30 Sep 2009 16:58
30 September 2009
Archial Group Plc
Interim Results for the six months ended 30 June 2009
Archial Group Plc ("Archial" or the "Group") (ARL.L), the architects and design business, announces its unaudited interim results for the six months ended 30 June 2009.
Financial Highlights:
Turnover of £18.0m (H1 2008: £22.0m)
EBITDA (pre exceptional costs) of £1.7m (H1 2008: £3.4m)
EBITDA (pre exceptional costs) margin of 9.2% (H1 2008: 15.5%)
Total implemented annualised savings of £7.2m (H1 2009: £2.6m : H2 2009: £4.6m)
Total actual 2009 savings implemented of £4.1m (H1 2009: £0.5m : H2 2009: £3.6m)
Adjusted* PAT of £0.9m (H1 2008: £2.2m)
Loss after tax of £3.4m (H1 2008: £1.2m profit after tax)
Basic adjusted* earnings per share 0.40p (H1 2008: 0.54p)
Loss per share (1.46p) (H1 2008: 0.54p earnings per share)
Trade debtors (pre exceptional) decreased from £14.6m to £13.6m in the period
Working capital banking facilities renewed until the end of September 2010 and improved term loan facilities committed until the end of December 2013
* see note 5 to the interim statements
Operational Highlights:
Robust business performance despite unprecedented market conditions in construction industry
Strict and effective control of costs through early action from management maintained profitability in line with H2 2008 levels in spite of the reduction in net revenues
EBITDA for the full year expected to benefit from the £4.1m reduction in costs
Increase in order book since July 2009 of 5% following period of gradual erosion since May 2008.
Total future order book of £34.7m plus additional total pipeline of £42m
£8.5m of new instructions confirmed since H1 2009 period end
Defensible diversification of sectors with significant international revenue growth:
37% of forward order book UK public sector
40% of forward order book UK private sector
23% of forward order book international
Strong visibility on future revenue stream with 96% of order book instructed for 2009 and 45% of 2010 order book instructed
Continued organic growth in Eastern Europe, Abu Dhabi, China, Vietnam and Malaysia
Further rationalisation of premises to be undertaken in the UK to create efficiencies and flexibility of resource and to consolidate into larger scale city centre locations
Sir Rodney Walker, Chairman commented:-
'With the vast majority (96%) of our anticipated turnover for the remainder of 2009 already instructed, and a good proportion of our anticipated turnover for 2010 (45%) also instructed, coupled with the cost saving measures having a greater effect in the remainder of this year, we are confident of a strong and improved second half performance resulting in a commendable outcome for the year as a whole.
The total order book has recently increased to £34.7m, following a period of gradual erosion since May 2008. This is exclusive of a strong pipeline of commissioned work, not included in the forward order book, of £42m. With this robust workflow, coupled with the fact that the full impact of the cost saving measures will be felt during H2 2009 and beyond into 2010, we look forward to the Group's future with confidence.
For further information please contact:
| Archial Group Plc Chris Littlemore, Chief Executive Officer John Taylor, Chief Financial Officer | Tel: +44 (0)20 7580 0400 |
| Numis Securities Limited Nominated Adviser: Stuart Skinner/ Brent Nabbs Corporate Broking: James Serjeant | Tel: +44 (0)20 7260 1000 |
| Financial Dynamics Billy Clegg/ Georgina Bonham/ Alex Beagley | Tel: +44 (0)20 7831 3113 |
CHAIRMAN'S STATEMENT
Overview
I am extremely proud of the achievements of the team to have responded so vigorously to the market environment, securing a satisfactory result in H1 2009 and most importantly a promising outlook for the Group going forward.
The unprecedented trading conditions experienced by all and especially those in the construction sector, have resulted in a portion of the Group's secured work being postponed or cancelled, with its inevitable effect on our trading performance. As a result, the Group's turnover compared to the corresponding period last year is down by 18% at £18.0m which is however significantly better than the industry average due to the efforts made over the last eighteen months to improve the resilience of the business.
As soon as we recognised the worsening situation, management took early, decisive action to reduce the cost base resulting in a pro forma annualised cost reduction in 2009 of approximately £7.2m. This also enabled us to maintain gross margins in line with H2 2008 levels, at around 44%, in spite of a 12% reduction in net revenues from the same period. Many difficult decisions have had to be made to achieve this which have affected all areas of the Group. Following these actions, we are pleased to report a pre-exceptional EBITDA profit of £1.7m in the period. After the impact of the exceptional cost of these actions, this results in a loss after tax of £3.4m for the period. Of particular significance, many of the cost reductions implemented during the first six months of 2009 will have a delayed impact with benefit accruing mainly from H2 2009 onwards. As a consequence, we expect EBITDA for the full year to benefit from the £4.1m cost savings implemented in 2009.
Our bank, HBOS, have backed the business for many years and we continue to benefit from their support with the recent renewal of facilities.
I would therefore like to express the thanks of the Board to the management, who have been ready to take the necessary decisive actions, to ensure the Group's continued performance. In particular, I would like to thank our employees, who have all been affected by the cost saving exercise carried out. The restructuring of the Group as a whole, which began in 2007, continues and has in a number of ways provided the impetus to enable further efficiencies to be identified and implemented quickly.
Despite the prospect of a general economic environment which is unlikely to worsen but is likely to remain challenging in 2010, we anticipate that there will be exciting opportunities to pursue further acquisitive growth for the business in the appropriate sectors and geographies. We are progressing with several organic growth opportunities overseas to strengthen the defensibility of our revenue and have established further international collaborative working arrangements.
Board Changes
I was pleased on behalf of the Board to be able to welcome John Taylor as Chief Financial Officer on 1 June 2009. John brings extensive plc experience having joined the Group from his previous role as CFO of Maxima Holdings Plc.
Outlook
With the vast majority (96%) of our anticipated turnover for the remainder of 2009 already instructed, and a good proportion of our anticipated turnover for 2010 (45%) also instructed, coupled with the cost saving measures having a greater effect in the remainder of this year, we are confident of a strong and improved second half performance resulting in a commendable outcome for the year as a whole.
The total order book has recently increased to £34.7m, following a period of gradual erosion since May 2008. This is exclusive of a strong pipeline of commissioned work, not included in the forward order book, of £42m. With this robust workflow, coupled with the fact that the full impact of the cost saving measures will be felt during H2 2009 and beyond into 2010, we look forward to the Group's future with confidence.
Sir Rodney Walker
Non-executive Chairman
CHIEF EXECUTIVE'S REVIEW
Introduction
We are pleased with the robust performance of the Group given the challenging market conditions in which we have been operating. The Group's resilience, relative to the sector, has largely been a result of two key factors. Firstly, the quick, decisive actions taken by management to manage the business efficiently during the downturn, have ensured that a firm and ongoing control of costs has been maintained. Secondly, the diverse nature of the sectors and geographies in which we operate, has ensured that we have not been dependant upon too few major income streams having a material effect on our performance.
Reducing the Group's cost base early was management's key focus during the period and we constantly continue to review the tight cost controls which we have in place. As a result of these actions, the Group has maintained its profitability level and produced pre-exceptional EBITDA of £1.7m. After the impact of the exceptional costs from the cost saving actions, this results in a loss after tax of £3.4m for the period. These results were from revenue of £18.0m, down 18% from the same period last year.
Notably, we have implemented further significant structural changes in the Group during H1 2009 and again since the period end. We expect to see the full impact of a cost saving of £4.1m during the year, of which £3.6m will be realised in the second half, and an annualised impact of £7.2m from these changes.
We are able to report that the successful turnaround of the Group commenced in 2008 is continuing and progressing well. We are in fact ahead of schedule, having brought forward several additional actions planned for 2010 / 2011 to gain greater efficiencies. These relate most significantly to the combination of our three larger studios in Glasgow and two in Edinburgh into one in each city, where we make use of existing office and operational capacity to greater effect. We have also rationalised smaller office locations into larger regional city centres, thereby maintaining our local, regional and national coverage.
Significant focus has been placed on the Group's international work which is now the fastest growing area within the Group. During the period we have secured contracts for a number of major overseas projects, not only in 'Sparch' our Asian operating business, but also in Archial Architects Ltd and Alsop (Consultants) Ltd. In addition, we are also pleased to have further diversified the business in the UK and have now achieved an optimum balance between public and private sector work. We are building on the international workflow and are increasing our presence in Abu Dhabi, investigating the prospect of a location in Delhi in 2010 and having secured a major project in Vietnam, are also considering organic growth in the country. These actions follow from the buoyant economic prospects that we are experiencing in each location.
Financials
In the six months ended 30 June 2009, revenue was down 18% to £18.0m (H1 2008: £22.0m), while EBITDA (pre-exceptional costs) was £1.7m (H1 2008: £3.4m). Adjusted profit after tax was £0.9m (H1 2008 £2.2m). Loss after tax for the first half was £3.4m (H1 2008: £1.2m profit). Adjusted earnings per share were 0.40p (H1 2008: 0.54p) and basic loss per share was 1.46p (H1 2008: 0.54p earnings per share).
The Group's balance sheet remains robust, with net debt marginally increasing from £14.3m at 31 December 2008 to £15.0m at 30 June 2009 due to the working capital requirement in the first half of 2009. We have, since the period end repaid a term loan facility of £1.35m, reducing the net debt of the Group. In addition, during the period trade debtors (pre exceptional) decreased from £14.6m to £13.6m.
We are pleased to report that since the end of the period, the Group's order book has now increased to £34.7m. This is significant as it represents the first improvement in the order book following a gradual erosion between May 2008 and February 2009. In addition to this order book, we are pleased to report an increased pipeline of £42m much of which arises from later stages of work currently forming part of our confirmed order book.
Banking
Our bank, HBOS, remains supportive of the Group and we have renewed our £3m working capital facility for a further year until the end of September 2010. We have also revised our £12m term loan facilities which now include a more favourable amortisation period along with an easing of covenants. The repayment period is now committed until the end of December 2013.
Cost reduction/ rationalisation
We have taken a rigorous approach to cost reduction in light of the economic environment. During the period, the Group's head count was reduced by 11% and other initiatives such as merging offices have resulted in an annualised cost saving in H1 2009 of £2.6m of which £0.5m has been reflected in the results for H1 2009. During H2 2009 we continue to focus on managing costs and initiatives already in place including further office mergers and headcount reductions which will deliver a cumulative cost saving of £4.1m in FY09.
During the year we sought to rationalise our offices, for example in each of Edinburgh and Glasgow, into a single larger city location in order to maximise our efficiency and presence in these key cities. In addition to the cost savings achieved, we anticipate significant efficiencies to come from bringing together small studios into larger central locations studios, as well as gaining further benefits from strengthening the Group's foothold in key locations.
Consequently, we expect to achieve total annualised cost savings from these initiatives of approximately £7.2m.
Exceptional costs
The costs of strategic change discussed above have impacted the Group with exceptional costs of £0.65m during the period.
The unprecedented trading conditions in the UK over the last 12 months have led to a portion of the Group's secured work being cancelled or postponed and the directors feel it is now prudent to make a provision against trade and other receivables of £3.85m.
Business Review
UK
In line with the Group's strategy, we have successfully steered the business towards a more balanced and diverse split of work, to ensure the business is as defensive as possible. On my appointment in January 2008, the public sector order book accounted for 31% of revenue and the private sector for more than 56%. During 2008 and H1 2009, we have focused on equalising this mix and the split of public (37%) and private (40%) work is now more balanced.
We are seeing an early indication that private sector instructions are increasing, notably in the residential sector, which we believe will assist to counter any potential decrease in public sector revenue in the medium term.
Regional update
During 2009 plans have been put in place to reduce the number of separate premises in the UK from 23 to 16 but without impacting our overall local, regional or national presence. Three of our smaller offices have been closed where they were within close proximity to other larger regional city centres and as noted above, in Edinburgh and Glasgow we have merged multiple offices to form larger more efficient single studios to reduce costs. These changes benefit the organisation both operationally and financially and in turn we are confident that our service level will improve as a direct consequence. Will Alsop has changed his role with the Group to become one of 'consultant' with the 'Alsop' brand operating on key internationally acclaimed design projects worldwide. Alsop (Consultants) Limited is led by Managing Director Duncan Macaulay and his team of four Directors from Battersea.
International
We have focused on increasing our international exposure. Since January 2008 we have increased the Group's income from overseas, as a proportion of Group turnover, from 7% (as delivered during 2007) to a current 23% of our future order book. We continue to target international opportunities and are confident that the percentage of international revenue will increase further in the short, medium and longer term.
We have a significant and expanding presence in Shanghai, Beijing, Singapore, Kuala Lumpur and Abu Dhabi. In addition to work in these cities, we also have significant projects ongoing in Canada, Holland, Germany, Estonia, India, Vietnam, and in many major cities in China. We see significant opportunities to further strengthen our position in the countries where we already have a presence, as well as expanding by organic growth into new geographies on the back of major projects. This model has been tried and tested over the last five years in Asia evidenced by the growth of 'Sparch' our operating business in the region. We are looking to progress further with organic growth in Vietnam and the Group as a whole is looking to open an office in India in H1 2010. Our recent presence in Abu Dhabi continues to produce good opportunities not only in the Emirates but also in Saudi Arabia.
Significant Project Wins
Since our AGM announcement at the end of June 2009, we have continued to generate new business. The following is a selection demonstrating the variety of projects, sectors and geographies that underpins the balanced portfolio of our business.
NE England - Major engineering facility - International Defence Systems Manufacturer
NW England - Orford Sports/leisure village - Warrington Borough Council
West End London - Major retail building for a publicly listed developer
Kent - Refurbishment and conversion for national supermarket chain
NE England - International Conference Centre, new exhibition halls and support areas
Birmingham - Heartlands Academy - Birmingham BSF - Bovis Lend Lease
Tyneside - Social Housing Development - Housing 21
Hamburg - Façade design for new ferry terminal
Toronto - Additional contract Underground Station Steeles West
Vietnam - Mixed retail and residential 104,000 sq metre scheme,145 metre high tower in Ho Chi Minh City
South England - Four recommenced Learning Skills Council college projects
Eastern Europe - Major Logistics Facility Masterplan
Scotland - Selection of Hospital / Clinic / Dental Buildings
Argyll Community Housing Campbeltown
In addition to the above, we have secured a number of smaller projects in all regions. The total value of projects instructed since the period end is £8.5m.
Strategy
We continue to focus on growing the Group both organically and through acquisitions. In doing so, our core focus will be on pursuing the following elements:
Building our international portfolio
Organic growth of each restructured office location
Acquisitive growth of appropriate companies where there is a marriage of either geography or expertise or both which develops our key income strategy
Maintaining and building our key income strategy of a balance of private and public work in the UK and an increasing proportion of work from international income streams in a widening number or economies
Building our quality and delivery to maintain our position as a leading architects company with international acclaim
Maintaining our cost base in line with our top-line growth
Given our strong position within our sector, we are well placed to acquire value-accretive businesses that fit our business model in existing locations as well as pursuing acquisition opportunities in new markets or locations in order to further strengthen our presence.
People
The past six months has been a challenging period as the whole business has had to respond quickly to changing market conditions. I would like to thank all of our employees for their hard work and dedication in ensuring the ongoing success of the Group during this period.
Outlook
It is extremely encouraging that in these tough economic conditions, our forward order book visibility, following a period of decline, is now growing and standing at £34.7m. In addition to this, we have a strong pipeline of future opportunities totalling in excess of £42m, a significant portion of which relates to further stages of currently instructed projects. This demonstrates the success of the Group's relationship with its client-base and the industry as a whole. It also reflects the restructuring put in place since January 2008, our more optimum balance of private and public sector work, as well as our focus on diversification, both by sector and geographies. Importantly, the Group also continues to remain focused on creativity and delivering service excellence to our clients.
Whilst we anticipate our environment will remain challenging in the second half of 2009, we are confident that given our robust order book, the fact that the full impact of the extensive cost saving measures will be felt during H2 2009 and into 2010, as well as our continued focus on cash generation and cost saving, the Group has the necessary financial strength to weather the challenging conditions and emerge a stronger and better business. We are therefore able to look forward to the Group's future with confidence.
Chris Littlemore
Chief Executive
| Interim consolidated income statement | ||||||||
| For the six months ended 30 June 2009 | ||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | Audited | ||||
| Notes | Pre Exceptional Costs June 2009 | Exceptional Costs June 2009 | Total 6 months ended 30 June 2009 | Total 6 months ended 30 June 2008 | Total Year ended 31 Dec 2008 | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | ||||
| CONTINUING OPERATIONS | ||||||||
| REVENUE | 18,030 | - | 18,030 | 22,008 | 42,466 | |||
| Cost of sales | (10,108) | - | (10,108) | (11,364) | (22,653) | |||
|
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| |||||||
| GROSS PROFIT | 7,922 | - | 7,922 | 10,644 | 19,813 | |||
| Administrative expenses | (6,260) | (4,499) | (10,759) | (7,236) | (14,458) | |||
| EBITDA* | 1,662 | (4,499) | (2,837) | 3,408 | 5,355 | |||
| Depreciation | (386) | - | (386) | (359) | (799) | |||
| Amortisation of intangible assets | (670) | - | (670) | (927) | (1,837) | |||
| Total operating expenses | (7,316) | (4,499) | (11,815) | (8,522) | (17,094) | |||
| Share of results of joint venture - post tax | (51) | - | (51) | - | (38) | |||
|
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| |||||||
| OPERATING PROFIT / (LOSS) | 555 | (4,499) | (3,944) | 2,122 | 2,681 | |||
| Finance revenue | 5 | - | 5 | 68 | 134 | |||
| Finance costs | (386) | - | (386) | (621) | (1,283) | |||
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| |||||||
| PROFIT / (LOSS) BEFORE TAXATION | 174 | (4,499) | (4,325) | 1,569 | 1,532 | |||
| Taxation | 4 | 72 | 903 | 975 | (376) | (100) | ||
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| PROFIT / (LOSS) FOR THE PERIOD | 246 | (3,596) | (3,350) | 1,193 | 1,432 | |||
| EARNINGS / (LOSS) PER SHARE (IN PENCE) | ||||||||
| Basic | 5 | 0.40 | (1.46) | 0.54 | 0.62 | |||
| Diluted | 5 | 0.40 | (1.46) | 0.54 | 0.62 | |||
*Earnings before interest, tax, depreciation and amortisation.
Interim consolidated statement of comprehensive income
| Unaudited Total 6 months ended 30 | Unaudited Total 6 months ended 30 | Unaudited Total Year ended 31 | ||
| June 2009 | June 2008 | Dec 2008 | ||
| £000 | £000 | £000 | ||
| (Loss)/profit for the period | (3,350) | 1,193 | 1,432 | |
| Exchange difference on translation of foreign operations | (591) | - | 695 | |
| Other comprehensive (loss)/income for the period, net of tax | (591) | - | 695 | |
| Total comprehensive (loss)/income for the period, net of tax | (3,941) | 1,193 | 2,127 |
| Interim consolidated statement of financial position | ||||
| As at 30 June 2009 | ||||
| Unaudited | Unaudited | Audited | ||
| Notes | 30 June 2009 | 30 June 2008 | 31 Dec 2008 | |
|
| £'000 | £'000 | £'000 | |
| NON-CURRENT ASSETS | ||||
| Goodwill | 21,196 | 20,979 | 21,196 | |
| Other intangible assets | 13,418 | 15,006 | 14,088 | |
| Property, plant and equipment | 1,697 | 2,085 | 1,893 | |
| Interests in joint venture | - | 35 | - | |
| Other financial assets | 1,720 | 1,672 | 1,706 | |
| TOTAL NON-CURRENT ASSETS | 38,031 | 39,777 | 38,883 | |
| CURRENT ASSETS | ||||
| Trade and other receivables | 7 | 21,266 | 26,104 | 24,648 |
| Deferred tax asset | 4 | 903 | - | - |
| Cash and short term deposits | - | - | 226 | |
| TOTAL CURRENT ASSETS | 22,169 | 26,104 | 24,874 | |
| TOTAL ASSETS | 60,200 | 65,881 | 63,757 | |
| CURRENT LIABILITIES | ||||
| Trade and other payables | 9,737 | 9,611 | 9,232 | |
| Current tax liabilities | 975 | 404 | 848 | |
| Interest bearing loans and borrowings | 2,918 | 2,756 | 2,303 | |
| Provisions | 479 | 75 | 3 | |
| TOTAL CURRENT LIABILITIES | 14,109 | 12,846 | 12,386 | |
| NET CURRENT ASSETS |
| 8,060 | 13,258 | 12,488 |
| NON-CURRENT LIABILITIES | ||||
| Trade and other payables | - | 9 | 573 | |
| Interest bearing loans and borrowings | 12,108 | 13,913 | 12,240 | |
| Provisions | - | 445 | 425 | |
| Deferred tax liabilities | 3,716 | 4,167 | 3,925 | |
| TOTAL NON-CURRENT LIABILITIES | 15,824 | 18,534 | 17,163 | |
| TOTAL LIABILITIES | 29,933 | 31,380 | 29,549 | |
| NET ASSETS |
| 30,267 | 34,501 | 34,208 |
| EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT | ||||
| Share capital | 1,190 | 1,190 | 1,190 | |
| Share premium | 25,803 | 25,819 | 25,803 | |
| Merger reserve | 8,106 | 8,106 | 8,106 | |
| Treasury shares | (158) | (158) | (158) | |
| Movement in Equity - Foreign Exchange | 104 | - | 695 | |
| Retained earnings | (4,778) | (456) | (1,428) | |
| TOTAL EQUITY | 30,267 | 34,501 | 34,208 |
| Interim consolidated statement of changes in equity | ||||
| For the six months ended 30 June 2009 | ||||
| Unaudited | Unaudited | Audited | ||
| 6 months ended 30 June 2009 | 6 months ended 30 June 2008 | Year ended 31 Dec 2008 | ||
|
| £'000 | £'000 | £'000 | |
| (Loss) / Profit for the period | (3,350) | 1,193 | 1,432 | |
| Foreign Exchange Movement | (591) | - | 695 | |
| Total recognised income and expense for the period | (3,941) | 1,193 | 2,127 | |
| Shares issued in the period | - | 15,070 | 15,070 | |
| Share issue costs | - | (1,943) | (1,959) | |
| Share-based payment | - | 30 | (389) | |
| Net change in equity in the period | (3,941) | 14,350 | 14,849 | |
| Opening equity | 34,208 | 20,151 | 19,359 | |
| Closing equity | 30,267 | 34,501 | 34,208 | |
| Interim consolidated cash flow statement | ||||
| For the six months ended 30 June 2009 | ||||
| Unaudited | Unaudited | Audited | ||
| 6 months ended 30 June 2009 | 6 months ended 30 June 2008 | Year ended 31 Dec 2008 | ||
|
| Notes | £'000 | £'000 | £'000 |
| Operating activities | ||||
| Cash (absorbed by) / generated from operations | 8a | (127) | (672) | 3,291 |
| Tax paid | (10) | (1,167) | (689) | |
| Net cash flow from operating activities | (137) | (1,839) | 2,602 | |
| Investing activities | ||||
| Interest received | 5 | 68 | 134 | |
| Purchases of property, plant and equipment | (190) | (609) | (857) | |
| Acquisition of subsidiaries | 8b | - | (6,881) | (7,978) |
| Net cash flow used in investing activities | (185) | (7,422) | (8,701) | |
| Financing activities | ||||
| Interest paid | (386) | (621) | (1,283) | |
| Repayment of bank loans | (562) | (469) | (1,875) | |
| Proceeds from issue of new shares | - | 13,127 | 13,111 | |
| Redemption of loan notes | - | (119) | (235) | |
| Repayment of capital element finance lease obligations | (27) | (107) | (172) | |
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| Net cash flow from financing activities | (975) | 11,811 | 9,546 | |
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| (Decrease)/increase in cash and cash equivalents | (1,297) | 2,550 | 3,447 | |
| Cash and cash equivalents at beginning of the period | 226 | (3,221) | (3,221) | |
| Cash and cash equivalents at end of the period | 8c | (1,071) | (671) | 226 |
| Notes to the interim consolidated financial statements | |||||||
| For the six months ended 30 June 2009 | |||||||
| 1 | Basis of preparation | ||||||
| The financial information contained in this interim report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2008 (prepared in accordance with International Financial Reporting Standards) were prepared and filed with the Registrar of Companies and received an unqualified audit report and did not contain a statement under section 237 (2) or (3) of the Companies Act 2006. The Board of Directors regularly monitors the ability of the Group to meet its liabilities as they fall due for the foreseeable future against the facilities and funding options open to it. The group has renewed working capital facilities for a further year to 3o September 2010 and has committed term loan facilities available to it to 31st December 2013. Accordingly the Board of Directors adopts the going concern basis of preparation of the financial statements as in its assessment it has a reasonable expectation that the Group has adequate resources to continue for the foreseeable future. The interim financial statements are unaudited but have been formally reviewed by the auditors, Ernst & Young LLP, and their review report is attached to these statements. | |||||||
| 2 | Adoption of IFRS | ||||||
| These interim financial statements for the six months ended 30 June 2009 have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations issued and effective or issued and early adopted as at the time of preparing these statements that management expect to apply in its 2009 financial statements. Archial Group Plc has adopted all IFRS with the exception of IAS 34 "Interim Financial Reporting" which is not mandatory for Archial Group Plc at this time. The interim financial statements have been prepared on the historical cost basis and are in accordance with the Group's accounting policies as set out in the annual report and accounts for the year ended 31 December 2008 except for the adoption of new Standards and Interpretations as of 1 January 2009, as noted below: FRS 8 Operating Segments The standard requires disclosure of information about the Group's operating segments and replaces the requirements to determine primary (business) and secondary (geographical) reporting segments of the Group. Adoption of this standard did not have any effect on the financial position or performance of the Group. IAS 1 Revised Presentation of Financial Statements The revised Standard separates owner and non-owner owned changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present in two statements. The amendments to the following standards below did not have an impact on the accounting policies, financial position or performance of the Group: IAS 23 Borrowing Costs IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial Instruments IFRIC 16 Hedges of Net Investments in a Foreign Operation IAS 1 Presentation of Financial Statements: Assets and liabilities classified as held for trading in accordance with IAS 39 Financial Instruments: Recognition and Measurement IAS 16 Property, Plant and Equipment IAS 38 Intangible Assets: Expenditure on advertising and Promotion activities IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 7 Financial Instruments: Disclosures IAS 8 Accounting Policies, changes in Accounting Estimates and Error IAS 10 Events after the Reporting Period IAS 18 Revenue IAS 19 Employee Benefits IAS 20 Accounting for Government Grants and Disclosure of Government Assistance IAS 27 Consolidated and Separate Financial Statements IAS 28 Investment in Associates IAS 31 Interest in Joint Ventures IAS 34 Interim Financial Reporting IAS 36 Impairment of Assets IAS 39 Financial Instruments: Recognition and Measurement | |||||||
| 3 | Exceptional costs | ||||||
| Exceptional costs of £3.85m relate to a provision made against trade receivables and amounts recoverable on contracts to allow for the possibility of delay or cancellation of certain projects in the current exceptional trading environment. Also included in exceptional costs is £649k which is the cost of rationalising the Group's activities, in particular the costs associated with the termination of employment and closure of various premises. | |||||||
| 4 | Taxation | |||||
| Taxation for the six months to 30 June 2009 is based on the effective rate of taxation which is estimated to apply for the year ending 31 December 2009. Taxation for the year ended 31 December 2008 is based on the actual rate of taxation which applied for the year ended 31 December 2008. Taxation for the six months to 30 June 2008 was based on the effective rate of taxation which was estimated to apply for the year ended 31 December 2008. The exceptional tax credit relates to partly recognising the deferred tax asset arising from the exceptional charge referred to in note 3. | ||||||
| Notes to the interim consolidated financial statements |
| 5 | Earnings per share | |||||
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| Unaudited | Unaudited | Audited | ||||
| 6 months ended 30 June 2009 | 6 months ended 30 June 2008 | Year ended 31 Dec 2008 | ||||
| Weighted average number of shares ('000) | ||||||
| For basic earnings per share | 229,176 | 220,354 | 229,176 | |||
| Dilutive effect of share options | 247 | 147 | 122 | |||
| For diluted earnings per share | 229,423 | 220,501 | 229,298 | |||
| Profits for basic and diluted earnings per share (£'000) | ||||||
| (Loss) / Profit for the period | (3,350) | 1,193 | 1,432 | |||
| Add back:- | ||||||
| - Exceptional costs | 4,499 | - | 1,121 | |||
| - Amortisation of intangible assets | 670 | 927 | 1,837 | |||
| - Share based (receipts) / payments | - | 30 | (389) | |||
| - Interest on contingent consideration | - | 20 | (465) | |||
| - Tax impact of above adjustments | (903) | - | 100 | |||
|
| Adjusted profit for the period |
|
| 916 | 2,170 | 3,636 |
| Earnings /(Loss) per share (pence per share) | ||||||
| Basic | (1.46) | 0.54 | 0.62 | |||
| Diluted | (1.46) | 0.54 | 0.62 | |||
| Adjusted earnings per share (pence per share) | ||||||
| Basic | 0.40 | 0.98 | 1.57 | |||
| Diluted | 0.40 | 0.98 | 1.57 | |||
| Adjusted earnings per share has been presented to allow earnings per share to reflect the earnings more directly related to the trading of the Group in each period. | ||||||
| Notes to the interim consolidated financial statements |
| 6 | Dividend | |||||
| There have been no dividend payments in the current financial year (no dividend payments in 2008 for the year ended 31 December 2008). | ||||||
| 7 | Trade and other receivables | ||||
| Unaudited | Unaudited | Audited | |||
| 6 months ended 30 June 2009 | 6 months ended 30 June 2008 | Year ended 31 Dec 2008 | |||
| £'000 | £'000 | £'000 | |||
| Trade receivables | 11,992 | 16,779 | 14,631 | ||
| Amounts recoverable on contracts | 7,304 | 7,404 | 8,376 | ||
| Other debtors | 166 | 289 | 169 | ||
| Prepayments | 1,804 | 1,632 | 1,472 | ||
| 21,266 | 26,104 | 24,648 |
| 8 | Notes to the cash flow statement | ||||||
| Unaudited | Unaudited | Audited | |||||
| 6 months ended 30 June 2009 | 6 months ended 30 June 2008 | Year ended 31 Dec 2008 | |||||
|
| £'000 | £'000 | £'000 | ||||
| a | Cash generated from/(absorbed by) operations | ||||||
| (Loss) / Profit before tax | (4,325) | 1,569 | 1,532 | ||||
| Finance revenue | (5) | (68) | (134) | ||||
| Finance costs | 386 | 621 | 1,283 | ||||
| Share based (receipts) / payments | - | 30 | (389) | ||||
| Share of results of joint venture - post tax | 51 | - | 38 | ||||
| Depreciation of property, plant and equipment | 386 | 359 | 799 | ||||
| Loss on disposal of property, plant and equipment | - | - | - | ||||
| Amortisation of intangible assets | 670 | 927 | 1,837 | ||||
| Movement in foreign exchange equity reserve | (591) | - | 695 | ||||
| (Increase) / decrease in trade and other receivables | 3,382 | (1,711) | (505) | ||||
| (Decrease) / increase in trade and other payables | (81) | (2,399) | (1,865) | ||||
| Cash generated from/(absorbed by) operations | (127) | (672) | 3,291 | ||||
| b | Acquisition of subsidiaries | ||||||
| Consideration paid on prior period acquisitions | - | (6,881) | (7,978) | ||||
| Net cash outflow for acquisitions | - | (6,881) | (7,978) | ||||
| c | Analysis of cash and cash equivalents | ||||||
| Cash and cash equivalents per balance sheet | - | - | 226 | ||||
| Bank overdrafts | (1,071) | (671) | - | ||||
| Cash and cash equivalents per cash flow statement | (1,071) | (671) | 226 | ||||
INDEPENDENT REVIEW REPORT TO ARCHIAL GROUP PLC
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity and consolidated cash flow statement. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 2, which comply with IFRS's as adopted by the European Union and in accordance with the AIM Rules issued by the London Stock Exchange.
Ernst & Young LLP
London
29 September 2009