ARL.L Regulatory News (ARL)

30 Aug 2006 07:02

SMC Group Plc30 August 2006 SMC GROUP PLC ("SMC", "the Company" or "the Group") Interim Results for Six Months ended 30 June 2006 SMC Group, the architects and design business, announces its interim results forthe six month period ended 30 June 2006. Highlights • Turnover increased by 108% to £11.3m (2005: £5.7m) • Gross profit increased by 105% to £6.1m (2005: £3.0m) • EBITDA increased by 77% to £2.6m (2005: £1.45m) • Profit before tax increased by 42% to £1.6m (2005: £1.1m) • Adjusted basic earnings per share* increased by 21% (76% when adjusted for IPO shares)** to 4.26p (2005: 3.53p) • Interim dividend - the Company confirms that it will pay an interim dividend of 0.35p per share, payable in January 2007. • Successful acquisition of four practices in the period - total staff numbers now 450 • Number of clients increased by over 230% from 120 to circa 400 • Strong pipeline of existing and new business Commenting on the results, Stewart McColl, Chief Executive of SMC said: "This has been a strong period of performance for SMC. The Group has enjoyedcontinued strategic expansion, reflecting the Group's policy of adopting abalanced approach to growth by diversifying into new market sectors and higherconstruction value ranges. We continue to win significant new business and areconfident of the Group's performance over the full year." * adjusted to exclude goodwill amortisation, share option charge and notionalinterest. **adjusted to include the effect of shares issued on IPO from 1 January 2005. - ends - For further information please contact: SMC Group Plc Tel: +44 (0)20 7495 5335Stewart McColl Numis Securities Tel: +44 (0)20 7776 1500Michael Rowan/Emma Tod Bell Pottinger Corporate & Financial Tel: +44 (0)20 7861 3232David Rydell/Geoff Callow Chairman's Statement During this six month period, SMC successfully completed its first full year asa company listed on AIM. Having recorded a strong performance in 2005, I ampleased to report that we have continued to grow through the first half of 2006and have reason to anticipate a strong performance for the full year. The Group's strategy is predicated upon organic growth supplemented by earningsenhancing acquisitions. The existing business is growing well and we havecompleted seven acquisitions since June 10th 2005. Four of these wereimplemented during the first half of 2006 providing further geographic spread inEngland. Importantly, we achieved our first international presence in NorthAmerica and the Far East through the acquisition of the award winning businessof Alsop Design based in London. In May we completed the Group's largest acquisition to date, that of SMC CharterArchitects, bringing the total staff complement to circa 450 people, therebycreating one of the largest architectural businesses in the UK. The talents of our people have been recognised by their peers and industrycommentators through the receipt of a number of Civic Trust and environmentalawards for which all those concerned should be justly proud. As a result of the hard work and dedication of our people, SMC has providedvalue to its clients. In turn, this performance has allowed us to return valueto our shareholders, including the payment of a maiden dividend and in July weare proposing a further dividend for this current period. We aim to continue toreturn value to shareholders through the full year and beyond. Trading continues to be strong and the Board views with confidence the outlookfor the Group over the full financial year. Sir Rodney Walker Chairman 29 August 2006 Chief Executive's Statement Operational and Financial Review for the six months ended June 2006 SMC has continued to grow strongly both organically and through acquisition withrevenue growth for the six months to the end of June 2006 increasing by 108% to£11.3m and profit before tax (PBT) for the six month period increasing by 42% to£1.6m. I am pleased to report that our strategy for organic growth supplemented byearnings enhancing acquisitions has continued to serve the Group well and I haveevery confidence that this will remain the right strategy going forward. We haverealised our short term targets as anticipated and have continued to drivetowards our principal objectives as presented to investors. Admission to AIM in 2005 undoubtedly provided the Group with a higher profile interms of visibility within the investment community. However, given ouracquisition policy, we were also determined to raise our profile in the eyes ofour peer group and had identified various businesses, including those regardedas 'signature architects' that we aimed to attract into the Group. It wastherefore of particular significance to be able to acquire the award winningteam at Alsop Design on March 23, which has changed the perception of SMC in thearchitectural community from being purely 'financially driven' to now also being'passionate about design'. SMC has never subscribed to the long outdated viewthat good design and profitability are incompatible. In both February and May, we announced contract wins that together amounted to£1.3bn in construction value, representing £20m in stage fees to SMC. These newcontracts represent business being won across almost all of the sectors in whichwe are active with no significant reliance on any one sector, which aligns withour desire to maintain a balanced approach to growth. On February 3, we announced the acquisition of Ian Penrose Architects based inExeter and Plymouth and Covell Matthews in Cambridge for initial considerationof £2m and £2.1m respectively. These businesses increased our exposure to thearchitecture markets in the South West and East of England, East Anglia and theHome Counties. In the same month, we raised £1.72m by way of a Placing of1,707,400 new shares of 0.5p at a price of £1.01 each. The Placing wassubstantially oversubscribed and was taken up by new and existing institutionalinvestors which enabled the shareholder base to be widened. Before the end of March we welcomed Robert Boardman as our new Finance Director.In addition to his financial and accounting prowess, Robert has extensivetransactional experience. He subsequently demonstrated his confidence in theGroup's strategy through the purchase of 8,887 ordinary shares at 1.64p pershare (28th April). Robert replaced David Pedley who had been one of ourfounding shareholders and wished to pursue other interests. The Board thankedDavid for his considerable contribution to the company's development since hefirst became involved in 1999. Robert had joined us in the same week that wecompleted the acquisition of the business and assets of Alsop Design for aninitial consideration of £1.8m. This highly strategic acquisition provided theGroup with another office in London, offices and projects in North America andthe Far East and the highly respected creative skills for which this team hadoften been recognised, not least by winning the RIBA Stirling Prize Award 2000. On April 27, we confirmed our year end results for 2005, showing that turnoverhad grown by 62% on the previous year to £13.1m and profit after tax had grownby 163% to £1.9m. The proposal to introduce a maiden dividend of 1p per share,subsequently ratified at the AGM on June 13 and paid in July 2006. In May the Group acquired Charter Architects for an initial consideration of£3.6 million. Based in Bournemouth, Bedford, Ipswich and London the acquisitionbrought into SMC not only a wide ranging portfolio but one which included bothsport, particularly swimming pools, and defence projects - market sectorspreviously not served by existing Group companies. Charter was renamed SMCCharter and its staff complement of 117 people was integrated into the Group.This is a particularly well managed business with a cultural 'fit' that drewboth parties together very smoothly and quickly and, as a result of theirstrengths we have subsequently drawn two of their people, in finance andmarketing, into sharing their role with equivalent roles within the wider Group. The benefit of these acquisitions is reflected on a pro rata basis and thereforea full periods earnings are not reflected in these results. Immediately after this acquisition, the largest in the Group's history, weundertook a review of our Nominated Advisors and on June 29, we announced theappointment of Numis Securities Ltd, a leading Nominated Advisor and Broker inthe support services sector. Numis had courted SMC over a period of time andattracted us into their fold. It has subsequently assisted the Company inattracting a number of large new institutional investment clients to the SMCshareholder register. I would like to record here that we have very much appreciated the adviceprovided in the flotation process and since by our previous Nominated Adviser,Noble & Company. All of the new acquisitions are trading ahead of expectations although obviouslyonly three months of SMC Alsop's figures, one month of SMC Charter's and fivemonths of SMC Penrose and SMC Covell Matthews are accounted for in this period.The existing Group businesses; SMC Gower (acquired 2001), SMC Corstorphine &Wright (acquired 2002),SMC Philip Lees (acquired on IPO and now incorporatedwith SMC Gower),Hills Erwin (acquired on IPO and now incorporated with SMC DTR)and SMC DTR (acquired October 2005) have continued to demonstrate strong organicgrowth. Update on progress since the end of the half year The second half of the year has progressed in line with expectations and weannounced on July 25, further contract wins across the Group with a totalconstruction value of £1.2bn representing stage fees in excess of £17m to beearned over future years. In view of the success in securing a number ofprojects related to sporting facilities, for example swimming pools and cricketgrounds, and other established projects such as horse racing facilities, theGroup announced the formation of a new division called SMC Sport & Leisure,designed to bring together all the expertise from throughout the Group toattract additional projects in that sector. This follows on from the success ofthe division formed in December 2005, SMC Education, which has had considerablesuccess in attracting approaches from the contractors and facilities managementconcerns bidding for the Building Schools for the Future programme. As stated in our presentations and documentation prior to and after ouradmission to AIM, we will continue our strategy of targeting earnings enhancingacquisition opportunities throughout the UK and further afield in due course. As stated in previous reports, and I make no apology for repetition, theperformance of our business relates directly to the performance of our people.The dedication of my colleagues to servicing our clients' requirements has beenexceptional, resulting in a high level of repeat commissions and someaward-winning projects. Our fundamental belief is that where we can return valueto our clients, we can increase value for our shareholders. I would therefore like to take this opportunity to express my appreciation toall my colleagues for their efforts and for providing me with the considerablepleasure I take in observing and encouraging their creativity and imagination. Stewart McCollChief Executive 29 August 2006 Consolidated profit and loss accountFor the six months ended 30 June 2006 Unaudited Unaudited Audited Continuing Acquisitions Total 6 6 months 12 months operations 6 months months ended 30 ended 31 6 months ended 30 ended 30 June 2005 December ended 30 June 2006 June 2006 2005 June 2006 (restated) Notes £'000 £'000 £'000 £'000 £'000 TURNOVERGroup and share of joint venture 7,825 3,588 11,413 5,660 13,511Less: share of joint venture turnover (107) - (107) (220) (414)--------------------------------------------------------------------------------------Group turnover 7,718 3,588 11,306 5,440 13,097 Cost of sales (3,528) (1,675) (5,203) (2,469) (5,723)--------------------------------------------------------------------------------------GROSS PROFIT 4,190 1,913 6,103 2,971 7,374 Administrative expenses (2,861) (777) (3,638) (1,537) (3,800)Depreciation (99) (38) (137) (69) (166)Goodwill amortisation (343) (101) (444) (86) (222)Other operating income - - - 3 6--------------------------------------------------------------------------------------Group operating profit 887 997 1,884 1,282 3,192 Share of operating profit of joint venture 107 15 24--------------------------------------------------------------------------------------TOTAL OPERATING PROFIT 1,991 1,297 3,216 Interest receivable 16 14 28Interest payable (442) (208) (435) --------------------------------------------------------------------------------------PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,565 1,103 2,809 Taxation 2 (666) (364) (1,005)--------------------------------------------------------------------------------------PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 899 739 1,804-------------------------------------------------------------------------------------- Basic earnings per ordinary share (in pence) 3 2.44 3.16 6.20 Diluted earnings per ordinary share (in pence) 3 2.30 3.16 6.08-------------------------------------------------------------------------------------- The directors will propose an interim dividend of 0.35p per ordinary share basedon the financial statements for the six months ended 30 June 2006 Consolidated balance sheetAt 30 June 2006 Unaudited Unaudited Audited as at 30 as at 30 as at 31 June 2006 June 2005 December 2005 (restated) Notes £'000 £'000 £'000 FIXED ASSETSIntangible assets 19,801 4,454 9,671Tangible assets 1,052 521 618 Investment in joint venture:Share of gross assets 298 262 378Share of gross liabilities (148) (229) (334)----------------------------------------------------------------------------------TOTAL FIXED ASSETS 21,003 5,008 10,333 CURRENT ASSETSDebtors: amounts falling due within one year 18,617 7,087 10,508Cash at bank and in hand - 1 1---------------------------------------------------------------------------------- 18,617 7,088 10,509 CREDITORS: amounts falling due within one year (10,100) (3,836) (5,815)----------------------------------------------------------------------------------NET CURRENT ASSETS 8,517 3,252 4,694---------------------------------------------------------------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 29,520 8,260 15,027 CREDITORS: amounts falling due after more than one year (7,856) (2,488) (2,812)PROVISIONS FOR LIABILITIES AND CHARGES (7,767) (11) (5,082)----------------------------------------------------------------------------------NET ASSETS 13,897 5,761 7,133---------------------------------------------------------------------------------- CAPITAL AND RESERVESCalled up share capital 197 171 173Share premium account 6,623 4,112 4,060Share option reserve 166 - 59Merger reserve 3,914 445 743Shares held by SIP Trust (150) (150) (150)Profit and loss account 3,147 1,183 2,248----------------------------------------------------------------------------------EQUITY SHAREHOLDERS' FUNDS 6 13,897 5,761 7,133---------------------------------------------------------------------------------- CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2006 Unaudited Unaudited Audited 6 months 6 months 12 months ended 30 ended 30 ended 31 June 2006 June 2005 December 2005 Notes £'000 £'000 £'000 Net cash flow from operating activities i (635) 286 (141)Returns on investments and servicing of finance ii (308) (226) (355)Taxation (716) - (209)Capital expenditure and financial investment ii (21) (19) (108)Acquisitions ii (5,755) (1,101) (2,659)------------------------------------------------------------------------------------Cash outflow before financing (7,435) (1,060) (3,472) Financing ii 7,137 2,796 3,804------------------------------------------------------------------------------------(Decrease) / increase in cash in the period (298) 1,736 332 Reconciliation of net cash flow to movement iiiin net debt (Decrease) / increase in cash in the period (298) 1,736 332Cash (outflow) / inflow from change in debt (5,463) 851 (247)------------------------------------------------------------------------------------Change in net debt resulting from cash flows (5,761) 2,587 85New finance leases and debts acquired with subsidiaries (232) (102) (116)------------------------------------------------------------------------------------Movement in net debt in period (5,993) 2,485 (31) Opening net debt (4,730) (4,699) (4,699)------------------------------------------------------------------------------------Closing net debt (10,723) (2,214) (4,730) i. Reconciliation of operating profit to net cash flow from operating activitiesOperating profit 1,884 1,282 3,192Amortisation of goodwill 444 86 222Depreciation of fixed assets 137 69 166Profit on disposal of fixed assets - (2) (8)Share option charge 107 - 59Increase in debtors (3,806) (787) (2,950)Increase/(decrease) in creditors 599 (362) (822)------------------------------------------------------------------------------------Net cash flow from operating activities (635) 286 (141) ii. Cash flows Returns on investments and servicing of financeInterest received 16 12 25Interest paid (314) (228) (373)Interest element of finance leases (10) (10) (7)------------------------------------------------------------------------------------ (308) (226) (355) Capital expenditure and financial investmentPurchase of tangible fixed assets (21) (21) (138)Sale of tangible fixed assets - 2 30------------------------------------------------------------------------------------ (21) (19) (108) AcquisitionsConsideration paid on acquisitions (6,311) (990) (2,092)Deferred consideration paid on prior year acquisition (486) (25) (25)Cash / (bank overdraft) acquired with subsidiaries 1,042 (86) (542)------------------------------------------------------------------------------------ (5,755) (1,101) (2,659) FinancingIssue of shares (net) 1,674 3,647 3,557Repayment of short-term borrowings (302) (745) (300)New bank loan 5,826 - 1,437Redemption of loan notes - - (790)Capital element of finance lease rental payments (61) (106) (100)------------------------------------------------------------------------------------ 7,137 2,796 3,804 Audited Unaudited As at 31 Cash Non-cash As at 30 December flows changes June 2006 2005 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------ iii. Analysis of net debt Cash in hand, at bank 1 (1) - -Bank overdraft (1,562) (297) - (1,859) Debt due within one year (300) (531) - (831)Debt due after one year (2,650) (4,993) - (7,643)Finance leases (219) 61 (232) (390)------------------------------------------------------------------------------------ (4,730) (5,761) (232) (10,723) Notes to the financial information For the six months ended 30 June 2006 1 Accounting policies The financial information contained in this interim report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The interim results, which have not been audited, have been prepared using accounting policies consistent with those used in the preparation of group financial statements for the year ended 31 December 2005 (except as stated below). Those accounts have been filed with the Registrar of Companies and received an unqualified report which did not contain a statement under section 237 (2) or (3)of the Companies Act 1985. The Group has adopted Financial Reporting Standard 20 'Share-based Payment' (FRS 20) and Financial Reporting Standard 25 'Financial Instruments: Disclosure and Presentation' (FRS 25) for the preparation of this financial information and the comparative numbers have been restated where applicable. In accordance with FRS 20 the fair value of equity-settled share-based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period based on the Group's estimate of shares or options that are likely to vest. The adoption of this Standard has resulted in a charge to the current period Profit and Loss account of £107,000 (31 December 2005: £59,000). In accordance with FRS 25, deferred contingent share consideration in respect of acquisitions has been restated from shares to be issued to provisions. The adoption of this standard has resulted in a reduction of net assets of £3,965,000 in the current period (31 December 2005: £1,900,000). 2 Taxation Taxation for the six months to 30 June 2006 is based on the effective rate of taxation which is estimated to apply for the year ending 31 December 2006. 3 Earnings per share Unaudited Unaudited Audited 6 months 6 months 12 months ended 30 ended 30 ended 31 June 2006 June 2005 December 2005 (restated) Weighted average number of shares 36,782,196 23,363,181 29,086,209 Retained profits (£'000) 899 739 1,804 ----------------------------------------------------------------------------------- Basic earnings per share (pence per share) 2.44 3.16 6.20 Weighted average number of shares 36,782,196 23,363,181 29,086,209 Dilutive effect of share options 2,280,382 32,087 591,348 ----------------------------------------------------------------------------------- Fully diluted earnings per share (pence per share) 2.30 3.16 6.08 Retained profits (£'000) 899 739 1,804 Add back:- - Goodwill amortisation (£'000) 444 86 222 - Share option charge (£'000) 107 - 59 - Notional interest on deferred consideration (£'000) 118 - - ----------------------------------------------------------------------------------- Adjusted retained profits (£'000) 1,568 825 2,085 Adjusted basic earnings per ordinary share before goodwill amortisation, share option charge and notional interest (pence per share) 4.26 3.53 7.17 Adjusted fully diluted earnings per ordinary share before goodwill amortisation, share option charge and notional interest (pence per share) 4.01 3.53 7.03 4 Dividend policy A dividend of 1p per ordinary share was approved at the AGM and paid in July 2006. The directors propose an interim dividend of 0.35p per share to be paid in January 2007. 5 Share capital On 2 February 2006, 839,053 ordinary shares were issued as part of the consideration for the acquisition of Ian Penrose Architects Limited and Covell Matthews Cambridge Architects Limited. The shares were issued at 109.3 pence per share for a total initial consideration of £917,085. On 21 February 2006, the company placed a further 1,707,400 0.5p ordinary shares at a price of 101 pence per share. On 23 March 2006, 624,277 ordinary shares were issued as part of the consideration for the purchase of the business and assets of Alsop Design Limited. The shares were issued at 144.17 pence per share for a total initial consideration of £900,000. On 31 March 2006, the company allotted 283,215 ordinary shares at 171.7 pence per share in respect of a stage payment for SMC DTR:UK. On 26 May 2006, 1,340,026 ordinary shares were issued as part of the consideration for the acquisition of The Charter Partnership Limited. The shares were issued at 132.83 pence per share for a total initial consideration of £1,779,957. 6 Reconciliation of movements in shareholders' funds Unaudited Unaudited Audited 6 months 6 months 12 months ended 30 ended 30 ended 31 June 2006 June 2005 December 2005 £'000 £'000 £'000 Opening shareholders' funds (as previously stated) 9,033 963 963 Prior period adjustments (note 1) (1,900) - - ----------------------------------------------------------------------------------- Opening shareholders' funds (as restated) 7,133 963 963 Shares issued for cash consideration (net of costs) 1,674 3,609 3,557 Shares issued in connection with acquisitions 4,084 450 750 Share option charge 107 - 59 Profit for the period 899 739 1,804 ----------------------------------------------------------------------------------- Closing shareholders' funds 13,897 5,761 7,133 ----------------------------------------------------------------------------------- 7 Acquisition of subsidiaries On 2 February 2006, SMC Group PLC acquired 100% of the issued share capital of Covell Matthews Cambridge Architects Limited ("CMA") and Ian Penrose Architects Ltd ("Penrose"). On 23 March 2006, the Group acquired certain of the business and assets of Alsop Design Limited. On 26 May 2006, the Group acquired 100% of the issued share capital of The Charter Partnership Ltd ("Charter"). Net assets acquired at fair value CMA Penrose Alsop Charter Total £'000 £'000 £'000 £'000 £'000 Tangible fixed assets 94 93 50 276 513 Debtors 499 880 473 2,460 4,312 Cash at bank and overdraft 404 385 - 253 1,042 Other creditors (230) (563) - (1,954) (2,747) Provisions for liabilities and charges (9) (8) - - (17) ------------------------------------------------------------------------------------- 758 787 523 1,035 3,103 Goodwill 1,449 1,286 1,949 4,822 9,506 ------------------------------------------------------------------------------------- 2,207 2,073 2,472 5,857 12,609 Satisfied by: Cash paid 1,692 1,486 900 1,548 5,626 Shares issued 422 495 900 1,780 3,597 Loan notes issued - - - 230 230 Cost of acquisitions 93 92 363 136 684 Provision for deferred consideration - - 309 2,163 2,472 ------------------------------------------------------------------------------------- 2,207 2,073 2,472 5,857 12,609 ------------------------------------------------------------------------------------- Deferred contingent consideration is based on the directors' estimates of future profits. The deferred consideration will be satisfied by an issue mixture of loan notes, ordinary shares in SMC Group plc and cash consideration. It will be payable in stages during the period up to July 2009. The goodwill arising on these acquisitions is being amortised to the profit and loss account on a straight line basis over its estimated useful life. The estimated useful economic life of the goodwill arising on each of these acquisitions is, in the opinion of the directors, 20 years. 8 Interim Report The interim report was approved by the board on 29th August 2006. The interim report will be sent to shareholders in early September and will be available to shareholders from the Company's registered office from the day of despatch. INDEPENDENT REVIEW REPORT TO SMC GROUP PLC IntroductionWe have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated profit andloss account, the consolidated balance sheet, the consolidated cash flowstatement and the related notes. We have read the other information in theinterim statement and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for thecompany for the purpose of their interim statement and for no other purpose. Wedo not, therefore, in producing this report, accept or assume responsibility forany other purpose or to any other person to whom this report is shown or intowhose hands it may come save where expressly agreed by our prior consent inwriting. Directors' responsibilitiesThe interim statement, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the Interim Statement in accordance with the AIM Ruleswhich require that the accounting policies and presentation applied to theinterim figures must be consistent with those that will be adopted in thecompany's annual accounts. Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom, as if thatBulletin applied. A review consists principally of making enquiries ofmanagement and applying analytical procedures to the financial information andunderlying financial data and based thereon, assessing whether the disclosedaccounting policies have been consistently applied unless otherwise disclosed. Areview excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly, we do notexpress an audit opinion on the financial information Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. BAKER TILLYChartered Accountants2 Bloomsbury StreetLondonWC1B 3ST 29 August 2006 This information is provided by RNS The company news service from the London Stock Exchange