RHL.L Regulatory News (RHL)

For Immediate Release 2 June 2011

Redhall Group plc

("Redhall" or the "Group")

Interim Results for the six months ended 31 March 2011

Redhall Group plc, the specialist engineering support services group, announces its interim results for the six months ended 31 March 2011.

FINANCIAL HIGHLIGHTS

OPERATIONAL HIGHLIGHTS

David Jackson, Chairman & Chief Executive of Redhall, commented:

 "Our business has suffered a set-back with the cessation of the Vivergo contract which has contributed to a disappointing first half result. The Board believes this is a low point and trading will be much improved in the second half and beyond. We are deeply committed to resolving the Vivergo issue and restoring shareholder value."

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Chairman's Statement

Introduction

The first half of the current financial year has been disappointing although trading profits are in line with current market expectations. The Board believe this is a low point and trading will be much improved in the second half and beyond. The underperformance was principally due to the loss of our major contract with Vivergo Fuels Limited ("Vivergo") during the period but the business was also affected by a lower level of manufacturing orders from our principal civil nuclear client, Sellafield, and a more competitive environment in the oil and gas sector within Energy. However Defence continued to perform well and the outlook for the second half of the current financial year and beyond was helped by the award of the first phase of a £20 million contract with AWE announced in February.

We have continued with our roll-out of the Redhall brand by merging our nuclear businesses to form Redhall Nuclear Limited from the beginning of April 2011. This has been well received by clients and staff and we are already seeing the benefits of this consolidation. The civil nuclear business has received its first substantial invitations to tender for nuclear new build although the lead times are such that this is unlikely to result in significant workload until the latter part of next year.

Vivergo

We have previously announced that we are involved in a contractual dispute with Vivergo in relation to a pipework contract at the new Bioethanol facility at Salt End. Our legal advisers are engaged in preparing our case and it is inappropriate for us to disclose further details of the matter. However, I am able to confirm that due to the importance of this matter in the context of the Group the Board has sought two external legal opinions and reached the conclusion, based on the specialist legal advice given, that Vivergo improperly brought our contract to an end through its repudiatory breach. We therefore believe, based on specialist legal advice, that any claim brought by Vivergo against us for damages will be invalid.

The Board is of the opinion at this time that no provision is required against the carrying amount of the contract work-in-progress and associated costs which at 31 March 2011 amounted to £14.6 million excluding any claim for damages. As previously advised, in April we agreed a settlement with our former employees on the Vivergo site. The agreement reached finalises any potential claim from our former employees against the Company. The cost of this settlement was £1.2 million. Whilst we will pursue the matter of recovery of all these costs through due legal process, the timing of any resolution remains uncertain. We will continue to keep the market informed of progress and we anticipate being in a more certain position by the year-end.

Trading Results

Revenue for the half year to 31 March 2011 amounted to £64.3 million down marginally on the 2010 half year comparative of £65.4 million. Adjusted profit before tax was down by 70% at £1.0 million (2010: £3.3 million) and adjusted fully taxed diluted earnings per share at 2.4p was down 70% on a comparative of 8.0p.

The business incurred exceptional costs of £361,000 in the first half of this financial year relating principally to integration costs on the formation of Redhall Nuclear Limited.

During the period our Defence division has continued to perform well but our Process and Energy divisions experienced tougher trading conditions. Energy was particularly impacted by the Vivergo dispute but we are expecting a return towards normal levels of profitability during the second half of this year. Process is showing signs of improvement but the environment remains very competitive.

Operating Review

Energy

The Group's performance in Energy has been disappointing in the first half of the financial year with revenue excluding the Vivergo contract at £24.9 million, down 20.6% from the comparative 2010 revenue of £30.1 million. Operating profit at £459,000 was achieved at a margin of 1.8% compared to £2.5 million at 8% in 2010. The shortfall in profitability in the first half can be attributed to the lack of profitability of the Vivergo contract, losses in our manufacturing business that serves the civil nuclear industry, and a continuing competitive environment in the onshore oil and gas sector. We anticipate a return towards a more normal operating margin for the second half.

A highlight of the first half was the signing of the £7.5 million three year term contract with Chevron for tank repair on their terminals. We also received one year extensions worth £4 million from Hexel in Cambridge and Polimeri Europa in Hythe. At Sellafield we received a £4.8 million order on the Fellside contract for Whorley Parsons.

Defence

Defence again performed well with revenue at £13.0 million for the first half and operating profit of £1.5m at 11.9% margin. This compares with first half 2010 revenue of £12.3 million and operating profit of £1.1 million at 9.3% margin. The margin achieved reflects the specialist nature of the work that we currently have in the order book. Our re-kit contracts at Aldermaston and Burghfield continue to provide a solid base of work for AWE. In addition the £20.0 million contract from AWE announced in February will give our Booth Industries subsidiary a strong order book for the next three years. Work at Barrow for BAE Systems on the Astute class submarine programme continues satisfactorily.

Process

Process continued to underperform and the general trading environment in this sector remains competitive. Revenue at £14.5 million was down 34% from the 2010 revenue of £22.0 million and operating profit of £214,000 at 1.5% margin compared to a 2010 figure of £935,000 at 4.3%.

Highlights in the first six months were orders from Nestlé of £1.6 million for the Booster 3 project and of circa £1.0 million for Crystal Global. The restructuring of the cost base in this business announced last financial year, was completed in the first half and now provides a more efficient platform to support current work levels.

Financial Position

The impact of Vivergo on our cashflow in the period was substantial with a resultant outflow of £14.6 million from operations. Net debt at 31 March was £10.8 million. We anticipate that the business will be cash generative in the second half of the current financial year and that the £25 million facilities negotiated with HSBC in January are adequate for working capital and other funding requirements of the business.

Dividend

The Board has recommended that no interim dividend will be paid at this time. This is a precautionary measure due to the on-going Vivergo dispute. The Board will consider the reinstatement of the dividend at the year-end.

People

I am pleased that our senior non-executive director, Ian Butcher, has now taken the position of non-executive Deputy Chairman. Ian will assist me in communicating with our institutional investors who value his independent views.

Our search for a new Chief Executive is on-going and we are hopeful of identifying a suitable candidate during the course of this calendar year. In the meantime I am pleased that we have been able to strengthen the operational management team in the past six months through the appointments of Helen Simms and Richard Edwards as Managing Directors of our Nuclear business and Manufacturing business respectively. Helen has joined us from Amec and Richard from Saint-Gobain and they have brought a wealth of operational experience and fresh perspective to their new roles.

Prospects

The trading prospects of the business remain good and the strength of our relationships with our key clients is at the heart of our future. Our strong relationships with clients are evidenced by the receipt of orders of £25.6 million since 14 March 2011. The order book stands at £101 million and compares to a 2010 figure of £105 million excluding Vivergo.

Whilst our immediate trading prospects look good, our longer term prospects will be further enhanced by the nuclear new build programme which remains largely on track notwithstanding the earthquake in Japan. The case for nuclear power in this country is irrefutable and progress by EDF at Hinkley Point appears unaffected. We have established a number of working relationships with major operators in the nuclear sector which should lead to the receipt of our first order for nuclear new build during the year 2012/13.

Our acquisition activity has, for the time being, been deferred to focus on restoring the Group's balance sheet strength although it is hoped that we will be in a position to resume our buy and build strategy by the end of the year.

Our business has suffered a set-back with the cessation of the Vivergo contract which has led to some uncertainty. However, we remain firmly of the belief that we acted appropriately and that we have a strategy to reach a satisfactory resolution. The Board is deeply committed to resolving this issue and restoring shareholder value. We look forward to an improved performance in the second half of this financial year and beyond.

David Jackson

Chairman and Chief Executive

2 June 2011

Redhall Group plc

Consolidated Interim Income Statement

* Before exceptional items and amortisation of intangible assets acquired with business combinations.

Redhall Group plc

Consolidated Interim Statement of Comprehensive Income

Redhall Group plc

Consolidated Interim Balance Sheet

Redhall Group plc

Consolidated Interim Statement of Changes in Equity

Redhall Group plc

Consolidated Interim Cash Flow Statement

Redhall Group plc

Notes to the Consolidated Interim Financial Statements

1. Basis of preparation

These consolidated interim financial statements ("interim financial statements) are for the six months ended 31 March 2011 and do not constitute statutory accounts under sections 434 and 435 of the Companies Act 2006. They do not include all of the information required for full annual financial statements. The comparative figures for the financial year ended 30 September 2010 are not the Group's consolidated statutory accounts for that financial year. Those accounts have been reported on by the Group's previous auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006. These interim financial statements should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2010.

These interim financial statements have been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU and under the historical cost convention, except for the revaluation of certain non-current assets and include fair values for share-based payments and the initial recognition of financial instruments.

These interim financial statements have been prepared in accordance with the accounting policies adopted in the latest consolidated financial statements for the year to 30 September 2010. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements.

These interim financial statements have been reviewed, but not audited, by the Group's auditors.

2. Segment analysis

The Group has three operating segments which are consistent with the analysis of operating results and other financial information reviewed by the Group's chief operating decision maker. The activities in each segment are as follows:

Energy

Energy comprises the design and manufacture of bespoke plant and equipment, repair and maintenance of production and storage infrastructure and the implementation of major mechanical engineering projects in the UK nuclear, oil and gas and power generation sectors. The operating results of the Vivergo contract which is subject to dispute (see note 3) have been separately identified in the following analysis.

Defence

Defence encompasses activities on behalf of the Ministry of Defence ("MOD"), in particular the outfitting of Astute class submarines at Barrow, West Cumbria and the design, specialist equipment manufacture and mechanical and electrical engineering activities at the Atomic Weapons Establishments at Aldermaston and Burghfield.

Process

Process comprises the design, manufacture and mechanical installation of process plant and systems to the food, chemical and pharmaceutical sectors.

Operating segments

The revenues and profit before tax generated by each of the Group's operating segments are summarised as follows:

Six months to 31 March 2011

Adjusted operating profit is stated before amortisation of acquired intangible assets and exceptional items. Exceptional items relate largely to restructuring and redundancy costs.

Segment analysis continued

Six months to 31 March 2010

Adjusted operating profit is stated before amortisation of acquired intangible assets. Exceptional items relate largely to restructuring and redundancy costs.

Year to 30 September 2010

Adjusted operating profit is stated before amortisation of acquired intangible assets and exceptional items. Exceptional items in the period relate to aborted acquisition costs and restructuring and redundancy costs. Geographical segments

The following table shows the distribution of the Group's consolidated revenue by geographical market, regardless of the origin of the goods or services.

3. Contract dispute

On 14 March 2011 we announced that through our subsidiary Redhall Engineering Solutions Limited ("RESL") we had, since March 2010, been performing a contract for Vivergo Fuels Limited ("Vivergo"), a joint venture between BP, British Sugar and DuPont to fabricate and install pipework for a new bio-ethanol plant on the BP Salt End site. On that day, Vivergo took action to repudiate the contract and this repudiatory breach brought the contract to an immediate end. RESL had completed 78% of the original contract plus variations. As at 31 March 2011 there were £14.6 million of costs incurred by RESL on the contract which remain unpaid.

An issue to be resolved at an early stage was the equitable treatment of RESL's former employees who had been employed in connection with the contract. On 20 April 2011, we announced that we had agreed a full and final settlement with those former employees which we believed had rights under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). The settlement agreement compromises, with no admission of liability whatsoever, any claims which the former employees might have had against RESL or the Group arising from their employment with RESL coming to an end. The cost of this settlement amounted to £1.2 million.

We intend to pursue recovery of all outstanding costs plus damages from Vivergo. The Directors have taken specialist legal advice and believe that a provision in the interim financial statements is not required against the original unpaid costs and further costs subsequently incurred on the contract.

4. Financial income and expenses

* Includes £75,000 of pension administration expenses paid for by the Group (31 March 2010: £75,000; 30 September 2010: £150,000).

5. Taxation

The charge for taxation has been based upon the estimated effective rate of tax of 28% (2010: 25%) for the current year.

6. Earnings per share

Basic earnings per share

The calculation of basic earnings per share of 0.7p (31 March 2010: 6.2p; 30 September 2010: 12.0p) is based on 29,616,700 shares (31 March 2010: 29,594,085; 30 September 2010: 29,605,423), being the weighted average number of shares in issue throughout the period and on an earnings of £210,000, (31 March 2010: £1,837,000; 30 September 2010: £3,558,000).

Diluted earnings per share

The calculation of diluted earnings per share of 0.7p (31 March 2010: 6.2p; 30 September 2010: 11.9p) is based on a profit for the period of £210,000 because there were no adjustments required (31 March 2010: £1,837,000; 30 September 2010: £3,558,000 - no adjustments were required for either period) and on 29,816,662 ordinary shares (31 March 2010: 29,801,476; 30 September 2010: 29,810,177) as calculated below.

Adjusted earnings per share

The Directors believe that helpful additional earnings per share calculations are earnings per share on adjusted bases. The basic and adjusted weighted average numbers of shares are set out above. The adjusted earnings have been calculated as follows:

7. Cash flow from operating activities

8. Dividends on equity shares

Amounts recognised as distributions to equity holders in the period:

The Directors do not propose the payment of an interim dividend for the six months ended 31 March 2011.

9. Distribution of interim report

Copies of this interim report are being sent to shareholders and are available from the Company Secretary, Redhall Group plc, 1 Red Hall Court, Wakefield, WF1 2UN.