Interim Results
Volvere PLC
27 September 2006
27 September 2006
VOLVERE PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2006
Volvere plc ('Volvere' or 'the Company', or 'the Group'), the turnaround
investment company, announces its unaudited interim results for the six months
ended 30 June 2006.
Highlights:
• Recommended all-share offer for NMT Group PLC ('NMT') announced on 14
September 2006
• Irrevocable undertakings received to accept the offer in respect of
approximately 20.2% of NMT's issued ordinary share capital. This, combined
with Volvere's existing shareholding in NMT, represents in aggregate
approximately 50.1% of NMT's issued ordinary share capital
• Cash acquisition cost of both Vectra Group and Sira Test and Certification
now recovered in full
• Turnover from the Group's businesses £6.6m (1 July 2005: £5.1m; 31 December
2005: £10.6m)
• Pre-tax profit £0.06m (1 July 2005: £0.03m; 31 December 2005: loss £0.06m)
• Consolidated net assets of £4.15m (1 July 2005: £3.87m; 31 December 2005:
£4.09m)
• Basic and diluted earnings per share 1.66p and 1.55p (1 July 2005: 0.88p
and 0.83p; 31 December 2005: basic and diluted loss per share 1.64p)
• Sira Test & Certification, acquired in September 2005, performing well.
Vectra's performance satisfactory. Sira Environmental, acquired in March
2006, performing in line with expectations.
• No dividend proposed
Chairman, Lord Kalms, said: 'Our recommended all-share offer for NMT Group PLC
is a key step towards ensuring that our strategy is expanded in terms of the
scale of the opportunities that we are able to complete, both in number and
size.'
For further information, please contact:
Volvere plc +44 (0) 20 7979 7596
Jonathan Lander, Chief Executive Officer
Weber Shandwick Square Mile +44 (0) 20 7067 0700
Terry Garrett
About Volvere
Volvere was admitted to trading on AIM in December 2002 to invest in, or
acquire, quoted companies where the market capitalisation does not reflect the
value of the assets or in any company that is in distress but offers the
possibility of a turnaround. Volvere employs approximately 150 people in 14
offices in the UK, Holland and the Middle East. Its executive directors are the
executives of the venture capital and advisory firm Dawnay Day Lander Ltd. Its
non-executive directors are Lord Kalms of Edgware, Neil Ashley and David
Buchler.
Website: www.volvere.co.uk
VOLVERE PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2006
CHIEF EXECUTIVE'S STATEMENT
Introduction
I am pleased to present the interim statement for the six months ending 30 June
2006.
Since Volvere was admitted to AIM in December 2002, the Group has implemented
its combined strategies of both investment in turnaround candidates and
investing in or acquiring quoted companies where the market capitalisation was
less than the value of the companies' net assets.
Acquiring turnaround candidates means that the path to profitability can be
challenging. We assess the success or failure of our turnaround investments
principally by how much of or how quickly we can recover the cash spent on
acquiring them. I am pleased to report that we now own both Vectra Group
Limited ('Vectra') and Sira Test and Certification Limited ('STC') for no cash
outlay. Moreover, in the case of STC this was achieved within 12 months of the
acquisition date. This is an important milestone for the Group and testament to
our turnaround skills.
I am also pleased to report that on 14 September 2006, we announced a
recommended, all share, offer for the shares in NMT Group PLC ('NMT') that the
Company does not currently own.
At the date of this announcement we have received irrevocable undertakings from
certain NMT shareholders, which together with our own holding will take us over
the minimum 50% threshold for the offer to go unconditional.
The offer for NMT is the natural step in the implementation of our activist
investment strategy. As you will recall, Volvere was successful in removing
NMT's then board in September 2005 by calling an EGM. At the Annual General
Meeting of NMT on 11 September 2006, a resolution was passed, inter alia,
adopting an investing strategy that is similar in many respects to that of
Volvere.
Your board believes that the acquisition by Volvere of NMT represents an
opportunity to reduce costs by combining two listed entities following
essentially similar strategies. The board also believes that together the
companies will benefit from an increase in the size and range of target
investments due to the increased amount of cash available for investment as well
as the risk diversification inherent in a larger portfolio.
Operating performance
Safety and risk consulting - Vectra
Upon its acquisition in 2003, Volvere implemented a turnaround strategy at
Vectra. This has resulted in an improvement in its operating performance and
working capital management. As a result we recouped the purchase price of
Vectra of £2 million within approximately three yearsand we now own Vectra at no
cash cost to the Group.
Our Transportation business performed well during the period and we continue to
see the benefits of having integrated our security solutions and property
practices into this business.
The Oil & Gas market has been strong, once again driven by the high oil price.
We have continued to see significant repeat workflows from our major clients,
particularly the Shell group.
The Nuclear consulting business has continued to suffer from somewhat
unpredictable workflows arising from the structural changes that have taken, and
continue to take, place in the supply chain for that market. However, we remain
optimistic about the long-term future for this business and indications are that
its performance will improve in the second half of the year. The nuclear
decommissioning market has, for the small-scale projects that are Vectra's
speciality, been particularly tough with the result that we have now ceased our
operations in this area.
The markets in which Vectra operates were generally buoyant during the period.
As a result we have experienced the inevitable recruitment pressures that arise
when there is a shortage of talented people. However, as a well-regarded
company in its sectors, we believe Vectra is in a good position to attract
quality employees in the future. The retention and recruitment of staff remains
our primary focus.
Certification services - Sira Test and Certification and Sira Environmental
Sira Test and Certification Limited ('STC')
STC was a new company set up to acquire certain business and assets from the
Sira Group. The transaction was completed on 29 September 2005.
STC provides certification services covering the safety of products that are
used within potentially explosive environments (such as chemical plants, mines
and other hazardous areas) and provides training for personnel that work in
these environments.
During the period STC delivered a strong operating performance, contributing
£250,000 to the Group before goodwill (£30,000) and intra-Group management
charges from Vectra (£49,000). As part of a planned growth strategy we opened a
second office during the period, in Bakewell, United Kingdom. We believe this
business is capable of further growth over the medium term and are very
encouraged by its performance to date.
STC drew down £600,000 pursuant to an acquisition finance facility from its
bankers during the period and this, combined with the positive operating cash
flow arising from STC since acquisition, has enabled us to recover all of the
cash element of the purchase price.
Sira Environmental Limited ('SEL')
We announced the acquisition of SEL on 29 March 2006 for a nominal
consideration.
SEL provides monitoring and conformity assessment solutions to the water quality
and emissions monitoring markets. It operates the Monitoring Certification
Scheme (MCERTS) for the Environment Agency, a national standard for monitoring
emissions to air, land and water. In addition, the business provides gas
testing and accelerometer calibration services in laboratories accredited by the
United Kingdom Accreditation Service. We consider this business to be a growth
area because of the increasing requirements of environmental legislation.
As part of the SEL acquisition, we acquired a security solutions business. In
the period under review this business formed part of the SEL business and its
results are included within those for Certification services. However, with
effect from 1 August 2006, we have transferred the business into a new company
called Sira Defence & Security Limited ('SDS'), which we believe will enhance
its profile.
SDS develops, and advises in relation to, security solutions and surveillance
products for government agencies, the Police service and the Home Office. The
principal product being developed, called Meerkat, is a software and hardware
solution that takes electronic images in multiple formats, and then digitizes
and catalogues them. Although this product is under development, prototype
versions have been sold to, and are being evaluated by certain clients. SDS
expects to launch the product in the fourth quarter of 2006 and expects to
deliver other products to clients in the second half of 2006.
During the 3 months from acquisition to 30 June 2006 the SEL business (including
that of SDS) reported an operating loss of £50,000. We expect this performance
to improve in the second half of 2006.
We are pleased with the operating performance of our acquisitions, and
particularly with Sira Test and Certification. Further commentary on the
performance of each of the Group's trading businesses is set out in the
Financial Review below.
Holding in NMT Group PLC
During the period we increased our holding in NMT Group PLC ('NMT') for a cash
consideration of £190,000. This resulted in our holding in NMT increasing to
29.9% of its issued ordinary share capital.
As noted above, we announced on 14 September 2006 a recommended, all share,
offer for the shares in NMT that the Company does not currently own. We have
received irrevocable undertakings from certain other NMT shareholders which,
together with our existing holding of 29.9%, means that the offer will, when
made, be capable of going unconditional as to acceptances.
Future Strategy
We continue to seek activist or turnaround investment opportunities as well as
acquisitions that are complementary to our existing businesses.
Outlook
We have now demonstrated the strength of our turnaround capability and also of
our activist skills. The acquisition of NMT will enable our strategy to be
implemented with increased scale and pace for the benefit of both Volvere's and
NMT's shareholders.
Jonathan Lander
Chief Executive Officer
27 September 2006
FINANCIAL REVIEW
Turnover
Turnover for the six months to 30 June 2006 was £6.6m (1 July 2005: £5.1m).
This arose from the Group's three trading businesses and from the generation of
management fees arising from services provided to NMT. The segmental analysis
of external turnover by activity is set out in the table below:
Segmental Note 1 January to 30 1 January to 1 Year ended 31
activity June 2006 July 2005 December 2005
Unaudited Unaudited Audited
£000 £000 £000
Management
services 1 160 - 70
Safety and
risk
consulting 2 5,064 5,130 9,898
Certification
services 3 1,359 - 658
Total turnover 6,583 5,130 10,626
Note 1: Represents the fees for the provision of management services by Volvere
plc to NMT Group PLC. The amount in respect of the year ended 31 December 2005
relates to the period from 14 September - 31 December 2005.
Note 2: Safety and risk consulting services are provided by Vectra Group
Limited.
Note 3: Certification services are provided by the Group's subsidiaries, Sira
Test and Certification Limited ('STC') and Sira Environmental Limited ('SEL').
STC was acquired on 29 September 2005 and its turnover is included in the year
ended 31 December 2005 from that date. SEL was acquired on 29 March 2006 and
its turnover is included from that date.
Operating Profit and Profit after tax
The Group's profit after tax for the six months was £0.06m (1 July 2005:
£0.03m). During the period Vectra has provided the central services functions
for the Sira companies and carried the costs associated with that. However,
given the Group's growth we established, on 1 July 2006, a separate subsidiary
company, Volvere Central Services Limited, to undertake the financial, IT and
human resources management activities of the Group. We believe this will enable
a more accurate reflection of the cost structure attributable to the Group's
operations.
The segmental analysis of Group operating profit, before Group management
charges and goodwill, is set out in the table below:
Group operating profit Note 1 January to 1 January to 1 Year ended 31
30 June 2006 July 2005 December 2005
Unaudited Unaudited Audited
£000 £000 £000
Management
services 1 (89) (132) (202)
Safety and
risk
consulting 2 13 92 (48)
Certification
services 2 151 - 83
Total
operating
profit 75 (40) (167)
Note 1: These are the costs of the Group's head office function net of
externally generated turnover in respect of services provided by the Group.
Note 2: Stated after an inter-segment recharge relating to the provision of
administration and other services from Safety and risk consulting to
Certification services of £49,000 (1 January - 1 July 2005: Nil; year ended 31
December 2005: £24,000).
For the whole of the period (and consistent with the treatment in the full year
accounts for 2005) the Group has accounted for its investment in NMT as an
associate because of the size of its shareholding. In the period to 1 July
2005, the smaller size of the Group's shareholding meant that it was treated as
an investment. This has given rise in 2006 (as it did in the full year 2005
results) to a share of the associate's loss being incorporated in the Group's
profit and loss account along with negative goodwill arising on consolidation.
Balance sheet and Cash flow
At the end of the period the Group's consolidated net assets were £4.15m (1 July
2005: £3.87m) of which cash represented £1.60m (1 July 2005: £2.67m). During
the period the Group increased its stake in NMT for a cash consideration of
£0.19m. On 30 June 2006 the Group's subsidiary STC drew down a 5-year term loan
of £600,000. This loan has been used to partly repay intra-Group debt with
Volvere in order to supplement existing cash resources and finance the Group's
investment activities.
During the period the net operating cash inflow was £0.22m compared to a net
operating cash outflow of £0.19m for the same period in 2005. The improvement
was a result principally of the improved financial performance in 2006 compared
to the same period in 2005 and improved working capital management.
On 16 August 2006 the Group closed the Contract for Difference ('CFD') through
which some of its investment in NMT Group PLC had been held and the Group
repurchased the shares which were the subject of the CFD. The Group's treatment
in respect of this CFD had been to show the funds received from the CFD provider
upon the original transfer of the holding to the CFD provider, net of the funds
provided by the Group as security under the terms of the CFD, as an increase in
debt. As at 30 June 2006 the net CFD debt outstanding amounted to £0.42m. Upon
closure of the CFD, the Group's cash resources have been reduced by this amount
and the debt reduced accordingly.
Nick Lander
Chief Financial & Operating Officer
27 September 2006
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Existing Total
1 January to Acquisitions 1 January to Year ended 31
30 June 2006 30 June 2006 December 2005
1 January to 30 1 January to
June 2006 1 July 2005
Unaudited Unaudited Unaudited Unaudited Audited
Note £000 £000 £000 £000 £000
TURNOVER 2 6,443 141 6,584 5,130 10,626
Cost of sales (3,225) (45) (3,270) (2,818) (5,791
GROSS PROFIT 3,218 96 3,314 2,312 4,835
Administrative expenses:
- before goodwill (3,093) (146) (3,239) (2,352) (5,002)
- realisation of negative 12 - 12 12 24
goodwill
- amortisation of positive (30) - (30) - (16)
goodwill
Total administrative expenses (3,111) (146) (3,257) (2,340) (4,994)
OPERATING PROFIT/(LOSS) 107 (50) 57 (28) (159)
Share of operating loss in (65) - (89)
associate
Negative goodwill arising in
respect of associate 37 - 135
Finance income - interest
receivable/(payable)
- group (4) 50 59
- share of associate 38 21
Cost of fundamental
reorganisation - share of
associate - - (30)
Profit on sale of tangible
fixed asset investments - 10 -
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE TAX 63 32 (63)
Tax on loss on ordinary - - 3
activities
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES AFTER TAX BEING
PROFIT/(LOSS) FOR PERIOD
TRANSFERRED TO/(FROM) RESERVES 63 32 (60)
Earnings/(Loss) per share
Basic 5 1.66p 0.88p (1.64p)
Diluted 5 1.55p 0.83p (1.64p)
All results are derived from continuing operations.
There are no recognised gains or losses other than the result for the current
and preceding financial periods. Accordingly, no statement of total recognised
gains and losses is given.
CONSOLIDATED BALANCE SHEET
30 June 1 July 31 December 2005
2006 2005
Note Unaudited Unaudited Audited
£000 £000 £000
FIXED ASSETS
Intangible fixed assets - positive
goodwill 3 1,167 - 1,285
Intangible fixed assets - negative
goodwill 3 (107) (78) (66)
Tangible fixed assets 248 139 218
Investments 1,735 385 1,535
3,043 446 2,972
CURRENT ASSETS
Stocks 44 - -
Debtors 4 4,452 3,028 3,663
Cash at bank and in hand 1,600 2,667 1,144
6,096 5,695 4,807
CREDITORS: amounts falling due
within one year (4,505) (2,269) (3,688)
NET CURRENT ASSETS 1,591 3,426 1,119
CREDITORS: amounts falling due after
more than one year (480) - -
TOTAL ASSETS LESS LIABILITIES 4,154 3,872 4,091
CAPITAL AND RESERVES
Called up share capital 50 50 50
Share premium account 361 50 361
Profit and loss account 3,743 3,772 3,680
EQUITY SHAREHOLDERS' FUNDS 5 4,154 3,872 4,091
CONSOLIDATED CASH FLOW STATEMENT
1 January 1 January Year ended 31
December 2005
to 30 June 2006 to 1 July
Note 2005
Unaudited Unaudited Audited
£000 £000 £000
Net cash inflow/(outflow) from
operating activities 6 221 (190) (21)
Returns on investment and
servicing of finance 7 (4) 50 59
Capital expenditure and financial
investment 7 (70) (196) (18)
Acquisitions and disposals 7 (134) - (2,457)
Cash inflow/(outflow) before
management of liquid resources
and financing 13 (336) (2,437)
Financing 443 - 578
Increase/(decrease) in cash in
the period 8 456 (336) (1,859)
NOTES TO THE INTERIM STATEMENT
1. The financial information contained in this interim report does not
constitute statutory accounts within the meaning of s240 of the Companies Act
1985, and has not been audited or reviewed. The interim statement has been
prepared on the basis of accounting policies expected to be applied consistently
for the foreseeable future, of which the principal ones are explained below.
The interim accounts were approved by the directors on 27 September 2006.
2. Turnover
Turnover is recognised on a basis appropriate to the income source. Turnover
earned on time and materials contracts is recognised as costs are incurred.
Income from fixed price contracts is recognised in proportion to the stage of
completion of the relevant contract.
Segmental information is set out in the Financial Review.
3. Intangible asset - goodwill
Goodwill, representing the excess of the fair value of the consideration given
over the fair value of the separable net assets acquired, is capitalised as an
intangible asset and is amortised over a period of 20 years, being the
directors' assessment of its likely future life. Provision is made for any
impairment.
Negative goodwill, representing the excess of the fair value of the separable
net assets acquired over the fair value of the consideration given, is
capitalised as an intangible asset and credited to the profit and loss account
over the periods in which the assets acquired are consumed or realised as cash.
4. Debtors
Debtors includes amounts recoverable under contracts of £1,090,000 (1 July 2005:
£1,031,000 and 31 December 2005: £1,253,000).
5. Reconciliation of movement in shareholders' funds
1 January 1 January Year ended 31
December 2005
to 30 June 2006 to 1 July
2005
Unaudited Unaudited Audited
£000 £000 £000
Opening shareholders' funds 4,091 3,840 3,840
Issue of share capital - - 300
Refund of expenses associated with
the issue of share capital - - 11
Profit/(loss) for the period 63 32 (60)
Closing shareholders' funds 4,154 3,872 4,091
6. Reconciliation of operating profit/(loss) to operating cash
flows
1 January 1 January Year ended 31
December 2005
to 30 June 2006 to 1 July
Group 2005
Unaudited Unaudited Audited
£000 £000 £000
Operating profit/(loss) 57 (28) (159)
Depreciation 49 27 66
Amortisation of positive goodwill 30 - 16
Realisation of negative goodwill (12) (12) (24)
Increase in stocks (44) - -
Increase in debtors (616) (238) (366)
Increase in creditors 757 61 457
Net cash inflow/(outflow) from
operating activities 221 (190) (21)
7. Analysis of cash flows
1 January 1 January Year ended 31
December 2005
to 30 June 2006 to 1 July
Group 2005
Unaudited Unaudited Audited
£000 £000 £000
Returns on investment and
servicing of finance
Interest received - 50 59
Interest payable (4) - -
Net cash inflow/(outflow) from
returns on investments and
servicing of finance (4) 50 59
Capital expenditure and financial
investment
Purchase of tangible fixed assets (70) (14) (97)
Sale of tangible fixed assets - - 3
Purchase of equity investment - (227) -
Sale of equity investment - 45 76
Net cash outflow from capital
expenditure and financial
investment (70) (196) (18)
Acquisitions and disposals
Acquisition of business (31) - (1,090)
Net cash acquired on acquisition
of business - - 1
Reduction in consideration of
previous acquisition 87 - -
Investment in associated
undertaking (190) - (1,368)
Net cash outflow from
acquisitions and disposals (134) - (2,457)
Financing
Increase in short term borrowings 600 - 874
Repayment of short term
borrowings (157) - (296)
Net cash inflow from financing 443 - 578
8. Analysis and reconciliation of net funds
Analysis of net funds 1 January Cash flow 30 June
Group 2006 2006
Unaudited Unaudited Unaudited
£000 £000 £000
Cash in hand at bank 1,144 456 1,600
Other loans - within one year (578) 37 (541)
Other loans - due after more than - (480) (480)
one year
Net funds at end of period 566 13 579
Reconciliation of net funds 30 June 1 July 31 December
2006 2005 2005
Unaudited Unaudited Audited
£000 £000 £000
Increase/(decrease) in cash in 456 (336) (1,859)
the period
Cash flow movement in debt (443) - (578)
financing
Change in net funds resulting 13 (336) (2,437)
from cash flows
Net funds at start of period 566 3,003 3,003
Net funds at end of period 579 2,667 566
9. Earnings per share
The basic and diluted earnings per share are based on the profit on ordinary
activities after taxation of the company attributable to ordinary shareholders
of £63,000 and on 3,786,588 shares and 4,061,698 shares respectively, being the
weighted average numbers of ordinary shares in the period. At the end of the
period 3,786,588 (1 July 2005: 3,638,440; 31 December 2005: 3,786,588) ordinary
shares were in issue. In addition, 99,470 convertible shares (1 July 2005:
99,470; 31 December 2005: 99,470) were in issue and options for 268,553 ordinary
shares (1 July 2005: 277,483; 31 December 2005: 278,260).
10. Dividend
The Board is not recommending payment of an interim dividend for the period
ended 30 June 2006.
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