Last checked at 10 Mar 2009 07:00
Embargoed Release: 07:00hrs Tuesday 10 March 2009
Mears Group PLC
("Mears" or "the Group")
Record Preliminary Results
For the Year Ended 31 December 2008
Mears Group PLC, the support services group to the social housing and domiciliary care sectors in the UK, is pleased to announce record results for the year ended 31 December 2008.
| Financial Highlights | Year ended 31 December 2008 | Year ended 31 December 2007 | Change |
| Revenue | £420.4m | £304.6m | up 38.0% |
| Operating profit pre amortisation and share option charges | £22.2m | £17.6m | up 26.1% |
| Diluted EPS - normalised for full tax, pre amortisation and share option charges | 20.12p | 16.93p | up 18.8% |
| Dividend per share | 4.75p | 4.00p | up 18.8% |
Operational Highlights
Bob Holt, Chairman, said:
"Our order book stands at £1.6 billion and the demand for our services continues to be strong. Importantly our two growth markets Social Housing and Domiciliary Care, which account for over 80% of Group revenues, largely reflect quality partnership relationships with first class public sector customers. These are defensive sectors where spend is largely non-discretionary and which afford us substantial immunity from bad debts.
"We continue to place great emphasis on winning good quality contracts that can provide clear and sustainable margins. The sales pipeline remains buoyant and we have a number of significant opportunities which are at an advanced stage of the bidding process. There are also tremendous opportunities with existing customers to unlock significant additional revenue."
A presentation for analysts will be held at 9.30 a.m. today at the offices of Investec, 2 Gresham Street, London, EC2V 7QP.
About Mears www.mearsgroup.co.uk
Mears is a leading social housing repairs and maintenance service provider to Local Authorities and Registered Social Housing Landlords in the UK and has a growing presence in the domiciliary care market, providing personal care services to people in their own homes delivered as part of outsourcing arrangements with Local Authorities.
Mears employs in excess of 8,000 people and provides maintenance and repairs services to 500,000 homes nationwide. Mears also provides over 85,000 hours of domiciliary care to 13,000 service users each week.
| Enquiries: | |
| Mears Group PLC | |
| Bob Holt, Chief Executive | Tel: +44(0)7778 798 816 |
| Andrew Smith, Finance Director | Tel: +44(0)7712 866 461 |
| Joint Broker - Investec | |
| Keith Anderson/Daniel Adams | Tel: +44(0)20 7597 5970 |
| Joint Broker - Collins Stewart | |
| Mark Dickenson/Piers Coombs | Tel: +44(0)20 7523 8350 |
| Financial PR - Mears Group | |
| Threadneedle Communications | |
| Trevor Bass/Alex White | Tel: +44(0)20 7936 9666 |
| Hansard Group | |
| John Bick | Tel: +44(0)7872 061007 |
Chairman's Statement
It gives me great pleasure to announce our thirteenth consecutive year of double digit growth in revenue and record profits in this first year since moving up to the Main Market from the Alternative Investment Market of the London Stock Exchange.
In the year ended 31 December 2008 revenue increased by 38.0% to £420.4 million (2007: £304.6m) and operating profit before amortisation was up 26.1% to £22.2 million (2007: £17.6m). Diluted normalised earnings per share were up 18.8% to 20.12p (2007: 16.93p). The number of employees in the Group exceeded 8,000 for the first time.
These results represent, I believe, the most successful year in our history achieved in a period of economic instability and with the country facing uncertain times. It has always and continues be our strategy to plan for and manage future growth.
Our order book stands at £1.6 billion and the demand for our services continues to be strong. Importantly our two growth markets Social Housing and Domiciliary Care, which account for over 80% of Group revenues, largely reflect quality partnership relationships with first class public sector customers. These are defensive sectors where spend is largely non discretionary and afford us substantial immunity from bad debts. Of further importance, we have not experienced any work delays from our public sector customers, all of whom have largely avoided the banking crisis. We enter the current year with 89% of consensus forecast revenue already secured. In addition, we have secured 54% of consensus forecast revenue for 2010.
I commend our workforce at all levels for their commitment and endeavour. We are better placed than ever to take advantage of opportunities that the current market brings us.
The Mears social housing division has long been recognised as a market leader in terms of operational performance and tenant satisfaction. I am delighted to be able to confirm that our customer care performance KPIs hit new heights during the last year. It is a testament to our excellent operational team, headed by David Miles, that we were able to start a number of significant contracts and still maintain operational excellence. Again the team are to be congratulated.
I am pleased that our domiciliary care division had a very successful year in what is seen as a difficult trading environment. Despite tightening public sector budgetary constraints the business still grew in excess of 10% organically as a result of our professional approach to long-term partnership contract bidding. The increasing trend of local authorities to procure services from fewer and larger care providers is entirely in line with our philosophy to work in partnership with our clients with the longer term aim towards improved outcome-based solutions for our clients. During the year, we grew the division organically by more than any of our competitors in the same segment, taking market share. Alan Long, the Divisional Chief Executive Officer, has strengthened the management team significantly in the year. I look forward to bringing you news of exciting developments in the future.
Haydon, our Mechanical and Engineering division had an excellent year but enters what should be regarded as a difficult period. This is a sound and well-managed business and the division reduced overheads in the final quarter of 2008 in anticipation of a trading downturn in the current year.
We have a stated intention to have the best-trained and equipped workforce in the sector and I will not rest until we are able to provide enhanced career opportunities for all our staff.
In the year we excelled at all the things which are the heart of Mears. We completed in excess of 400 community based programmes, embracing those very communities in which we work and where our employees reside.
Your Board is mindful that they must provide the best possible opportunities for all our existing employees to prosper whilst continuing to attract the best possible talent available into our workforce.
Outlook
The demand for our services continues to be strong. Our two growth markets, Social Housing and Domiciliary Care, are defensive sectors where spend is largely non-discretionary. We continue to place great emphasis on winning good quality contracts that can provide clear and sustainable margins. The sales pipeline remains buoyant. There are a number of significant opportunities which are at an advanced stage of the bidding process and there are also tremendous opportunities with existing customers to unlock significant additional revenue.
The year ahead will bring its challenges and I look forward to bringing you news of our successes in the future.
Bob Holt
bob.holt@mearsgroup.co.uk
Chairman and Chief Executive
Operating and Financial Review
Revenue
In the year to 31 December 2008 we grew revenue to £420.4m (2007: £304.6m), an increase of 38.0%. The Social Housing division contributed revenue of £282.0m (2007: £205.6m), growth of 37.2% including organic growth of 33.6%. The order book of £1.6 billion coupled with our robust bid pipeline reflects our confidence in the demand drivers for repair and maintenance spending of our public sector partners.
The Domiciliary Care division contributed revenue of £54.6m compared to £28.7m in 2007. This increase is predominantly due to the full year impact of the twelve Care acquisitions completed during 2007, together with a further three bolt-on acquisitions during the first half of 2008. The Domiciliary Care division has been successful in winning seven new contracts during 2008, five of which mobilised during the period and have contributed to the organic growth in 2008 in excess of 10.0%.
The Mechanical & Electrical division (M&E) produced a 27.5% increase in revenue to £78.0m compared to last year (2007: £61.2m).
Operating result
We achieved an operating result before amortisation and share option costs of £22.2m (2007: £17.6m), an increase of 26.1%.
The Social Housing division maintained its operating margin above 6.0% which continues to be at the higher end for this sector. This is a tremendous achievement at a time when it has mobilised a number of large and complex multi-service contract awards. Typically the Group anticipates a low margin from a new contract during its mobilisation phase at a time where customer service is the only focus and ensuring that robust processes are put in place. At a time of high growth, one would expect to see an initial dilution in operating margin, so it is particularly encouraging to see robust margins and high levels of operational performance on the newly mobilised contracts. This is a credit to our operational teams working within those new locations.
The Domiciliary Care division maintained its operating margin at 5.6%, which is in line with the margin reported in our half-year interim report. Our aim is to maintain these margin levels as we expand this division and win new contracts. The division has incurred costs of further investment in IT integration and branding into a single Care operating unit, including a management restructure in the later part of 2008. We have successfully integrated the acquisitions we have made and, whilst there may be the expected short-term challenges of high staff turnover and recruitment within a minimum wage environment, there are equally opportunities to generate margin improvements through system improvements, operating efficiency, synergies and economies of scale. Our focus remains on improving contract profitability at the same time as gaining scale in our Care offering.
The M&E operating margin of 2.7% (2007: 4.5%) is pleasing in a business that has managed impressive growth through particularly difficult trading conditions. Given the economic uncertainties, the M&E division completed a restructure during the fourth quarter to ensure that a streamlined business was in place to move into an uncertain 2009.
Share option costs
The share option costs were £1.2m (2007: £0.6m). This increase was due to the full year impact of the SIP award approved by shareholders in November 2007. There is no cash impact from this expense.
Amortisation of acquisition intangibles
A charge of £3.6m (2007: £1.5m) arose in the period. This represents the amortisation of the identified intangible assets acquired predominantly in relation to the acquisition of the Domiciliary Care division in 2007 and a further three bolt-on acquisitions in 2008. The excess of purchase price over the fair value of identified net assets is capitalised as goodwill and is not amortised but is subject to an annual impairment review.
Tax expense
£3.8m has been provided for a tax charge (2007: £4.5m). The effective rate in 2008 is 22.9% (2007: 29.2%). The Group benefited from a reduction in the rate of Corporation Tax in March 2008 from 30% to 28%. The Group also benefited from a corporation tax deduction in respect of the exercise of 0.8m share options and a deferred tax credit of £1.0m in respect of the amortisation of acquisition intangibles.
Earnings per share (EPS)
Basic normalised EPS increased by 18.4% to 20.76p (2007: 17.54p). Our diluted normalised EPS, which allows for the potential diluting impact of outstanding share options, was up 18.8% to 20.12p on the comparative 2007 figure of 16.93p. Normalised earnings exclude amortisation of acquisition intangibles and the share option costs together with an adjustment to reflect a full tax charge of 28%. We believe that this normalised measure better allows the assessment of operational performance, the analysis of trends over time, the comparison of different businesses and the projection of future performance.
Dividend
These excellent results allow the Group to continue the progressive dividend policy adopted over recent years. A final dividend of 3.40p per share is proposed which combined with the interim dividend, gives a total dividend in the year of 4.75p (2007: 4.00p) an 18.8% increase. The dividend is payable on 1 July 2009 to shareholders on the register on 12 June 2009.
Financing
The efficiency with which the Group manages working capital remains a cornerstone of our business. The Group has consistently set high standards of tight working capital and high levels of conversion of operating profit into cash. In a year where the Group has organically increased revenue by £100m it is not unexpected to suffer a short-term spike in cash consumption. Our operations remain cash generative. This has been exaggerated further given that the organic growth has predominantly come from large-scale TUPE transfers and as such these new works have typically been entirely self-delivered. This model for delivery normally results in a longer working capital cycle. As a result of the increased mobilisations and associated working capital consumption, the Group's conversion of operating profit pre amortisation to cash was 43% (2007: 93%). Our net cash position at 31 December 2008 was £6.6m, reduced from £15.3m at the start of the year. Whilst it was anticipated that there would be an increased working capital requirement in 2008, strong operational cash flows are expected to reduce average debt levels in 2009.
The Group has experienced no delay in settlement of debts within its Social Housing or Domiciliary Care divisions where the customers are local authorities and housing associations. The Group is, however, experiencing some delays in settlement of debts within its M&E division where customers are typically blue chip construction companies. Whilst this delay has a short term impact on the Group's net funds, the credit risk is insured.
In April 2008, the Group entered into an agreement to replace the previous banking facility of £21m with a new facility arrangement for £40m with a term of five years. Barclays Bank PLC has supported the Group's financing requirements since flotation in 1996. The Group has taken this opportunity to include HSBC Bank plc within this new arrangement. This new facility is available to fund further acquisitions and to provide additional working capital to fund future organic growth. As anticipated, net interest costs increased to £0.8m (2007: £0.1m).
Since the year end, the Group has taken advantage of the continued reduction in the Bank of England base rate by entering into a hedging arrangement to fix rates on £15m at 2.95% for a 4 year term.
Acquisition
The Group has settled deferred consideration of £4.6m in respect of a number of historic acquisitions most notably £2.8m in respect of the acquisition of Laidlaw Scott Limited which was acquired in June 2006. This Scottish operation has performed well since acquisition and this sum represented the maximum consideration payable.
The Group has completed three further small Care acquisitions for a combined initial sum of £3.6m, with up to £0.3m deferred subject to future profitability. The latest acquisitions include an extension of our care activities to cover those with learning difficulties, which we are confident gives us scope for developing a national offering.
Disposal
During July 2008, the Group disposed of its non-core Vehicle Distribution division. The consideration of £2.8m was settled in cash. This represented the Group's first ever disposal. The activities of our Vehicle division were considered non-core and the offer represented excellent value for the Group.
Events after balance sheet date
On 22 January 2009, the Group announced the acquisition of 3C Asset Management Limited ('3C'). The initial consideration for 3C is £1.0 million for goodwill together with a pound-for-pound payment for 3C's net assets. The valuation of net assets is subject to a post completion review and is anticipated to be around £5.0 million. An additional deferred consideration is payable up to a maximum of £6.5 million, subject to the achievement of performance criteria linked to contract retention and profitability over the 24 month period to 31 December 2010. The consideration is being satisfied out of the Company's existing debt facilities.
Order book and sales pipeline
The visibility of our earnings continues to improve; £460m of new work was secured in the period. Our order book stands at £1.6 billion (comparative: £1.4 billion). The proportion of market forecast consensus revenue secured for 2009 is 89% with some 54% of the 2010 projection (comparative 2008: 86%, 2009: 58%). In addition, the sales pipeline remains buoyant and there are a number of significant opportunities that are at an advanced stage of the bidding process. There are also tremendous opportunities with existing customers to unlock significant additional revenue.
Major contract wins and mobilisations.
We have achieved a number of major successes, winning contracts valued at in excess of £460m in total over the last twelve months.
Social Housing organic growth
Mears has been awarded new social housing contract awards amounting to £420 million inclusive of the following:
Metropolitan Housing Trust - a ten-year sole partner contract with Metropolitan Housing Trust ("MHT") based in London and the Midlands to provide responsive repairs, planned maintenance, cyclical decorating and voids services. MHT owns over 30,000 properties, making them one of the largest Housing Associations in the country. The total contract is valued at £157m.
Cross Keys Homes - a ten-year partnership with Cross Keys Homes to provide responsive repairs and voids services. The contract is valued at £41m for the ten-year period. This award widens the range of services we provide to Cross Keys Homes, adding to the partnering arrangements we hold with them for Decent Homes, Gas Servicing and Cyclical Decorations.
Octavia Housing and Care - a ten-year partnership with Octavia Housing and Care based in Central London to provide repairs and void services. The contract is valued at £36m for the ten-year period.
Watford Community Housing Trust - one of two partners for a five-year Decent Homes partnership. The contract is worth approximately £33m over the five-year period for each partner. The services provided include the replacement of kitchens, bathrooms and external upgrade works.
Old Ford Housing Association - a ten-year partnership with Old Ford to provide responsive repairs and voids services. The contract is valued at £21m for the ten-year period. Old Ford is one of seven Group partners within the Circle Anglia Group, which has a housing stock of over 27,000 properties. Since the start of 2008, Mears has entered into partnership arrangements with four of the seven Circle Anglia Group partners.
Domiciliary Care organic growth
Careforce continues to build a presence across a growing geographical area and is well placed to take a leading position in the consolidation of the Domiciliary Care market. Investment in infrastructure and people continues as we grow the business. Notable successes in the year have included the following seven contract wins within our Domiciliary Care division amounting to in excess of 11,000 hours per week or over £7m of annualised revenues over the previous 12 months.
Blackburn with Darwen - a preferred supplier status for one of three localities within Blackburn with Darwen Borough Council. The contract to supply homecare commenced in July 2008 and runs until March 2011, with a possible extension for a further two years. The expected volume under this contract will be 1,000 hours per week. It is understood that the number of providers in the area has been reduced from 13 to 9 as a result of this retender process.
Manchester City Council - a locality-based contract to supply home care to Manchester City Council commenced in June 2008 for an initial term ending in March 2011, with a possible extension for a further two years thereafter. The expected volume under this contract will grow to 2,250 hours per week.
Southend-on-Sea - a contract to supply home care to Southend Borough Council will run for an initial period of three years with a possible extension for a further two years. It is expected that the hours supplied under this contract will grow in stages up to 2,000 hours per week. As a result of this contracting exercise we understand that the number of contracted providers has been reduced from 19 to 6.
Surrey - a contract to supply both home care and live-in care to Surrey County Council commenced in April 2008 and will run for an initial period of two years with a possible extension for a further two years. The award of the live-in contract consolidates our existing supply of live-in care to Surrey. We now also have the opportunity to supply home care in Surrey following this contract award and we expect the initial volume of work to build up to 650 hours per week.
Neath Port Talbot - a block contract to supply a minimum of 750 hours per week of home care to Neath Port Talbot County Borough Council for an initial one-year period with a possible extension for a further two years. This award represents the Care division's first contract win in Wales and will provide a valuable springboard to pursue other opportunities in the region.
Norfolk - a block contract to supply home care to Norfolk County Council; initially for a period of 5 years from January 2009, with a possible extension for a further 2 years thereafter. The expected volume under this contract is 3,700 hours per week. This represents the single largest new contract award achieved by Careforce since it was acquired by Mears and extends the Careforce coverage into a new geographical location. Following the award of this contract, the number of providers has been reduced from 11 to 5 with Careforce being awarded a third of the works.
Windsor and Maidenhead - a contract to supply homecare to the Royal Borough of Windsor and Maidenhead Council commenced in February 2009 and will run for a period of 2 years with a possible extension for a further 2 years thereafter. It is expected that the hours supplied under this contract will be 1,100 hours per week. This is in addition to the work we do with the Council already.
In addition, Careforce has been successful in winning a contract for the provision of domiciliary care across Nottinghamshire County Council. Previous contracts were held for specific areas of Nottinghamshire by 2 companies that Careforce acquired in 2008. The new contract enables Careforce to extend its service across the whole of Nottinghamshire and we are currently preparing our plans to do this.
The integration and rebranding of Careforce's eleven bolt-on acquisitions is nearing completion. We have continued to invest significantly in IT, accounting systems and in our workforce's development and training programmes.
The Government remains committed to prioritising the agenda of housing in an ageing society to ensure that as people grow older they stay comfortable and secure in their own homes. We continue to see a convergence between our Social Housing and Care divisions; there are increasing opportunities to combine our Care and Repair offerings and thereby add further value to our customers. A very successful pilot of joint working has been delivered in Wakefield, resulting in improved service and lower cost. Under the scheme, Careforce provides carer support to vulnerable people while Decent Home improvement work is being undertaken. We expect to roll this out to other contacts this year.
Environmental
Mears have a dynamic approach to the environment to create less waste and recycle more. The figures in 2008 have shown this in practice, as we are now recycling over 70% of our waste generated and have set a 75% standard for 2009. Branches within Mears have introduced green champions to look at ways of using less energy, recycling more and minimising waste. Some great initiatives have come out in 2008, including re-using waste wood as an additive to fertilizers, compacting waste to reduce transport, and greener vehicles. For the first time, in 2008 we introduced the Green Awards to further motivate and communicate our "Getting Greener Campaign". In 2009 we will continue to improve our environmental impact, setting higher standards, introducing more green initiatives and continuing to put the environment at the top of our agenda.
Health and Safety
In 2008 Mears have seen a 15% reduction in all accident rates compared to 2007. This is the third year we have seen a reduction and without a doubt this is down to the branches and Group management continuously looking to improve standards through training, communication and monitoring. All branches, as well as the SHE team have been set specific objectives for 2009, these include closer monitoring of high risk areas, focusing on the main accident causes and developing new ideas to reduce accidents. Through quality systems and procedures these will be analysed and new initiatives will be developed to further improve our current safety performance. Branch managers have also had a great involvement in our success including the Scunthorpe branch introducing a gloves only policy trial. We achieved 4,274 training days in 2008. These training days include the British Safety Council (BSC) courses, management and supervisor safety courses. In 2009 we will be following the success of the BSC and introducing a BSC supervisors and management course specifically aimed at the working environment within Mears.
Training and development
We have made a commitment to Skills Pledge at a National level and actively encourage and support our employees to gain the skills and qualifications that will support their future employability and meet the needs of our business. It is our ambition to have every employee qualified to Level 2 in an area that is relevant to our business and to improve our organisations performance through investing in economically valuable training and development.
Our Customer Services Level 3 training programme has proved very successful within our Customer Services team, with 30 staff achieving the required standard in 2008.
We are established in the Investors in People accreditation and ensure that equality and diversity is high on our agenda and reflective throughout all our policies, procedures, training and development.
We are particularly proud of our commitment to work placements for 14-19 year olds and our apprentice and graduate programmes. In 2008 we launched our Training Awards which are aimed at recognising and rewarding excellence amongst our apprentices and trainees within the Mears Group.
We are continuing to support young people within our local training centres and are also providing invaluable skills to local residents; the training provided includes basic DIY, numeracy and literacy skills.
Through our Community projects we encourage team working between managers, operatives, office staff and the wider community. The projects also provide training to staff in areas that they would not normally venture and promote community spirit.
Bob Holt
bob.holt@mearsgroup.co.uk
Chairman and Chief Executive
Andrew Smith
andrew.smith@mearsgroup.co.uk
Finance Director
Consolidated income statement
for the year ended 31 December 2008
| 2008 | 2008 | 2007 | 2007 | ||
| Note | £'000 | £'000 | £'000 | £'000 | |
| Sales revenue | 2 | 420,376 | 304,620 | ||
| Cost of sales | (309,721) | (224,808) | |||
| Gross profit | 110,655 | 79,812 | |||
| Other administrative expenses | (88,426) | (62,186) | |||
| Operating result before share-based payments and amortisation of acquisition intangibles | 22,229 | 17,626 | |||
| Amortisation of acquisition intangibles | (3,600) | (1,500) | |||
| Share-based payments | (1,200) | (550) | |||
| Total administrative costs | (93,226) | (64,236) | |||
| Operating result | 17,429 | 15,576 | |||
| Finance income | 263 | 222 | |||
| Finance costs | (1,110) | (345) | |||
| Result for the year before tax | 16,582 | 15,453 | |||
| Tax expense | 3 | (3,800) | (4,519) | ||
| Net result for the year | 12,782 | 10,934 | |||
Consolidated balance sheet
as at 31 December 2008
| 2008 | 2007 | ||
| Note | £'000 | £'000 | |
| Assets | |||
| Non-current | |||
| Goodwill | 50,258 | 46,781 | |
| Intangible assets | 11,214 | 12,608 | |
| Property, plant and equipment | 9,517 | 8,199 | |
| Deferred tax asset | 3,485 | 1,116 | |
| Trade and other receivables | 2,031 | 1,710 | |
| 76,505 | 70,414 | ||
| Current | |||
| Inventories | 8,392 | 9,277 | |
| Trade and other receivables | 85,654 | 49,929 | |
| Cash at bank and in hand | 16,094 | 15,250 | |
| 110,140 | 74,456 | ||
| Total assets | 186,645 | 144,870 | |
| Equity | |||
| Equity attributable to the shareholders of Mears Group PLC | |||
| Called up share capital | 6 | 740 | 732 |
| Share premium account | 6 | 31,940 | 31,007 |
| Share-based payment reserve | 6 | 3,235 | 2,035 |
| Merger reserve | 6 | 11,548 | 11,548 |
| Retained earnings | 6 | 48,241 | 37,373 |
| Total equity | 6 | 95,704 | 82,695 |
| Liabilities | |||
| Non-current | |||
| Pension and other employee benefits | 488 | 55 | |
| Deferred tax liabilities | 3,159 | 3,721 | |
| Other liabilities | - | 3,191 | |
| 3,647 | 6,967 | ||
| Current | |||
| Short term borrowings and overdrafts | 9,500 | - | |
| Trade and other payables | 74,903 | 52,410 | |
| Current tax liabilities | 2,891 | 2,798 | |
| Current liabilities | 87,294 | 55,208 | |
| Total liabilities | 90,941 | 62,175 | |
| Total equity and liabilities | 186,645 | 144,870 |
Consolidated statement of recognised income and expense
for the year ended 31 December 2008
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Actuarial (loss)/gain on defined benefit pension scheme | (967) | 295 | |
| Increase/(decrease) in deferred tax asset | 2,185 | (1,675) | |
| Net income/(expense) recognised directly to equity | 1,218 | (1,380) | |
| Profit for the financial period | 12,782 | 10,934 | |
| Total recognised income and expense for the period | 14,000 | 9,554 |
Consolidated cash flow statement
for the year ended 31 December 2008
| 2008 | 2007 | |||
| Note | £'000 | £'000 | ||
| Operating activities | ||||
| Result for the year before tax | 16,582 | 15,453 | ||
| Adjustments | 7 | 7,459 | 3,767 | |
| Change in inventories | 598 | (134) | ||
| Change in operating receivables | (35,884) | (5,190) | ||
| Change in operating payables | 20,194 | 1,971 | ||
| Cash generated from continuing operations | 8,949 | 15,867 | ||
| Taxes paid | (4,980) | (3,506) | ||
| Net cash inflow from operating activities | 3,969 | 12,361 | ||
| Investing activities | ||||
| Additions to property, plant and equipment | (3,705) | (3,314) | ||
| Additions to other intangible assets | (725) | (225) | ||
| Proceeds from disposals of property, plant and equipment | 8 | 143 | ||
| Acquisition of subsidiary undertakings, net of cash | (7,778) | (28,391) | ||
| Disposal of business activities | 2,454 | - | ||
| Interest received | 263 | 280 | ||
| Net cash outflow from investing activities | (9,483) | (31,507) | ||
| Financing activities | ||||
| Proceeds from share issue | 941 | 25,544 | ||
| Discharge of finance lease liability | (23) | (88) | ||
| Interest paid | (928) | (415) | ||
| Dividends paid | (3,132) | (2,544) | ||
| Net cash (outflow) / inflow from financing activities | (3,142) | 22,497 | ||
| Cash and cash equivalents, beginning of year | 15,250 | 11,899 | ||
| Net (decrease) / increase in cash and cash equivalents | (8,656) | 3,351 | ||
| Cash and cash equivalents, end of year | 6,594 | 15,250 | ||
| Cash and cash equivalents is comprised as follows: | ||||
| Cash at bank and in hand | 16,094 | 15,250 | ||
| Short term borrowings and overdrafts | (9,500) | - | ||
| Cash and cash equivalents | 6,594 | 15,250 |
Notes to the preliminary announcement for the year ended 31 December 2008
1. Basis of preparation
The preliminary announcement contains extracts from the full financial statements.
The full financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and also in accordance with IFRS as issued by the International Accounting Standards Board. The financial statements are prepared under the historical cost convention. The accounting policies remain unchanged from the previous year.
2. Segment reporting
The Group operated four (2007: four) business segments: Social Housing, Domiciliary Care, Mechanical and Electrical (M&E) and Vehicle Distribution. During the year the Group disposed of the Vehicle Distribution segment.
All of the Group's activities are carried out within the United Kingdom.
| 2008 | 2007 | |||||||||||||
| Social | Domiciliary | Vehicle | Social | Domiciliary | Vehicle | |||||||||
| Housing | Care | M&E | Distribution | Total | Housing | Care | M&E | Distribution | Total | |||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||
| Revenue | 282,046 | 54,611 | 78,008 | 5,711 | 420,376 | 205,559 | 28,718 | 61,181 | 9,162 | 304,620 | ||||
| Operating result pre-amortisation of acquisition intangibles | 17,091 | 3,065 | 2,071 | 2 | 22,229 | 12,563 | 1,826 | 2,737 | 500 | 17,626 | ||||
| Share based payment | (1,000) | (50) | (150) | - | (1,200) | (355) | (25) | (150) | (20) | (550) | ||||
| Amortisation of acquisition intangibles | (589) | (3,011) | - | - | (3,600) | (300) | (1,200) | - | - | (1,500) | ||||
| Operating result | 15,502 | 4 | 1,921 | 2 | 17,429 | 11,908 | 601 | 2,587 | 480 | 15,576 | ||||
3. Tax expense
Tax recognised in the income statement
| 2008 | 2007 | |
| £'000 | £'000 | |
| United Kingdom corporation tax effective rate 22.9% (2007: 29.2%) | 5,304 | 4,703 |
| Adjustment in respect of previous periods | (312) | (203) |
| Total current tax recognised in income statement | 4,992 | 4,500 |
| Total deferred taxation recognised in income statement | (1,192) | 19 |
| Total tax expense recognised in income statement | 3,800 | 4,519 |
4. Dividends
The following dividends were paid on ordinary shares in the year:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Final 2007 dividend of 2.90p (2007: final 2006 dividend of 2.40p) per share | 2,135 | 1,743 |
| Interim 2008 dividend of 1.35p (2007: interim 2007 dividend of 1.10p) per share | 997 | 801 |
| 3,132 | 2,544 |
The proposed final 2008 dividend of 3.40p per share has not been included within the Group financial statements as no obligation existed at 31 December 2008.
5. Earnings per share
| Basic | Diluted | |||||
| 2008 | 2007 | 2008 | 2007 | |||
| p | p | p | p | |||
| Earnings per share | 17.36 | 15.65 | 16.82 | 15.11 | ||
| Effect of amortisation of acquisition intangibles | 4.89 | 2.15 | 4.74 | 2.07 | ||
| Effect of full tax adjustment | (2.65) | (0.81) | (2.57) | (0.78) | ||
| Normalised pre-amortisation earnings per share | 19.60 | 16.99 | 18.99 | 16.40 | ||
| Effect of share based payment, post tax | 1.16 | 0.55 | 1.13 | 0.53 | ||
| Normalised pre-amortisation and share based payment earnings per share | 20.76 | 17.54 | 20.12 | 16.93 | ||
A normalised earnings per share is disclosed in order to show performance undistorted by amortisation of intangibles and the tax effect of share options. The profit attributable to shareholders before and after adjustments for both basic and diluted earnings per share is:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Profit attributable to shareholders | 12,782 | 10,934 |
| - amortisation of acquisition intangibles | 3,600 | 1,500 |
| - full tax adjustment | (1,953) | (567) |
| - share based payment, post normalised tax | 858 | 385 |
| Adjusted profit attributable to shareholders | 15,287 | 12,252 |
The calculation of earnings per share is based on a weighted average of ordinary shares in issue during the year. The diluted earnings per share is based on a weighted average of ordinary shares calculated in accordance with IAS 33 'Earnings per Share', which assumes that all dilutive options will be exercised. The additional normalised basic and diluted EPS use the same weighted average number of shares as the basic and diluted EPS.
| 2008 | 2007 | |
| Millions | Millions | |
| Weighted average number of shares in issue | 73.63 | 69.85 |
| - dilutive effect of share options | 2.34 | 2.51 |
| Weighted average number of share for calculating diluted earnings per share | 75.97 | 72.36 |
6. Reconciliation of movement in equity
| Share | Share-based | |||||
| Share | premium | payment | Merger | Retained | Total | |
| capital | account | reserve | reserve | earnings | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2007 | 615 | 5,547 | 1,485 | - | 30,363 | 38,010 |
| Net result for the year | - | - | - | - | 10,934 | 10,934 |
| Deferred tax | - | - | - | - | (1,675) | (1,675) |
| Pension obligation | - | - | - | - | 295 | 295 |
| Total recognised income and expense for the year | - | - | - | - | 9,554 | 9,554 |
| Issue of shares | 117 | 25,460 | - | 11,548 | - | 37,125 |
| Share option charges | - | - | 550 | - | - | 550 |
| Dividends | - | - | - | - | (2,544) | (2,544) |
| At 31 December 2007 | 732 | 31,007 | 2,035 | 11,548 | 37,373 | 82,695 |
| Net result for the year | - | - | - | - | 12,782 | 12,782 |
| Deferred tax | - | - | - | - | 2,185 | 2,185 |
| Pension obligation | - | - | - | - | (967) | (967) |
| Total recognised income and expense for the year | - | - | - | - | 14,000 | 14,000 |
| Issue of shares | 8 | 933 | - | - | - | 941 |
| Share option charges | - | - | 1,200 | - | - | 1,200 |
| Dividends | - | - | - | - | (3,132) | (3,132) |
| At 31 December 2008 | 740 | 31,940 | 3,235 | 11,548 | 48,241 | 95,704 |
The Share-based payment reserve comprises the amounts charged to the income statement in respect of equity share based payments.
The Merger reserve relates to the difference between the nominal value and total consideration in respect of the acquisition of Careforce Group PLC, where the Company was entitled to the merger relief offered by the Companies Act.
7. Notes to the consolidated cash flow statement
The following non operating cash flow adjustments have been made to the pre-tax result for the year:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Depreciation | 1,989 | 1,666 |
| Loss / (Profit) on disposal of property, plant and equipment | 109 | (127) |
| (Profit) on disposal of subsidiary undertaking | (398) | - |
| Amortisation | 3,712 | 1,555 |
| Share-based payments | 1,200 | 550 |
| Finance income | (263) | (222) |
| Finance cost | 1,110 | 345 |
| Total | 7,459 | 3,767 |
8. Publication of Non Statutory Accounts
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.
The summarised balance sheet at 31 December 2008 and the summarised profit and loss account, summarised cash flow statement and associated notes for the year then ended have been extracted from the Group's financial statements. Those financial statements have not yet been delivered to the Registrar, nor have the auditors reported on them.