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Maclellan Group (MLG)

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Tuesday 28 September, 2004

Maclellan Group

Interim Results

Maclellan Group PLC
28 September 2004


                              MacLellan Group plc

              Interim report for the six months ended 30 June 2004





Chairman's Statement


I am pleased to report a positive set of results for the six months ended 30
June 2004 which show continued growth in turnover and profitability.

The highlights for the half-year are:


   • Turnover increased by 16% to £86.995 million (half year to 30 June
     2003: £74.85 million)


   • Profit before exceptional items, goodwill amortisation and taxation
     increased by 9% to £2.543 million (2003: £2.337 million)


   • Operating profit before exceptional items and goodwill amortisation
     increased by 17% to £2.884 million (2003: £2.456 million)


   • Underlying earnings per share maintained at 2.3 pence (2003: 2.3 pence).


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


Operational Review


Our business continued to grow organically during the period and we started work
for a number of new customers including Boots and Somerfield.  Also, we have
invested in retail electronic and tagging security systems which should, in the
Board's view, show significant future benefits in terms of profit and margin
growth.


We have also secured a number of important new contract wins since 31 December
2003 the largest of which was the award of an £8 million per annum, six year
multi disciplinary facilities management contract for the Inland Revenue and
Department of Work and Pensions estate in Newcastle.  Over 300 employees will
join us under the TUPE regulations when the contract goes live on 1 November
2004.


We were also delighted to sign major extended scope contracts with both Group
Lotus, which has been a customer for over ten years, and with Outokumpu
Stainless in Sheffield which has been a customer for over six years.  These
contract wins have helped us to offset the negative impact of Lend Lease's
decision to take in house to their own FM company the work which we had
undertaken at the Bluewater and Touchwood Shopping Centres. Our work at these
centres has won a number of industry awards and contributed to us building our
own significant presence in the retail sector.


Cashflow generated from operations showed an outflow of £1.482 million during
the period as part of the Group's working capital cycle; however we expect that
the second half of 2004 will show significant cash inflows from operations.
Total group borrowings at 30 June 2004 were £10.465 million with interest cover
of 8 times.


Strategy


The Group has grown very substantially since its formation in April 2000 in
terms of turnover, profits and employee numbers.  We believe that sustained long
term growth in the FM and Cleaning market sectors is a function of contract
longevity and increased size and that further consolidation will occur in these
sectors in years to come.  We will continue to extend our range of self
performed services and further develop the MacLellan brand name so that it is
associated with service excellence in the minds of our customers.


We have also identified a number of opportunities to grow our presence in the
security sector within the next few years. The introduction of a new regulatory
regime within the security industry offers considerable scope for profitable
growth for well organised companies which are able to offer an integrated
service offering to customers.


Outlook

The Board remains confident that its current strategy will continue to deliver
further healthy growth.



A L R Morton
Chairman

28 September 2004



GROUP PROFIT AND LOSS ACCOUNT
                                                                           Six months ended              Year ended
                             Six months ended 30 June 2004                     30 June 2003        31 December 2003
                                      (unaudited)                               (unaudited)                (audited)
           Before goodwill &           Goodwill &                Total
                 exceptional    exceptional items
                       items
                        £000                 £000                 £000                 £000                    £000
Turnover
Continuing
operations
Existing              86,995                    -               86,995               74,850                 153,268
Discontinued               -                    -                    -                    -                       -
operations
                ------------    -----------------   ------------------   ------------------    --------------------
                      86,995                    -               86,995               74,850                 153,268

Cost of              (75,016)                   -              (75,016)             (66,329)               (132,621)
Sales
               -------------   ------------------   ------------------   ------------------   --------------------

Gross Profit          11,979                    -               11,979                8,521                  20,647

Administrative
Expenses
Goodwill                   -               (1,362)              (1,362)              (1,001)                 (2,139)
amortisation
Exceptional                -                 (232)                (232)                 881                     111
items (note 2)

Other                 (9,095)                   -               (9,095)              (6,065)                (15,023)
               -------------    -----------------   ------------------   ------------------   ---------------------
                      (9,095)              (1,594)             (10,689)              (6,185)                (17,051)
               -------------   ------------------   ------------------   ------------------   ---------------------
Operating
Profit
Continuing
operations
Existing               2,884               (1,594)               1,290                1,455                   2,715
Discontinued               -                    -                    -                  881                     881
operations
               -------------   ------------------    -----------------    -----------------    ---------------------
                       2,884               (1,594)               1,290                2,336                   3,596

Interest                (341)                   -                 (341)                (119)                   (317)
               -------------   ------------------   ------------------   ------------------   ---------------------

Profit/(loss)
on ordinary
activities
before
taxation
                       2,543               (1,594)                 949                2,217                   3,279
                     =======           ==========

Tax on profit                                                     (669)                (624)                 (1,263)
on ordinary
activities
(note 3)
                                                    ------------------   ------------------   ---------------------

Profit on
ordinary
activities
after
taxation                                                           280                1,593                   2,016

Dividends -                                                          -                    -                    (583)
including
non-equity
(note 4)
                                                     -----------------    -----------------    ---------------------
Retained
profit for the
financial
period                                                             280                1,593                    1,433
                                                            ==========           ==========             ============

Earnings per
share (note 5)

Underlying                                                         2.2p                 2.2p                    5.0p
diluted
Underlying                                                         2.3p                 2.3p                    5.2p
undiluted
FRS 14 basic                                                       0.3p                 2.1p                    2.6p
FRS 14                                                             0.3p                 2.0p                    2.6p
diluted
                                                             ==========           ==========            ============



GROUP BALANCE SHEET
   
                                30 June 2004        30 June 2003    31 December 2003
                                  (unaudited)         (unaudited)           (audited)
                                        £000                £000                £000
Fixed assets
Intangible assets                     48,222              39,835              49,584
Tangible assets                        5,813               6,369               6,120
Investments                            1,724               1,752               1,752
                           -----------------   -----------------   -----------------
                                      55,759              47,956              57,456
                           -----------------   -----------------   -----------------

Current assets
Stocks                                   536                 601                 608
Debtors                               32,416              23,105              28,663
Cash at bank and in hand                 444                 883               1,701
                           -----------------   -----------------   -----------------
                                      33,396              24,589              30,972
                           -----------------   -----------------   -----------------

Creditors: Amounts falling
due within one year
Borrowings                            (9,173)             (3,361)             (5,809)
Other creditors                      (24,727)            (20,043)            (25,427)
                           -----------------   -----------------   -----------------
                                     (33,900)            (23,404)            (31,236)
                           -----------------   -----------------   -----------------

Net current (liabilities)/              (504)              1,185                (264)
assets
                           -----------------   -----------------   -----------------

Total assets less current             55,255              49,141              57,192
liabilities

Creditors: Amounts falling
due after more than one
year
Borrowings                            (1,736)             (2,910)             (2,991)
Other creditors                       (2,000)                  -              (3,000)
                           -----------------   -----------------   -----------------
Net assets                            51,519              46,231              51,201
                                  ==========          ==========          ==========

Capital and reserves
Called up share capital                4,535               4,295               4,464
Shares to be issued                    3,600               2,000               4,600
Share premium account                 38,680              35,352              37,713
Other reserves                           204                 204                 204
Profit and loss account                4,500               4,380               4,220
                           -----------------   -----------------   -----------------
Total shareholders' funds             51,519              46,231              51,201
(note 6)
                                  ==========          ==========          ==========

Analysis of shareholders'
funds
Equity                                49,519              44,231              49,201
Non-equity                             2,000               2,000               2,000
                           -----------------   -----------------   -----------------
                                      51,519              46,231              51,201
                                  ==========          ==========          ==========



GROUP STATEMENT OF CASH FLOWS


                                 Six months              Six months                 Year ended
                                      ended                   ended                31 December
                               30 June 2004            30 June 2003                       2003
                                 (unaudited)             (unaudited)                  (audited)
               Note                    £000                    £000                       £000
Net cash      
(outflow)/
inflow from
operating
activities     A                     (1,482)                    787                      6,470

Returns on
investments
and servicing
of finance
Interest                                 96                      75                        142
received
Interest                               (308)                   (127)                      (317)
paid
Interest                                
element of
finance lease
payments                                (63)                    (73)                      (162)
Preference                                
dividends
paid                                      -                       -                         (9)
                      ---------------------   ---------------------    ------------------------
Net cash
outflow from
returns on
investments
and servicing
of finance                             (275)                   (125)                      (346)
                      ---------------------   ---------------------   ------------------------

Taxation                                 69                     (28)                      (309)

Capital
expenditure
and financial
investment

Purchase of                            
tangible and
intangible
fixed assets                           (692)                   (474)                    (1,074)
Disposal of                               
tangible fixed
assets                                    2                       6                         13
Redemption of                             
shares in
unquoted
company                                   -                     100                        100
Redemption of                            
loan stock in
quoted
company                                  28                       -                          -
                      ---------------------   ---------------------   ------------------------
Net cash
outflow from
capital
expenditure
and financial
investment                             (662)                   (368)                      (961)
                      ---------------------   ---------------------   ------------------------

Acquisitions
and
Disposals

Purchase of                               
subsidiary
undertakings                              -                       -                     (2,617)
Overdraft
balances
acquired with
subsidiary
undertakings                              -                  (1,499)                    (3,747)
Earnout
consideration
on
acquisitions
made in prior
year                                   (762)                      -                       (293)
                      ---------------------   ---------------------   ------------------------
Net cash                               
outflow from
acquisitions
and
disposals                              (762)                 (1,499)                    (6,657)
                      ---------------------   ---------------------   ------------------------

Equity                                    
dividends
paid                                      -                       -                       (379)
                      ---------------------   ---------------------   ------------------------
Net cash                             
outflow before
financing                            (3,112)                 (1,233)                    (2,182)

Financing
Ordinary                                 
shares
issued                                   38                      37                         67
Loans due
within one
year:
- increases in                        
term debt                             1,139                   1,178                      2,004
- repayments                         
in period                            (1,605)                 (1,668)                    (3,164)
Loans due
after one
year:
- increases in                            -                     617                      1,546
term debt (net
of issue
costs)
Capital                                
element of
finance lease
payments                               (554)                   (372)                      (791)
                      ---------------------   ---------------------   ------------------------
Net cash                               (982)                   (208)                      (338)
outflow from
financing
                      ---------------------   ---------------------   ------------------------
Decrease in    B,C                   
cash in the
period                               (4,094)                 (1,441)                    (2,520)

                               ============            ============              =============



NOTES TO THE GROUP STATEMENT OF CASH FLOWS




A.        RECONCILIATION OF OPERATING PROFIT TO NET CASH (OUTFLOW)/INFLOW FROM
          OPERATING ACTIVITIES

                       Six months ended           Six months ended                 Year ended
                           30 June 2004               30 June 2003                31 December
                                                                                         2003
                            (unaudited)               (unaudited)                   (audited)
                                   £000                      £000                        £000
Operating
Activities

Operating                         1,290                     2,336                       3,596
profit
Amortisation                      1,362                     1,001                       2,139
Depreciation                      1,013                       988                       1,989
Profit/(loss)                        25                        (4)                          8
on disposal of
tangible fixed
assets
Exchange                             13                         -                           -
differences
Decrease/                            72                      (173)                       (178)
(increase) in
stocks
(Increase)/                      (3,704)                    1,860                         563
decrease in
debtors
Decrease in                      (1,553)                   (5,221)                     (1,647)
creditors
               ------------------------   -----------------------   -------------------------
Net cash                         
(outflow)/
inflow from
operating
activities                       (1,482)                      787                       6,470
                         ==============             =============              ==============




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


                      Six months ended          Six months ended                  Year ended
                          30 June 2004              30 June 2003                 31 December
                                                                                        2003
                           (unaudited)               (unaudited)                   (audited)
                                  £000                      £000                        £000

Decrease in                     (4,094)                   (1,441)                     (2,520)
cash in the
period
Net cash flow                    1,020                       245                         405
from changes
in debt
New loan                          (238)                        -                        (647)
notes
New finance                        (54)                     (151)                       (216)
lease
agreements
Finance leases                       -                       (81)                       (141)
acquired with
subsidiary
undertakings
Exchange                             -                         -                         (20)
movements
               -----------------------   -----------------------   -------------------------
Movement in                     (3,366)                   (1,428)                     (3,139)
net debt in
the period
Net debt at                     (7,099)                   (3,960)                     (3,960)
beginning of
period
               -----------------------   -----------------------   -------------------------
Net debt at                    (10,465)                   (5,388)                     (7,099)
end of
period
                         =============             =============              ==============




C.       ANALYSIS OF CHANGES IN NET DEBT DURING THE PERIOD



                 At 31 December                    Cash                  Other                    At 30 June
                           2003                    Flow               non-cash                          2004
                      (audited)                                        changes                    (unaudited)
                           £000                    £000                   £000                          £000

Cash at bank              1,701                  (1,257)                     -                           444
and in
hand
Overdraft                (1,897)                 (2,837)                     -                        (4,734)
             ------------------   ---------------------   --------------------   ---------------------------
                           (196)                 (4,094)                     -                        (4,290)
             ------------------   ---------------------   --------------------   ---------------------------
Debt due                 (2,924)                    466                 (1,106)                       (3,564)
within one
year
Debt due                 (2,351)                      -                    868                        (1,483)
after one
year
Finance
lease
agreements
- within one               (988)                    554                   (441)                         (875)
  year
- after one                (640)                      -                    387                          (253) 
  year
             ------------------   ---------------------   --------------------   ---------------------------
                         (6,903)                  1,020                   (292)                       (6,175)
             ------------------   ---------------------   --------------------   ---------------------------
             ------------------   ---------------------   --------------------   ---------------------------
                         (7,099)                 (3,074)                  (292)                      (10,465)
                     ==========            ============           ============               ===============





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 six months ended 30 June 2004 are prepared on the
basis of the accounting policies set out in the Group's financial statements for
the year ended 31 December 2003; this interim report is unaudited.  The results
for the year ended 31 December 2003 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:

                   Six months ended       Six months ended           Year ended
                       30 June 2004           30 June 2003          31 December
                                                                           2003
                        (unaudited)            (unaudited)            (audited)
                               £000                   £000                 £000

Restructuring                  (232)                     -                 (989)
expenses
Claim                             -                    881                  881
settlement
(net of
costs)
              ---------------------   --------------------   ------------------
                               (232)                   881                 (108)
                     ==============          =============          ============



3.                    Tax on profit on ordinary activities


The tax charge for the six months ended 30 June 2004 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 2003 there was no interim dividend
and the proposed final dividend (paid on 1 July 2004) was 0.75 pence per
ordinary share and 0.2625 pence per preference share.



5.                    Earnings per share



The FRS14 basic and diluted earnings per share have been calculated on the
following earnings and weighted average number of shares in issue:



                Six months ended                  Six months ended                       Year ended
                    30 June 2004                      30 June 2003                 31 December 2003
                        Earnings       Number of          Earnings       Number of         Earnings        Number of
                                          shares                            shares                            shares
                            £000            '000             £000             '000             £000             '000

Profit for the               280                            1,593                             2,016
financial
period
Less:                          -                                -                               (13)
preference
dividends
               -----------------   -------------   --------------   --------------   --------------   -------------
Basic EPS:
Earnings
available to
ordinary
shareholders                 280          79,920            1,593           75,820            2,003          76,060

Effect of
dilutive
securities:

Convertible                    -           1,750                -            1,750               13           1,750
preference
shares

Options                        -             893                -            1,446                -             857
               -----------------   -------------   --------------   --------------   --------------   -------------
Diluted EPS:                 280          82,563            1,593           79,016            2,016          78,667
Adjusted
earnings
                      ==========        ========         ========         ========         ========         =======



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.



NOTES TO THE INTERIM REPORT - continued





5.             Earnings per share continued



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

                                            Diluted                                                Undiluted

                Six months ended   Six months ended       Year ended  Six months ended   Six months ended  Year ended
                    30 June 2004       30 June 2003 31 December 2003      30 June 2004       30 June 2003 31 December   
                                                                                                                 2003
                           pence              pence            pence             pence              pence       pence

FRS14 basic                  0.3                2.0              2.6               0.3                2.1         2.6
Effect of:
- exceptional                0.3               (1.1)            (0.2)              0.3               (1.1)       (0.2)
items
- goodwill                   1.6                1.3              2.6               1.7                1.3         2.8
amortisation
               -----------------   ---------------- ----------------   ---------------   ----------------  ----------
Underlying                   2.2                2.2              5.0               2.3                2.3         5.2
basis
                      ==========          =========        =========         =========          =========   =========





6.             Reconciliation of movements in total shareholders' funds



                  Six months ended       Six months ended             Year ended
                      30 June 2004           30 June 2003            31 December
                       (unaudited)            (unaudited)                   2003
                                                                       (audited)
                              £000                   £000                   £000

Profit for                     280                  1,593                  2,016
the financial
period
Dividends                        -                      -                   (583)
              --------------------   --------------------   --------------------
                               280                  1,593                  1,433
Ordinary                     1,038                     37                  2,567
shares issued
including
premium
Movement in                 (1,000)                 2,000                  4,600
ordinary
shares to be
issued
              --------------------   --------------------   --------------------
Net increase                   318                  3,630                  8,600
in
shareholders'
funds
Opening                     51,201                 42,601                 42,601
shareholders'
funds
              --------------------   --------------------   --------------------
Closing                     51,519                 46,231                 51,201
shareholders'
funds
                      ===========             ===========            ===========



7.             Approval


This interim report was approved by a committee of the Board of Directors on 28
September 2004.  This report is being sent to shareholders and is available from
the Company's registered office: Enterprise House, Castle Street, Worcester WR1
3AD and website: www.maclellan-group.plc.uk.






                      This information is provided by RNS
            The company news service from the London Stock Exchange
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IR LRMPTMMATBRI