Inspirit Energy Regulatory News (INSP)

4 Apr 2006 07:01

Inspace Plc04 April 2006 Press Release 4 April 2006 Inspace plc ("Inspace" or "the Group") Final Results Inspace plc (AIM:INSP), the property based support services business that hasestablished itself as one of the UK's leading social housing repair andmaintenance providers, announces its Final Results for the year ended 31December 2005. Financial Highlights • Turnover up 45% to £147.5m (2004: £101.7m)• Operating profit up 24% to £7.9m* (2004: £6.36m)• Diluted earnings per share up 16.0% to 8.49p* (2004: 7.32p)• Order book up 61% to £450.0m (2004: £280m)• Operating cash conversion up to 85% from 59%• Net cash of £6.1m (2004: £0.04m)• All debt settled on flotation• Shareholders' funds up from £5.5m** to £16.0m * After adjustment for exceptional items** After restatement for dividends Commenting on the results, Colin Enticknap, Executive Chairman, said: "2005 wasa good year for Inspace. The de-merger and flotation brought unique challengesand potential distractions, but our people took them all in their stride,delivering well against both financial and operational targets.Organisationally, we remain very focused upon meeting customer, employee andultimately shareholder expectation, and armed with a clear strategy, visibleorder book and enthusiastic team of people, we should be well placed to continueour success into 2006 and beyond." For further information: Inspace plc Colin Enticknap, Executive Chairman Tel: +44 (0) 1462 678 910 colin.enticknap@inspace.co.uk www.inspace.co.uk Seymour Pierce Mark Percy, Corporate Finance Tel: +44 (0) 20 7107 8000 markpercy@seymourpierce.com www.seymourpierce.com Media enquiries: Abchurch Henry Harrison-Topham Tel: +44 (0) 20 7398 7700 henry.ht@abchurch-group.com www.abchurch-group.com Executive Chairman's Statement Overview In my half year statement, I reported that we had made good progress during ourfirst six months as a stand alone business. We had successfully completed thede-merger and flotation process and our entry onto AiM had been well received;we had delivered encouraging first half results that promised to provide theplatform for continued full year growth; and we had increased the size of ourorder book by 61% on the position just twelve months earlier. I alsohighlighted clear challenges for the remainder of 2005. In social housingterms, we needed to mobilise the four new contracts just secured, nurturing inthe meantime the tracking list required to feed our new workload demands for2006 and beyond. In non-housing terms, our challenge was change related, theaim being to complete the development phase of our software system replacementprogramme, which would provide the catalyst for more fundamental efficiency andservice realignment changes scheduled for 2006. I am now pleased to report that our second half year has been equallysuccessful. Full year results demonstrate significant growth in all key areas;turnover, which grew by 45% when compared to equivalent operations in 2004 toreach £147.5 million; operating profit, which grew by 24% in comparable terms toreach £7.86 million; and cash conversion, which improved significantly to 85%. The surge of new social housing contracts has been properly digested, creatingthe capacity once more for further mobilisations. Equally importantly, we nowhave agreed plans in place which should see each of the four contracts convertto 'cost plus' invoicing arrangements, the optimum framework to foster long termpartnering relationships. Our social housing sales pipeline has grown to exceed£2 billion, with a healthy level of opportunities at the tracking,prequalification and tender stages. Notably, we now see a number ofsignificant opportunities with registered social landlords (housingassociations) alongside our traditional local authority targets. The change programme affecting our non-housing operations is well ahead ofprogramme. Whilst the software replacement programme remains on track withrollout scheduled to start in the summer, we have accelerated the morefundamental structural changes to allow expected efficiency improvements to bereflected in 2006 budgets. All non-housing maintenance has now been streamlinedwithin one operating business offering an integrated one-stop-shop propertymaintenance service, a simpler and more easily understood structure, and aleaner cost base. Customer feedback has been positive. The third strand of this programme, aimed at reducing dependence upon privatesector customers who typically offer lower levels of order book visibility, issimilarly ahead of plan. For the first time, the majority of our non-housingsales pipeline, which has grown strongly, now reflects public sectoropportunities. Also for the first time, one of those opportunities for theLondon Borough of Sutton, has been secured on a 'cost plus' invoicingarrangement, mirroring what has proved to be such a successful model for oursocial housing business. Financial Highlights Turnover growth was principally driven by our social housing operations, whichprovided the largest individual contribution to Group turnover at £61.2 million,marginally ahead of non-housing maintenance operations which accounted for £60.8million. Interior design, installation and furnishing operations have now movedbeyond the initial 'incubation' stage of their business development. Withturnover having reached £25.5 million, they now have sufficient critical mass tobe seen as a credible contender in their market place and to operate at anefficient level. Operating profit, which represented a return of 5.3% on turnover, remains at asatisfactory and, we believe, sustainable level. Unsurprisingly, the largestindividual contribution came, once again, from social housing operations, wherethe operating margin reached 7.4%, demonstrating a consistent ability to extractmargin from performance based incentive mechanisms. Comparable margin withinnon-housing maintenance operations fell back to 3.6%, partly due to acceleratedinvestment in the change programme and partly because of tightening marginsacross corporate accounts during the third and fourth quarters. Interiordesign, installation and furnishing operations also performed strongly,delivering an operating margin of 4.6%. Interest payable during the pre-flotation period, when we were reliant upon afixed interest loan from our previous parent, was essentially balanced byinterest received post flotation. As a result, profit on ordinary activitiesbefore exceptional items and taxation mirrored operating profit at £7.87million. The exceptional charges, which amount to £0.29 million after tax, relateentirely to the effects of an EMI share incentive scheme introduced in April2005 in order to compensate participants in an earlier share incentive plan forthe withdrawal of that scheme. The earlier plan, previously introduced in 2002,established two classes of shares. As a prerequisite to flotation, the twoclasses of shares needed to be consolidated into one class of ordinary share,which was achieved with the welcome support of participants who sacrificedexisting benefits and accumulated taper relief. Earnings per share, which we view as our most important measure, increased by16.0% to 8.49p per share on a fully diluted basis after adjustment forexceptional items. Effective cash management controls led to both a strong year end cash and bankbalance of £6.1 million with no borrowings, and to a significant and necessaryimprovement to our cash conversion rate. Whilst this latter measure now sits at85%, we are confident that there is still scope for further improvement. Having ended 2004 with net current assets of £0.7 million and a net worth of£1.3 million (before accounting rules required restatement for the dividendproposed in 2004 but paid in 2005), a balance sheet transformation was anabsolute prerequisite. It is here that we have achieved the most dramaticimprovement; with net current assets increased to £14.9 million and net worth ata creditable £16.0 million, our underlying covenant strength now properlyreflects the scale of our business. Andrew Telfer has naturally expanded upon the financial position within hisChief Financial Officer's Report. Dividend The board is recommending the payment of a final dividend of 1.85p per sharewhich, subject to approval at the Annual General Meeting on 18 May 2006, will bepaid on 24 May 2006. People We have achieved a great deal during the last twelve months, and this has onlybeen possible through the immense effort demonstrated by so many of our people,for which we are extremely grateful. Their energy, enthusiasm and willingnessto go that extra mile has become inherent in everything we do, and it is thatabove all else that makes Inspace what it is. Mick Williamson, Karim Khan and Gerry Graville, our three business streammanaging directors, deserve particular mention. Mick has fostered a uniqueculture in Inspace Partnerships, characterised by a blend of passion,professionalism, openness and healthy self criticism, attributes regularly citedby customers as our main distinguishing features. Karim has taken a leadingrole in developing the realignment plan for Inspace Maintain, and has madeencouraging progress during the early implementation phase. Gerry hassuccessfully overseen a period of intense growth at Inspace Complete, which hasseen the business rapidly develop from concept stage to become widely respectedas a leading provider in its market. Each has, of course, been well supported by his business stream board, and it istherefore very fitting that participation in the next generation of our shareoption scheme will be widened in 2006 to include both business stream directorsand also key functional heads. Thanks also go to my main board colleagues for their invaluable judgement,guidance and support during what has naturally been a critical period in theGroup's development. Andrew Telfer took the lead role during the de-merger andflotation process, and warrants considerable credit for its ultimate success.Duncan Forbes took the lion's share of operational responsibility, maintainingfocus and delivering against targets despite potential distractions.Christopher Sheridan and David Batchelor undoubtedly brought breadth, balanceand objectivity to our discussions, so critical in the context of our evolvingroles and responsibilities. At every level, our people have risen well to the unique challenges of 2005,which gives us real encouragement as we turn our minds to the future. Future Prospects As we closed our accounts for 2005, our workload platform for 2006 was almostexactly in line with expectation. In social housing terms, our order bookaccounted for about 80% of budgeted sales; in non-housing terms, where empiricalevidence suggests that we will secure high levels of additional discretionaryspend alongside secured routine maintenance orders, and where the incubationperiod for new project works is measured in weeks not months, our order bookaccounted for about 50%. Looking further forward, our total order book,assuming projects run for their full terms, was approximately £450 million. When sourcing the balance of our workload needs, we will remain focused uponquality rather than quantity. Our success has been built upon developing longterm, sustainable relationships with customers able to offer consistent revenuesacross a wide property portfolio, and who recognise that greatest value is notalways synonymous with lowest tender cost. By prioritising these customers andbeing able to deliver high levels of service, we have demonstrated a consistentability to not only achieve realistic levels of performance based profit, butalso to grow organically across each account through the expansion of ourservice offering. We do not expect this strategy to change, and theopportunities that feed into our growing sales pipeline are continually assessedagainst this customer profile. Against this backcloth, the workload challenge for our social housing businesswill be to secure the balance of our 2006 requirement, about half of which isexpected to come organically from existing accounts, and to build a robustplatform for 2007, when existing Decent Homes contracts at Barnsley andColchester start to wind down. The operational challenge will be to continuedelivering year on year service level improvements, whilst at the same timerefining our service offering, particularly in relation to our call centresupport and asset management tools. For our non-housing maintenance business, the workload challenge will be tosecure an increasing share of work from the public sector, offering greaterorder book visibility. Ideally, at least half of our order book will relate topublic real estate by the end of 2006, although this realignment will not diluteour commitment towards those corporate customers who also meet our profile.Whitbread is an ideal example, not just because it represents an important andlong standing customer, but also because it illustrates one with an appetite forour new one-stop-shop service. At an operational level, rolling out the newsoftware platform will naturally be a critical challenge, and will need carefulmanagement to avoid undue disturbance to normal operations. Having grown so quickly over recent years, our interior design, install andfurnish business sees 2006 as a year for consolidation. Further growth,scheduled for 2007 and beyond, is expected to come from public sector frameworkcontracts, where much sales team effort is now being invested. Summary Looking back over 2005, I believe the whole Inspace team can be justifiablypleased with what it has achieved. It has been a good year for the Group, notalways an easy one, but one in which we have remained focused upon meetingcustomer, employee and ultimately shareholder expectation. We have deliveredwell against our own financial and operational targets and, equally importantly,the business is now well placed to meet the challenges of 2006. Having said that, we fully recognise the dangers of complacency. Our marketsremain as competitive as ever, our performance based margins demand continuallyimproving service levels, and high quality recruits essential to resource ourgrowth plans are increasingly difficult to find. But armed with a clearstrategy, a strong team of people and a track record of successfully confrontingsuch issues, I am confident that we have a very bright future ahead. Colin EnticknapExecutive Chairman3 April 2006 Chief Financial Officer's Report The Group has met its financial performance targets during 2005. It closes witha strong balance sheet and cash position. De-merger and Flotation The Group was de-merged from Willmott Dixon on 1 January 2005, with theexception of a discontinued fitting-out business. Until that time Inspace hadrelied upon financing of its working capital needs by way of an inter-companyarrangement. On de-merger, the amount due to Willmott Dixon of £7.4m (includingoutstanding dividends of £4.3m in relation to 2004 earnings), was exchanged fora £10.0m loan with interest payable at 0.5% above the Royal Bank of Scotland'sbase rate. The net £2.6m cash introduced to the business provided the headroomnecessary to meet ongoing working capital needs. On 26 May 2005, Inspace plc was admitted to the AiM of the London StockExchange. The flotation introduced net proceeds of £9.4m, through the issue of9.3m ordinary 2p shares, enabling full repayment of the Willmott Dixon loan andestablishing the Group as an independent entity with a revised dividend policy.Accordingly, the Group balance sheet had no financial gearing and asignificantly improved and more appropriate financial covenant. Principal Accounting Policies The issue of revised accounting standards has given rise to changes in ourprincipal accounting policies. Firstly, the application of FRS 21 requiresdividends to now be recognised in the year in which they are paid rather thanbeing accrued as a liability when the directors have resolved to recommend them. Secondly, UITF 40 requires the recognition of turnover and profit attributableto short term contracts whereas in previous years such work was only recognisedwhen the jobs were completed. A further consequence of this change is thatamounts previously shown as work in progress or accrued income have now beenre-categorised as amounts recoverable on contracts. Where necessary thecomparative figures for 2004 have been restated in respect of these changes. Operational Performance Group turnover from continuing operations grew by 45% to reach £147.5m (2004:£101.7m). Whilst all parts of the business contributed, Inspace Partnerships(Partnerships) proved the main growth engine delivering more than half of theoverall increase and reaching revenues of £61.2m (2004: £35.2m). Delayedcontract mobilisations prevented growth in the year exceeding the 74% achieved.Partnerships now represents 42% of total turnover (2004: 35%, 2003: 24%, 2002:17%) and for the first time represents the largest of our business streams.Inspace Maintain (Maintain) experienced more modest growth at 7%, increasingturnover to £60.8m (2004: £56.9m) and now accounts for 41% of overall turnover(2004: 56%). Inspace Complete (Complete) achieved a more than doubling of itsturnover to £25.5m (2004: £9.7m) representing 17% of Group turnover. I wouldnot expect Complete to repeat this level of growth or indeed exceed 15% of Groupturnover now that it has surpassed its critical turnover mass of around £20.0m. Operating profit before exceptional items increased 24% to £7.86m (2004: £6.36m)from continuing operations. Whilst Group operating profit met our expectationsand all parts of the business remained profitable, Group operating marginreduced to 5.3% (2004: 6.3%). The fall was primarily due to Maintain whoseprofits for the year fell back by 32% to £2.17m (2004: £3.20m) and margins to3.6% (2004: 5.6%) due in the main to further investment in the strategic changeprogramme and a worsening of trading conditions led by tightening margins oncertain consultant led corporate accounts. Our Partnerships business model centres on the need to deliver high operationalperformance year-on-year, ultimately to ensure social housing tenants receivecontinually improving service levels. Consequently, our Partnerships profitsare largely driven through performance related profits derived from deliveryagainst key performance indicators and shared savings on agreed budgeted spends. These factors have enabled us to share in our customers' success and led to a7.4% operating margin in the year (2004: 7.3%). The business stream's operatingprofits increased by 77% to reach £4.53m (2004: £2.55m). Complete also delivered excellent results achieving 89% growth in operatingprofits to £1.16m (2004: £0.62m) representing a 4.6% return (2004: 6.3%).Complete's growth was driven by increased public sector work with theGovernment's Job Centre refurbishment programme. Whilst public sector work inthe design led interiors market typically attracts slightly lower margins, ourfocus is on the long term and to continue to drive resilience into the businessto ensure an appropriate workload balance with the corporate market. The board and central team was largely in place at the point of the de-merger on1 January 2005. Accordingly, the 2005 results reflect the first full year ofcosts as a stand alone business, including all relevant incentive payments forthe period. Naturally, incremental ongoing costs were incurred in relation toour plc status. Exceptional Items The Executive Chairman's Statement describes the circumstances that gave rise tothe exceptional items of £0.29m after tax. The exceptional charges arose solelyas a result of the flotation due to the replacement of a previous incentivescheme by the EMI scheme. The first of the exceptional charges comprises a share based payment provisionof £0.24m, in accordance with UITF 17 'Employee Share Schemes', representing thenet deemed value of the unquoted minority holdings. UITF 17 requires theestablishment of a share based payment reserve and as such no further adjustmentto the provision will arise for this item. The balance of the exceptionalcharge is a provision to reimburse individuals for the surrender of taxationrelief of £0.18m. The post tax effect of the exceptional items is £0.29m; the pre-tax exceptionalitem of £0.42m is offset by corporation tax relief of £0.13m. Further relief,in respect of options exercised in 2006, is expected to benefit the 2006 taxcharge. Taxation Tax on profit on ordinary activities increased to £2.30m (2004: £1.97m). Theeffective tax rate improved to 31.0% (2004: 31.4%) primarily due to the taxeffect of disallowed items. Earnings Per Share Earnings per share figures have been appropriately adjusted to remove the impactof the exceptional items. Basic earnings per share decreased to 8.64p (2004:8.82p) due to the shares issued on flotation. More importantly, dilutedearnings per share, which better reflect the underlying performance of thebusiness, increased by 16.0% to 8.49p (2004: 7.32p). Dividends The board has recommended a final dividend of 1.85p per share to theshareholders on the register at 18 April 2006. Subject to approval at the AGMon 18 May 2006 this will be paid to shareholders on 24 May 2006. During the year, the board recommended two interim dividends based on the policyset out in the AiM admission document. The first of 0.933p per ordinary sharewas paid to the shareholders on the register at 24 May 2005, representing 5/6thsof the total interim dividend, and a second interim dividend of 0.161p perordinary share was paid to the shareholders on the register at 16 September2005, representing 1/6th of the total interim dividend. Both interim dividendswere paid on 14 October 2005. The total dividend for the year of £1.90m (2004: £4.28m) equates to a pro forma2.82p per share based on annualised dividends paid to post flotationshareholders. Dividend cover is 2.7x on a post tax profit basis and 2.2x basedon cash generated in the year ignoring dividend payments. The Directors' intention is that the Company will pay dividends whilstcontinuing to retain a significant proportion of the Group's earnings. Cash Flow The enforcement of strict cash management controls is firmly embedded andremains a priority for all parts of the business. These principles helped theGroup to generate cash from operating activities of £6.7m (2004: £3.7m)representing an improved conversion rate of operating profit excludingexceptional items of 85.3% (2004: 58.5%). The conversion of operating cash is akey measure and enables the business to continue its technology investmentprogramme. It is worth noting that trade debtor days fell to 33 days (2004: 36days) whilst creditor days fell to 40 days (2004: 53 days) reflecting, in part,the increasing proportion of social housing business. The closing net cashposition was £6.1m at 31 December 2005 (2004: £0.04m). Treasury functions are administered centrally through a cash poolingarrangement, to enable appropriate control and ensure the best short termdeposit rates are achieved. Interest generated from deposits of £0.2m (2004:nil) was offset by the interest due on the Willmott Dixon loan of £0.2m (2004:nil) during the first part of the year. Whilst the Group generates cash overall and during the year the Group remainedcash positive, it is subject to short term volatility. A Royal Bank of Scotlandoverdraft facility of £5.0m was arranged to provide additional headroom. Pensions For the duration of its contractual relationships with various local authoritiesthe Group contributes to a number of local authority pension schemes in respectof those employees working for the Group under Transfer of UndertakingsProtection of Employment (TUPE) arrangements. The relevant accounting standardFRS 17 'Retirement Benefits' requires, if necessary, the Group's share of anydeficit to be recognised as a liability on the balance sheet but offset by acorresponding goodwill asset. As this liability was immaterial, no suchrecognition was required and the scheme contributions have been duly expensed asthey fall due. International Financial Reporting Standards (IFRS) As a company listed on AiM, Inspace will be required to adopt IFRS from 1January 2007. The board's decision not to adopt these standards earlier than2007 is based upon the continuing uncertainty surrounding certain IFRS. TheGroup is exploring the effects of the transition to IFRS in conjunction with itsfinancial advisers. Initial indications are that there is unlikely to be amaterial impact on the Group of adopting IFRS. Andrew TelferChief Financial Officer3 April 2006 Group Profit and Loss AccountYear ended 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 Re-stated Notes £000 £000 TurnoverContinuing operations 1 147,527 101,731Discontinued operations 1 - 5,541 147,527 107,272Cost of sales (113,802) (79,615) Gross profit 33,725 27,657Administrative expenses Excluding exceptional items (25,865) (21,407) Exceptional items 2 (418) - (26,283) (21,407) Operating profitContinuing operations Excluding exceptional items 1 7,860 6,362 Exceptional items 2 (418) - 7,442 6,362Discontinued operations 1 - (112) 7,442 6,250Interest receivable 3 223 -Interest payable and similar charges 4 (218) - -Profit on ordinary activities before taxation 7,447 6,250Tax on profit on ordinary activities 5 (2,310) (1,965)Profit for the financial year 5,137 4,285 Unadjusted earnings per ordinary share: (pence)Basic 7 8.17 8.82Diluted 7 8.03 7.32Adjusted earnings per ordinary share: (pence)Basic 7 8.64 8.82Diluted 7 8.49 7.32 There were no recognised gains or losses other than the above profit for eitherfinancial year. The discontinued operations for 2004 have no material impact on the earnings pershare. Group Balance SheetAs at 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 Re-stated £000 £000Fixed assetsTangible assets 1,058 579 Current assetsStocks 335 265Debtors 30,350 24,770Cash at bank and in hand 6,084 37 36,769 25,072 Creditors: amounts falling due within one year (21,873) (20,123) Net current assets 14,896 4,949 15,954 5,528 Capital and reservesCalled up share capital 1,343 1,125Share premium 10,107 113Capital redemption reserve 3 -Profit and loss account 4,501 4,290 15,954 5,528 Group Cash Flow StatementYear ended 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 Re-stated Notes £000 £000 Cash flow from operating activities 8 6,707 3,657Returns on investments and servicing of finance 5 -Taxation paid (1,706) (1,742)Capital expenditure and financial investment 8 (861) (312)Equity dividends paid 6 (4,923) (1,900) Cash flow before use of liquid resources andfinancing (778) (297)Financing 8 6,825 311 Increase in cash 6,047 14 Reconciliation of net cash flow to movement in netfundsIncrease in cash in the year 6,047 14Consolidation of balances due to Willmott DixonLimited 3,143 -Change in net funds resulting from cash flows 9,190 14Repayment of Willmott Dixon Limited loan (3,143) - Movement in net funds 6,047 14Net funds as at 1 January 2005 37 23 Net funds as at 31 December 2005 6,084 37 The amounts due to Willmott Dixon Limited were consolidated into a loan facilityon 1 January 2005 which was subsequently repaid on flotation. Reconciliation of Movement in Shareholders' FundsYear ended 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 Re-stated Notes £000 £000 Profit for the year 5,137 4,285Dividends paid 6 (4,923) (1,900) 214 2,385Call on share capital 530 311Purchase of own shares (3) -Issue of shares under option 244 -Issue of shares 10,054 -Costs associated with issue of shares (613) - Net proceeds from issue of shares 10,212 311 Movement in shareholders' funds 10,426 2,696Opening shareholders' funds - as restated 5,528 2,832 Closing shareholders' funds 15,954 5,528 Restatement of opening position As detailed in the Chief Financial Officer's Report, the Company has adopted therequirements of FRS 21 and has restated the opening shareholders funds as aconsequence. The proposed dividend as at 31 December 2004 of £4.28 million(2003: £1.90m) has been derecognised increasing the shareholders funds by thatamount. The dividend was paid in 2005 and there is no impact on shareholdersfunds as at 31 December 2005 as a result of this change, Notes to the Financial StatementsYear Ended 31 December 2005 BASIS OF PREPARATION AND ACCOUNTING POLICIES The above results for the year ended 31 December 2005 are an abridged version ofthe Company's audited statutory financial statements for the year ended 31December 2005; both the financial statements and the above results were approvedby the Board on 3 April 2006. The financial statements will be delivered to theRegistrar of Companies shortly; the auditor's report thereon was unqualified,and nor did it include an "emphasis of matter" paragraph. The profit and loss account and balance sheet do not constitute statutoryfinancial statements within the meaning of Section 240 of the Companies Act1985. These accounts have been prepared on the basis of the same accounting policiesas set out in the statutory accounts for the year ended 31 December 2004, exceptas follows: a. The Company has adopted FRS 21 which requires that dividends are recognised in the year in which they are paid rather than accrued as a liability when the Directors have resolved to recommend them. The impact of this is disclosed in the Reconciliation of Movement in Shareholders' Funds. b. The Company has adopted UITF 40 which has resulted in the recognition of turnover and profit attributable to work in progress under short term contracts together with the re-categorisation of work in progress and accrued income as amounts recoverable on contracts in the balance sheet. This change has no material effect on the results for the year. Various presentational changes have also been adopted, consequent on thede-merger of the Company from Willmott Dixon. 1. Segmental analysis Year ended Year ended 31 December 2005 31 December 2004 £000 £000TurnoverSocial housing maintenance 61,201 35,154Corporate and public sector maintenance 60,821 56,885Interior design, installation and furnishing 25,505 9,692Discontinued activities - 5,541 147,527 107,272 Operating profitSocial housing maintenance 4,529 2,552Corporate and public sector maintenance 2,167 3,195Interior design, installation and furnishing 1,164 615Discontinued activities - (112) 7,860 6,250 Net assetsSocial housing maintenance 2,329 2,638Corporate and public sector maintenance 1,267 3,165Interior design, installation and furnishing 1,069 931Parent Company less items eliminated on consolidation 11,289 (1,206) 15,954 5,528 The segmental analysis excludes the exceptional items outlined in note 2. The Group was de-merged from Willmott Dixon Limited on 1 January 2005, with theexception of a discontinued fitting-out business. Accordingly, the results ofthis business have been re-classified as discontinued in 2004. The Group's turnover, profit on ordinary activities and net assets are allderived in the United Kingdom. 2. Exceptional items The exceptional items comprise: Year ended Year ended 31 December 2005 31 December 2004 £000 £000 Share based payments 244 -Compensation payments 174 - 418 -Corporation tax relief (125) - 293 - 3. Interest receivable Year ended Year ended 31 December 2005 31 December 2004 £000 £000 Income from short term deposits 223 - 4. Interest payable and similar charges Year ended Year ended 31 December 2005 31 December 2004 £000 £000 Interest on loan from Willmott Dixon Limited 218 - On 1 January 2005, the amounts due to Willmott Dixon Limited were consolidatedinto a £10.0 million loan from Willmott Dixon. The loan was repaid on theflotation of Inspace plc on 26 May 2005 with interest at 0.5% above the RoyalBank of Scotland's base rate. 5. Taxation Year ended Year ended 31 December 2005 31 December 2004 £000 £000 a) Analysis of chargeCurrent taxUK Corporation tax on profit for the year beforeexceptional items 2,411 1,935UK Corporation tax relief on exceptional items (125) -Adjustment in respect of previous years - 26 2,286 1,961Deferred taxOrigination and reversal of timing differences 24 4 2,310 1,965 b) Factors affecting tax charge for the yearThe tax assessed for the year is higher than thestandard rate of corporation tax in the UK (30%). Thedifferences are explained below:Profit on ordinary activities before tax 7,447 6,250 Profit on ordinary activities multiplied by standardrate of corporation tax in the UK (30%) 2,235 1,875Effects of:Expenses not deductible for tax purposes 75 66Capital allowances in excess of depreciation (24) (4)Lower rates on earnings - (2)Adjustment in respect of previous years - 26 2,286 1,961 c) Factors that may affect future tax charges The Company expects to gain future tax relief in respect of shares to be issuedunder employee share incentive schemes on the difference between the marketvalue of shares on exercise and the option price. In January 2006 653,282 shareoptions were exercised which will result in tax relief during 2006 of £226,459.An additional outstanding 98,820 share options have yet to be exercised. The Group is not aware of any other significant factors that may affect futuretax charges. 6. Dividends Year ended Year ended 31 December 2005 31 December 2004On ordinary shares of 2p each: £000 £000 Final 2003 paid of 4.22p per share - 1,900Interim 2004 paid of 7.634p per share 4,275 -Interim 2005 paid of 0.933p (2004: nil) 540 -Interim 2005 paid of 0.161p (2004: nil) 108 - 4,923 1,900 The dividend per share in respect of the final 2003 dividend has been adjustedto take account of the division of ordinary shares of 10p into ordinary sharesof 2p on 16 November 2004. An interim dividend of 0.933p per ordinary share was paid to the shareholders onthe register at 24 May 2005, representing 5/6ths of the total interim dividend,and an interim dividend of 0.161p per ordinary share was paid to theshareholders on the register at 16 September 2005, representing 1/6th of thetotal interim dividend. Both payments were made on 14 October 2005. A proposed final dividend of 1.85p per ordinary share is proposed for payment on24 May 2006. 7. Earnings per share Earnings per share are based upon the average number of ordinary shares in issueduring the year of 62,872,928 (2004: 48,584,462). The diluted earnings per shareare based upon the weighted average number of 63,975,884 (2004: 58,549,950)ordinary shares having taken into account the dilutive effect of shares whichhave been made available to employees under existing incentive schemes. The weighted average number of shares for 2004 has been adjusted to take accountof the division of ordinary shares of 10p into ordinary shares of 2p on 16November 2004. The earnings for the periods are set out in the table below. An adjustedearnings measure has been included to highlight the impact of the exceptionalitems during 2005. Earnings Earnings per share 2005 2004 2005 2004 £000 £000 pence pence Unadjusted earnings 5,137 4,285Basic earnings per share 8.17 8.82Diluted earnings per share 8.03 7.32 Exceptional items 418 -Tax relief on exceptional items (125) - Adjusted earnings 5,430 4,285Basic earnings per share 8.64 8.82Diluted earnings per share 8.49 7.32 8. Cash flows Year ended Year ended 31 December 2005 31 December 2004Reconciliation of operating profit to net cash £000 Re-statedinflow from operating activities £000 Operating profit on ordinary activities beforeinterest and taxation 7,442 6,250Depreciation 383 305Loss on sale of fixed assets - 34Increase in stock and amounts recoverable oncontracts (1,674) (5,379)(Increase)/decrease in debtors (3,988) 376Increase in payments on account 323 502Increase in trade and other creditors 3,977 1,569Non-cash cost of share based payments 244 - Net cash inflow from operating activities 6,707 3,657 Analysis of change in net As at As atfunds 1 January Cash flows Non-cash 31 December 2005 movements 2005 in the year £000 £000 £000 £000 Cash at bank and in hand 37 6,047 - 6,084 Loans - (3,143) 3,143 - 37 2,904 3,143 6,084 The non-cash movement shown above represents the consolidation of amounts due toWillmott Dixon Limited into a loan facility on 1 January 2005 which wassubsequently repaid on flotation. Year ended Year ended 31 December 2005 31 December 2004 £000 Re-stated £000Returns on investments and servicing of financeInterest receivable 223 -Interest payable (218) - 5 - Taxation paid (1,706) (1,742) Capital expenditure and financial investmentPurchase of tangible fixed assets (868) (411)Sale of tangible fixed assets 7 99 (861) (312) FinancingCall on share capital 530 311Issue of shares 10,054 -Repayment of Willmott Dixon loan (3,143) -Costs associated with issue of shares (613) -Purchase of own shares (3) - 6,825 311 This information is provided by RNS The company news service from the London Stock Exchange