the
National Roads Authority, Eire. A much improved business sector balance was
achieved by the acquisition of Ferguson Mcllveen and McLay Collier in 2006 and
2007 respectively. Our market position in Northern Ireland is very strong,
particularly in the property and environment sectors with good project wins in
the health sector. Two key projects underway in the Division are the A90 upgrade
which now connects the Forth Bridge to the motorway network and the North Coast
Waste Water Treatment Works, one of the most intricate wastewater schemes to be
completed within Northern Ireland.
• UK Railways Division continued to show strong organic growth increasing
revenue by 17.2 per cent compared to last year, with an increasing
proportion of sales comprising multi-disciplinary projects in partnership
with other Divisions. The Division's adjusted* operating margin was 5.2 per
cent (2006: 8.0 per cent) due to the run-off of the new Network Rail
framework agreement and a number of major projects being slower to start
than anticipated.
The Division continued to deliver a number of ongoing major projects in addition
to securing several major new infrastructure enhancement contracts. In the
South, the East London Line remains the major ongoing commitment while Airdrie
to Bathgate and the Waverley Line in Scotland underline the Division's strong
reputation across the UK rail market. The recent government announcement on
Crossrail is likely to lead to an increase in activity on the project following
completion of parliamentary procedures in Spring 2008. A new 5-year engineering
consultancy framework has been agreed with Network Rail which should provide a
general improvement in trading margins in the second half. The new agreement
will also apply to the ongoing substantial work on West Coast Route
Modernisation.
The Division continues to increase its portfolio of projects outside the UK
particularly in Eastern Europe and those associated with mining projects
worldwide.
International
• International Division's market continues to show enormous
opportunities across our four market sectors, driven in particular by the
rapidly growing economies of China and India and investment in the Middle
East. Our regional businesses have responded to these opportunities by
increasing revenue including share of joint venture revenues to £32.0m
(2007: £30.7m), while adjusted* operating profit has increased by a factor of
four with an adjusted* operating margin slightly ahead of the year end
internal benchmark at 5.1 per cent.
Increasing horizontal engagement between our regional businesses in sharing
workload and resources means that the Group can enjoy the benefits of global
integration as we witness the convergence of economies and cultures around the
world. Since the start of the year our China-based staff have been involved in
projects in 18 countries and our India-based staff in 12. An additional
regional office has been opened in Brisbane, Australia, led by ten staff
transferring internally from our UK rail offices. Our recently acquired Toronto
based mining consultancy continues to perform strongly and has established a
permanent presence in Beijing.
In the transportation sector there have been further project wins in toll
highways in Greece and in Poland and ports development work in Qatar, Abu Dhabi,
India and Kazakhstan. The property sector continues to flourish in mainland
China, alongside an improvement in the market in Hong Kong. Major commissions
have been secured in the Middle East including The National Assembly Building in
Bahrain and the Oqyana World First Development, replicating the islands of
Australia and New Zealand off the coast of Dubai. In a global shift toward
renewable energy sources, new assignments include six new hydro-electric
projects ranging from Sudan and Kenya to Pakistan.
We have stabilised the South African based business which moves towards a
break-even trading position with all local staff now employed by our
black-empowered joint venture Masetloaka Scott Wilson, in which we have a 40 per
cent shareholding.
The Division continues to make its planned, continuing improvement in business
performance as it responds to a growing and exciting international market by
implementing clear global business sector development strategies across the
regional businesses.
Related Party Transactions
Related party transactions for the period are disclosed in note 12 to the
condensed set of financial statements.
There have been no material changes to the related party transactions described
in the last annual report.
Managing Risks
Our strategy for achieving consistent and sustainable growth and margins in a
changing economic climate is to manage the balance between the markets in which
we operate. The Group mitigation strategy includes spreading market risks to
achieve an acceptable balance of revenue earned from market sector, geography,
public/private client and contract type, to invest in market sectors where
growth is more assured, to ensure our commitment to excellence in quality of our
services and client care. In addition, where possible, we use hedging
instruments to reduce our currency and interest rate risks. These factors
remain fundamental to mitigating economic risks.
The key financial and non-financial risks faced by the Group are disclosed in
the Group's Annual Report and Accounts for the 52 week period ended 29 April
2007 within the Business Review (pages 20 and 21) and in Note 3 of the
Consolidated Financial Statements available at www.scottwilson.com. The Board
considers that these remain a current reflection of the risks and uncertainties
facing the business.
Condensed Consolidated Income Statement
26 weeks ended 26 weeks 52 weeks ended
28 October ended 29 April 2007
2007 29 October audited
unaudited 2006
unaudited
Adjusted* Note (i) Total Adjusted* Note (i) Total Adjusted* Note (i) Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations:
Revenue including share
of joint venture 153,123 - 153,123 113,194 - 113,194 261,002 - 261,002
revenues
Less: share of joint
venture revenues (6,264) - (6,264) (4,611) - (4,611) (11,472) - (11,472)
Group revenue 146,859 - 146,859 108,583 - 108,583 249,530 - 249,530
Cost of sales (85,709) - (85,709) (69,205) - (69,205) (158,401) - (158,401)
Gross profit 61,150 - 61,150 39,378 - 39,378 91,129 - 91,129
Administrative expenses 3 (50,706) (1,241) (51,947) (32,491) - (32,491) (75,995)(1,210) (77,205)
Share of result of joint 506 (152) 354 272 (63) 209 1,164 (346) 818
ventures
Operating profit 10,950 (1,393) 9,557 7,159 (63) 7,096 16,298(1,556) 14,742
Finance income 4 7,308 - 7,308 5,948 - 5,948 11,275 - 11,275
Finance costs 3,5 (6,537) (83) (6,620) (5,068) - (5,068) (10,583) - (10,583)
Profit before taxation 11,721 (1,476) 10,245 8,039 (63) 7,976 16,990(1,556) 15,434
Taxation (4,078) 549 (3,529) (2,689) 63 (2,626) (6,171) 709 (5,462)
Profit for the period 7,643 (927) 6,716 5,350 - 5,350 10,819 (847) 9,972
Attributable to:
Equity holders of the 7,610 (927) 6,683 5,351 - 5,351 10,833 (847) 9,986
Company
Minority 33 - 33 (1) - (1) (14) - (14)
interests
7,643 (927) 6,716 5,350 - 5,350 10,819 (847) 9,972
Earnings per share:
Basic 6 10.21p (1.25)p 8.96p 7.60p - 7.60p 15.04p (1.18)p 13.86p
Diluted 6 9.72p (1.18)p 8.54p 7.42p - 7.42p 14.48p (1.13)p 13.35p
Dividends declared:
Amount per share 2.3p -
1.0p
Total amount absorbed 1,727 -
747
(£'000)
There were no discontinued operations in any period.
* Before: items described in note (i) below.
Note (i): Amortisation of business combination intangibles, changes in the fair
value of derivative financial instruments and the Group's share of taxation in
relation to joint ventures, as detailed further in note 3.
Condensed Consolidated Statement of Recognised Income and Expense
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
£'000 £'000 £'000
Currency translation differences on translation of foreign 532 (342) (865)
operations
Actuarial gains and losses on defined benefit pension 9,043 (9,105) 3,555
schemes
Tax on items recognised directly in equity (2,873) 2,834 (807)
Deferred tax relating to unexercised share options 281 - 911
Income/(expense) recognised directly in equity 6,983 (6,613) 2,794
Profit for the period 6,716 5,350 9,972
Total recognised income/(expense) for the period 13,699 (1,263) 12,766
Attributable to:
Equity holders of the Company 13,666 (1,262) 12,780
Minority interests 33 (1) (14)
13,699 (1,263) 12,766
Condensed Consolidated Balance Sheet
28 October 2007 29 October 2006 29 April 2007
unaudited unaudited audited
Notes £'000 £'000 £'000
ASSETS
Non-current assets
Tangible fixed assets 18,035 14,192 17,342
Goodwill 37,328 8,820 34,538
Other intangible assets 15,869 1,546 15,908
Investments in joint ventures 1,051 204 837
Deferred tax assets 1,257 12,260 5,456
73,540 37,022 74,081
Current assets
Trade and other receivables 119,378 76,818 99,514
Derivative financial instruments 76 - -
Current tax assets - 938 1,314
Cash and cash equivalents 14,765 17,366 13,689
134,219 95,122 114,517
TOTAL ASSETS 207,759 132,144 188,598
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
Company
Issued capital 7 96,206 86,291 95,168
Shares to be issued 7 385 481 481
Other reserves 7 (6,334) (6,313) (6,528)
Retained earnings 7 (3,473) (29,138) (15,289)
86,784 51,321 73,832
Minority interests 141 130 74
Total equity 86,925 51,451 73,906
Non-current liabilities
Borrowings 3,008 2,429 3,801
Provisions 2,932 570 3,767
Retirement benefit obligations 205 24,459 12,449
6,145 27,458 20,017
Current liabilities
Trade and other payables 74,936 47,499 65,102
Derivative financial instruments 186 - -
Current tax liabilities 1,259 161 -
Borrowings 30,096 3,867 24,537
Provisions 8,212 1,708 5,036
114,689 53,235 94,675
Total liabilities 120,834 80,693 114,692
TOTAL EQUITY AND LIABILITIES 207,759 132,144 188,598
Condensed Consolidated Cash Flow Statement
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
Notes £'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 8 6,681 7,503 19,631
Defined benefit pension plan (3,923) (20,143) (23,415)
contributions
Dividends received from joint ventures - 694 1,547
Tax received / (paid) 52 (197) (1,207)
Net cash flows from operating activities 2,810 (12,143) (3,444)
Cash flows from investing activities
Purchase of tangible fixed assets (3,678) (1,646) (5,416)
Purchase of intangible assets (689) (641) (1,917)
Proceeds from sale of tangible fixed 1,780 - 183
assets
Acquisition of subsidiaries, net of cash
and cash equivalents acquired (1,484) (1,621) (28,676)
Net cash flows from investing activities (4,071) (3,908) (35,826)
Cash flows from financing activities
Interest received 101 513 548
Interest and finance charges paid (1,091) (281) (762)
Proceeds from issue of Ordinary Shares, net of
issue costs of £nil 25 14 35
Receipt of new loans and finance lease 6,333 2,005 24,513
advances
Repayment of loans and finance leases (1,725) (1,833) (4,518)
Dividends paid to equity shareholders (1,727) - (747)
Net cash flows from financing activities 1,916 418 19,069
Net increase/(decrease) in cash and cash equivalents 655 (15,633) (20,201)
Net cash and cash equivalents at start of 12,815 33,067 33,067
period
Foreign exchange 262 (87) (51)
Net cash and cash equivalents at end of 13,732 17,347 12,815
period
Cash and cash equivalents 14,765 17,366 13,689
Bank overdrafts (1,033) (19) (874)
Net cash and cash equivalents 13,732 17,347 12,815
Notes to the Condensed Interim Consolidated Financial Statements
1 General information
The condensed interim consolidated financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting. The basis of preparation,
methods of computation and accounting policies used in the condensed interim
financial statements are consistent with International Financial Reporting
Standards (IFRS) and those followed in the preparation of the Group's financial
statements for the 52 weeks ended 29 April 2007.
Subsequent to 29 April 2007, the Group has entered into derivative financial
instruments in order to hedge its exposure to interest and exchange rates. Such
derivatives are held at fair value in the balance sheet. They are not
designated as hedges in accordance with IAS 39 Financial Instruments:
Recognition and Measurement and accordingly gains and losses arising from
changes in their fair value are recognised immediately in the income statement.
The financial information in the Interim Report relating to the 52 weeks ended
29 April 2007 does not constitute statutory accounts within the meaning of S240
of the Companies Act 1985. The statutory accounts of the Group for the 52 week
period ended 29 April 2007 have been delivered to the Registrar of Companies.
The auditors' opinion on those accounts was unqualified and did not contain a
statement made under S237(2) or S237(3) of the Companies Act 1985.
2 Segment analysis
The trading activities and performance of the Group continue to be managed
through five geographical divisions: UK Central, UK South, Scotland & Ireland,
UK Railways and International.
Segment revenue and results for the 26 weeks ended 28 October 2007 (unaudited):
UK UK Scotland UK
Central South & Ireland Railways International Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue including share of
joint venture revenues 43,081 39,809 14,465 23,738 32,030 153,123
Group revenue 37,985 39,809 14,465 23,738 30,862 146,859
Adjusted operating* profit 3,620 3,273 1,189 1,225 1,643 10,950
Operating profit - segment result 3,147 2,908 768 1,221 1,513 9,557
Included in the above is a net cost of £384,000 relating to a dilapidations
charge of £1,434,000 and a profit on sale of property of £1,050,000.
Segment revenue and results for the 26 weeks ended 29 October 2006 (unaudited):
UK UK Scotland UK
Central South & Ireland Railways International Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue including share of
joint venture revenues 32,593 21,576 8,047 20,260 30,718 113,194
Group revenue 28,469 21,576 8,047 20,260 30,231 108,583
Adjusted operating* profit 2,920 1,520 675 1,626 418 7,159
Operating profit - segment result 2,875 1,520 675 1,626 400 7,096
2 Segment analysis (continued)
Segment revenue and results for the 52 weeks ended 29 April 2007 (audited):
UK UK Scotland UK
Central South & Ireland Railways International Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue including share of
joint 75,324 56,938 22,146 43,030 63,564 261,002
venture revenues
Group revenue 65,002 56,939 22,145 43,030 62,414 249,530
Adjusted operating* profit 6,688 3,739 1,658 3,145 1,068 16,298
Operating profit - segment 6,077 3,453 1,268 3,145 799 14,742
result
3 Amortisation of business combination intangibles, changes in the fair value of
derivative financial instruments and the Group's share of taxation in relation
to joint ventures
26 weeks 26 weeks 52 weeks
ended ended Ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
£'000 £'000 £'000
Administrative expenses:
Amortisation of intangibles assets acquired in business (1,214) - (1,210)
combinations
Changes in the fair value of derivative financial instruments (27) - -
Group's share of taxation relating to joint ventures (152) (63) (346)
(1,393) (63) (1,556)
Finance income/costs:
Changes in the fair value of derivative financial instruments (83) - -
(1,476) (63) (1,556)
Changes in the fair value of derivative financial instruments
The amounts recorded reflect the net movement in the period in the fair value of
the Group's derivative financial instruments relating to interest and exchange
rates. The net movement relating to exchange rate derivative financial
instruments is reflected within administrative expenses, the net movement
relating to interest rate derivative financial instruments is reflected within
finance income or costs.
Group's share of taxation relating to joint ventures
The Group's share of tax in relation to joint ventures has been included as an
adjustment in order to present operating profit before tax (which would have
been arrived at under UK GAAP equity accounting) a measure which Scott Wilson
management uses for internal performance analysis. Comparative figures have
been reclassified accordingly.
4 Finance income
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
£'000 £'000 £'000
Interest income on bank deposits 368 471 630
Expected return on pension plan assets 6,940 5,477 10,645
7,308 5,948 11,275
5 Finance costs
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
£'000 £'000 £'000
Interest on bank loans and overdrafts 674 93 498
Interest on other loans 105 59 73
Finance lease charges 187 198 350
Unwind of discount on deferred consideration 107 22 104
Loss on interest rate derivative financial instruments 83 - -
Interest on retirement benefit obligations 5,464 4,696 9,558
6,620 5,068 10,583
6 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of Ordinary Shares
in issue during the period, excluding Ordinary Shares held by the Scott Wilson
Holdings Ltd Employee Share Ownership Trust.
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
£'000 £'000 £'000
Profit attributable to equity holders of the Company 6,683 5,351 9,986
Weighted average number of Ordinary Shares in issue 74,552 70,448 72,047
(thousands)
Basic earnings per share (p) 8.96p 7.60p 13.86p
Weighted average number of Ordinary Shares in issue 74,552 70,448 72,047
(thousands)
Dilutive effect of share options 2,878 1,694 2,418
Dilutive effect of business combination deferred consideration 831 - 360
shares
Diluted weighted average number of Ordinary Shares in issue 78,261 72,142 74,825
(thousands)
Diluted earnings per share (p) 8.54p 7.42p 13.35p
6 Earnings per share (continued)
Adjusted* earnings per share
The Directors believe that the presentation of adjusted* earnings per share
assists with the understanding of the results of the Group. Adjusted* earnings
per share is earnings per share adjusted for amortisation of business
combination intangibles and changes in the fair value of derivative financial
instruments.
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
£'000 £'000 £'000
Profit attributable to equity holders of the Company 6,683 5,351 9,986
Amortisation of intangibles assets acquired in business combinations 1,214 - 1,210
Changes in the value of derivative financial instruments 110 - -
Tax relating to amortisation of business combination intangibles and (397) - (363)
changes in the value of derivative financial instruments
Adjusted * profit attributable to equity holders of the Company 7,610 5,351 10,833
Weighted average number of Ordinary Shares in issue (thousands) 74,552 70,448 72,047
Adjusted * basic earnings per share (p) 10.21p 7.60p 15.04p
Weighted average number of Ordinary Shares in issue (thousands) 74,552 70,448 72,047
Dilutive effect of share options 2,878 1,694 2,418
Dilutive effect of business combination deferred consideration shares 831 - 360
Diluted weighted average number of Ordinary Shares in issue 78,261 72,142 74,825
(thousands)
Adjusted * diluted earnings per share (p) 9.72p 7.42p 14.48p
No options over Ordinary Shares have been awarded since 28 October 2007.
7 Statement of changes in shareholders' equity
Issued Shares to Retained Other
capital be issued earnings reserves Total
£'000 £'000 £'000 £'000 £'000
At 30 April 2007 95,168 481 (15,289) (6,528) 73,832
Shares issued under share option schemes 27 - - - 27
Shares issued relating to business
acquisitions 1,011 (96) - - 915
Income recognised directly in - - 6,611 - 6,611
equity
Profit for the period - - 6,683 - 6,683
Equity-settled share-based
compensation expense - - 249 - 249
Translation differences (net of - - - 372 372
tax)
Dividend declared on Ordinary - - (1,727) - (1,727)
Shares
Release of revaluation reserve - - - (140) (140)
Other movements - - - (38) (38)
At 28 October 2007 96,206 385 (3,473) (6,334) 86,784
8 Cash generated from operations
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
£'000 £'000 £'000
Operating profit 9,557 7,096 14,742
Share of result of joint ventures (354) (209) (818)
Movement on acquisition of minority interests - (117) (117)
(Profit)/loss on sale of tangible fixed assets (980) - 83
Defined benefit pension plan current service cost 2,198 2,700 4,631
Depreciation and amortisation 4,079 1,655 5,251
Share-based compensation expense 294 230 467
Increase in receivables and prepayments (18,347) (10,788) (15,790)
Increase in payables and accruals 8,798 6,378 9,380
Increase in provisions 1,436 558 1,802
Cash generated from operations 6,681 7,503 19,631
9 Contingent liabilities
The Group has issued guarantees in the normal course of business to secure
advance payments on contracts and to meet contractual bid and performance bond
obligations. The amount of all such guarantees at 28 October 2007 was £8.7m
(29 October 2006: £6.7m, 29 April 2007: £7.5m).
10 Business combinations
(a) Acquisition of DCL
On 9 May 2007, the Group acquired the entire share capital of DCL Consulting
Engineers Limited (DCL), a South-west England based building services
consultancy business, for a total potential consideration of £1.1m.
The assets and liabilities acquired and the provisional goodwill arising on the
acquisition are as follows:
Acquiree's Fair
carrying value
amount Revaluation Accounting to Group
policy
alignment
£'000 £'000 £'000 £'000
Tangible fixed assets
63 - - 63
Intangible assets
120 70 - 190
Trade and other receivables
630 - - 630
Cash and cash equivalents
345 - - 345
Deferred tax liabilities
- (57) - (57)
Trade and other payables
(482) - - (482)
676 13 - 689
Cost of acquisition
Cash consideration 342
Issue of 118,375 Ordinary Shares 385
Deferred contingent consideration to be settled in 385
Ordinary Shares
Acquisition costs -
Total purchase consideration 1,112
Fair value of assets and liabilities acquired 689
Provisional goodwill 423
The deferred consideration to be settled in Ordinary Shares is payable in equal
annual instalments over three years, contingent upon the achievement of
financial targets, with the first settlement due in May 2008.
The goodwill is attributable to the premium paid to strengthen and expand the
Group's existing service offering and market share in line with the Group's
strategy.
The net cash inflow on the acquisition of DCL was:
£'000
Cash consideration 342
Cash and cash equivalents acquired (345)
(3)
DCL contributed revenue of £801,000 and profit before taxation of £154,000 to
the Group's results for the 26 weeks ended 28 October 2007.
(b) Acquisition of McLay Collier
On 25 July 2007, contracts were exchanged for the acquisition of the business
and assets of McLay Collier LLP, a Glasgow based practice, which operates within
the property sector, for a goodwill payment of £2.7m plus a payment for net
assets.
The assets and liabilities acquired and the provisional goodwill arising on the
acquisition are as follows:
Acquiree's Fair
carrying value
amount Revaluation Accounting to Group
policy
alignment
£'000 £'000 £'000 £'000
Tangible fixed assets 22 - - 22
Intangible assets - 915 - 915
Trade and other receivables 924 - - 924
Trade and other payables (483) - - (483)
463 915 - 1,378
Cost of acquisition
Initial cash consideration 1,185
Issue of 163,793 Ordinary Shares 530
Deferred cash consideration 888
Deferred consideration to be settled in Ordinary Shares 540
Acquisition costs 49
Total purchase consideration 3,192
Fair value of assets and liabilities acquired 1,378
Provisional goodwill 1,814
The deferred cash consideration is payable in three instalments. The first
instalment was payable in October 2007, the second is due on the first
anniversary of completion in July 2008 and the third is due on the second
anniversary of completion in July 2009.
The deferred consideration to be settled in Ordinary Shares is payable in two
instalments. The first instalment is due on the first anniversary of completion
in July 2008 and the second is due on the second anniversary of completion in
July 2009.
The goodwill is attributable to the premium paid to strengthen and expand the
Group's existing service offering and market share in line with the Group's
strategy.
The net cash outflow on the acquisition of McLay Collier was:
£'000
Initial cash element of purchase consideration 1,185
Cash and cash equivalents acquired -
1,185
McLay Collier contributed revenue of £540,000 and profit before taxation of
£83,000 to the Group's results for the 26 weeks ended 28 October 2007.
(c) Total of all acquisitions
Had the acquisitions taken place at the beginning of the financial year, Group
revenue and profit before taxation for the 26 weeks ended 28 October 2007 would
have been £147.5m and £10.3m respectively.
11 Interim dividend
An interim dividend for the 52 week period ended 29 April 2007 of 1.0p per
Ordinary Share was paid on 23 February 2007. A final dividend for the 52 week
period ended 29 April 2007 of 2.3p per Ordinary Share was paid on 5 October
2007.
The Directors have declared an interim dividend for the 52 week period ending 27
April 2008 of 1.2p per Ordinary Share to be paid on 22 February 2008 to
shareholders on the register at 25 January 2008. In accordance with IAS 10, this
interim dividend has not been recognised in the Interim Report.
12 Related party transactions
Transactions between the Company and its subsidiaries and joint ventures
represent related party transactions.
Transactions with subsidiaries are eliminated on consolidation.
Except as disclosed below, no material related party transactions have been
entered into, during the period, which might reasonably affect any decisions
made by the users of these Interim Condensed Consolidated Financial Statements.
26 weeks ended 28 26 weeks ended 52 weeks ended 29
October 2007 29 October 2006 April 2007
unaudited unaudited unaudited
£'000 £'000 £'000
Transactions with joint ventures:
- Sales of goods and services 2,639 2,442 6,823
- Purchases of goods and services 246 - 226
Net amount due to Group at the period end 333 230 368
In the 26 weeks ended 28 October 2007, the Group made contributions to defined
benefit pension schemes of £3,923,000 (26 weeks ended 29 October 2006
£20,143,000: 52 weeks ended 29 April 2007 £23,415,000)
Compensation paid to key management of the Group will be disclosed in the
Group's Annual Report for the 52 weeks ending 27 April 2008.
13 Reconciliation of adjusted Group results
The Directors believe that the presentation of adjusted operating profit,
adjusted operating margin and adjusted profit before taxation assists with the
understanding of the results of the Group.
Adjusted operating profit is operating profit adjusted for amortisation of
business combination intangibles, changes in the fair value of derivative
financial instruments and the Group's share of taxation in relation to joint
ventures.
Adjusted operating margin is adjusted operating profit expressed as a percentage
of revenue, including share of joint venture revenues.
Adjusted profit before taxation is profit before taxation adjusted for
amortisation of business combination intangibles, changes in the fair value of
derivative financial instruments and the Group's share of taxation in relation
to joint ventures.
A reconciliation of these measures to operating profit is given below.
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
unaudited unaudited audited
£'000 £'000 £'000
Operating profit 9,557 7,096 14,742
Amortisation of intangible assets acquired in business 1,214 - 1,210
combinations
Changes in the fair value of derivative financial instruments 27 - -
Group's share of taxation relating to joint ventures 152 63 346
Adjusted* operating profit 10,950 7,159 16,298
Net finance income 688 880 692
Changes in the fair value of derivative financial instruments 83 - -
Adjusted* profit before taxation 11,721 8,039 16,990
Adjusted* operating margin 7.2% 6.3% 6.2%
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance
with IAS 34;
(b) the interim management report includes a fair review of the information
required by DTF4.2.7R; and
(c) the interim management report includes a fair review of the information
required by DTF 4.2.8R;
By order of the Board
H Blackwood/R H Wall S V Cummins
Joint Chief Executives Finance Director
12 December 2007
INDEPENDENT REVIEW REPORT TO SCOTT WILSON GROUP PLC
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the 26 weeks ended 28 October
2007 which comprises the income statement, the statement of recognised income
and expense, the balance sheet, the cash flow statement and related notes 1 to
13. We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our
work has been undertaken so that we might state to the company those matters we
are required to state to them in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdoms' Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the 26 weeks ended 28 October 2007 is not prepared , in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
London, UK
12 December 2007
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