Management Resource Solutions Regulatory News (MRS)

28 February 2019

Management Resource Solutions PLC

("MRS" the "Company" or the "Group")

Half Year Results

A solid first half with growth delivered across the business

Management Resource Solutions PLC, a leading Maintenance, Fabrication, Civil and Earthworks company, announces its Half Year Results for the six months ended 31 December 2018 ("1H19" or "half year").

Half Year Financial Highlights*

· Trading performance in line with expectations

· Revenue up 3.6% to $34.8m (1H18: $33.6m)

· Profit before Tax up 39.0% to $3.51m (1H18: $2.52m)

· Basic EPS of 1.35c (1H18: 1.43c)

· Debt restructuring progressing well with further announcement expected by the end of March 2019

* All references to dollars or $ relate to Australian dollars, the Group's presentational currency

Half Year Operational Highlights

· Strong profit delivered at MRS Services Group ("MRSSG") through a continued focus on minimising operating costs and leveraging the Group's central processes

· Bachmann Plant Hire ("BPH") produced a solid result despite extended rain periods during October to December

· Construction progressing well and to budget on MRSSG buildings in the Hunter Valley purchased in FY18, with an anticipated completion in Q4 2019

Paul Brenton, CEO of MRS, commented:

"I am pleased to report that the first half of the Group's financial year has been another busy period with growth delivered across the business. This performance reflects the significant restructuring that has been executed within the MRS Group and the strength of the BPH and MRSSG businesses. The project pipeline for BPH remains steady for the foreseeable future and MRSSG remains focused on the low risk, hourly rate work in the Hunter Valley.

"The second half has started well and I look forward to updating shareholders on further progress later in the financial year. The outlook for the Group remains strong and the Board looks to the future with confidence."

Management will host a presentation for retail investors in London at the end of March/early April, details of which will be released via RNS once finalised.

Enquiries:

Notes to Editors

Management Resource Solutions PLC (MRS), through its subsidiaries Bachmann Plant Hire and MRS Services Group, offers plant hire, equipment repair, refurbishment and fabrication, mine rehabilitation, earthmoving, road construction and other support services to a wide base of private and public sector clients in Australia. MRS caters predominately for the mining, civil engineering, construction and infrastructure industries.

Further information on the Company can be found at http://www.mrsplc.info.

Chief Executive's Review

Bachmann Plant Hire Pty Ltd ("BPH")

Bachmann Plant Hire Pty Ltd is based in Ipswich, approximately 40km west of Brisbane (Queensland), and specialises in providing bulk earthworks to the construction and infrastructure sectors, generally throughout South East Queensland. BPH delivers wet hire services (plant is accompanied by operators) which is completed through either an hourly wet hire arrangement or performed at a bulk cubic metre rate, which is often referred to as contract work.

The Ipswich Economic Development Plan 2016 to 2031, enacted by the Queensland Government, is an ambitious plan to attract 292,000 people to 20 employment and population growth areas in the vicinity of Ipswich. More than 500 new residential dwellings are required to be completed every month to achieve the plan, resulting in the fastest growing residential growth corridor in Australia.

BPH has a 50-year history and an experienced workforce of long-term employees and is perfectly located to benefit from the current opportunities. The majority of BPH's contracts are based on bulk earthworks within a small, well defined area of a residential or commercial sub-division to a final level finish of +/- 50mm. Although operations can be hampered by excessive rainfall, overall BPH operates in a relatively low risk contracting environment. Whilst contracts are generally relatively short (two to six months in length), there is a steady pipeline of work for the foreseeable future.

BPH's 1H19 contribution was an Operating Profit of $1.5m (1H18: $1.8m) on revenue of $10.3m (1H17: $10.5m). The first half revenue and profit contribution is slightly lower than the comparative year due to extended rain periods during the October to December period.

MRS Services Group Pty Ltd ("MRSSG")

MRS Services Group Pty Ltd is strategically located in the heart of the coal mining region of the Hunter Valley in New South Wales, approximately 125km north west of the coal exporting port of Newcastle and approximately 240km north of Sydney. Some 90% of revenues are derived from blue chip mining companies including Yancoal, New Hope, BHP and Glencore. Demand for high quality coal (containing high energy content with low ash and pollutants) from the Hunter Valley remains strong, in particular for export to China and East Asia where over 1,000 new High Energy Low Emissions Ultra-Supercritical Coal Fired Power Stations are planned or under construction.

The majority of MRSSG's work in the Hunter Valley is low risk, derived from selling trade labour at hourly rates. The fabrication and mine rehabilitation businesses are based on longer-term contracts in well-established work relationships and well understood risk profiles.

MRSSG's 1H19 contribution was an Operating Profit of $4.0m (1H19: $2.8m) on revenue of A$24.5m (1H18: $23.3m).  This strong profit performance was delivered through a continued focus on minimising MRSSG operating costs and leveraging the Group's central processes. This was helped by the reduction in distractions and unnecessary costs associated with the discontinued operations from FY17.

MRS Property No1 Pty Ltd

During FY18, MRS Property No1 Pty Ltd purchased the land and the partially completed buildings from which MRSSG operates in the Hunter Valley for $3.0m. At the time of acquisition, the land and buildings had a valuation of $4.8m. The cost to complete the building is approximately $2.0m, which is fully funded through a construction facility. Construction is progressing well and to budget with an anticipated completion in Q4 2019. Management's estimated valuation of the completed facility is approximately $9.0m to $10.0m.

Financial Review

All references to dollars or $ relate to Australian dollars, the Group's presentational currency.

The results for the half year ended 31 December 2018 are a net profit after tax of $2.6m (1H18: net profit after tax $2.5m) on revenue of $34.8m (1H18: $33.6m), reflecting the significant restructuring that has been executed within the MRS Group and the strength of the Bachmann Plant Hire and MRS Services Group businesses.

As a result, there is a significant change in the operational results compared to 1H18 as set out in the table below:

Prior year tax losses only partially offset the 1H19 operating profit, the net result is a tax expense for 1H19 of $865k (1H18: Nil). Profit before tax in 1H19 was $3.51m which has increased $985k (39%) on the prior year comparative of $2.52m,

Property, Plant & Equipment

During 1H19, the Group invested $7.1m in Property, Plant & Equipment, with $1.7m in Capital Work In Progress. The majority of the capital expenditure (CAPEX) has been funded through free cash flow. New debt contributed $2.1m, with $0.7m equipment finance and $1.4m property and construction finance. During 1H19 the Company has continued to invest in CAPEX, extending the life of the capital equipment and supporting the Group's sustainable growth.

Cash and Borrowings

The cash balance of the MRS Group varies significantly on a day to day basis. The MRS Group utilises a Debtor finance facility, and only the cash required to service the business in the very short term (i.e. the next week) is drawn down through the debtor finance facility which minimises the interest cost to the business. The available capacity of the debtor finance facility at 31 December is $2.6m in addition to the closing cash balance at 31 December 2018 of $768k.

The restructure of the debt is progressing well and will be announced during Q3.

There are five current core debt facilities:

1) Debtor Finance - BPH has a $2.6m facility, and MRSSG has a $7.0m facility

2) Commercial Bills - The commercial bills were established with the restructure of the Group in FY17.

3) Equipment Finance -There are two equipment finance loans and the "Rent to buy" loan in BPH

4) Property Finance

5) Property Construction Finance

Current Trading and Outlook

The Directors believe the markets which BPH and MRSSG service continue to be strongest they have been in years and trading during the first half of our 2019 financial year has been in line with expectations. BPH is currently working close to full capacity and has a strong pipeline of work to complete. MRSSG is experiencing strong end market demand. The Hunter Valley thermal coal price has been strong and stable providing confidence for the coal mines to commit to repairs and maintenance.

1H19 has set up the MRS Group for another successful year and on behalf of the Board, I'd like to thank all employees for their continued commitment to working safely and to all stakeholders of MRS including our customers, suppliers, funders and shareholders for maintaining their support of the Company

On behalf of the board, I'd like to thank all employees for their continued commitment to working safely and to all stakeholders of MRS including employees, customers, suppliers, funders and shareholders for maintaining their support for the Company.

Paul Brenton

Chief Executive Officer

Consolidated Statement of Profit and Loss and Other Comprehensive Income for the period ended 31 December 2018

Consolidated Balance Sheet

as at 31 December 2018

Consolidated Statement of Changes in Equity

for the period ended 31 December 2018

Consolidated Statement of Cash Flow

for the period ended 31 December 2018

Notes to the Consolidated Financial Statements for the period ended 31 December 2018

1. Accounting policies Basis of preparation

The condensed consolidated unaudited six months ended 31 December 2018 financial information set out in this report is based on the financial statements of Management Resource Solutions plc ("MRS") and its controlled entities (the "Group").

The condensed financial information should be read in conjunction with the annual financial statements for the year ended 30 June 2018, which were prepared in accordance with International Financial Reporting Standards. The financial statements for the Group for the six months ended 31 December 2018 were approved and authorised for issue by the Board on 28 February 2019.

These financial statements have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of the Group for the year ending 30 June 2019 and are consistent with International Financial Reporting Standards adopted for use in the European Union.

The financial information for the six months ended 31 December 2018 (and 31 December 2017) is unaudited and does not constitute the Company's statutory financial statements for those periods. The comparative financial information for the full year ended 30 June 2018 has been derived from the statutory financial statements for that period. The statutory accounts for the year ended 30 June 2018 have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified.

The financial information is presented in Australian Dollars and all values are rounded to the nearest thousand dollars ($'000) except where otherwise indicated.

Going concern

The financial statements have been prepared on the going concern basis as, in the opinion of the Directors, at the time of approving the financial statements, there is a reasonable expectation that the Group will continue in operational existence for the foreseeable future.

Basis of consolidation

Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following elements are present: power over an investee, exposure to variable returns from the investee, and the ability of the investor to use its power of affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

Goods and Services Tax (GST), Value Added Tax (VAT) and equivalent taxes

Revenues, expenses and assets are recognised net of the amount of GST and VAT, except where the amount of GST or VAT incurred is not recoverable.

2. Earnings per share

Earnings per share is calculated on the reported profit for the period of $3,509,358 and on 196,104,472 ordinary shares, being the weighted average number of shares in issue throughout the period ended 31 December 2018.

For diluted earnings per share, the weighted average number of ordinary shares in issue has been adjusted to assume conversion of all dilutive potential ordinary shares. The Company has two classes of dilutive potential ordinary shares, being share options granted to directors and employees and warrants to subscribe for ordinary shares.

3. Operating Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board of Directors.

Segmental information is as follows:

4. Property, Plant and Equipment

5. Trade and other receivables

The Company's ageing of trade receivables is as follows:

6. Trade and other payables (current)

7. Borrowings

8. Interim Statement

Copies of this Interim report for the six months ended 31 December 2018 will be available on the company's website www.mrsplc.net.