RHL.L Regulatory News (RHL)

31 May 2007 08:03

Redhall Group PLC31 May 2007 For Immediate Release 31 May 2007 Redhall Group plc ("Redhall" or the "Group") Interim Results for the six months ended 31 March 2007 Redhall Group plc, the specialist engineering support services group, announcesits interim results for the six months ended 31 March 2007. FINANCIAL HIGHLIGHTS • Turnover up 59% at £22.3m (H1 2006: £14.0m) • Organic growth of 51% • Operating profit increased 336% to £886,000 (H1 2006: £203,000) • Earnings per share of 4.67p (H1 2006: 0.85p) • Interim dividend of 1p per share (Full year 2006: 1p) OPERATIONAL HIGHLIGHTS • Integration of Steels Engineering Services and Steels Engineering & Design progressing well following acquisition at the end of January 2007 • Nuclear Services won orders in the period of £22m including: • £7.5 million Multi-Discipline Site Works at Sellafield • £6m Sellafield THORP evaporator replacement contract • Engineering Services awarded significant three year contract at Esso Fawley • Specialist Manufacturing undertook significant contracts with British Nuclear Group and Bovis Lend Lease • Forward order book now approaching £60m (December 2006: £40m) ACQUISITION HIGHLIGHTS Also as announced separately today Redhall is acquiring Jex Engineering CompanyLimited for £11.9m by way of a vendor share placing of 5,454,546 OrdinaryShares. • Significant profitable bolt-on acquisition to the current Redhall business • Increased exposure to food, pharmaceutical and chemical markets • Access to further design and engineering resource • Strong presence in key geographical area previously targeted by the Group • Substantial order book with further pipeline to come • Strong synergies with other Redhall manufacturing and engineering operations David Jackson, Chairman and Chief Executive of Redhall, commented: "I am delighted to welcome the Jex business and its employees to the Redhallgroup. Following the acquisition, Redhall will offer a balanced portfolio ofskilled engineering services in attractive, growing markets, including thethriving nuclear sector. The order book is now approaching £60 million and welook forward to the future with confidence." "Overall we are in good shape for next year in trading terms. We continue towork on acquisitions and are targeting companies that would enhance our nuclearengineering services capability." For more information please contact: Redhall Group plc Tel: +44 (0)1924 385 386 David Jackson, Chairman and Chief Executive Simon Foster, Deputy Chief Executive Christopher Lewis-Jones, Group Finance Director Buchanan Communications Tel: +44 (0) 20 7466 5000 Tim Anderson / Isabel Podda / James Strong Notes to the Editor: Redhall is a well established engineering services group serving a range ofspecialist markets including nuclear, oil and gas, food manufacturing anddefence. The business operates in regulatory driven markets with high barriersto entry. In addition to its national skill base Redhall has an experiencedcentral management team led by David Jackson and Simon Foster. Redhall Group plc ("Redhall" or the "Group") Interim Report 2007 Chairman's Statement Introduction I am pleased to be able to announce further progress in the development of theGroup with much improved interim trading results and the announcement of theacquisition of Jex Engineering Company Limited ("Jex") which substantiallyenhances Redhall's engineering capability. Trading Results Turnover for the six months ended 31st March 2007 increased 59% to £22.3m (2006:£14.0m) and excluding our acquisition of Steels Engineering Services Limited andSteels Engineering and Design Limited ("Steels"), organic growth was 51%. Weachieved an operating profit prior to exceptional items of £886,000, an increaseof 336% on the 2006 comparative of £203,000 with operating margin in the firsthalf improving to 4%. Earnings per share stood at 4.67p compared to last year's0.85p. I believe that these results confirm the strength of our current trading whichis entirely in line with management expectations. Exceptional Item We have identified an exceptional charge of £102,000 in relation to nationalinsurance on the exercise of a personal share option details of which wereannounced on 8th June 2006. The charge is currently being contested with HMRevenue & Customs. Acquisition of Jex I am pleased to announce the acquisition of Jex for £11.9m net of inheritedcash. Jex is one of the UK's leading independent providers of engineeringservices to process industry. It can supply a full turnkey solution fromfeasibility and design to manufacturing, construction and major plantrelocation. The acquisition of Jex gives us a strong trading position in thefood, pharmaceutical and chemical industries. With its head office andprincipal trading operation based in Grimsby, the acquisition also gives us thecapability of expanding the Group's wider engineering services offering into theNorth East of England. In its latest audited accounts for the year ended 31stOctober 2006, Jex reported revenue of £18.8m and made a profit before taxationof £1.65m. We look forward to working with the management and staff at Jex togrow the business substantially over the next few years. The core business ishighly rated in its field and we have an excellent base to work from. Weanticipate that the additional critical mass that this acquisition provides willhave a positive effect on contract opportunities for all Group companies. Operating Review All businesses have traded in line with expectations in the first half and madesubstantial contributions to the half year result. Highlights in the first halfare: Nuclear Services We have witnessed the coming of age of Jordan Nuclear during the six monthperiod under review. The acquisition of Steels has given our nuclear businessthe additional foundation of AWE Aldermaston and orders won by both businessesin the period total £22m. Turnover at £8.2m for the half year was up 148% on the comparative of £3.3m. Wehave an order book for the second half of this year already standing at £10.5mand firm orders for next year of £11.9m. I therefore believe we can lookforward to a continuation of this improved performance. What is important in the achievements in the last six months is that we haveacquired term contracts at Sellafield including the £7.5m Multi-Discipline SiteWorks contract and preferred supplier status for certain critical facilities atAWE Aldermaston. This will reduce the reliance on the winning of one-offcontracts going forward. In addition, the growing profile and technical capability of our nuclearservices business is enabling us to secure larger project work as evidenced bythe recent award of the £6m Sellafield THORP evaporator replacement contract. Engineering Services Engineering Services in the first half contributed £5.2m to our Group turnover,an increase of 38% on the 2006 comparative of £3.8m. The acquisition of Jexannounced today will considerably enhance the contribution from EngineeringServices during the second half. The major achievement in the period was the award of a three year term contractat Esso Fawley which is the UK's largest refinery. We have also been active atPembroke with shutdowns and tank work. Specialist Manufacturing Turnover in this segment of the business increased to £8.9m in the period, anincrease of 29% on the 2006 comparative of £6.9m. The performance of theSpecialist Manufacturing division is all the more commendable because it hasbeen achieved despite the delays on site on the SPRS contract which was securedin 2006. We have undertaken a significant contract for British Nuclear Groupwith phase one of a nuclear container contract (£1.2m) and also for Bovis LendLease in the London architectural market (£0.9m). Dividend The Board has decided, in line with its previously stated policy, to pay aninterim dividend of 1p per share. The dividend will be paid on 3 July 2007 toshareholders on the register on 8 June 2007. This compares to a full yeardividend of 1p for 2006. Financial Position We continue to operate with cash in the bank. The balance at the period endstood at £1.0m. Cash generated in the half year from operating activities was£675,000. Creditors continue to be paid regularly in accordance with suppliers'normal terms. The Steels acquisition was funded by the issue of new equity of £2m and cash of£100,000. Contemporaneous with the acquisition of Jex a special contributionestimated to be £3m will be made to the Group's defined benefit pension schemeto eliminate the actuarial deficit. We are funding the Jex acquisition andspecial pension contribution with an equity fundraising of £12m and term debtprovided by the Bank of Scotland. At this stage of our development we have chosen not to overgear our balancesheet. Notwithstanding this conservative approach to debt we anticipate bothacquisitions being earnings enhancing. We have adopted FRS 20 "Share-based Payment" in the period. This has notresulted in a material charge to the profit and loss account. IFRS The Group is required to issue its financial statements for the year endingSeptember 2008, including the March 2008 interims, in accordance withInternational Financial Reporting Standards ("IFRS"). The Directors areconsidering the implications of these requirements, and in particular whichareas of the Group's balance sheet and results would be significantly affectedby the adoption of IFRS. This process is continuing, but the key areas wheredifferences in treatment between UK GAAP and IFRS may arise include: IFRS 3 - Business combinations IAS 12 - Income taxes (Deferred tax) A further update on IFRS matters will be provided to shareholders in due course,once the impact of the changes can be quantified in a sufficiently reliablemanner. Prospects The acquisition of Steels and Jex has given Redhall enhanced prospects for nextyear. The order book is now approaching £60 million and this gives 2007/8 astrong base. New contract momentum is strong and we are bidding several othermajor projects where we believe the Group is well placed. Steels has been a successful acquisition in its own right with £4.3m of orderswon since acquisition but more importantly the management team are assistingother Group companies with contract opportunities at Aldermaston. Jex gives us access to new markets and in particular opportunities on the HumberBank. We are fortunate that the Jex management team has chosen to join Redhall. This is a testament to our achievements and the growing reputation of theGroup over the last twenty months. Jordan Nuclear has now firmly established itself as a key tier two contractorwith a series of major contract wins. Turnover in 2007/8 will be more than 200%ahead of 2005/6 levels. We are presently seeking to strengthen the seniormanagement team in order to continue our growth profile. I am pleased to note that Booth Industries has secured its first major designorder for new facilities at AWE Aldermaston, with high hopes of significantfollow-on manufacturing that will benefit results in 2008. Booth Industriescontinues to focus on new products for the road and rail infrastructure marketsparticularly in South-East England where expenditure is expected to grow overthe next five years. Jordan Manufacturing has good prospects but needs to convert one of severalmajor enquiries for 2007/8 to sustain its progress. CHB-Jordan has enhanced prospects due to the award of the Esso Refinery contractat Fawley. Tank work enquiries have risen as a result of the recommendationsmade in the report on the Buncefield fire. Overall we are in good shape for next year in trading terms. We continue towork on acquisitions and are targeting companies in particular that wouldenhance our nuclear engineering services capability. David Jackson Chairman and Chief Executive 31 May 2007 Redhall Group plc Consolidated Profit and Loss Account (Unaudited) Note Half-year Half-year Year ended 31 March 31 March 30 September 2006 2007 2006 (audited) £000 £000 £000 Turnover 22,268 14,028 31,618 Operating profit before exceptional item 886 203 933 Exceptional item 1 (102) - - Operating profit on ordinary activities 784 203 933 Net interest receivable/(payable) 32 (33) (48)Other finance charges (56) (57) (113) Profit before taxation 760 113 772 Taxation (57) - 8 Profit after taxation 703 113 780 Earnings per share 2 - basic 4.67p 0.85p 5.77p- diluted 4.53p 0.84p 5.12p Redhall Group plc Consolidated Balance Sheet (Unaudited) Note As at As at As at 31 March 31 March 30 September 2007 2006 2006 (audited) £000 £000 £000 Fixed assets Tangible assets 2,663 2,393 2,543Intangible assets - goodwill 3 2,115 - - 4,778 2,393 2,543 Current assets Stocks 262 175 218Debtors 13,631 7,007 10,130Cash at bank 1,038 2,267 723 14,931 9,449 11,071 Creditors: amounts falling due within (12,315) (8,449) (8,751)one year Net current assets 2,616 1,000 2,320 Total assets less current liabilities 7,394 3,393 4,863 Creditors: amounts falling due after - - (8)more than one year Net assets excluding pension scheme 7,394 3,393 4,855deficit Pension scheme deficit (2,794) (4,731) (2,871) Net assets/(liabilities) including 4,600 (1,338) 1,984pension scheme deficit Capital and reserves Called up share capital 3,966 3,338 3,664Share premium account 1,117 578 1,110Merger reserve 2,042 294 294Revaluation reserve 1,005 1,033 1,005Other reserve 14 - -Profit and loss account (3,544) (6,581) (4,089) Equity shareholders' funds/(deficit) 4,600 (1,338) 1,984 Redhall Group plc Consolidated Cash Flow Statement (Unaudited) Note Half-year Half-year Year ended 31 March 2007 31 March 2006 30 September 2006 (audited) £000 £000 £000 Cash inflow from operating activities 4 675 1,657 348 Returns on investments and servicing of finance Interest paid (2) (145) (334)Interest received 35 13 17Interest element of finance lease rentals (1) (1) (2) Taxation UK Corporation tax paid - - - Capital expenditure and financial investment Purchase of tangible fixed assets (236) (65) (337)Proceeds from disposals of tangible fixed assets - - 11 Dividends Equity dividends paid (158) - - AcquisitionsSteels businesses (180) - -Cash acquired with subsidiary undertakings 164 - - Net cash inflow/(outflow) before financing 297 1,459 (297) Financing Issue of new shares 27 - 858Finance leases (9) (6) (23)Medium term loan repayments - (100) (100)Loan stock repayments - (528) (1,157) Increase/(decrease) in cash for the period 5 315 825 (719) Redhall Group plc Consolidated Statement of Total Recognised Gains and Losses (Unaudited) Half-year Half-year Year ended 31 March 31 March 30 September 2006 2007 2006 (audited) £000 £000 £000 Profit for the period 703 113 780 Dividends paid (158) - - Actuarial gain in respect of defined benefit - - 518pension scheme Movement on deferred tax relating to defined - - (155)benefit pension scheme deficit Total recognised gains relating to the period 545 113 1,143 Notes 1. Exceptional item It was reported in the annual report and accounts for the year ended 30September 2006 that on 8 June 2006, R S McDowell and family granted options over1,000,000 of his beneficial shareholding to D J Jackson ("Private OptionArrangement"). On 31 January 2007, D J Jackson exercised his option over500,000 of these shares. This has attracted an employer's national insurancecharge of £102,000 which has been paid to HM Revenue and Customs ("HMRC"). D JJackson is currently contesting the tax treatment of this Private OptionArrangement with HMRC. 2. Earnings per share The calculation of basic earnings per share for the six months ended 31 March2007 is based on 15,047,224 shares (31 March 2006: 13,354,471; 30 September2006: 13,515,489) being the weighted average number of shares in issuethroughout the period, and on earnings of £703,000 (31 March 2006: £113,000; 30September 2006: £780,000). The diluted earnings per share is based on the basic earnings for the period of£703,000 as there were no convertible instruments in issue during the period andon 15,516,537 diluted weighted average ordinary shares as calculated below. Forthe period to 31 March 2006, the conversion of loan stock would have had theeffect of increasing the earnings per share and is, therefore, not a dilutionunder the terms of FRS22. Accordingly the diluted earnings per share for thatperiod is based on the basic earnings for the period of £113,000 and on13,456,912 diluted weighted average ordinary shares as calculated below. Forthe period to 30 September 2006, the diluted earnings per share is based on anadjusted profit for the year of £814,000 and on 15,888,638 diluted weightedaverage ordinary shares as calculated below. Half-year Half-year Year ended 31 March 31 March 30 September 2007 2006 2006 (audited) £000 £000 £000 Earnings:Profit on ordinary activities after tax 703 113 780Interest and redemption premium on convertible loan - - 49stockTax relating to interest and redemption premium - - (15)Adjusted profit 703 113 814 Basic weighted average number of shares 15,047,224 13,354,471 13,515,489Dilutive effect of share options 469,313 102,441 346,573Dilutive effect of provision for convertible loan stock - - 2,026,576 15,516,537 13,456,912 15,888,638 3. Acquisition On 31 January 2007, the company completed the acquisition of Steels EngineeringServices Limited and Steels Engineering and Design Limited ("the Steelsbusinesses"). The consideration is to be calculated by reference to the netassets derived from unaudited completion accounts prepared as at the date ofacquisition. The completion accounts are to be agreed by both the purchaser andthe vendor and have not yet been agreed and therefore the total considerationhas not yet been finally determined. Accordingly, for the purpose of thisInterim Report the directors have accounted for the acquisition by reference tothe maximum purchase consideration, which has already been paid, plus costs,amounting in total to £2,211,000 and the aggregate net assets of the Steelsbusinesses as set out in the draft completion accounts amounting to £78,000. During the period from acquisition to 31 March 2007 the Steels businesses didnot make a material contribution to the turnover or operating profit of thegroup. 4. Reconciliation of operating profit to net cash inflow from operating activities Half-year Half-year Year ended 31 March 31 March 30 September 2007 2006 2006 (audited) £000 £000 £000 Operating profit on ordinary activities 784 203 933Difference between pension charge and cash (133) (135) (271)contributionsDepreciation charge 148 116 250Amortisation of goodwill charge 18 - -Loss on sale of tangible fixed assets included - - 2within operating profit on ordinary activitiesCharge in respect of company share option schemes 14 - -(Increase)/decrease in stocks (44) 9 (34)(Increase)/decrease in debtors (2,326) 1,038 (2,120)Increase in creditors 2,214 426 1,588 Net cash inflow from operating activities 675 1,657 348 5. Reconciliation of net cash flow to movement in net funds/(debt) Half-year Half-year Year ended 31 March 31 March 30 September 2007 2006 2006 (audited) £000 £000 £000 Increase/(decrease) in cash in the period 315 825 (719)Cash outflow from decrease in debt and lease 9 634 1,280financing Increase in net funds arising from cash flows 324 1,459 561New finance leases - - (24)Movement in loan stock redemption premium - (5) 252 Increase in net funds during the period 324 1,454 789Opening net funds/(debt) 701 (88) (88) Closing net funds 1,025 1,366 701 Basis of Preparation of Interim Financial Information The interim accounts are prepared on the basis of the accounting policies setout in the Group's statutory accounts for the year ended 30 September 2006except for share based payments for which the Company has adopted FRS20 "Share-based Payment" that has resulted in a change in accounting policy. Taxation is calculated by applying the directors' best estimate of the annualtax rate to the result for the period. The financial information contained herein does not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. Theaccounts of the company for the year ended 30 September 2006 have been filedwith the Registrar of Companies and carry an unqualified audit opinion. Copies of this interim report are being sent to shareholders and are availablefrom the Company Secretary, Redhall Group plc, 1 Red Hall Court, Wakefield WF12UN. This information is provided by RNS The company news service from the London Stock Exchange