Kazera Global Regulatory News (KZG)

11 Mar 2008 07:02

Worthington Nicholls Group plc11 March 2008 FOR IMMEDIATE RELEASE 11 March 2008 Worthington Nicholls Group plc PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 Worthington Nicholls Group plc announces its preliminary results for the twelvemonths ended 30 September 2007. KEY POINTS • Loss before tax £42.1 million. • Goodwill impairment £21.9 million • Statutory basic loss per ordinary share 54.75p • Further restructuring under way • Targeting breakeven trading • Net cash balance at 30 September 2007, £11.4 million, net cash balance at 28 February 2008 £6.5 million • Dividend payment NIL • Proposed name change to Managed Support Services plc Commenting on the results, Simon Beart, Chief Executive said: "These results document a failure of management and Corporate Governance by theprevious Board. However, the new Board, appointed on 21 November 2007, hasaddressed the major issues and has made the appropriate cost reductions. As aresult, whilst the next reporting period to 31 March 2008 will show furthersubstantial losses, following the second restructuring, we expect Group tradingto stabilise, thereby protecting our net cash balances". FOR FURTHER INFORMATION, PLEASE CONTACT: Worthington Nicholls Group plc: Simon Beart, Chief Executive 07710 444370 William Good, Group Finance Director 01483 735703Cenkos Securities plc: Nick Wells 020 7397 8900 Stephen KeysBuchanan Communications: Richard Darby 020 7466 5000 Nicola Cronk CHIEF EXECUTIVE'S REVIEW The new Board was appointed in late November 2007 following a series of profitwarnings and a fall in the share price of some 90 per cent. The changes to theBoard were brought about by the Company's major shareholders, since it wasevident that the Company was confronting a number of serious issues. Shortly after appointment, the new Board became aware of the poor underlyingtrading, previously disguised by the inappropriate treatment of certain costsand revenue in the main trading subsidiary, WN Trading ("WNT") as identified ina report by KPMG. It was also clear that management failings had led to highstaff turnover, poorly executed acquisitions, negative cash flows and theuncontrolled pursuit of loss-making contracts. The Board announced its estimate of the resultant underlying losses on 7December 2007. At that stage write-offs and provisions totalling approximately£15.9 million were required in order to reflect the reality of underlyingtrading. The majority of these adjustments were made to the accounts of theoriginal Worthington Nicholls trading units which had made up the Group atflotation. A proportion of the write offs related to prior years since theincorrect recognition of revenue had taken place over a substantial period oftime. The accounts of the more recently acquired businesses, WoodsEnvironmental Ltd ("Woods"), Euro-Property Services ("EPS") and ClassicInteriors ("Classic") were largely unaffected. In light of the poor current trading, the Board immediately undertook asubstantial headcount reduction and withdrew from certain unprofitableactivities. Headcount across the Group was reduced by approximately one thirdand businesses with operating losses of some £150,000 per month were immediatelyclosed. The Board also inherited a number of loss-making contracts and onerouscontractual obligations for which no provision at that time had been taken. Following recent trading in the quarter to 31 December 2007, it became apparentthat a further retrenchment of activity was required. This was necessary inorder to ensure that all parts of the Group could operate with certainty, at noworse than break even. As a result, an additional headcount reduction hascommenced and certain installation and project operations that were duplicatedon multiple cost bases will now be rationalised. It is expected that theseactions will incur a further cash cost of some £500,000. The Group has retaineda full sales engagement with customers but can now deliver an improved service,from a rationalised delivery platform. The Board, as would be expected, has taken steps to improve senior managementand has implemented internal controls in order to provide a sharper focus onmargin management and cash flow. In the opinion of the Board, these managementactions will enable the Group to operate at break even, on an underlying basisbefore exceptional costs and to improve the historically poor cash flow. The restructurings and the consequences of correcting the accountingirregularities have led to the carrying value of the Group's subsidiaries beingmaterially overstated. The associated impairment of goodwill was £21.9 million. TRADING ACTIVITIES The Group is now focused on the performance of Classic, EPS and Woods, all ofwhich were acquired in May 2007, and the rationalised operations at WNT. Classic offers customers a broad range of shop fitting and design skills, whichare primarily focused on the hotel industry and the retail industry. Profitshave reduced from the historic peak at the time of acquisition, but the businesshas a strong management team, which has been increased and is currently enjoyinggood activity levels. Debtor write offs have been an issue but controls havebeen improved and the team is working well in the new environment. EPS, based in London, is a specialist supplier of kitchen equipment and cateringfacilities to the hotel industry whilst also undertaking certain airconditioning contracts. The majority of activity is concentrated within the M25area. EPS was acquired under earn out arrangements. As a result of poortrading post acquisition, no payment was due in respect of the calendar earn outperiod to December 2007. Woods is an air conditioning supplier specialising in the commercial markets.Woods undertook a poorly executed expansion programme immediately afteracquisition, which incurred substantial losses. This process was unwound by thenew Board, requiring office closures and the sale of a loss-making subsidiary. Rationalisation, rapid management action and cost cutting will enable Woods toreturn to improved levels of profitability, admittedly at reduced levels ofturnover. The remaining Woods management team is capable and experienced and isalready delivering the benefits of the recent rationalisation. The activities of WNT, the original Group entity, incurred the majority ofheadcount reductions and provisions for losses. Unprofitable contracts are nowbeing completed and a reduced level of new business is being taken on atreasonable margins. Pricing in the hotel sector remains highly competitive, butthe unit will continue to develop its maintenance and building servicesofferings, which offer higher quality income and less exposure to high riskcontracts. Clearly the recent events and substantial changes to the Group have raisedconcerns amongst customers and suppliers. Considerable time and effort istherefore being spent re-engaging with customers and suppliers in order toemphasise improvements in operating performance and the benefits of the strongbalance sheet which the Group enjoys. BOARD CHANGES, CORPORATE GOVERNANCE The former Chief Executive Mark Worthington was dismissed for gross misconductin November 2007. Mr Worthington had previously been asked to resign from hisformer position as Group Chief Executive following the profit warning of 17August 2007. Arrangements were made to effect the resignation of the Corporate DevelopmentDirector, Mr D Levis on 21 November 2007. The Group Finance Director Mr T Hunthad previously stepped down and had been replaced by a part-time, interimdirector Mr C Nielson. Arrangements were made for Mr Nielson and Mr Hunt toleave the Group shortly after the appointment of the new Board. The former Chairman, Mr A Stoddart resigned at the time of the disclosure offurther losses and accounting failures on 7 December 2007. Mr Stoddart had beena non-Executive Director since flotation and Chairman since July 2007. MrStoddart operated as interim Chief Executive for three months prior to hisdeparture. The previous Chairman was Peter Worthington who resigned in July2007. The remaining non-Executive Director, Mr S Mulligan, tendered his resignationduring September 2007 and this was accepted and agreed on 21 November 2007. Messrs Beart, Good and Mann were appointed on 21 November 2007. It is clear to the new Board that there was a complete failure of corporategovernance at all levels during 2006 and 2007. In particular, the Board notesthat financial information made available to the previous Board directors wasboth poor and materially incomplete until April 2007, and that this state ofaffairs had been allowed to prevail for over two years. In addition, the Boardis currently unable to reconcile the statements made in respect of currenttrading during April and May 2007 with the evidence of the available managementaccounts. There would also appear to have been no effective action by the Boardand in particular the Non Executive Directors in respect of the preparation ofthe accounting records, inappropriate trading statements and lack of contractmanagement, leading to unmonitored, severe adverse cash flows. In the light of these failings, the Board has instituted a number of operationaland financial controls at Main Board level and operational level. Headcount andcash disciplines have been imposed at all levels and all material financialauthorisations have been reserved for the Main Board, including headcountcontrol, cost base management, capital expenditure, banking arrangements andregulatory disclosures. In due course, the Board regards it as important to appoint a Non ExecutiveDirector. However, at the current state of the Company's development and in theface of considerable legal uncertainty relating to previous events, the Boardregards it as unlikely that a suitably qualified and experienced Non ExecutiveDirector will be available. It is to be hoped that once the issues arising fromthe recent period of instability have been resolved, a suitable candidate can beattracted. In the meantime, the Board is receiving detailed advice from theGroup's advisors in order to ensure that appropriate corporate governance isimposed, delivered and supervised, in particular with respect to anycommunications with shareholders. William Good has indicated to the Board that during mid to late 2008 he intendsto leave the Group, having completed the initial phase of delivering andimplementing suitable financial controls across the Group. In due course, theBoard will seek to identify an appropriate replacement. William Good has beeninstrumental in improving and managing the Company's previously poor systems andhas made a significant contribution to the recent strengthening of financialcontrols. The Directors wish to express their gratitude for William'sexceptional efforts during what has been a difficult time for the Company. LEGAL MATTERS The Group is inevitably incurring continuing, material legal costs as the Boardexamines the various options available, in the event that the previousaccounting irregularities and trading statements give rise to criminal or civilproceedings. NAME CHANGE It is not appropriate that the Group should continue to trade under its existingbranding and the Board is therefore proposing that the Group be renamed ManagedSupport Services plc by a resolution to be proposed at the forthcoming AnnualGeneral Meeting, which has been convened for 14 April 2008. LONG TERM INCENTIVE PLAN The Group has suffered from a substantial reduction in market value and anecessary but wide ranging series of management changes. It is important thatif shareholder value is to be re-built and capable management attracted to theGroup, an attractive incentive scheme is made available that can offer theprospect of material capital gain in the event that the share price recovers. Accordingly, a draft scheme has been proposed and a summary of this scheme isset out in the Notes to the Annual General Meeting. In due course, the Boardexpects that all senior managers charged with delivering material profit growthwill participate in the scheme. The Board has decided that approval of the scheme by shareholders isappropriate. PROSPECTS The Board is of the opinion that it will take until mid year in order to imposethe correct level of effective internal controls and to upgrade further staffand processes where appropriate. The historical lack of contract management andthe absence of management KPIs have represented a considerable short termchallenge. However, the Board believes that current trading will shortly stabilise and theBoard has curtailed or closed loss-making activities. The Group is thereforefocused on those trading units which have capable and experienced management,proven market positions and the historical achievement of good levels ofprofitability. In addition, the Group retains a considerable net cash balance. The Board will be preparing full statutory accounts for the period ending 31March 2008. These accounts will inevitably reflect the trading losses incurredduring the recent rationalisations and the costs of restructuring the Group.The March 2008 results will be released in late June 2008 at which time theBoard hopes to confirm that trading and cash flow have stabilised. Simon BeartChief Executive FINANCIAL COMMENTARY Results Turnover from continuing operations and acquisitions was £25.9 million for theyear to September 2007. After write-offs and provisions in respect of September2007, of £8.3 million (detailed below), the Group recorded an operating lossbefore goodwill impairment of £20.2 million (see note 2 for reconciliation). Provisions and Write-offs On 7 December 2007 the Group announced that, following work undertaken by theBoard and a limited scope review by KPMG, provisions and write downs totallingsome £15.9 million would be required to provide an accurate accounting treatmentin respect of sales and debtors. Following this initial announcement, the Board asked its new auditors, Deloitte& Touche LLP to consider, as part of the audit for 30 September 2007, the impactof the investigation that had occurred on the financial statements. The audithas now been finalised, producing a reduced total adjustment of £13.7 million asdetailed below: Period ended Year ended 30 September 30 September 2006 2007 Total £000s £000s £000s Matched costs 2,407 715 3,122Trade debtors and retentions 260 2,242 2,502Specific contract issue 699 - 699Unallocated accrued income 1,367 1,787 3,154Stock 184 270 454WIP 150 462 612Debit notes not recovered 300 - 300Fixed assets - 103 103Investment property write down - 500 500Other prepayments - 364 364Loss making contracts - 592 592Other items - 1,272 1,272 Total 5,367 8,307 13,674 Due to the issues identified, the comparative figures for the year ended 30September 2006 are considered potentially unreliable. The prior year adjustmentis disclosed within note 3. The current year adjustment, including theexceptional charge, is disclosed within note 2. Movement in provisions The announcement of the original provision of £15.9 million was made on the 7December 2007, two weeks after the new Board were appointed. Subsequently, theDirectors concentrated on reducing losses and improving cash flow. A number ofloss making contracts were finalised and a number of project disputes settled.These efforts released previously written off work in progress and secured thepayment of old debtors previously provided against, leading to a correspondingreduction in the total provision. Balance Sheet Following the implementation of the write-offs and provisions, the Group had netassets of £13.6 million as at 30 September 2007, a significant proportion ofwhich related to net cash. Although there will be additional losses in thecurrent financial period to March 2008, the Directors believe that the Group isrobustly financed and that further working capital improvements are possible. Restructuring Approximately 90 employees were made redundant in late 2007 and certainoperations and offices closed. Following a further review of trading in February 2008, additional costreductions have been undertaken. These reductions will remove duplicated costcentres and will focus the resources of the Group where the best servicedelivery can be achieved. These cost reductions are expected to be fullyimplemented by July 2008. The total cost of the restructuring programmes will be in the region of £1.5million. This cost is in addition to the write offs and provisions detailedabove and will be charged to the profit and loss account in the currentfinancial period ending 31 March 2008. Accounting structure At flotation there were no qualified accountants employed by the Group. Duringthe current year an appropriate finance department has been established andsince November 2007, detailed reporting processes and controls have beenintroduced. Cash During the year to September 2007 the Group raised £25.2 million from the issueof new equity. The fundraisings were described as required in order to financenew acquisitions and in particular to fund organic growth in newly acquiredbusinesses. In the opinion of the Board, the additional funding was required toallow the Group to continue trading. A total of £25.2 million was raised net of fees, of which only £4.8 million wasused to finance acquisitions (net of cash received from the sale of aninvestment property to a vendor), £1.0 million for corporation tax, £2.0 millionto repay opening debt and £0.5 million on capital expenditure. The Groupfinished the year with net cash of £11.6 million. Accordingly, some £6.7million of cash was used to fund trading losses. Trade creditor balances at 30 September 2007 were inflated due to a number oflarge supplier payments being overdue. These overdue amounts have now been paidin full. As at 28 February 2008 the Group had a net cash balance of £6.5 million. Sincethe year end the Group has paid £0.7 million in corporation tax, issued £0.7million in vendor loan notes and has spent some £0.4 million on restructuringand advice and has spent £0.2 million on capital expenditure. Acquisitions, Deferred consideration The Group made four acquisitions during the period: Lumenglow, Classic, EPS andWoods. The initial consideration for these businesses totalled £4.8 million incash and £2.3 million in shares valued at £1.70 each. The final earn out payment for Classic of £250,000 was earned and will be paidin 2008 in cash. As a result of the Group reorganisation, and the concentrationof service delivery at Woods, the Woods earn out has been restructured with anin principle agreement to a cash payment of £250,000 payable in the current yearand £250,000 payable thereafter. These payments will represent the full andfinal payment in respect of the acquisition of Woods. The remaining earn out payment obligation for EPS is in relation to levels ofprofitability to be achieved in calendar 2008. The poor performance of thebusiness in calendar 2007 meant that no payment was due. The EPS acquisitioncontract contains a number of errors and does not, in the opinion of the Board,reflect the intention of the parties at the time of acquisition. A revisedproposal, designed to replicate the expectations at the time of acquisition hasbeen made to the vendor. Impairment of Goodwill Goodwill totalling £24.4 million has been fully impaired (includingamortisation) relating to the assets of the original Worthington Nichollstrading divisions. The Board has also fully impaired the goodwill of £4.4million relating to Project Air Ltd, acquired in July 2006. Lumenglow has continued to be loss making, accordingly the goodwill of £0.3m hasbeen fully impaired. The Directors also believe it is prudent to write down thecarrying value of EPS and Woods to £4.5 million, generating an impairment of£3.6 million. Taxation The Group has paid £1.6 million in corporation tax since flotation. Asignificant proportion of this tax payment relates to tax owed on profits madein the acquired companies before acquisition. Dividend The Company paid a maiden dividend during the previous financial year. However,following the substantial write offs and provisions made in the year endingSeptember 2007, there are insufficient reserves to allow the payment of adividend. The Directors are considering a corporate reconstruction that mayallow the directors to recommend the payment of a dividend in the future. William Good10 March 2008 CONSOLIDATED PROFIT AND LOSS ACCOUNTYEAR ENDED 30 SEPTEMBER 2007 Restated (note 3) 3 February 2006 to 30 September 2006 £'000 Year ended 30 September 2007 Continuing Group operations Acquisitions total £'000 £'000 £'000 TURNOVER 17,279 8,621 25,900 3,265Cost of Sales (15,092) (7,811) (22,903) (6,009) Gross profit/(loss) 2,187 810 2,997 (2,744) Administrative expenses - normal (18,260) (2,242) (20,502) (1,349)Administrative expenses - exceptional (24,504) (163) (24,667) - Administrative expenses - total (42,764) (2,405) (45,169) (1,349)Other operating income 96 8 104 16 OPERATING LOSS (40,481) (1,587) (42,068) (4,077) Interest receivable and similar income 212 22 234 10Interest payable and similar charges (227) (18) (245) (76) LOSS ON ORDINARY ACTIVITIES BEFORETAXATION (40,496) (1,583) (42,079) (4,143)Tax on loss on ordinary activities - - - (360) LOSS FOR THE FINANCIAL PERIOD (40,496) (1,583) (42,079) (4,503) BASIC AND DILUTED LOSS PER ORDINARYSHARE (54.75p) (14.74p) There is no material difference between the result as disclosed in the profitand loss account and the result on an unmodified historical cost basis for theperiod. Statement of total recognised gains and losses forYear ended 30 September 2007 2007 2006 £'000 £'000Loss for the financial year (42,079) (4,503) Total recognised gains and losses relating to the year (42,079) (4,503) Prior year adjustments (5,491) Total gains and losses recognised since last annual report (47,570) CONSOLIDATED BALANCE SHEET30 SEPTEMBER 2007 Restated (note 3) 2007 2006 £'000 £'000FIXED ASSETSIntangible fixed assets 6,270 28,713Tangible fixed assets 1,601 1,770 7,871 30,483CURRENT ASSETSStocks and WIP 1,894 247Debtors 8,001 5,503Cash at bank and in hand 12,712 519 22,607 6,269CREDITORS: amounts falling due within one year (13,841) (7,616) NET CURRENT ASSETS/(LIABILITIES) 8,766 (1,347) TOTAL ASSETS LESS CURRENT LIABILITIES 16,637 29,136 CREDITORS: amounts falling due after morethan one year (1,589) (1,463) PROVISIONS FOR LIABILITIES (1,477) - NET ASSETS 13,571 27,673 CAPITAL AND RESERVESCalled up share capital 870 662Share premium reserve 56,491 30,802Merger reserve 2,845 588FRS 20 reserve 241 124Profit and loss account (46,876) (4,503) SHAREHOLDERS' FUNDS 13,571 27,673 The balance sheet as at 30 September 2006 has been restated for the adoption ofFRS 20 'Share-based payments' and for the correction of the fundamental errors(note 3). These financial statements were approved by the Board of Directors on 10 March2008. CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 30 SEPTEMBER 2007 Restated 3 February 2006 12 Months to 30 to 30 September September 2007 2006 £'000 £'000 Net cash outflow from operating (6,686) (2,457)activitiesReturns on investments and servicing of finance (11) (51) Taxation (1,060) - Capital expenditure and financial investmentPurchase of tangible fixed assets (531) (10)Sale of tangible fixed assets 1,341 - AcquisitionsPurchase of subsidiary undertakings (4,681) (16,259) Dividends paid (294) - Net cash outflow before financing (11,922) (18,777) FinancingReceipts from new loans - -Net loan repayments (181) (12)Issue of equity share (net of expenses) 25,204 18,352Capital element of hire purchase payments (14) (11) 25,009 18,329 Increase/(decrease) in cash in the period 13,087 (448) RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET CASHYEAR ENDED 30 SEPTEMBER 2007 2007 2006 £'000 £'000 Increase/(decrease) in cash in the period 13,087 (448)Cashflow from change in debt and lease financing 193 23 Change in net cash resulting from cash flows 13,280 (425) Loan notes cancelled 326 -New hire purchase agreements - (15)Finance leases, loan and notes acquired with subsidiaries (208) (1,533) Movement in net cash in the period 13,398 (1,973) Net debt at 1 October 2006 (1,973) - Net cash/(debt) at 30 September 2007 11,425 (1,973) 1. Segmental Reporting Heating and Air Conditioning Systems Other Segments Group Restated Restated Restated 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 Turnover 23,963 3,265 3,505 - 27,468 3,265Inter-segment turnover (431) - (1,137) - (1,568) - Net turnover 23,532 3,265 2,368 - 25,900 3,265 Loss before tax (41,112) (4,143) (967) - (42,079) (4,143)Loss before tax and exceptional items (16,551) (4,143) (861) - (17,412) (4,143) Segment net assets - continuing 10,512 27,673 3,059 - 13,571 27,673 Included within heating and air conditioning are the results for WorthingtonNicholls Group plc, A S Nicholls Limited, Worthington Nicholls FacilitiesLimited, Project Air Limited, Woods Holdings Wilmslow Limited, WoodsEnvironmental Limited, Woods Environmental (North East) Limited, WoodsEnvironmental (South) Limited, Woods Facilities Limited, Woods Plumbing andHeating Limited and Woods Ventilation Limited. Included within other segments are the results for Lumenglow Limited,Euro-Property Services (London) Limited and Classic Interiors ContractorsLimited. The prior year restatement had no impact upon the segmental disclosures becauseprior to the current year acquisitions, the Group operated in only one segment. 2. Exceptional items As noted in the Directors' report, the group has incurred exceptional costs inthe period. 2007 2006 £'000 £'000 Investment property impairment 500 -Bad debt provision 1,470 -Legal fee provisions 795 2,765Goodwill impairment 21,902 - Total exceptional items 24,667 The financial commentary makes reference to a non-statutory balance. This isreconciled below. 2007 2006 £'000 £'000 Operating loss per profit and loss account (42,068) (4,077)Goodwill impairment 21,902 - Operating loss before goodwill impairment (20,166) (4,077) The reconciliation to the £13,674,000 as disclosed in the directors' report isas follows: Adjustment Fundamental to error - prior Admin Admin management year Gross margin - exceptional -normal accounts £'000 £'000 £'000 £'000 £'000 Matched costs (being irrecoverablerevenue) 2,407 - - - 715Trade debtors and retentions 260 - 1,470 - 772Specific contract issue 699 - - - -Unallocated accrued income 1,367 - - - 1,787Stock 184 - - 270 -WIP 150 - - 462 -Fixed assets - - - 103 -Investment property impairment - - 500 - -Other prepayments - - - 364 -Loss making contracts - 592 - - -Other items 300 - 795 477 - Total 5,367 592 2,765 1,676 3,274 Total 13,674 3. Prior period adjustments During the year the company has adopted FRS 20 'Share based payment' whichrequired changes in the method of accounting for share based payments. Also, asnoted in the directors' report, there were fundamental errors in the prior yearaccounts. Accordingly the 2006 results have been restated; the effects aresummarised below:Group Operating Share- profit/ Trade FRS 20 holders' (loss) Debtors creditors Stock reserve funds £'000 £'000 £'000 £'000 £'000 £'000 2006 as previously reported 10,236 (3,347) 581 - 33,040 1,414 Adoption of FRS 20 during periodended 30 September 2006 - - - (124) - (124) Correction of fundamental errorduring period ended 30 September2006 (4,733) (300) (334) - 5,367 (5,367) 2006 restated 5,503 (3,647) 247 (124) 27,673 (4,077) With the exception of £90,000, the prior period adjustment relates to the parentcompany. Accordingly no additional table showing the effect upon the parentcompany balance sheet has been disclosed. The effect upon operating profit is split accordingly: Operating Cost of Admin profit/ Turnover sales expenses (loss) £'000 £'000 £'000 £'000 2006 as previously reported 7,998 (5,375) (1,225) 1,414 Adoption of FRS 20 during period ended 30 September 2006 - - (124) (124) Correction of fundamental error during period ended 30September 2006 (4,733) (634) - (5,367) 2006 restated 3,265 (6,009) (1,349) (4,077) Fundamental errors There were found to be fundamental errors in last year's accounts that wereconsidered to be of such significance that they alter the true and fair view ofthe previous period's figures. It was therefore considered necessary to restatethe comparatives in these financial statements arising from: - Stock and WIP balances were included at their cost price but did not have a net realisable value to the business. - Retentions were being included as trade debtors before the period of retention had lapsed. No creditor was being held for the work required before the retention would be recoverable. - "Matched" costs held on balance sheet. These were excess costs raised as revenue but not recoverable from customers. - At 30 September 2006 rebates agreed in respect of future purchases from a supplier were recognised as an asset. - Amounts recoverable on contracts. These amounts were not and are not expected to be received. 4. INTEREST PAYABLE AND SIMILAR CHARGES 2007 2006 £'000 £'000 Bank loan and overdraft interest 151 70Hire purchase interest 47 6Unwinding of discount on Project Airdeferred consideration 47 - 245 76 5. LOSS PER ORDINARY SHARE Loss per ordinary share is based on the loss for the year of £42.08 million(2006 (revised loss): £4.50 million) and 76,854,682 (2006: 30,548,045) ordinaryshares being the weighted average number of ordinary shares in issue during theyear. FRS 22 requires presentation of diluted earnings per share when a company couldbe called upon to issue shares that would decrease net profit or increase netloss per share. For a loss making company with outstanding share options, netloss per share would only be increased by the exercise of out-of-the-moneyoptions. Since it seems inappropriate to assume that option holders would actirrationally and there are no other diluting future share options, dilutedearnings per shares equals basic earnings per share. 2007 Loss No, of Loss per £'000 shares share pence Basic loss per share (42,079) 76,854,682 (54.75) Revised 2006 Loss No, of Loss per £'000 shares share pence Basic loss per share (4,503) 30,548,045 (14.74) ADJUSTED LOSS PER ORDINARY SHARE Adjusted, basic loss per ordinary share has been based on the loss on ordinaryactivities after taxation for each period but excluding exceptional items andgoodwill impairment since the Directors believe that this gives a moremeaningful measure of the underlying performance of the group. 3 February 2006 12 Months to to 30 30 September September 2007 2006 £'000 £'000 Loss on ordinary activities after taxation (42,079) (4,503)Exceptional items (see note 4) 2,765 -Goodwill impairment 21,902 - Revised loss after taxation (17,412) (4,503) Adjusted basic loss per ordinary share (22.6p) (14.74p) In November 2007 a further 3,201,898 shares were issued as part of the deferredconsideration in respect of EPS. 6. STOCKS AND WORK IN PROGRESS Group Company Restated Restated (note 3) (note 3) 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Stocks - 247 - 92Work in progress 2,754 - 1,408 -Less provision for work in progress (860) (860) 1,894 247 548 92 7. DEBTORS Group Company Restated Restated (note 3) (note 3) 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Trade debtors 7,246 3,699 2,604 2,161Amounts owed by group undertakings - - 2,380 487Other debtors 325 1,687 268 1,340Prepayments and accrued income 430 117 69 99Corporation tax - - 319 - 8,001 5,503 5,640 4,087 8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Group Company Restated Restated (note 3) (note 3) 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Bank loans and overdrafts 1,140 986 1,070 813Obligations under finance leasesand hire purchase contracts 83 43 39 43Trade creditors 6,733 3,647 2,886 2,805Amounts owed to group undertakings - - 3,660 480Corporation tax 301 732 - 253Social security and other taxes 952 1,155 526 611Other creditors 3,038 1,013 2,970 1,001Accruals and deferred income 1,594 40 781 14 13,841 7,616 11,932 6,020 Included in other creditors is deferred and contingent purchase consideration of£2,948,925 (2006: £1,000,000). The bank loan of £1,069,778 was repaid on 20December 2007. 9. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Group Company Restated Restated (note 3) (note 3) 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Bank loans and overdrafts - 1,077 - 1,077Obligations under finance leasesand hire purchase contracts 64 60 40 60Contingent consideration 1,525 - 1,525 -Loan notes - 326 - 325 1,589 1,463 1,565 1,462 10. CALLED UP SHARE CAPITAL 2007 2006 £'000 £'000 Authorised 115,000,000 ordinary shares of 1 pence each 1,150 850 Called up, allotted and fully paid 87,002,078 ordinary shares of 1 pence each (2006: 66,165,000) 870 662 During the year ended 30 September 2007 a total of 20,837,078 new ordinaryshares were issued by the Company. In November 2006 the Company issued6,666,067 shares at 90 pence per share in a placing. In May 2007 the Companyissued 11,764,706 new ordinary shares at 170 pence per share to finance theacquisitions of Classic, EPS and Woods. In addition, Blue Oar Securitiesexercised an option over 650,000 new ordinary shares at 50 pence per share, atwhich time the market price was 122 pence. The Company also issued new ordinaryshares in respect of acquisitions totalling 1,756,305. On 1 November 2007 a further 3,201,898 shares were issued as part of thedeferred consideration in respect of EPS. 11. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS Restated 2007 2006 £'000 £'000 Operating loss (42,068) (4,077)Goodwill amortisation 11,082 -Goodwill impairment 21,902 -Depreciation 233 27FRS 20 charge 117 124Loss on disposal of fixed assets 104 -Investment property impairment 500 -(Increase)/decrease in stocks (777) 637(Increase)/decrease in debtors (144) 1,378Increase/(decrease) in creditors 2,365 (546) Net cash outflow from operating activities (6,686) (2,457) 12. ANALYSIS OF NET DEBT Acquisitions (excl cash and 1 October Cash overdraft) 30 September 2006 flow £'000s Other 2007 £'000s £'000s £000 £'000s Cash at bank and in hand 519 12,193 - - 12,712Bank overdraft (961) 894 - - (67) Net cash (442) 13,087 - - 12,645 Debt due within one year (25) 206 (177) (1,077) (1,073)Debt due after one year (1,403) - - 1,403 -Hire purchase (103) 15 (59) - (147) Change in debt (1,531) 221 (236) 326 (1,220) Net (debt)/cash (1,973) 13,308 (236) 326 11,425 13. POST BALANCE SHEET EVENTS On 31 December 2007, the trade and certain assets of Worthington Nicholls Groupplc were transferred to a new Group company, W N Trading Limited. W N TradingLimited is a direct subsidiary of Worthington Nicholls Group plc. On 5 January 2008 Woods Environmental (North East) Limited (turnover-£1,611,400;loss before tax-£48,777) was sold for £53,000. The operations of Worthington Nicholls Facilities Limited (turnover-£1,956,721;loss before tax-£532,684), Woods Environmental (South) Limited(turnover-£2,414,819; profit before tax £77,470) and Project Air Limited(turnover-£3,089,596; loss before tax-£268,234) are ceasing, this process willbe completed by 31 March 2008. 14. The accounting policies adopted in the preparation of this preliminaryannouncement are consistent with those set out in the Group financial statementsfor the year ended 30 September 2007. The financial information does notconstitute the Company's Statutory Accounts. The Statutory Accounts for the year ended 30 September 2007 have been reportedon with the following qualification by the Company's auditors, extracts of thequalification read as follows: "In respect of the unsubstantiated journal entries the auditors were unable todetermine whether proper accounting records have been kept. Also in respect ofthese unsubstantiated journal entries and the limitation on the audit relatingto the group profit and loss account and cash flow statement for the periodended 30 September 2006, the auditors have not obtained all the information andexplanations that they considered necessary for the purposes of their audit. Except for any adjustments to the corresponding amounts that might have beenfound to be necessary had the auditors been able to obtain sufficient evidenceconcerning the group profit and loss account and group cash flow statement forthe period ended 30 September 2006, the financial statements for year ended 30September 2007 are unqualified". The Statutory Accounts for the year ended 30 September 2007 will be delivered tothe Registrar in due course. It is intended to post the Annual Report to shareholders on 14 March 2008,copies of this report will be available from the Company Secretary at BaronsCourt, Manchester Road, Wilmslow, Cheshire SK9 1BQ and from the Company'swebsite www.worthington-nicholls.co.uk from the 18 March 2008. The Annual General Meeting of the Company has been scheduled for 10.00 am onMonday 14 April 2008 to be held at the offices of the Company's legal advisers,Osborne Clarke, One London Wall, London EC2Y 5EB. This announcement was approved by the Board of Directors on 10 March 2008. This information is provided by RNS The company news service from the London Stock Exchange