Last checked at 19 Mar 2009 07:00
Preliminary Results for the year ended 31 December 2008
T. CLARKE PLC
T. Clarke plc, the electrical engineering and contracting company, has announced its preliminary results for the year to 31st December 2008.
Group Turnover up 15.4% to £223.7m (2007: £193.8m)
Adjusted Profit Before Tax* up 86.1% to £15.2m (2007: £8.2m)
Profit Before Tax up 64.0% to £13.4m (2007: £8.2m)
Adjusted EPS* up 85.8% to 26.63p (2007: 14.33p)
Basic EPS up 54.4% to 22.12p (2007: 14.33p)
Final Dividend up 8.0% to 8.75p (2007: 8.10p)
Total Dividend for the year up 8.3% to 13p (2007: 12p)
* Adjusted figures are calculated before goodwill impairment of £1.8m
Pat Stanborough, Chief Executive commented:
"Last year was an excellent year for T. Clarke and I am very pleased with the Group's performance. Having been selected for a number of major projects our reputation remains as the leading electrical contractor in the UK. To win projects such as the Olympic Stadium demonstrates the quality of projects that we are associated with.
" While market conditions remain challenging and visibility on future workload is more limited now than it has been for some time, we continue to further diversify our business both in terms of sector and geography, so that we are not overly dependent on any one sector. We anticipate 2009 revenues to be at more modest levels, however our reputation for quality service and our strong balance sheet should position us well to take advantage of opportunities as they arise."
-ends-
Date: 19th March 2009
For further information contact:
| T. Clarke plc | City Profile |
| Pat Stanborough, Chief Executive | Jonathan Gillen / William Attwell |
| Victoria French, Finance Director | Tel: 020-7448 3244 |
| Tel: 020-7358 5000 | Email: tclarke@city-profile.com |
| web: www.tclarke.co.uk |
Chairman's Statement
While the business environment is challenging, it is very pleasing to be able to report excellent results for the Group in 2008. The London operations benefited from a high level of capacity utilisation and the successful completion of some major projects. In addition there was an overall improvement in the operating performance of our regional businesses.
The current economic problems have been well documented, and this uncertain environment is undoubtedly having an impact on the construction industry. As our skills tend to be used at the latter end of contracts, there is a delayed effect on our order book as the level of new build slows down. Nevertheless we can look to a solid and sustainable level of activity during the current year. Looking to the future we have also the underpinning for our London operations of some long-term, high-profile contracts which are detailed elsewhere in the Report. For all our operations, we will continue to focus on positive cash flow and on the reduction of risk.
The difficulties of operating in the present business climate should not be underestimated, and the Board is particularly appreciative of the professionalism and dedication of all our staff whose efforts continue to keep T Clarke as a beacon of excellence in the industry. At the same time, we continue to value highly our long-standing links with our supportive client base.
There have been some changes to our non-executive directors. We are very grateful for the contribution made by Len Arnold who stood down during the year after ten years on the Board. Bob Campbell, who joined at the beginning of 2008, brings relevant industry and City skills, and we look forward to working with Iain McCusker, who joined at the beginning of this year, and whose financial background will be particularly appropriate in current times.
The Group is well placed to perform to the very best for shareholders in the year ahead, and to face the difficult business climate from a position of financial strength, and, equally importantly, with that unique asset - the T Clarke team.
Russell Race
Chairman
Business review
Financial results
| Overview of Performance | 2008 £m | 2007 £m | Change |
| Group Revenue | 223.73 | 193.85 | +15.4% |
| Adjusted operating profit * | |||
| London operations * | 9.75 | 5.15 | +89.3% |
| UK regions * | 4.23 | 2.51 | +68.6% |
| Property rental income * | 0.40 | 0.46 | - 11.8% |
| Total * | 14.38 | 8.12 | +77.2% |
| Goodwill impairment | -1.80 | 0.00 | - |
| Operating profit after goodwill impairment | 12.58 | 8.12 | +55.0% |
| Investment income | 0.97 | 0.27 | +262.8% |
| Finance costs | -0.15 | -0.22 | -30.1% |
| Profit before tax | 13.40 | 8.17 | +64.0% |
| Adjusted profit before tax * | 15.20 | 8.17 | +86.1% |
| Basic earnings per share (pence) | 22.12p | 14.33p | +54.4% |
| Adjusted earnings per share (pence) * | 26.63p | 14.33p | +85.8% |
| * Adjusted figures are calculated before goodwill impairment of £1.80m | |||
Summary
Given the current economic climate, 2008 was an exceptional year. Our core business is in 'late cycle' within the commercial property development cycle and our revenues were also increased due to the accelerated programme on Westfield Shopping Centre. We have tough challenges ahead and must face them head on. Whilst seeking sensible cost savings and new initiatives it is essential that we retain our skills base for future workload and for the upturn in the market when it comes.
Prospects
Despite these uncertain and challenging times we remain cautiously optimistic. The group is in very good shape and we have a very strong cash position. Our order book at the year end stood at £160m (2007: £215m) plus £30m of contracts currently under negotiation; £140m is due for completion in 2009 (2007: £180m). As previously announced, we anticipate revenues for 2009 to be at more modest levels. We will however seek to exploit growth opportunities where they arise.
Operational review
With 120 years in business, T.Clarke continues to be a market leader in the electrical contracting industry. The company is widely recognised for its excellent customer service and training of apprentices who become the skilled trades people and engineers of tomorrow.
Maintenance of this position is central to the company's long term prosperity, which can be expressed in terms of value to shareholders and attracting and retaining the best people.
The T.Clarke group of companies provides services and coverage across the UK from Aberdeen in Scotland to St. Austell in Cornwall.
Our strategy and core objectives across the group are as follows:
Maintain our excellent reputation in the market place, provide top quality service to our customers and develop long standing customer partnerships
Focus on new market sectors to broaden the spread of the business and to reduce market risk
Provide a comprehensive service to all market sectors and achieve leading positions in each sector
Controlled organic growth and growth by acquisition
Offer ongoing apprentice schemes and train all staff in new technologies and systems
Offer industry-leading remuneration packages to help retain and motivate our staff
Provide a safe and healthy working environment for all our staff and operatives
Reduce the impact of the group's business on the environment
Involvement in social and community issues
To enhance its value for shareholders, the group will drive its operations and strategy from these core objectives and will look to improving efficiency, support for our customers and maintaining competitive advantage from having a highly skilled, directly employed labour force.
Market development
Since autumn 2008 there has been a well-publicised downturn in new commercial property development, particularly in the City of London. Major developers are cancelling and delaying a number of large schemes. Private residential schemes have been similarly affected throughout the UK. There is however, continued demand in the public sector. Sectors such as health, education, prisons and rail, and also affordable housing and social housing continue to provide the group with work. Our strategy is to build strong relationships with our client base and supply chain, and to enhance our capabilities, skills and finances to operate in the current environment.
Operations
2008 was an excellent year and the group delivered record results. We are very pleased with the integration of our businesses. Operating at almost full capacity, due in the main to the accelerated Westfield Shopping Centre programme, our London operations again contributed to a very strong performance. Our regional business performed well but the results for the year were impacted by significant bad debts. We carefully assess our credit risk but in these uncertain times this is challenging, particularly where established contractors' bankers and other sources of finance take increasingly demanding and short term views.
London
London operations have commenced work with Team Stadium on the construction of the Olympic Stadium which is scheduled for completion in early 2011. Negotiations are continuing with Westfield for the new shopping centre in Stratford City, bordering Olympic Park, due to be opened in late 2010. Contracts have been signed for the Pinnacle Building, Bishopsgate, due for completion in early 2012. These projects, together with other contracts, represent most of the significant business available in the London market.
Regions
A selection of contracts recently secured by our regional operations is included below:
Carstairs State Hospital, Scotland; New Stand Falkirk Stadium; Haymarket Transport Hub, Newcastle; Burnside and Silksworth Swimming Pools, Wallsend and Sunderland, Tyne on Wear; Harrogate Library; Abraham Guest School, Wigan; HMP Norwich; Bell Bird Primary School, Sawston, Cambridge; RAF Bicester, Oxon; Truro Library, Cornwall; five Waitrose supermarkets and additional works at Tidworth Garrison.
Board changes
Bob Campbell, formerly Managing Director of Waterman Group Plc (a leading quoted Engineering Consultancy), was appointed as an additional Independent Non-Executive Director on 1st January 2008. Bob Campbell was appointed Senior Independent Director after Len Arnold, having served a term of 10 years as an Independent Non-Executive Director, stood down from the board on 31st July 2008. It was the board's intention to appoint an additional Independent Non-Executive Director and Iain McCusker was appointed as an Independent Non-Executive Director on 1st January 2009. Iain McCusker was previously a partner in Coopers & Lybrand (now PricewaterhouseCoopers), has held several senior roles in industry and was also appointed chair of the Audit Committee on 1st January 2009.
Regional Board
For reporting and operational efficiency the regional board, consisting of the Regional Managing Directors, supported by the Group Financial Controller, reports to the Managing Director - Regions.
People
The group remains committed to providing the best training for all members of staff and currently employs 233 apprentices and 56 adult trainees. This is a key feature of our business and we are proud of the quality of our people. The group draws on the expertise of its people in thirteen subsidiary companies across the UK; each with its own local brand but with a shared reputation for excellence. Health and safety remains of paramount importance to the group and we remain vigilant in this area.
Community and the Environment
We are committed to the community in which we operate and we contribute to a number of charities and fundraising events each year. Equally important is our focus on minimising any impact caused by our business on the environment and we continue to monitor our progress in this area.
Pensions
The risk associated with the defined benefit scheme has to be weighed up against increased staff retention and other benefits to staff as a result of the scheme. During 2008, T. Clarke conducted a consultation with members and bonuses were removed from pensionable salary with effect from 1st January 2009. In order to contribute towards scheme funding, the group is granting a charge to the value of the greater of £1.5m or half the value of our London property (current valuation of £2.7m) to the pension fund, before 31st March 2009. An advantage to the group would be the related reduction in the risk-based levy paid to The Pensions Protection Fund and the ability to spread deficit contributions over a longer period. T. Clarke will continue to monitor the scheme and consult with members as required.
Principal risks and uncertainties
The main areas of uncertainty facing the group relate to market conditions, acquisitions, operational risk, cost inflation, people and health and safety. These are the main risk factors that could potentially impact the group's performance.
Market conditions
During 2009, market conditions have been more difficult as a result of the downturn. There is the possibility that projects may be delayed and there may be increased pressure on margins. However, whilst our business will always be subject to economic cycles, risk is reduced by the diversity of our markets, both in terms of geography and sector. There could also be opportunities because, although we are a clear leader in our industry, we still have a relatively small share of our target market and we may have the ability to exploit opportunities and bolt-on acquisitions at the appropriate time.
Acquisitions
We are not currently pursuing acquisitions; we will act only when opportunities advance our strategy at sensible prices.
Operational risk
We are continually assessing and managing operational risks through the bidding stage to the final commissioning of an installation and handover to the client. We have experienced teams of estimators and all bids are reviewed by a director and checks are carried out to avoid incorrect or non-competitive pricing. Inadequate supervision would result in poor quality and low productivity, both of which would result in loss of reputation and profit. Our contract engineers, supervisors, surveyors and skilled trade's people receive regular training to meet our demanding standards.
Cost inflation
Commodity prices of copper and steel, which are major component parts within our industry, are near to an all time low as a result of the global downturn in demand. However, UK prices could be affected by the weakness of Sterling. We have in place formal supplier framework agreements to manage this risk.
People
Providing high quality service to our clients is only possible with the right people and attracting and retaining high calibre staff is key to our success. This is achieved through a remuneration system linked to performance and strongly embedded training schemes throughout the group. However, in the event of sharp down-turns in the group's businesses, or major contract slippages, having a large directly employed labour force could prove costly in the short term. We have continuous dialogue with the trade unions and continue to review our policies and procedures in managing this risk.
Health & safety
We need to ensure that we provide safe working conditions for our employees, sub-contractors and the public. We recognise that any lack of commitment in our health and safety approach will have a negative impact on individuals, attract financial penalties and adversely impact our reputation. The group has a comprehensive framework in place to manage health and safety risks.
A selection of key customers
British Land, Hammerson, Land Securities, Stanhope, Canary Wharf, RBS, Credit Suisse, Bank of America, Deutsche Bank, ABN Amro, John Lewis Partnership, Waitrose, Westfield Shoppingtowns, Cala Homes, Berkeley Homes, Barratt Homes, Newcastle University, Durham University, Leeds University, Home Office Prisons, MOD, British Energy, Imperial College and Kent International Airport.
Pat Stanborough
Chief Executive
Financial review
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). There have been no changes in accounting policies during the year.
Summary of financial performance
Group financial performance was exceptional in 2008 in terms of revenue, profit and earnings per share. Revenue increased by £29.9m (15.4%) to £223.7m, operating profit increased by £4.5m (55.0%) to £12.6m, profit before tax increased by £5.2m (64.0%) to £13.4m and earnings per share increased by 7.79p (54.4%) to 22.12 pence per share.
Revenue and operating profit
The Group's revenue increased by 15.4% or £29.9m to £223.7m (2007: £193.8m). Turnover in the London business increased by 32.3% to £102.1m (2007: £77.2m) as a result of the acceleration of major projects in London. Revenue in the UK regional businesses increased 4.3% to £121.6m (2007: £116.6m).
Group operating profit increased 55.0% to £12.6m (2007: £8.1m) and Group operating margin increased to 5.6% (2007: 4.2%), after goodwill impairment of £1.8m (2007: £0m) relating to three regional subsidiaries.
Before goodwill impairment, group operating profit increased by £6.3m to £14.4m in 2008 and group operating margin was 6.4%.
The London business showed a £4.6m (89.3%) increase in operating profit to £9.8m (2007: £5.2m) due to favourable completions on contracts and the operating margin was 9.6% (2007: 6.7%).
Regional operating profit, before £1.8m of goodwill impairment, was £4.2m (2007: £2.5m) due to a greatly improved performance across a number of subsidiaries. Regional operating margin, before goodwill impairment, increased from 2.1% to 3.5%. After goodwill impairment, regional operating profit was £2.4m and operating profit margin was 2.0%.
Group administrative expenses increased by £5.5m to £26.0m (2007: £20.5m) due to increases in salary costs, bad debt and other operating expenses. Group bad debt expense totalled £1.4m in the year (2007: £0.1m) including a charge of £0.6m in London and a £0.8m charge from the regional businesses due to a number of regional customers experiencing difficulties.
Profit before tax
Group profit before tax before goodwill impairment was £15.2m (2007: £8.2m), a £7m (86.1%) increase on the previous year.
After goodwill impairment, group profit before tax increased £5.2m or 64.0% to £13.4m, uplifted by £0.9m of net interest income (2007: £0.1m) due to substantially higher levels of cash deposits held.
Profit after tax
Group profit after tax increased £3.1m (54.4%) to £8.8m (2007: £5.7m) after taxation of £4.6m (2007: £2.4m). The effective tax rate increased to 34.0% (2007: 29.9%) mainly due to £1.8m of tax disallowable goodwill impairment. Excluding goodwill impairment, the effective tax rate was 30.0% (2007: 29.9%).
Net profit margin was 3.95% in 2008 (or 4.75% excluding goodwill impairment) compared with 2.95% in prior year.
Earnings per share
Earnings per share increased 7.79p (54.4%) for 2008 to 22.12 pence per share (2007: 14.33p). Earnings per share, excluding goodwill impairment, were 26.63p.
Dividend
The board proposes a final dividend of 8.75p (2007: 8.10p). The total dividend in 2008 is 13p (2007: 12p), an 8.3% increase from 2007. The dividend per share is covered 1.7 times by earnings per share (2007: 1.2 times). The final dividend will be paid, subject to shareholder approval on 13th May 2009 to shareholders on the register as at 14th April 2009. The shares will go ex-dividend on 8th April 2009. Further information regarding a dividend reinvestment plan (DRIP) which is available to shareholders is included in note 5.
Cash flow
Cash generation was very strong with net cash from operating activities increasing £15.3m during the year to £26.3m as at 31st December 2008 (2007: £11m). The increase in cash was partly due to increased cash collection from debtors and a different business mix with payments being received directly from end user clients. Cash and cash equivalents (net of overdrafts) as at 31st December 2008 was £30.4m compared with £9.0m as at 31st December 2007. The improved cash position has prompted the board to increase the dividend for the year. Remaining cash will be held by the group to mitigate against the uncertain economic environment going forward and will also be available if an acquisition opportunity were to arise in the future.
Pension obligations
An actuarial gain before tax of £0.3m, in relation to the defined benefit scheme, (2007: gain of £3.2m) has been recognised in reserves on the balance sheet.
The pension scheme deficit before taxation has decreased by £0.6m (2007: decrease of £3.0m) to £2.7m (2007: £3.3m) due to the 0.9% increase in the discount rate assumptions from 5.8% to 6.7% (2007: an increase from 5.10% to 5.8%), offset by a lower return on scheme assets and an increase in the mortality assumptions from the medium to the long cohort projection.
In order to contribute towards the scheme funding, a contingent asset (to the value of the greater of £1.5m or half the current £2.7m value of the group's London property) is in the process of being granted to the T. Clarke pension scheme as outlined in the Section 'Pensions' on page 7. The security documentation in this regard is expected to be completed prior to 31st March 2009.
Treasury and funding
The Group currently manages its funding so that cash generated is used in day to day operations, invested in growth or in acquisitions. The Group does not currently have any long term debt apart from finance leases and similar hire purchase arrangements.
Financial risks
Credit risk
There is the risk that a counterparty will fail to discharge its obligations which may result in a financial loss. The group has procedures for mitigating the credit risk on trade receivables prior to accepting a contract and during the progression of the contract. The counterparty risk on cash and bank deposits is managed actively by the regular review of the credit-worthiness of the relevant banking institutions.
Liquidity risk
The group manages liquidity risk by maintaining adequate reserves and banking facilities, by monitoring cash flows and by matching the maturity profiles of financial assets and liabilities within the bounds of its contractual obligations. At the year end the group had £30.4m of net cash (2007: £9.0m).
Cash flow interest rate risk
The group is exposed to changes in interest rates on its bank borrowings and deposits. Surplus cash is placed on instant access, short-term or long-term deposit at fixed or floating rates of interest.
The Group's financial instruments comprise cash and cash equivalents (short term deposits), overdraft facilities, contract and other trade receivables, trade payables and similar balances arising directly from its operations. The Group does not trade in speculative financial instruments.
Victoria French
Finance Director
Consolidated income statement
for the year ended 31st December 2008
|
| 2008 £000 | 2007 £000 |
| Revenue Cost of sales | 223,725 (185,242) | 193,845 (165,326) |
| Gross profit Other operating income Administrative expenses | 38,483 100 (26,001) | 28,519 90 (20,493) |
| Profit from operations Investment income Finance costs | 12,582 965 (151) | 8,116 266 (216) |
| Profit before taxation Taxation | 13,396 (4,559) | 8,166 (2,441) |
| Profit for the period from continuing operations | 8,837 | 5,725 |
| Earnings per share | 22.12 pence | 14.33 pence |
| All the revenue & profit arose from continuing operations. | ||
| Consolidated statement of recognised income & expense for the year ended 31st December 2008 | ||
| 2008 £000 | 2007 £000 | |
| Actuarial gains on defined benefit pension scheme | 324 | 3,173 |
| Tax on items taken directly to equity | (91) | (1,006) |
| Net income recognised directly in equity | 233 | 2,167 |
| Profit for the period | 8,837 | 5,725 |
| Total recognised income & expenses for the period | 9,070 | 7,892 |
Consolidated balance sheet
at 31st December 2008
|
| 2008 £000 | 2007 £000 |
| Non current assets Goodwill Property, plant and equipment Deferred taxation | 12,584 7,747 90 | 14,385 7,768 88 |
| 20,421 | 22,241 | |
| Current assets Inventories Construction contracts Debtors Cash and cash equivalents |
292 11,255 14,220 34,363 |
287 11,096 25,072 10,762 |
| 60,130 | 47,217 | |
| Total assets | 80,551 | 69,458 |
| Current liabilities Bank overdraft and loans Creditors and accruals Corporation tax liabilities Obligations under finance leases | 4,002 40,907 2,954 216 | 1,811 36,934 1,660 259 |
| 48,079 | 40,664 | |
| Net current assets | 12,051 | 6,553 |
| Non current liabilities Retirement benefit obligation Obligations under finance leases | 1,938 221 | 2,395 222 |
| 2,159 | 2,617 | |
| Total liabilities | 50,238 | 43,281 |
| Net assets | 30,313 | 26,177 |
| Equity Share capital Share premium Profit and loss account | 3,995 1,234 25,084 | 3,995 1,234 20,948 |
| Total equity | 30,313 | 26,177 |
Consolidated cash flow statement
for the year ended 31st December 2008
|
| 2008 £000 | 2007 £000 |
| Net cash from operating activities | 26,314 | 10,998 |
| Investing activities Interest received Purchase of tangible fixed assets Receipts on disposal of fixed assets | 905 (1,024) 320
| 266 (595) 122
|
| Net cash from / (used in) investing activities | 201 | (207) |
| Financing activities Equity dividends paid Repayments of obligations under finance leases |
(4,934) (171) |
(4,494) (254) |
| Net cash used in financing activities | (5,105) | (4,748) |
| Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period | 21,410 8,951 | 6,043 2,908 |
| Cash and cash equivalents at end of period | 30,361 | 8,951 |
Consolidated statement of changes in equity
for the year ended 31st December 2008
|
| 2008 £000 | 2007 £000 |
| Balance at start of period Profit for period Interim dividend paid Prior year final dividend paid Actuarial gain on defined benefit pension scheme Corporation tax provision on pension benefits Effect of change in tax rate on deferred tax recognised through equity | 26,177 8,837 (1,698) (3,236) 324 (91) - | 22,779 5,725 (1,558) (2,936) 3,173 (888) (118) |
| Balance at end of period | 30,313 | 26,177 |
Notes to the preliminary financial statements
Note 1 - Basis of preparation
T.Clarke plc (the 'company') is a company incorporated in the United Kingdom. The consolidated preliminary financial statements (the 'financial information') comprise the financial statements of the company and its subsidiaries (together the 'group') and are prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and have been prepared on the historic cost basis.
The financial information does not constitute the company's statutory accounts for the year ended 31st December 2008 or 2007 but is derived from the audited financial statements for the year ended 31st December 2008. Statutory accounts for the year ended 31st December 2007 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31st December 2008 will be delivered to the Registrar of Companies in due course and will be available on the company's website at www.tclarke.co.uk. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports, and (iii) did not contain statements under section 237 (2) or (3) of the Companies Act 1985.
Note 2 - Segmental information
The group considers that it has only one business segment, being mechanical and electrical contracting.
For management and internal reporting purposes the group is organised into two operating divisions, London and UK Regions, and an internal property division. All assets and liabilities of the group have been allocated to divisions, apart from the retirement benefit obligation and tax assets and liabilities.
All the group's operations are carried out within the United Kingdom, and there is no significant difference between turnover based on the location of assets and turnover based on location of customers.
| 31st December 2008 | London £000 | UK Regions £000 | Property £000 | Elimination £000 | Total £000 |
| Revenue | 102,132 | 121,593 | 637 | (637) | 223,725 |
| Profit from operations | 9,753 | 2,425 | 404 | - | 12,582 |
| Investment income | 781 | 275 | - | (91) | 965 |
| Finance costs | (97) | (145) | - | 91 | (151) |
| Profit before tax | 10,437 | 2,555 | 404 | - | 13,396 |
| Taxation expense | (4,559) | ||||
| Profit for the period from continuing operations | 8,837 |
Profit from operations for the UK Regions is stated net of a goodwill impairment charge of £1,801,000 (2007: £nil). Following the annual impairment review undertaken at 31st December 2008, the Directors concluded that the goodwill arising on the acquisitions of JJ Cross Limited, Kestrel Electrical Systems Limited and GDI Electrical Company Limited, all of which form part of the UK Regions operating division, had been impaired. Goodwill in respect of these subsidiaries has been written down to £nil in the consolidated balance sheet. No other class of asset other than goodwill was impaired. The impairment charge has been included in 'Administrative expenses' in the consolidated income statement.
| 31st December 2007 | London £000 | UK Regions £000 | Property £000 | Elimination £000 | Total £000 |
| Revenue | 77,210 | 116,635 | 610 | (610) | 193,845 |
| Profit from operations | 5,152 | 2,506 | 458 | - | 8,116 |
| Investment income | 97 | 218 | - | (49) | 266 |
| Finance costs | (141) | (124) | - | 49 | (216) |
| Profit before tax | 5,108 | 2,600 | 458 | - | 8,166 |
| Taxation expense | (2,441) | ||||
| Profit for the period from continuing operations | 5,725 | ||||
Other segment information:
| 2008 | 2007 | |||
| Capital additions £000 | Depreciation £000 | Capital additions £000 | Depreciation £000 | |
| London | 13 | 28 | 5 | 42 |
| UK Regions | 676 | 659 | 793 | 681 |
| Property | 463 | 141 | - | 134 |
| 1,152 | 828 | 798 | 857 | |
| 2008 | |||
| Assets £000 | Liabilities £000 | Net assets £000 | |
| London | 41,532 | (31,140) | 10,392 |
| UK Regions | 38,996 | (15,236) | 23,760 |
| Property | 6,027 | (5,064) | 963 |
| Unallocated | 90 | (4,892) | (4,802) |
| Eliminations | (6,094) | 6,094 | - |
| 80,551 | (50,238) | 30,313 | |
| 2007 | |||
| Assets £000 | Liabilities £000 | Net assets £000 | |
| London | 22,389 | (17,708) | 4,681 |
| UK Regions | 45,012 | (20,196) | 24,816 |
| Property | 5,846 | (5,199) | 647 |
| Unallocated | 88 | (4,055) | (3,967) |
| Eliminations | (3,877) | 3,877 | - |
| 69,458 | (43,281) | 26,177 | |
Note 3 - Taxation expense
| | 2008 £000 | 2007 £000 |
| Current taxation | | |
| Current year | 4,451 | 2,653 |
| Prior year | 23 | (81) |
| | 4,474 | 2,572 |
| Deferred taxation | | |
| Arising on: | | |
| Current year timing differences | 85 | (137) |
| Changes in tax rates | - | 6 |
| | 85 | (131) |
| Taxation expense | 4,559 | 2,441 |
| | | |
| Reconciliation of tax charge | | |
| Profit before tax | 13,396 | 8,166 |
| | | |
| Tax at standard UK tax rate of 28.5% (2007: 30%) | 3,818 | 2,450 |
| Permanently disallowable items | 718 | 66 |
| Changes in deferred tax arising from change in tax rates | - | 6 |
| Under / (over) provision in prior years | 23 | (81) |
| Taxation expense | 4,559 | 2,441 |
£87,000 of the deferred tax charge (2007: deferred tax credit, £35,000) has been included within the retirement benefit obligation.
Note 4 - Earnings per share
The earnings per share figure represents the profit for the period from continuing operations divided by the number of ordinary shares in issue. The numbers of ordinary shares for the purpose of this calculation is 39,947,889 (2007: 39,947,889).
Note 5 - Dividends
| 2008 £000 | 2007 £000 | |
| Final dividend of 8.1 pence (2007: 7.35 pence) per ordinary share proposed and paid during the year relating to the previous year's results | 3,236 | 2,936 |
| Interim dividend of 4.25 pence (2007: 3.9 pence) per ordinary share paid during the year | 1,698 | 1,558 |
| 4,934 | 4,494 |
The directors are proposing a final dividend of 8.75 pence (2007: 8.1 pence) per ordinary share totalling £3,495,000 (2007: £3,236,000). Subject to approval at the Annual General Meeting, the final dividend will be paid on 13th May 2009 to shareholders on the register as at 14th April 2009. The shares will go ex-dividend on 8th April 2009. This dividend has not been accrued at the balance sheet date. A dividend reinvestment plan is available to shareholders. Those shareholders who have not elected to participate in the plan, and who would like to do so in respect of the 2008 final payment, may do so by contacting Capita Registrars on 0871 664 0300 (calls cost 10p per minute plus network charges). The last day for election for the final dividend reinvestment is 18th April 2009 and any requests should be made in good time ahead of that date.
Note 6 - Pension commitments
The present value of the defined benefit pension scheme and the related past and current service costs were measured using the projected unit credit method. The amount included in the balance sheet arising from the group's obligations in respect of its defined benefit retirement scheme is as follows:
| | 2008 £000 | 2007 £000 |
| Present value of defined benefit obligations | 18,924 | 22,290 |
| Fair values of scheme assets | (16,233) | (18,963) |
| Deficit in scheme | 2,691 | 3,327 |
| Related deferred tax asset | (753) | (932) |
| Liability recognised in the balance sheet | 1,938 | 2,395 |
| Key assumptions used: | | |
| Rate of increase in salaries | 3.70% | 4.40% |
| Rate of increase of pensions in payment | 2.40% | 3.00% |
| Discount rate | 6.70% | 5.80% |
| Inflation assumption | 2.70% | 3.40% |
| Expected return on scheme assets | 6.60% | 6.90% |
| | | |
| Mortality assumptions (years): | 2008 | 2007 |
| Life expectancy at age 65 for current pensioners: | | |
| Men | 23.7 | 21.9 |
| Women | 26.8 | 24.8 |
| Life expectancy at age 65 for future pensioners (current age 45) | | |
| Men | 24.8 | 23.0 |
| Women | 27.8 | 25.8 |
Note 7 - Notes to the cash flow statement
| a - Reconciliation of operating profit to net cash from operating activities | 2008 £000 | 2007 £000 |
| Profit from operations | 12,582 | 8,116 |
| Depreciation charges | 828 | 857 |
| Goodwill impairment charge | 1,801 | - |
| Defined benefit pension scheme charge | (252) | 110 |
| Loss on sale of fixed assets | 25 | 16 |
| Operating cash flows before movements in working capital | 14,984 | 9,099 |
| Decrease in inventories | (5) | 83 |
| Decrease / (increase) in debtors | 10,852 | (2,228) |
| (Increase) / decrease in contract balances | (159) | 2,905 |
| Increase in creditors | 3,973 | 3,808 |
| Cash generated by operations | 29,645 | 13,667 |
| Corporation tax paid | (3,179) | (2,499) |
| Interest paid | (152) | (170) |
| Net cash from operating activities | 26,314 | 10,998 |
b - Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less, less bank overdrafts, and are analysed as follows:
| 2008 £000 | 2007 £000 | |
| Cash and cash equivalents | 34,363 | 10,762 |
| Bank overdrafts | (4,002) | (1,811) |
| 30,361 | 8,951 |
Note 8 - Related party transactions
The remuneration of key management (including directors) was £4,989,000 (2007: £4,367,000). Pension contributions in respect of key management (including directors) were £519,000 (2007: £484,000). Transactions between the company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There were no other related party transactions requiring disclosure in the financial statements.
Note 9 - Annual General Meeting
The Annual General Meeting will be held at Savoy Place, 2 Savoy Place, London WC2R 0BL on Friday 8th May 2009 at 12 noon.
Statement of directors' responsibilities in respect of the financial information
We confirm that to the best of our knowledge:
On behalf of the board
Russell Race Chairman
Pat Stanborough Chief Executive
Victoria French Finance Director
19th March 2009