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Maclellan Group (MLG)

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Tuesday 30 September, 2003

Maclellan Group

Interim Results

Maclellan Group PLC
30 September 2003



MACLELLAN GROUP PLC


INTERIM REPORT FOR THE HALF YEAR TO 30 JUNE 2003



Chairman's Statement



I am pleased to report a strong set of results producing substantially increased
turnover, profits and earnings per share during the half year to 30 June 2003.



The highlights of the results for the half year are:



•        Turnover from continuing operations increased by 24% to £74.85 million
         (half year to 30 June 2002: £60.2 million);



•        Profit before exceptional items, goodwill amortisation and taxation
         increased by 54% to £2.34 million (2002: £1.52 million);



•        Underlying earnings per share increased by 35% to 2.3 pence (2002: 1.7
         pence);



•        Operating profit margin improved to 3.3% (2002: 2.6%);



•        Interest cover of 20 times (2002: 17 times) with period end gearing of
         net debt to total shareholders' funds of 12% (2002: 15%).



During the period, an outstanding claim was settled resulting in an exceptional
credit (net of costs) of £0.88 million.  This contributed to a profit before tax
of £2.22 million (2002: £0.95 million) resulting in an FRS14 basic earnings per
share of 2.1p (2002: 0.8p).



Dividend



It is the Board's policy at this stage in the Group's development to recommend
only an annual dividend and, therefore, no interim dividend is declared.



Operational Review



Our business continues to grow organically. We started contracts for a number of
new customers during the period including Continental Teves, NHS Trust
Portsmouth, New Covent Garden Market Authority and the Department of Health.  We
also gained further work from a number of established customers such as
Sainsburys, Dupont and Avesta Polarit.



Our operating profit margin has grown to 3.3% and this continues to be an area
of focus for us. We believe that operating margin growth is mainly a function of
contract longevity, increased size and the broadening of the range of self
performed facilities services delivered to our customers. We have identified
further opportunities for operational efficiencies and the second half of 2003
will see our operating divisions brought closer together so that our customers
have the opportunity to use whatever services they require from our one service
provider approach.



Cashflow generated from operations amounted to £0.79 million (2002: £1.66
million) because of a substantial reduction in creditors which occurred at the
June period end as part of the Group's normal working capital cycle. The
decrease in group cash balances of £1.4 million arose principally from
borrowings assumed on the acquisition of Tasker (U.K.) Limited.



Acquisitions



We acquired the entire issued share capital of Tasker (U.K.) Limited on 18 June
2003 for an initial consideration of £400,000 with further consideration payable
dependent upon the achievement of agreed earn out targets up to a maximum of £2
million. Tasker (U.K.) Limited is a national window cleaning business and was
purchased to increase our national coverage. Tasker's operations are now
integrated within the MacLellan Specialist Services Division.



Our acquisition policy has twin objectives: the extension of the range of self
performed services available to our customers and the effective penetration of
new markets on a national scale.



Strategy



The Group has grown substantially since its formation in April 2000 in terms of
turnover, profits and employee numbers.  The Board remains committed to its
strategy of growing both organically and through appropriate acquisition by
focusing on self performed facilities services provided from a "one company"
structure.  In support of this strategy we are further strengthening our
management team through development and training courses and continuing to
streamline our administrative systems in order to provide a solid platform for
planned future growth.



Outlook



The Board remains confident that 2003 will be a successful year and that its
current strategy will continue to deliver further healthy turnover and profit
growth.



A L R Morton

Chairman

30 September 2003





GROUP PROFIT AND LOSS ACCOUNT


                                            Half year to 30 June 2003
                                                (unaudited)                              Half year    12 months
                                                Before                                          to           to
                                              goodwill       Goodwill                           30           31
                                                   and            and                         June     December
                                           exceptional    exceptional                         2002         2002
                                                 items          items        Total     (unaudited)    (audited)
                                                 £'000          £'000        £'000           £'000        £'000

Turnover
Continuing operations                           74,730              -       74,730          60,164      129,242
Acquisitions                                       120              -          120               -            -
                                             ---------      ---------    ---------       ---------    ---------
                                                74,850              -       74,850          60,164      129,242
Discontinued operations                              -              -            -           1,807       12,296
                                             ---------      ---------    ---------       ---------    ---------
                                                74,850              -       74,850          61,971      141,538
Cost of Sales                                 (66,329)              -     (66,329)        (55,092)    (123,156)
                                             ---------      ---------    ---------       ---------    ---------
Gross Profit                                     8,521              -        8,521           6,879       18,382

Administrative Expenses
   Goodwill amortisation                             -        (1,001)      (1,001)           (568)      (1,580)
   Exceptional items (note 2)                        -            881          881               -        (734)
   Other                                       (6,065)              -      (6,065)         (5,264)     (13,841)
                                             ---------      ---------    ---------       ---------    ---------
                                               (6,065)          (120)      (6,185)         (5,832)     (16,155)
Operating Profit
Continuing operations
   Existing                                      2,446          (995)        1,451           1,141        2,282
   Acquisitions                                     10            (6)            4               -            -
                                             ---------      ---------    ---------       ---------    ---------
                                                 2,456        (1,001)        1,455           1,141        2,282
Discontinued operations                              -            881          881            (94)         (55)
                                             ---------      ---------    ---------       ---------    ---------
                                                 2,456          (120)        2,336           1,047        2,227

Exceptional items - profit on
   disposal of discontinued
   operations                                        -              -            -               -          707

Interest                                         (119)              -        (119)            (95)        (288)
                                             ---------      ---------    ---------       ---------    ---------
Profit/(loss) on ordinary
   activities before taxation                    2,337          (120)        2,217             952        2,646
                                             ---------      ---------
Tax on profit on ordinary
   activities (note 3)                                                       (624)           (459)        (804)
                                                                         ---------       ---------    ---------
Profit on ordinary activities
   after taxation                                                            1,593             493        1,842

Dividends - including non-equity
   (note 4)                                                                      -               -        (388)
                                                                         ---------       ---------    ---------
Retained profit for the financial
   period                                                                    1,593             493        1,454
                                                                         ---------       ---------    ---------
Earnings per share (note 5)
Underlying                                                                    2.3p            1.7p         4.6p

FRS 14 basic                                                                  2.1p            0.8p         2.7p
FRS 14 diluted                                                                2.0p            0.8p         2.6p
                                                                         ---------       ---------    ---------




GROUP BALANCE SHEET

                                                                                  30             30           31
                                                                                June           June     December
                                                                                2003           2002         2002
                                                                         (unaudited)    (unaudited)    (audited)
                                                                               £'000          £'000        £'000
Fixed assets
Intangible assets                                                             39,835         38,052       37,241
Tangible assets                                                                6,369          6,417        6,274
Investments                                                                    1,752          1,915        1,852
                                                                           ---------      ---------    ---------
                                                                              47,956         46,384       45,367
                                                                           ---------      ---------    ---------

Current assets
Stocks                                                                           601            391          393
Debtors                                                                       23,105         25,780       24,113

Cash at hand and in hand                                                         883             51        2,324
                                                                           ---------      ---------    ---------
                                                                              24,589         26,222       26,830
                                                                           ---------      ---------    ---------
Creditors: Amounts falling due within one year
Borrowings                                                                   (3,361)        (2,946)      (3,111)
Other creditors                                                             (20,043)       (24,883)     (23,312)
                                                                           ---------      ---------    ---------
                                                                            (23,404)       (27,829)     (26,423)
                                                                           ---------      ---------    ---------
Net current assets/(liabilities)                                               1,185        (1,607)          407
                                                                           ---------      ---------    ---------
Total assets less current liabilities                                         49,141         44,777       45,774


Creditors: Amounts falling due after more than one year
Borrowings                                                                   (2,910)        (3,162)      (3,173)
                                                                          ---------      ---------    ---------
Net assets                                                                    46,231         41,615       42,601

                                                                           ---------      ---------    ---------
Capital and reserves

Called up share capital                                                        4,295          4,212        4,291
Shares to be issued                                                            2,000          1,250            -
Share premium account                                                         35,352         34,128       35,319
Other reserves                                                                   204            204          204
Profit and loss account                                                        4,380          1,821        2,787
                                                                           ---------      ---------    ---------
Total shareholders' funds                                                     46,231         41,615       42,601

                                                                           ---------      ---------    ---------
Analysis of shareholders' funds

Equity                                                                        44,231         39,615       40,601
Non-equity                                                                     2,000          2,000        2,000
                                                                           ---------      ---------    ---------
                                                                              46,231         41,615       42,601
                                                                           ---------      ---------    ---------



GROUP STATEMENT OF CASH FLOWS


                                                                           Half year      Half year      12 months
                                                                               to 30          to 30          to 31
                                                                                June           June       December
                                                                                2003           2002           2002
                                                                         (unaudited)    (unaudited)      (audited)
                                                              Note             £'000          £'000          £'000

Net cash inflow from operating activities                   A                    787          1,660          6,566

Returns on investments and servicing of finance
Interest received                                                                 75             66            172
Investment income                                                                  -              -             32
Interest paid                                                                  (127)           (82)          (286)
Interest element of finance lease payments                                      (73)              -          (105)
                                                                           ---------      ---------      ---------
Net cash outflow from returns on investments and
   servicing of finance                                                        (125)           (16)          (187)

Taxation                                                                        (28)            (5)          (413)

Capital expenditure and financial investment

Purchase of tangible and intangible fixed assets                               (474)          (700)          (947)
Disposal of tangible fixed assets                                                  6              4            672
Redemption of shares in unquoted company                                         100              -             75
Disposal of shares in quoted company                                               -            983            984
                                                                           ---------      ---------      ---------
Net cash (outflow)/inflow from capital expenditure
   and financial investment                                                    (368)            287            784

Acquisitions and disposals                                  D

Purchase of subsidiary undertakings                                                -          (669)        (1,490)
Cash balances acquired with subsidiary undertakings                          (1,499)        (4,358)        (4,357)
Disposal of subsidiary undertakings                                                -              -          (240)
Cash balances disposed with subsidiary undertakings                                -              -          (119)
                                                                           ---------      ---------      ---------
Net cash outflow from acquisitions and disposals                             (1,499)        (5,027)        (6,206)
                                                                           ---------      ---------      ---------
Net cash (outflow)/inflow before financing                                   (1,233)        (3,101)            544


Financing

Ordinary shares issued                                                            37             19             39
Expenses incurred in issue of ordinary shares                                      -              -          (238)
Loans due within one year:
- increases in term debt                                                       1,178              -              -
- repayments in period                                                       (1,668)          (358)        (1,000)
Loans due after one year:
- increases in term debt                                                         617              -              -
Capital element of finance lease payments                                      (372)          (280)          (792)
                                                                           ---------      ---------      ---------
Net cash outflow from financing                                                (208)          (619)        (1,991)
                                                                           ---------      ---------      ---------
Decrease in cash in the period                              B,C              (1,441)        (3,720)        (1,447)

                                                                           ---------      ---------      ---------




NOTES TO THE GROUP STATEMENT OF CASH FLOWS



A.            RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES


                                                                           Half year      Half year      12 months
                                                                               to 30          to 30          to 31
                                                                                June           June       December
                                                                                2003           2002           2002
                                                                         (unaudited)    (unaudited)      (audited)
                                                                               £'000          £'000          £'000

Operating activities

Operating profit                                                               2,336          1,047          2,227
Amortisation                                                                   1,001            568          1,580
Depreciation                                                                     988            609          1,593
Profit on disposal of tangible fixed assets                                      (4)           (21)           (75)
Profit on disposal of investments                                                  -              -           (22)
Investment income                                                                  -              -           (32)
Exchange differences                                                               -           (10)            (9)
(Increase)/decrease in stocks                                                  (173)             57          (233)
Decrease in debtors                                                            1,860          1,861            237
(Decrease)/increase in creditors                                             (5,221)        (2,451)          1,300
                                                                           ---------      ---------      ---------
Net cash inflow from operating activities                                        787          1,660          6,566

                                                                           ---------      ---------      ---------



B.            RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT


                                                                           Half year      Half year      12 months
                                                                               to 30          to 30          to 31
                                                                                June           June       December
                                                                                2003           2002           2002
                                                                          (unaudited)    (unaudited)      (audited)
                                                                               £'000          £'000          £'000

Decrease in cash in the period                                               (1,441)        (3,720)        (1,447)
Net cash flow from changes in debt                                               245            639          1,792
New finance lease agreements                                                   (151)          (381)        (1,829)
Finance leases acquired with subsidiary undertakings                            (81)          (792)          (792)
Finance leases disposed with subsidiary undertakings                               -              -            119
                                                                           ---------      ---------      ---------
Movement in net debt in the period                                           (1,428)        (4,254)        (2,157)
Net debt at beginning of period                                              (3,960)        (1,803)        (1,803)
                                                                           ---------      ---------      ---------
Net debt at end of period                                                    (5,388)        (6,057)        (3,960)

                                                                           ---------      ---------      ---------



C.            ANALYSIS OF CHANGES IN NET DEBT DURING THE PERIOD


                                                        At 31                                      At 30
                                                     December                   Other                         June
                                                         2002       Cash     non-cash     Acquired            2003
                                                    (audited)       flow      changes         debt      (unaudited)
                                                        £'000      £'000        £'000        £'000           £'000

Cash at bank and in hand                                2,324    (1,441)            -            -             883

Debt due within one year                              (2,312)        490        (619)            -         (2,441)
Debt due after one year                               (1,922)      (617)          619            -         (1,920)
Finance lease agreements
- within one year                                       (799)        372        (435)         (58)           (920)
- after one year                                      (1,251)          -          284         (23)           (990)
                                                    ---------  ---------    ---------    ---------       ---------
                                                      (6,284)        245        (151)         (81)         (6,271)
                                                    ---------  ---------    ---------    ---------       ---------
                                                      (3,960)    (1,196)        (151)         (81)         (5,388)
                                                    ---------  ---------    ---------    ---------       ---------



D.            ACQUISITION



On 18 June 2003 the Group acquired the entire issued share capital of Tasker
(U.K) Limited.  The acquisition is being accounted for using acquisition
accounting principles.  The acquisition summary, with net liabilities (including
bank borrowings of £1,499,000) at their provisional fair values, is as follows:


                                                                                                            £'000
Net liabilities on acquisition                                                                            (1,117)
Goodwill                                                                                                    3,595
                                                                                                        ---------
Consideration                                                                                               2,478
                                                                                                        ---------

Satisfied by:
Earn out consideration                                                                                      2,000
Cash payable                                                                                                  400
Acquisition expenses                                                                                           78
                                                                                                        ---------
                                                                                                            2,478
                                                                                                        ---------


The earn out consideration may be settled, at the Company's option, in cash or
shares and will be determined by reference to the level of earnings from the
business during a maximum four year earn out period.





NOTES TO THE INTERIM REPORT



1.            Accounting Policies



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 2003 are prepared on the
basis of the accounting policies set out in the Group's financial statements for
the twelve months ended 31 December 2002; this interim report is unaudited.  The
results for the twelve months ended 31 December 2002 are abridged from the full
Group financial statements for that period upon which the auditors gave an
unqualified report; the full accounts have been delivered to the Registrar of
Companies.



2.            Exceptional Items


Exceptional items comprise:
                                                                     Half year          Half year       12 months
                                                                         to 30              to 30           to 31
                                                                          June               June        December
                                                                          2003               2002            2002
                                                                   (unaudited)        (unaudited)       (audited)
                                                                         £'000              £'000           £'000

Claim settlement (net of costs)                                            881                  -               -
Restructuring and rebadging expenses                                         -                  -           (734)
                                                                     ---------          ---------       ---------
                                                                           881                  -           (734)
                                                                     ---------          ---------       ---------



3.         Tax on profit on ordinary activities



The tax charge for the half year ended 30 June 2003 is based on the effective
tax rate which it is estimated will apply on earnings for the full year.





4.            Dividends



No interim dividend has been declared.  In 2002 there was no interim dividend
and the proposed final dividend was 0.5 pence per ordinary share and 0.175 pence
per preference share.





5.            Earnings per share



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

30 June 2003                                                             75,819,904                    79,016,181
31 December 2002                                                         67,942,504                    71,117,809
30 June 2002                                                             60,528,353                    63,965,879




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 and share save schemes. The FRS14 basic and diluted earnings per share
have been calculated on the profit attributable to ordinary shareholders of
£1,593,000 (2002: June £493,000; December £1,833,000).  The Directors consider
that a more appropriate measure of the performance of the Group excludes,
principally, the effect of goodwill which is a non-cash item.  This measure, the
underlying earnings per share has been calculated on the above profit
attributable to ordinary shareholders adjusted for exceptional items, profit on
disposal of tangible fixed assets, goodwill amortisation and the related tax
effect.



The calculations of earnings per share can be reconciled as follows:


                                                                     Half year          Half year       12 months
                                                                         to 30              to 30           to 31
                                                                          June               June        December
                                                                          2003               2002            2002
                                                                         pence              pence           pence

FRS14 basic                                                                2.1                0.8             2.7
Effect of:
- exceptional items                                                      (1.1)                  -           (0.3)
- profit on disposal of tangible fixed assets                                -                  -           (0.1)
- goodwill amortisation                                                    1.3                0.9             2.3
                                                                     ---------          ---------       ---------
Underlying basis                                                           2.3                1.7             4.6
                                                                     ---------          ---------       ---------




6.                  Reconciliation of movements in Group shareholders' funds



                                                                     Half year          Half year       12 months
                                                                         to 30              to 30           to 31
                                                                          June               June        December
                                                                          2003               2002            2002
                                                                   (unaudited)        (unaudited)       (audited)
                                                                         £'000              £'000           £'000

Profit for the financial period                                          1,593                493           1,842
Dividends                                                                    -                  -           (388)
                                                                     ---------          ---------       ---------
                                                                         1,593                493           1,454

Ordinary shares issued including premium (net of
expenses)                                                                   37             16,664          17,934

Movement in ordinary shares to be issued                                 2,000              1,250               -

Currency adjustments                                                         -               (10)             (5)
                                                                     ---------          ---------       ---------
Net increase in shareholders' funds                                      3,630             18,397          19,383

Opening shareholders' funds                                             42,601             23,218          23,218
                                                                     ---------          ---------       ---------
Closing shareholders' funds                                             46,231             41,615          42,601

                                                                     ---------          ---------       ---------



7.            Approval



This interim report was approved by a committee of the Board of Directors on 30
September 2003.  This report is being sent to shareholders and is 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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