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Maclellan Group (MLG)

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Tuesday 17 September, 2002

Maclellan Group

Interim Results

Maclellan Group PLC
17 September 2002



MacLellan Group plc

Interim report for the six months ended 30 June 2002


Chairman's Statement

I am pleased to report that the Group continues to make very positive progress,
which is reflected in a substantial growth in turnover, profits and earnings per
share during the half year to 30 June 2002.

Profit before goodwill amortisation and taxation increased by 50% to £1.520
million (half year to 30 June 2001: £1.014 million).  Turnover from continuing
operations increased by 37% to £60.164 million (2001: £43.920 million).
Comparable headline earnings per share increased by 31% to 1.7 pence (2001: 1.3
pence). Period end gearing was 14% (2001: 12%) with interest covered 17 times by
operating profits (2001: 6 times).  No dividend is proposed.


Acquisitions and Disposals

We completed the acquisition of Broadreach Group Limited on 13 May 2002.
Broadreach strengthens our presence in the retail and commercial markets and
provides us with nationwide operating coverage. The total consideration payable
was £19.8 million which included a £2.5 million earn out.  We are delighted that
the conditions for the earn out have already been satisfied as a result of a
substantial level of new work secured after the acquisition completion date. In
addition, we are on course to achieve the planned £0.7 million of annualised
overhead savings as a result of Broadreach's integration into the Group.

We have subsequent to 30 June 2002 sold our shareholding in our small non-core
Portuguese operation for a nominal sum.  We have shown the results of this
operation under the heading of "Discontinued operations".


Operational Review

The Group now has over 12,000 employees and a balanced portfolio of work in its
chosen retail, commercial, industrial and PFI market sectors. We have undergone
a rapid expansion since the creation of the new MacLellan Group plc in April
2000 when we had 5,000 employees and a limited presence in two of our chosen
market sectors.

We announced on 1 July 2002 a new Cleaning and Support Services Division which
complements the existing Integrated Services Division. Both trading divisions
have national operating coverage and trade under the MacLellan brand name;
centralised accounting and support functions are provided from our office at
Redditch.

Operating margins from continuing operations increased to 2.8% (2001: 2.1%) and
we expect that the gradual process of operating margin improvement will continue
as we realise the benefits of our increased size. All of our contracts are
performing satisfactorily and the integration of Broadreach into the Group is on
course to be successfully completed during 2002.

Net cash inflow from operating activities during the six month period was £1.660
million.  Our borrowings increased during the period to £6.057 million at 30
June 2002 mainly due to the assumption of bank borrowings of £4.358 million at
the date of acquisition.

We have won a number of major new contracts during 2002 especially in the
commercial and retail market sectors which have an annualised value in excess of
£15 million and secure a sound platform for continued organic growth for this
year and next year. The largest contract wins were at Sainsburys, the Department
of Health, UGC Cinemas, Dixons and the National Audit Office.


Strategy

The Board has pursued a strategy since 1998 of increasing the Group's presence
in the outsourced business services market. We have made six acquisitions since
1998 in order to create a Group which has sufficient critical mass to operate in
its chosen market sectors.

Our focus is now turning to the issues of margin improvement and total service
capability. The next stage of our growth strategy will reflect this focus.


Outlook

We are confident that our strategy will continue to deliver turnover and profit
growth and look forward to further positive progress in the second half of 2002.


A L R Morton
Chairman
17 September 2002


GROUP PROFIT AND LOSS ACCOUNT

                            Half year to 30 June 2002                             Half year to 30      12 months to 31
                                  (unaudited)                                           June 2001        December 2001  
                                                                                        (restated      
                   Before Goodwill             Goodwill                Total           unaudited)   (restated audited) 
                             £'000                £'000                £'000                £'000                £'000
  Turnover                                                                                                            
  Continuing                                                                                                          
  operations                                                                                                          
  Existing                  55,033                    -               55,033               43,920              100,287 
  Acquisitions               5,131                    -                5,131                    -                    -
                ------------------  -------------------  -------------------  -------------------  -------------------

                            60,164                    -               60,164               43,920              100,287 
  Discontinued               1,807                    -                1,807               21,354               24,036
  operations                                                                                                          
                ------------------  -------------------  -------------------  -------------------  -------------------

                            61,971                    -               61,971               65,274              124,323
  Cost of                  (55,092)                   -              (55,092)             (59,006)            (111,419)
  Sales                                                                                                               
                ------------------  -------------------  -------------------  -------------------  -------------------

  Gross Profit               6,879                    -                6,879                6,268               12,904
  Administrati                                                                                                        
  ve Expenses                                                                                                         
  Goodwill                       -                 (568)                (568)                (324)                (727)
  amortisation                                                                                                        
  Other                     (5,264)                   -               (5,264)              (5,055)              (9,879)
                ------------------  -------------------  -------------------  -------------------  -------------------
                                                                                                                      
                            (5,264)                (568)              (5,832)              (5,379)             (10,606) 
  Operating                                                                                                           
  Profit                                                                                                              
  Continuing                                                                                                          
  operations                                                                                                          
  Existing                   1,514                 (415)               1,099                  612                1,919
  Acquisitions                 195                 (153)                  42                    -                    -
                ------------------  -------------------  -------------------  -------------------  -------------------
                                                                                                                      
                             1,709                 (568)               1,141                  612                1,919 
  Discontinued                 (94)                   -                  (94)                 277                  379
  operations                                                                                                          
                ------------------  -------------------  -------------------  -------------------  -------------------
                                                                                                                      
                             1,615                 (568)               1,047                  889                2,298 
  Exceptional                                                                                                         
  provision                                                                                                           
  for loss                                                                                                            
  on sale of                                                                                                          
  business                                                                                                            
  Loss on                                                                                                             
  disposal of                                                                                                         
  discontinued                   -                    -                    -                    -              (2,200)
  operations                                                                                                          
  Less                           -                    -                    -                    -                2,200
  utilisation                                                                                                         
  of prior                                                                                                            
  period                                                                                                              
  provision     ------------------  -------------------  -------------------  -------------------  -------------------

  Interest                     (95)                   -                  (95)                (199)                (283)
  Profit/(loss)                                                                                                       
  on                                                                                                                
  ordinary                                                                                                            
  activities                 1,520                 (568)                 952                  690                2,015
  before                                                                                                              
  taxation                                                                                                            
                ------------------  -------------------                                                               

  Taxation                                                              (459)                (325)                (892)
                                                         -------------------  -------------------  -------------------
                                                                                                                      
  Profit on                                                                                                           
  ordinary                                                                                                            
  activities                                                                                                          
  after                                                                  493                  365                1,123
  taxation                                                                                                            
  Dividends                                                                -                    -                    -
                                                         -------------------  -------------------  -------------------
                                                                                                                      
  Retained                                                                                                            
  profit for                                                                                                          
  the                                                                                                                 
  financial                                                              493                  365                1,123
  period                                                                                                              
                                                         -------------------  -------------------  -------------------
                                                                                                                      
  Earnings                                                                                                            
  per share                                                                                                           
  Headline                                                                                                            
  basis                                                                                                               
  - undiluted                                                           1.7p                 1.3p                 3.2p
  - diluted                                                             1.6p                 1.2p                 3.1p
                                                         -------------------  -------------------  -------------------
                                                                                                                      
  FRS 3 basis                                                                                                         
  - undiluted                                                           0.8p                 0.7p                 2.1p
  - diluted                                                             0.8p                 0.6p                 2.0p
                                                         -------------------  -------------------  -------------------
                                                                                                                      
GROUP BALANCE SHEET 

                                                                                                         
                                                 30 June 2002           30 June 2001     31 December 2001
                                                                (restated unaudited)            (restated
                                                  (unaudited)                                     audited)
                                                        £'000                  £'000                £'000
              Fixed Assets                                                                               
              Intangible assets                        38,052                 12,382               15,428
              Tangible assets                           6,417                  3,883                3,769
              Investments                               1,915                    225                2,850
                                           ------------------     ------------------   ------------------
                                                       46,384                 16,490               22,047
                                           ------------------     ------------------   ------------------
              Current Assets                                                                             
              Stocks                                      391                  4,457                  386
              Debtors                                  25,780                 27,695               23,885
              Cash at bank and in hand                     51                    217                3,771
                                           ------------------     ------------------   ------------------
                                                       26,222                 32,369               28,042
                                           ------------------     ------------------   ------------------
              Creditors: Amounts                                                                         
              falling due within one                                                                     
              year                                                                                       
              Borrowings                              (2,946)                (2,480)              (2,321)
              Other creditors                        (24,883)               (22,796)             (21,297)
                                           ------------------     ------------------   ------------------
                                                     (27,829)               (25,276)             (23,618)
                                           ------------------     ------------------   ------------------
              Net current                                                                                
              (liabilities)/assets                    (1,607)                  7,093                4,424
                                           ------------------     ------------------   ------------------
              Total assets less current                                                                  
              liabilities                              44,777                 23,583               26,471
              Creditors: Amounts                                                                         
              falling due after more                                                                     
              than one year                                                                              
              Borrowings                              (3,162)                   (69)              (3,253)
              Provision for liabilities                                                                  
              and charges                                   -                (2,200)                    -
                                           ------------------     ------------------   ------------------
                                                       41,615                 21,314               23,218
                                           ------------------     ------------------   ------------------
              Shareholders' funds                                                                        
              (including non-equity                                                                      
              interests)                                                                                 
              Ordinary shares                           3,712                  2,674                2,771
              Convertible preference                                                                     
              shares                                      500                    500                  500
              Shares to be issued                       1,250                      -                    -
              Share premium account                    34,128                 17,349               18,405
              Other reserves                              204                    204                  204
              Profit and loss account                   1,821                    587                1,338
                                           ------------------     ------------------   ------------------
              Total shareholders' funds                41,615                 21,314               23,218
                                           ------------------     ------------------   ------------------



GROUP STATEMENT OF CASH FLOWS 
                                                                                                             
                                                       Half year to         Half year to         12 months to
                                                       30 June 2002         30 June 2001     31 December 2001
                                                        (unaudited)          (unaudited)            (audited)
                                                              £'000                £'000                £'000
            Net cash inflow from                                                                             
            operating activities                              1,660                3,477                9,630
            Returns on investments and                                                                       
            servicing of finance                                                                             
            Interest received                                    66                    -                   13
            Interest paid                                      (82)                (194)                (317)
            Interest element of finance lease                                                                
            payments                                              -                 (13)                 (26)
                                                 ------------------   ------------------   ------------------
                                                               (16)                (207)                (330)
            Taxation                                            (5)                (114)                (162)
            Capital expenditure and                                                                          
            financial investment                                                                             
            Payments to acquire tangible and                                                                 
            intangible fixed assets                           (700)                (388)              (2,227)
            Receipts from disposal of                                                                        
            tangible fixed assets                                 4                   10                1,416
            Proceeds from sale of                                                                            
            investments                                         983                    -                   50
                                                 ------------------   ------------------   ------------------
                                                                287                (378)                (761)
            Acquisitions and Disposals                                                                       
            Purchase of subsidiary                                                                           
            undertaking                                       (669)                    -              (3,369)
            Cash balances of business                                                                        
            acquired                                        (4,358)                    -                (509)
            Additional consideration on                                                                      
            acquisitions made in prior year                       -                    -                  (5)
            Disposal of business of                                                                          
            subsidiary undertaking                                -                    -                (306)
                                                 ------------------   ------------------   ------------------
                                                            (5,027)                    -              (4,189)
                                                  -----------------    -----------------    -----------------
            Net cash (outflow)/inflow                                                                        
            before financing                                (3,101)                2,778                4,188
            Financing                                                                                        
            Ordinary shares issued                               19                    -                  258
            Loans due within one year:                                                                       
            - increases in term debt                              -                    -                1,090
            - repayments in period                            (358)                    -                (400)
            Loans due after one year:                                                                        
            - increases in term debt                              -                (400)                3,163
            - repayments in period                                -                    -                    -
            Capital element of finance lease                                                                 
            and hire purchase payments                        (280)                 (41)                (162)
            Net cash (outflow)/inflow from       ------------------   ------------------   ------------------
            financing                                         (619)                (441)                3,949
                                                  -----------------    -----------------    -----------------
            (Decrease)/increase in cash in                                                                   
            the period                                      (3,720)                2,337                8,137
                                                  -----------------    -----------------    -----------------


NOTES TO THE GROUP STATEMENT OF CASH FLOWS 

1 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 

                                                                                                           
                                                       Half year to        Half year to        12 months to
                                                       30 June 2002        30 June 2001    31 December 2001
                                                        (unaudited)         (unaudited)           (audited)
                                                              £'000               £'000               £'000
            Operating activities                                                                           
            Operating profit                                  1,047                 889               2,298
            Amortisation                                        568                 352                 755
            Depreciation                                        609                 572               1,213
            Profit on disposal of fixed assets                 (21)                   -               (106)
            Exchange differences                               (10)                   -                 (5)
            Decrease/(increase) in stocks                        57               (600)                 361
            Decrease in debtors                               1,861               3,718               3,927
            (Decrease)/increase in creditors                (2,451)             (1,454)               1,187
                                                  -----------------   -----------------   -----------------
            Net cash inflow operating                                                                      
            activities                                        1,660               3,477               9,630
                                                  -----------------   -----------------   -----------------


2 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 

                                                                                                          
                                                      Half year to        Half year to        12 months to
                                                      30 June 2002        30 June 2001    31 December 2001
                                                       (unaudited)         (unaudited)           (audited)
                                                             £'000               £'000               £'000
              (Decrease)/increase in cash for                                                             
              the period                                   (3,720)               2,337               8,137
              Net cash flow from changes in                                                               
              debt                                             639                 441             (3,691)
              Issue of loan notes                                -                   -               (981)
              New finance leases and hire                                                                 
              purchase agreements                            (381)                   -               (184)
              Loans and finance leases                                                                    
              obligations acquired with                                                                   
              purchase of business                           (792)                   -                (11)
              Finance lease obligations of                                                                
              business sold                                      -                   -                  37
                                                 -----------------   -----------------   -----------------
              Movement in net debt in the                                                                 
              period                                       (4,254)               2,778               3,307
              Net debt at beginning of period              (1,803)             (5,110)             (5,110)
                                                 -----------------   -----------------   -----------------
              Net debt at end of period                    (6,057)             (2,332)             (1,803)
                                                 -----------------   -----------------   -----------------
 

3 ANALYSIS OF CHANGES IN NET DEBT DURING THE PERIOD 

                                                                                                                      
                                             At 31                                                               At 30
                                          December                             Other                              June
                                              2001             Cash         Non-cash         Acquired             2002
                                         (audited)             flow          changes             debt      (unaudited)
                                             £'000            £'000            £'000            £'000            £'000

  Cash at bank and in hand                   3,771          (3,720)                -                -               51
  Overdrafts                                     -                -                -                -                -
                                    --------------   --------------   --------------   --------------   --------------
                                             3,771          (3,720)                -                -               51
  Debt due within one year                 (2,071)              359            (593)                -          (2,305)
  Debt due after one year                  (3,163)                -              593                -          (2,570)
  Finance leases and hire                    (340)              280            (381)            (792)          (1,233)
  purchase agreements                                                                                                 
                                    --------------   --------------   --------------   --------------   --------------
                                           (5,574)              639            (381)            (792)          (6,108)
                                    --------------   --------------   --------------   --------------   --------------
                                           (1,803)          (3,081)            (381)            (792)          (6,057)
                                    --------------   --------------   --------------   --------------   --------------
4 ACQUISITION 

On 13 May 2002 the Group acquired the entire issued share capital of Broadreach Group Limited. The acquisition
summary, with net liabilities (excluding goodwill) acquired at their provisional fair values, is as follows:

                                                                                    
                                                                               £'000

                                    Net liabilities on acquisition           (3,378)
                                    Goodwill                                  23,192
                                                                      --------------
                                    Consideration                             19,814
                                                                      --------------
                                    Satisfied by:                                   
                                    Shares issued                             16,645
                                    Expenses of vendor placing                   238
                                    Acquisition costs                            431
                                    Earn out consideration                     2,500
                                                                      --------------
                                                                              19,814
                                                                      --------------
 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDER'S FUNDS 

                                                                                                           
                                                    Half year to           Half year to        12 months to
                                                    30 June 2002           30 June 2001    31 December 2001
                                                                              (restated           (restated
                                                     (unaudited)              unaudited)            audited)
                                                           £'000                  £'000               £'000

            Opening shareholders' funds                   23,218                 18,965              18,965
            Prior year adjustment                              -                  1,984               1,984
                                               -----------------      -----------------   -----------------
            As restated                                   23,218                 20,949              20,949
            Profit for the financial period                  493                    365               1,123
            New ordinary shares issued                                                                     
            including premium                             16,664                      -               1,153
            Movement in ordinary shares to                                                                 
            be issued                                      1,250                      -                   -
            Currency adjustments                            (10)                      -                 (7)
                                               -----------------      -----------------   -----------------
            Closing shareholders' funds                   41,615                 21,314              23,218
                                               -----------------      -----------------   -----------------
            Analysed:                                                                                      
            Equity                                        39,615                 19,314              21,218
            Non-equity                                     2,000                  2,000               2,000
                                               -----------------      -----------------   -----------------
                                                          41,615                 21,314              23,218
                                               -----------------      -----------------   -----------------


NOTES TO THE INTERIM REPORT


1    The financial information contained in this document does not constitute 
     statutory accounts within the meaning of s240 of the Companies Act 1985 
     (as amended).  The figures for the half year ended 30 June 2002 are 
     prepared on the basis of the accounting policies set out in the Group's
     financial statements for the period ended 31 December 2001 together with a
     change in accounting policy for deferred taxation; this interim report is
     unaudited.  The results for the twelve months ended 31 December 2001 are
     abridged from the full Group accounts for that period with an adjustment 
     for the effects of implementing FRS 19; the auditors gave an unqualified 
     report on the financial statements for that period and the full accounts 
     have been deliveredto the Registrar of Companies.

2    Financial Reporting Standard No 19: Deferred Tax (FRS 19) became effective 
     for accounting periods ending on or after 23 January 2002. Under the new 
     standard, the Group is required to recognise deferred tax as a liability or 
     asset if transactions or events giving rise to an obligation to pay more 
     tax in the future, or a right to pay less tax in the future, have occurred
     by the balance sheet date.  Previously the Group provided for deferred tax 
     only in respect of timing differences which were expected with reasonable 
     probability to result in a tax liability within the foreseeable future; 
     deferred tax assets were not recognised.  Deferred tax, which is now 
     required to be provided for under FRS 19, has been treated as a prior year 
     adjustment and reflected through reserves.  Comparative financial      
     information has been restated as necessary.


3    No interim dividend has been declared.
     
4    The calculation of earnings per share is based on the weighted average 
     number of shares in issue during the period as follows:


                                        Undiluted               Fully diluted
     June 2002                         60,528,353                  63,965,879
     December 2001                     54,091,574                  56,733,679
     June 2001                         53,486,080                  55,768,570


The fully diluted shares comprise the weighted average number of shares in issue
adjusted to take account of future issues of ordinary shares in respect of the
convertible preference shares and options under the Company's share option
schemes.

Earnings upon which the calculations are based and the reconciliation of
undiluted EPS is as follows:


                                 June 2002                   June 2001                 December 2001
                              Profits           EPS       Profits           EPS       Profits           EPS
                                £'000             p         £'000             p         £'000             p

Headline basis                  1,040           1.7           689           1.3         1,744           3.2
Effect of:
- disposal of fixed
assets                             21             -             -             -           106           0.2
                                   
- goodwill amortisation         (568)         (0.9)         (324)         (0.6)         (727)         (1.3)

                                
                        ------------- ------------- ------------- ------------- ------------- -------------
FRS3 basis                        493           0.8           365           0.7         1,123           2.1
                        ------------- ------------- ------------- ------------- ------------- -------------


5    Copies of this interim report are being sent to shareholders and are 
     available from the Company's registered office: Enterprise House, Chamber 
     Court, Castle Street, Worcester WR1 3AD and website: 
     www.maclellan-group.plc.uk.


END
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