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Redhall Group plc

("Redhall" or the "Group")

Interim Results for the six months ended 31 March 2013

Redhall Group plc, the specialist engineering support services group, announces its interim results for the six months ended 31 March 2013.

HIGHLIGHTS

David Jackson, Chairman of Redhall Group plc, commented:

"Recent orders and a record order book level of around £152.0 million to be executed over the next four years give the Board confidence in the immediate prospects of the business. The new executive management team has finished its review of contracts and systems and, with enhanced control, the business should now start to improve.

"With our order book at a record level and our focus on margins, we look forward to the future with confidence."

Contacts details:

Chairman's Statement

Introduction

I am pleased to report that the results for the six months to 31 March 2013 are in line with management expectations. As indicated previously the Group's performance will be weighted towards the second half. Current market conditions remain challenging, but nevertheless Redhall has continued to strengthen its order book with new contract wins and following the restructuring and changes to management over the last nine months, we look forward to an improved performance across the Group through the rest of this year and beyond.

Our principal clients remain confident in our ability to execute major projects and we have won substantial pieces of work in all sectors of the business which are detailed later in this statement.

The legal dispute with Vivergo remains unresolved and we have limited visibility on the timing of a verdict, however, we are hopeful this will be forthcoming in the relatively near future.

The sale of non-core businesses is ongoing although we will choose to retain these assets within the Group if a fair price cannot be obtained. We expect to confirm the outcome of this exercise by the time of our year end results announcement in December.

Trading Results

Adjusted revenue for the half year to 31 March 2013 amounted to £56.6 million, down 5.4% on the 2012 comparative of £59.9 million. Adjusted profit before tax and amortisation was £574,000, compared with £1.34 million in the first half of last year. Adjusted fully diluted earnings per share at 1.47p compared with 3.38p for the period to 31 March 2012. A detailed overview of the trading performance is included in the Chief Executive's review.

Financial Position

Our debt position at the 31 March 2013 stood at £18.6 million compared with £10.6 million at 30 September 2012. The increase of £8.0 million is largely attributable to an increase in our funding of working capital. We have restructured our facilities since the year end with the continued support of our bankers HSBC Bank plc. We currently have £22.0 million of facilities comprising an overdraft of £6.0 million; loans of £8.0 million amortising by £1.25 million over the period from 31 October 2013 to 31 October 2014 with the balance repayable on 31 January 2015; and a loan of £8.0 million repayable on 30 June 2014. We have matched the loan repayment provisions of the restructured facilities with the debt requirements of the business and consider these are adequate for the foreseeable future.

As in previous years, we have conducted an impairment test (as referred to in note 7) on the intangible assets and goodwill at the period-end which demonstrates that there has been no impairment of the amounts carried in the Consolidated Interim Balance Sheet.

We have no tax to pay in the current year due to the use of losses brought forward from last year.

Vivergo

The financial position on Vivergo reflected in the balance sheet remains unchanged from 30 September 2012 and amounts to £9.8 million. We had anticipated a verdict before the release of these interim results and it is unfortunate that the Court timetable has not allowed this. We believe a decision will be given in the near future but the precise timing is outside of our control. The Court judgement will decide two matters:

i) whether our contract was terminated unlawfully;

ii) the level of extension of time that our subsidiary, Redhall Engineering Solutions Limited, was entitled to under the contract.

Furthermore we have, as yet, not agreed our final account for the work completed prior to the contract being terminated, the balance of which we have submitted at £5.0m. The Board continues to be advised by the Company's lawyers in this dispute and hopes to resolve the matter quickly once the Judge has delivered his verdict.

Dividend

The Board has recommended that no interim dividend will be paid in 2013. The dividend policy continues to be reviewed by the Board on a regular basis.

People

I am pleased to announce that with effect from today Chris Lewis-Jones has been confirmed in the position of Group Finance Director. Chris has had a long association with the company and has served as interim FD since September 2012. His commitment and hard work have resulted in this thoroughly deserved promotion.

As previously announced Dr Jim Carrick left the Board on 31 May 2013. I would like to take this opportunity to thank Jim for his contribution during his term of office.

Prospects

The order book has been much enhanced by contract wins in the past few weeks as follows:

Engineering:

·; We have received a new three year contract to partner PX on a combined heat and power plant at Sellafield worth £3.0 million;

·; Air Products has awarded us a contract valued at £3.3 million for work at its gas plant on Teesside.

Nuclear:

·; We have now signed the MDSW2 contract at Sellafield with Hertel which is a maximum four year contract estimated to be worth £26.0 million to Redhall over the full term;

·; Nuvia has secured a number of projects at the Sellafield site and is utilising Redhall Nuclear as its main installation partner. The value of the work to Redhall Nuclear will be circa £7m over the next two years;

·; We are one of three contractors to have been awarded a framework agreement for mechanical services at Dounreay which are valued at £20.0 million over four years.

Manufacturing:

·; We have received a number of orders in the oil and gas sector for blast decks and panels from Hyundai Heavy Industries, Edward Greig and Talisman worth £11.0 million in aggregate;

·; We have received an order from Grants of Shoreditch worth £2.1 million for architectural work in London; and

·; We have been granted exclusivity for a specialist project in defence valued at £5.0 million.

These orders show a high degree of confidence by our key clients in our capabilities and have contributed to a record order book level of around £152.0 million to be executed over the next four years which gives the Board confidence in the immediate prospects of the business. The new executive management team has finished its review of contracts and systems and with enhanced control the business should now start to improve.

We await with interest the result of the Government's discussions with EDF on UK nuclear new build in general and Hinkley Point in particular. We remain convinced that this project will go forward but nonetheless the market is sufficiently buoyant to enable us to grow the business substantially in the foreseeable future.

With our order book at a record level and our focus on margins, we look forward to the future with confidence.

David Jackson

Chairman

13 June 2013

Chief Executive's Review

The Redhall Group is a multi-disciplinary Engineering business offering design, manufacture, installation, maintenance and decommissioning services to the nuclear, oil and gas, petrochemical and food process sectors. The services we provide are delivered through our directly employed workforce at locations centred close to our clients to develop the long standing key customer relationships that underpin the business. Our manufacturing activities are centred around three locations at Bolton, Bristol and Newcastle which deliver key products to our UK and overseas customers.

Engineering

Engineering activity for the six months to 31 March 2013 contributed revenue of £28.1 million, up 4.1% on 2012. Adjusted operating profit was £1.02 million (3.6% margin) compared with a 2012 figure of £744,000 (2.8% margin). The improvement in margin reflects the operational improvements implemented within the business.

Whilst the industrial market continues to be challenging, the business continues to secure an acceptable share of new opportunities as well as growing the work volumes from our existing customers under contracts that commenced prior to the period covered by this report. The latter is testimony to the value our customers place on the safe, reliable service we continue to provide.

As noted in the Chairman's Statement there have been no further developments in the Vivergo dispute whilst we await the judgement.

Nuclear

Nuclear turnover in the period was £16.1 million, down 10.9% on that achieved in the comparable period last year (2012: £18.1 million). Adjusted operating profit of £397,000 was significantly lower than last year's result of £624,000. We have now formally signed the contract with Hertel to provide multi-disciplinary site works at the Sellafield site which will run for up to four years. In addition the business was selected as a strategic partner by AWE to provide mechanical and engineering services at Aldermaston and Burghfield which also runs for up to four years. These two framework contracts underpin approximately 50% of the annual turnover of the Nuclear division. The transition between the old and new framework contracts has resulted in a lower than expected volume of work during the first half of this year. It is envisaged that work volumes will increase as the transition to the new framework contracts is completed.

Manufacturing

Turnover in Manufacturing for the period amounted to £12.4 million compared with £14.8 million in 2012, a decrease of 16.2%. Adjusted operating profit in the period was £731,000 compared with £1.35 million for the same period in 2012. Whilst this year's adjusted operating profit margin at 5.9% is disappointing compared with 9.1% for the same period in 2012 it does not accurately reflect the significant improvements which have been made in manufacturing by the new management team under the leadership of John Hynes who started with the business on 29 October 2012. The business has now completed the majority of contracts that contributed to the margin erosion in the first half of this year and we can now move forward positively. Prospects for this business are very encouraging.

Activity levels at our specialist door business in Bolton are showing signs of improvement with strong demand from the oil and gas and defence sectors. Notwithstanding the delay to the announcement of the UK nuclear new build programme, our manufacturing operation in Bristol has a stronger order book than for some time having recently secured a £2.1 million contract from Grants of Shoreditch. Our manufacturing operation in Newcastle has been relatively quiet in the first half of this year and local management is actively pursuing opportunities to improve the level of activity in this part of the business.

Richard Shuttleworth

Chief Executive

13 June 2013

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 2013 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 2012 are not the Group's consolidated statutory accounts for that financial year. Those accounts have been reported on by the Group's 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 2012.

These interim financial statements have been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU but not in compliance with IAS34 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 reflect for the first time the requirements of IAS1 (Revised 2012) Presentation of Financial Statements. The amendments to the standard have not affected the financial position or results of the Group but have required some additional disclosure in the consolidated interim statement of comprehensive income.

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 2012 other than as noted above in connection with IAS1 (Revised 2012). The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements.

As noted in the Chairman's Statement and note 9 the Group has agreed amendments to its banking arrangements since 30 September 2012. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance and the status of the Vivergo matter, show that the Group should be able to operate within the level of the revised facilities. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly they have continued to adopt the going concern basis in the preparation of these interim financial statements.

These interim financial statements have been reviewed, but not audited, by the Group's auditors and their report is set out later in this report.

2. Principal operating risks and uncertainties

The principal operating risks and uncertainties faced by the Group were reported in the latest consolidated financial statements of the Group for the year to 30 September 2012 and remain unchanged. The key specific uncertainty is that of the Vivergo matter. As reported previously the court case brought by Vivergo against us concluded on 9 November 2012. The case will determine whether the contract was terminated lawfully by Vivergo; and what extension of time our subsidiary, Redhall Engineering Solutions Limited, was entitled to on the contract. We continue to await the judge's verdict. An amount of £9.8m is carried on the balance sheet and is unchanged from the year end.

3. Segment analysis

The segment information set out below reflects the information provided to the Group Chief Executive, who is the Chief Operating Decision Maker as described by IFRS8. The activities in each segment are as follows:

Nuclear

Nuclear comprises activities in both the civil and defence sectors and includes design, project management and execution of on-site works through qualified and experienced engineers and trades personnel. Activities in the civil sector include decommissioning and waste management, support to operating nuclear power stations, and nuclear new build. Activities in the defence sector encompass activities on behalf of the Ministry of Defence and include the marine outfitting of Astute class submarines at Barrow, West Cumbria, and the design and manufacture of specialist equipment and mechanical and electrical engineering activities for the AWE establishments at Aldermaston and Burghfield.

Engineering

Engineering comprises activities in industrial processes including oil and gas, petrochemical, chemical, pharmaceutical and food and includes design, project management and execution of on-site works through qualified and experienced engineers and trades personnel. Activities include mechanical design and construction, storage tank services, plant modifications and upgrades, repair and maintenance, shutdown services and offsite services.

Manufacturing

Manufacturing encompasses the design, manufacture and installation of bespoke specialist plant and equipment typically in the nuclear, defence, oil and gas, petrochemical, chemical, pharmaceutical and food sectors. The division has particular expertise in the design and manufacture of high integrity fire and blast resistant doors, window and wall systems.

Operating segments

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

3. Segment analysis continued

Six months to 31 March 2013

Adjusted operating profit is stated before amortisation of acquired intangible assets and exceptional items.

Exceptional items totalled £697,000 and comprised restructuring costs of £438,000 and further provisions against legacy contracts of £259,000.

3. Segment analysis continued

Six months to 31 March 2012

Adjusted operating profit is stated before amortisation of acquired intangible assets.

3. Segment analysis continued

Year to 30 September 2012

Adjusted operating profit is stated before amortisation of acquired intangible assets and exceptional items. Exceptional items in the period relate to a further provision for the estimated legal and professional fees in connection with the Vivergo matter, contract provisions, the cost of bidding for Nuclear New Build opportunities, a bad debt, property revaluations, the impact on the defined benefit pension scheme of pension increases being linked to CPI inflation rather than RPI inflation, and restructuring 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.

4. Financial income and expenses

* Includes £75,000 of pension administration expenses paid for by the Group (31 March 2012: £75,000; 30 September 2012: £110,000).

5. Taxation

The credit for taxation reflects an estimated effective rate of current tax of 0% and estimated movements in the deferred tax balance. The charge for taxation in the interim results for 2012 was based on an effective overall tax rate of 20%.

6. Earnings per share

Basic (loss)/earnings per share

The calculation of basic (loss)/earnings per share of (1.07)p (31 March 2012: 2.65p; 30 September 2012: loss per share (14.46)p is based on 29,846,700 shares (31 March 2012: 29,730,033; 30 September 2012: 29,788,367), being the weighted average number of shares in issue throughout the period and on the loss of £(320,000), (31 March 2012: profit of £788,000; 30 September 2012: loss of £(4,306,000)).

Diluted (loss)/earnings per share

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted loss per share for the period ended 31 March 2013 and for the year ended 30 September 2012 are identical to those used for the basic loss per share. This is because the exercise of share options would have the effect of reducing the loss per share and is, therefore, not a dilution under the terms of IAS33.

The calculation of diluted earnings per share for the period ended 31 March 2012 is based on a profit for the period of £788,000, being profit after tax for the period, because no adjustments were required and on 29,801,548 ordinary shares 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 and the adjusted earnings have been calculated as follows:

7. Intangible assets and goodwill

Management has conducted an impairment test of the carrying amount of intangible assets and goodwill at the period-end which demonstrates that there has been no impairment of the amounts carried in the Consolidated Interim Balance Sheet. The impairment test has indicated an impairment in the carrying amount of certain investments in the Company balance sheet in the region of £7 million and this will be reviewed and confirmed at the year-end. This does not impact on the Group's net asset position.

8. Cash flow from operating activities

9. Reconciliation of net debt

A reconciliation of the cash and cash equivalents reported in the consolidated interim cash flow statement with the total borrowings reported in the consolidated interim balance sheet as at 31 March 2013 is set out as follows:

As noted in the Chairman's Statement, the bank facilities had been renegotiated since the year-end with an element of the loan falling due within one year. Since 31 March 2013, the repayment date of £8.0m of the amount shown as due within one year has been re-set to 30 June 2014.

10. Dividends on equity shares

11. 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.

Independent review report to Redhall Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2013 which comprises the consolidated interim income statement, the consolidated interim statement of comprehensive income, the consolidated interim statement of changes in equity, the consolidated interim balance sheet, the consolidated interim cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2013 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU and the AIM Rules.

David Morritt for and on behalf of KPMG Audit Plc