ARL.L Regulatory News (ARL)

5 Sep 2005 07:00

SMC Group Plc05 September 2005 SMC Group Plc ("SMC" or "the Group") SMC Group, the architects company, announces maiden interim financial resultsfor the period ended 30 June 2005. Highlights: •Completed admission to AIM raising £4.59m •Turnover increased by 47% to £5.44m •Profit before tax (PBT) increased by 255% to £1.10m •Gross profit margin increased by 74% to £2.97m •EBITDA increased by 139% to £1.45m •Profit after tax (PAT) increased by 279% to £0.74m •Fully diluted earnings per share increased by 259% up from 0.88p to 3.16p •Group intends to introduce a maiden dividend in June 2006 •Clients now totalling 120 up from 80 since 30th June 2004. Commenting on the results, Stewart McColl, Chief Executive of SMC stated: "I am delighted to be able to report strong maiden interim results. We have aclear strategy in place to win larger value, higher margin contracts. Thisinvolves a combination of acquisitive and organic growth aimed at deliveringvalue to our shareholders." For further information please contact: SMC GroupStewart McColl Chief Executive 020 7495 5335 Bell Pottinger Corporate & FinancialDavid Rydell/Chris Hamilton 020 7861 3232 Noble & CompanyMatthew Hall/Rory Boyd 020 7763 2200 Chairman's Statement I originally committed to SMC on the basis of my belief in the Group's businessplan and strategy for growth. Since taking up the Chairmanship in November 2004I have observed and contributed to the progressive implementation of thebusiness plan, the single most significant aspect of which was admission to AIMin June 2005 providing the Group with funding to assist organic and acquisitivegrowth. I am pleased to report that SMC has achieved, and is continuing toachieve growth in line with our expectations and business plan. The SMC Group Plc is first and foremost a commercial business. The product ofthe business is architecture, very good architecture that contributes to thesuccess of our clients' own businesses and enhances the lives of the people whoexperience it. Our Chief Executive, Stewart McColl, is passionate about businessand architecture. Therefore, whilst I am pleased to report financial success Iam also delighted to record that we have received recognition for ourcontribution to the built environment, including awards for energy efficient andsustainable buildings where we have applied design principles that will have anever increasing relevance to our marketplace. As the holding company for a group of architectural businesses, SMC isdetermined to maximise the advantages of the considerable knowledge and skillsbase and best practice principles that exist throughout the Group, ultimatelyfor the benefit of our people and our clients. To achieve this, we have createda 'Group Operating Board' comprised of the principal Directors from eachsubsidiary company. I am pleased to report that considerable commitment has beenmade by this Board throughout the first half of the year and we expect it toreturn value in the future. Sir Rodney WalkerChairman (Non-executive) Operational and Financial Review I am delighted to be presenting our first set of financial results as a publiclylisted company. The first half of the financial year was significant as wejoined AIM, an important milestone in the evolution of the business. We do nothowever view this as an end, rather it is the beginning of the next stage in ourdevelopment and we are keen to utilise the public status of the Group to aid andaccelerate our future growth plans. The SMC Group has achieved compound organic revenue growth since 2002 of 52%.Revenue growth for the six months to the end of June 2005, compared to the sameperiod in 2004 has been 47% to £5.44m. Profit after tax (PAT) for the six monthperiod has increased by 279% to £0.74m. The business is therefore growing at asatisfactory rate and we remain positive that this will also be reflected in ourfull year figures to the end of December 2005. At the time of our statement for the year ended 31st December 2004, I indicatedthat our development strategy was already showing through in the Group's resultsand that we were continuing to pursue our strategy for both organic andacquisitive growth. At that time we were preparing for admission to AIM whichwas successfully achieved on 10 June 2005, raising £4.6m to support ourstrategy. In our Admission Document we demonstrated a history of both organicand acquisitive growth, announced the intention to complete two acquisitions onflotation and described the business as focussed on returning value toshareholders. Strategy I am pleased to report that our strategy has proven to be correct throughout theperiod and I have every confidence that this will remain the right strategygoing forward. We have grown as anticipated in my 2004 statement and havecontinued to implement the principle objectives as presented to investors. Someinvestors have asked us when the company expects to pay its first dividend. I ampleased to announce that we expect to introduce a dividend when we report ourfull year figures in April 2006, with payment in June 2006. A balanced approach to growth Our stated policy of 'a balanced approach to growth' has continued. We havesecured significant projects across seven market sectors and in a variety ofconstruction value ranges. The focus is on the larger values where we generatehigher margins. Operating companies acknowledge that they have secured largerscale projects as a result of being part of the Group. SMC Gower Architects (Leeds, acquired 2001) and SMC Corstorphine & Wright(Warwick, acquired 2002) have both experienced organic growth and returned goodmargins. Turnover has grown by 147% and 29% respectively compared to the sameperiod last year. The two acquisitions completed on flotation, Corstorphine & Wright Hills Erwin(Manchester and Lancaster) and Philip Lees & Associates (Leeds), are tradingabove expectations, although only 20 days of their figures are accounted for inthis report. Philip Lees & Associates has been integrated into SMC GowerArchitects, sharing office space and resources, with Philip Lees appointed as aDirector of that business. The new acquisitions are forecasting healthyperformances for the full year. We have initiated discussions with furtherpotential earnings enhancing acquisitions that could also bring sector andgeographic advantages to the Group. The second half of the year has started well and, as we announced on the 15thAugust 2005, we have already secured a number of new contracts, both at home andabroad, with a total construction value of £100m and total fee income of £1m. These projects include: •A new headquarters building, Coventry •Mixed-use development, retail, and residential in conservation area - The Royal, Windermere •Sports Centres, Warwickshire •Confidential office/mixed-use/retail developments for Pillar Properties, St James's Securities and Canary Wharf Ltd •Mixed-use development including 35 storey Iconic building, Minsk, Belarus €290 bed Hotel, Islamabad, Pakistan The performance of our business relates directly to the performance of ourpeople. The dedication of my colleagues to servicing our clients' requirementshas been exceptional, resulting in a high level of repeat commissions and someaward-winning projects. I would like to take this opportunity to express myappreciation for their considerable efforts and the pleasure I take in observingand encouraging their creativity and imagination. Stewart McCollChief Executive Consolidated profit and loss statement For the six months ended 30 June 2005 Unaudited Unaudited Audited 6 months ended 6 months ended 12 months ended 30 June 2005 30 June 2004 31 December 2004 Notes £'000 £'000 £'000 TURNOVERGroup andshare of jointventure 5,660 4,032 8,481less: share ofjoint ventureturnover (220) (339) (392) --------- --------- ---------Group turnover(includingacquisitionsof £83,000) 5,440 3,693 8,089 Cost of sales (2,469) (1,985) (4,006) --------- --------- ---------GROSS PROFIT 2,971 1,708 4,083 Administrativeexpenses (1,537) (1,121) (2,421)Depreciation (69) (53) (112)Goodwillamortisation (86) (52) (116)Otheroperatingincome 3 3 6 --------- --------- ---------Groupoperatingprofit(includingacquisitionsof £23,000) 1,282 485 1,440 Share ofoperatingprofit injoint venture 15 18 30 --------- --------- ---------TOTALOPERATINGPROFIT 1,297 504 1,470 Interestreceivable 14 6 22Interestpayable (208) (198) (467) --------- --------- ---------PROFIT ONORDINARYACTIVITIESBEFORETAXATION 1,103 312 1,025 Taxation 2 (364) (116) (316) --------- --------- ---------PROFIT ONORDINARYACTIVITIESAFTER TAXATION 739 195 708 --------- --------- --------- Basic earningsper ordinaryshare (inpence) 3 3.16 0.88 3.21 Dilutedearnings perordinary share(in pence) 3 3.16 0.88 3.21 Dividend perordinary share(in pence) 4 nil nil nil Consolidated balance sheet At 30 June 2005 Unaudited Unaudited Audited as at as at as at 30 June 2005 30 June 2004 31 December 2004 Notes £'000 £'000 £'000 FIXED ASSETSIntangible assets 4,454 2,007 3,224Tangible assets 522 378 382 Investment in jointventure:Share of gross assets 262 255 262Share of gross liabilities (229) (250) (246) --------- --------- ---------TOTAL FIXED ASSETS 5,008 2,390 3,622 CURRENT ASSETSDebtors: amount fallingwithin one year 7,087 5,159 5,675Cash at bank and in hand 1 - 1 --------- --------- --------- 7,088 5,159 5,676 CREDITORS: amounts fallingdue within one year (3,836) (4,947) (5,213) --------- --------- ---------NET CURRENT ASSETS 3,252 212 463 --------- --------- --------- TOTAL ASSETS LESS CURRENTLIABILITIES 8,260 2,602 4,085 CREDITORS: amounts fallingdue after more than oneyear (2,488) (2,155) (3,122)PROVISIONS FOR LIABILITESAND CHARGES (11) (1) - --------- --------- ---------NET ASSETS 5,761 446 963 --------- --------- --------- CAPITAL AND RESERVESCalled up share capital 171 110 110Share premium account 4,112 409 409Merger reserve 445 - -Shares held by EBT (150) - -Profit and loss account 1,183 (73) 444 --------- --------- ---------EQUITY SHAREHOLDERS' FUNDS 6 5,761 446 963 --------- --------- --------- Consolidated cash flow statement For the six months ended 30 June 2005 Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2005 2004 2004 Notes £'000 £'000 £'000 Net cashflowfrom operatingactivities i 286 672 243Returns oninvestmentsand servicingof finance ii (226) (154) (409)Taxation - (155) (298)Capitalexpenditureand financialinvestment ii (19) (17) (67)Acquisitions ii (1,101) - (25) --------- --------- ---------Cash (outflow)/ inflowbeforefinancing (1,060) 346 (556) Financing ii 2,796 (262) (185) --------- --------- ---------Increase /(decrease) incash in theperiod 1,736 84 (741) --------- --------- --------- Reconciliation of net cash iiiflow to movement in netdebt Increase /(decrease) incash in theperiod 1,736 84 (741)Cash outflowfrom change indebt 851 262 185 --------- --------- ---------Change in netdebt resultingfrom cashflows 2,587 346 (556)New financeleases (102) (102) (119) --------- --------- ---------Movement innet debt inperiod 2,485 244 (675) Opening netdebt (4,699) (4,024) (4,024) --------- --------- ---------Closing netdebt (2,214) (3,780) (4,699) --------- --------- --------- Notes to the Consolidated cash flow statement For the six months ended 30 June 2005 Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 i Reconciliation of operating profit to net cashflow from operating activities Operating profit 1,282 485 1,440 Amortisation of goodwill 86 52 116 Depreciation of fixed assets 69 53 112 (Profit) / loss on disposal (2) - 8 Increase in debtors (787) (1,433) (1,950) (Decrease) / increase in creditors (362) 1,516 517 ---------- --------- ---------- Net cash flow from operating activities 286 672 243 ---------- --------- ----------ii Gross cash flows Return on investments and servicing of finance Interest received 12 6 22 Interest paid (228) (150) (413) Interest element of finance lease rental payments (10) (10) (18) ---------- --------- ---------- (226) (154) (409) ---------- --------- ---------- Capital expenditure and financial investment Purchase of tangible fixed assets (21) (17) (67) Sale of tangible fixed assets 2 - - ---------- --------- ---------- (19) (17) (67) ---------- --------- ---------- Acquisitions Consideration paid on acquisitions (990) - - Consideration paid on prior year acquisition (25) - (25) Bank overdraft acquired with subsidiairies (86) - - ---------- --------- ---------- (1,101) - (25) ---------- --------- ---------- Financing Issue of shares (net) 3,647 - - Debt due within one year: repayment of short term borrowings (745) (220) (997) Debt due within one year: increase in bank loan - - 888 Capital element of finance lease rental payments (106) (42) (76) ---------- --------- ---------- 2,758 (262) (185) ---------- --------- ---------- Audited Unaudited as at as at 31 December Cash Non-cash 30 June 2004 flows movements 2005 £'000 £'000 £'000 £'000 iii Analysis of net debt cash in hand, at bank 1 - - 1 bank overdraft (1,893) 1,736 - (157) debt due within 1 year (858) 583 (445) (720) debt due after 1 year (1,745) 162 445 (1,138) finance leases (204) 106 (102) (200) ---------- --------- ---------- --------- (4,699) 2,587 (102) (2,214) ---------- --------- ---------- --------- Notes to the financial information For the six months ended 30 June 2005 1 Accounting policies The financial information contained in this interim report does not constitute statutory accounts. 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 2004. 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. 2 Taxation Taxation for the six months to 30 June 2005 is based on the effective rate of taxation which is estimated to apply for the year ending 31 December 2005. 3 Earnings per share Unaudited Unaudited Audited 6 months 6 months 12 months ended 30 ended 30 ended 31 June June December 2005 2004 2004 £'000 £'000 £'000 Average number of shares 23,363,181 22,075,000 22,075,000 Retained profits 739 195 709 ----------- --------- --------- Basic earnings per share (pence per share) 3.16 0.88 3.21 ----------- --------- --------- Average number of shares 23,363,181 22,075,000 22,075,000 Dilutive potential shares 32,087 - - ----------- --------- --------- Fully diluted earnings per share (pence per share) 3.16 0.88 3.21 ----------- --------- --------- PAT 739 195 709 Add back goodwill / amortisation 86 52 116 ----------- --------- --------- Adjusted basic and fully diluted earnings per ordinary share before goodwill amortisation (pence per share) 3.53 1.12 3.73 ----------- --------- --------- 4 Dividend policy It is proposed to introduce a dividend recommendation at the time of announcing our preliminary results for the year ended 31st December 2005, in April 2006. 5 Share capital On the 10 June 2005, the company allotted 10,675,934, 0.5p ordinary shares at 43p each for cash consideration on the admission of the company to AIM. On the same day, the company allotted 348,837 0.5p ordinary shares at 43p each and 1,046,512 0.5p ordinary shares also at 43p each to an employee benefit trust and to acquire two subsidiaries respectively. Further details of the acquisitions are disclosed in note 7 below. 6 Reconciliation of movements in shareholders' funds Profit for the period attributable to shareholders 739 195 708 Dividends - - - ----------- --------- --------- 739 195 708 Issue of share capital (net of expenses) 4,209 - - Shares held in EBT (150) - - ----------- --------- --------- Net movement in shareholders' funds 4,798 195 708 Opening shareholders' funds 963 251 254 ----------- --------- --------- Closing shareholders' funds 5,761 446 962 ----------- --------- --------- 7 Acquisitions of subsidiaries On 10 June 2005, SMC Group PLC acquired 100% of the issued share capital of Corstorphine & Wright Hills Erwin Ltd ("C&WHE") and Philip Lees & Associates Ltd ("P Lees") Net assets acquired at fair value C&WHE P Lees Total £'000 £'000 £'000 Tangible fixed assets 66 20 86 Debtors 411 251 662 Cash at bank and in hand 34 - 34 Bank loan and overdraft - (120) (120) Other creditors (409) (92) (501) Provisions for liabilities and charges (11) - (11) ----------- --------- --------- 91 59 150 Goodwill 642 648 1,290 ----------- --------- --------- 733 707 1,440 ----------- --------- --------- Satisfied by:Cash paid 400 525 925Shares issued 300 150 450Costs of acquisitions 33 32 65 ----------- --------- --------- 733 707 1,440 ----------- --------- --------- 8 Interim Report The interim report was approved by the board on 2 September 2005. The interim report will be sent to shareholders in early September and will be available free of charge from the Company's registered office from the day of despatch. This information is provided by RNS The company news service from the London Stock Exchange