RHL.L Regulatory News (RHL)

Redhall Group plc

("Redhall" or the "Group")

Preliminary Results for the year ended 30 September 2011

Redhall Group plc, the specialist engineering support services group, announces its preliminary results for the year ended 30 September 2011.

FINANCIAL HIGHLIGHTS:

·; Revenue before exceptionals £126.6 million (2010: £144.7 million)

·; Adjusted profit before tax £3.9 million in line with expectations (2010: £7.0 million)

·; £11.3 million exceptional provision principally in connection with Vivergo

·; Adjusted fully taxed and diluted earnings 9.5p (2010: 17.0p)

·; Strong balance sheet with net assets of £37.4 million (2010 : £45.0 million)

·; Net debt of £10.2 million (2010: £5.4 million net cash)

·; Order book strong at £116 million (2010: £115 million)

OPERATIONAL HIGHLIGHTS:

·; Won key adjudication on Vivergo and first award of £700,000 post year end

·; Greatly improved trading H2, particular strength in Defence and Energy

·; Nuclear new build tendering commenced with key strategic partners

·; Number of new contracts won and existing contracts extended with Chevron, GDF Suez, Magnox and at Sellafield

David Jackson, Chairman of Redhall, commented:

 "We are in a much better position than we were six months ago and I anticipate further improvements in the next half year. This is an exciting time for the prospects of Redhall. We are on the cusp of the biggest opportunity in the engineering industry for decades with the commencement of the UK nuclear new build programme. We have the best tender prospects that I have seen in this business and an order book with good gross margin potential. Our primary objective is to settle the Vivergo dispute equitably and to take the business forward with the considerable opportunities available to us in our chosen market sectors."

For more information please contact:

Chairman's Statement

Introduction

As anticipated second half trading in the year to 30 September 2011 has improved materially compared to the disappointing first half and this positive trend has continued into the start of the new financial year. We have the best tender prospects that I have seen in this business and an order book with good gross margin potential. The restructuring of the Group and of its operational management team is complete and we look forward to continuing the steady recovery.

Whilst the financial year 2010/11 was challenging, we are in a much better position than we were six months ago and I anticipate further improvement in the next half year. Most importantly we have established via an adjudication process that our contract with Vivergo Fuels Limited ("Vivergo") was unlawfully terminated and, although the client has started proceedings in the High Court in an attempt to overturn this decision, the Board supported by strong legal opinion believes this will be unsuccessful and may, under the Judge's direction, lead to an equitable settlement.

Trading Results

Revenue at £126.6 million was 12% down on the prior year of £144.7 million. Adjusted profit (before exceptional items and amortisation) at £3.9 million was in line with market expectations although down 45% from the prior year comparative of £7.0 million. The adjusted fully taxed diluted earnings per share was 9.5p, down 44% on a comparative of 17.0p.

During the period under review our Defence division again performed well and in the second half of the year our Energy division returned to normal levels of profitability. The Process division remains disappointing but the restructuring of its cost base carried out at the beginning of the year has enabled it to remain competitive and profitable in difficult market conditions. It is expected to make progress towards more normal levels of profitability in the coming year. Details of the sector performance can be found in the Business Review.

Exceptional Items

The total provision for exceptional items in the financial year to 30 September 2011 was £11.3 million. The Board, after taking legal advice, has decided to provide for a total of £8.4 million on our contract with Vivergo. This is in no way a reflection of a just award for the work undertaken under the contract. It is more an acceptance that the process of recovery of outstandings under English law is an extremely lengthy and expensive process.

In addition to the above and as a result of the major structural changes to the Group we have provided for further restructuring costs and associated contract provisions totalling £2.9 million. Although these provisions are in excess of previous estimates they are now complete and no further restructuring costs are anticipated.

Financial Position

Notwithstanding the large exceptional charge in the year, the balance sheet remains strong with net assets of £37.4 million. Net debt at 30 September 2011 was £10.2 million and this position is expected to improve during the course of the new financial year due to cash generated from operations and repayments from Vivergo. Our bank borrowings remain within our covenanted facilities and headroom is forecast to improve during the course of the 2011/12 financial year. Our facilities are not due for renewal until 2015. The cash outflow from operations, primarily due to our exceptional items, was substantial this year at £13.0 million but it is important to note that the Group was cash generative in the second half of the 2010/11 financial year.

Due to the exceptional loss the Group will pay no tax during the financial year under review and it is entitled to reclaim £0.5 million of tax paid on the profits for the year ended 30 September 2010. We had £5.8 million of tax losses carried forward at the 30 September 2011 and we have recognised £1 million of these in our deferred tax reserve.

Dividend

In the light of this year's overall trading performance and the exceptional charge the Board has taken the decision that no dividend will be paid. The Board will reconsider the dividend policy in the new year.

People

This has been a year of challenge for our Group and our key staff have remained exceptionally loyal to us. We have also retained all our key clients. I would like to take this opportunity to thank our staff and clients for their loyalty and support.

As previously highlighted Ian Butcher has decided to retire as Non-Executive Deputy Chairman and will be succeeded in that role by Paul Kirk, who has served on the Board as a Non-Executive Director since 2007. I would like to thank Ian for his considerable contribution over the last four years. Phillip Hilling, who was formerly Managing Partner of Ernst & Young in Leeds, will head the Audit Committee going forward.

Our search for a suitable Chief Executive Officer is on-going. We anticipate an appointment during the course of the coming months.

Prospects and Strategy

This is an exciting time for the prospects of this Group. We are on the cusp of the biggest opportunity in the engineering industry for decades with the commencement of the UK nuclear new build programme. This programme will give opportunities to both the manufacturing and contracting operations within the Group.

We have already announced two business associations to enable us to play a part in the UK nuclear new build programme. Our joint venture with ACPP is enabling us to bid for the supply and fix of Pond Liners and we have already submitted our bid for the proposed nuclear power station at Hinkley Point C which is worth to us in the region of £25 million. Our Memorandum of Understanding with Nuvia, the UK subsidiary of Vinci of France, will enable us to bid for the pipework element of the Balance of Nuclear Island and Balance of Plant contracts. Each such contract will contain pipework to the value of c.£100 million. We are also in discussion with a third potential partner for the supply of shield and security doors. The value of this contract for each nuclear installation is approximately £50 million. We believe that key decisions on nuclear new build will be made during the course of the next twelve months. The supplier base is starting to take shape and we are well positioned to play a significant role.

In the main the niche sectors that we work in are enabling us to avoid the extremes of the current difficult economic climate. Certain public sector projects are proceeding with secured funding in place and we are playing a key role in those projects particularly with AWE. The oil and gas industry in particular and energy in general remains competitive but we have seen evidence in recent weeks of improving gross margin potential in contract awards and we are beginning to win opportunities with more substance. I am particularly pleased with the progress being made by the nuclear team despite the demands of quoting for the nuclear new build programme.

I am pleased to announce that we have been awarded preferred bidder status for five year term contracts with Huntsman Tioxide and Huntsman Polyurethane on Teesside, which are anticipated to generate revenue of £25 million over the five years commencing 1 January 2012. The order book for our nuclear activities has improved steadily over the last few months and now represents 70% of its planned revenue for the 2011/12 financial year. Our total order book stands at £116 million and is of considerably better quality than twelve months ago. We have high level order prospects of £143 million and considerable further opportunities in the nuclear new build programme.

The business has shown its robustness over the last year by being able to withstand the major contract dispute with Vivergo. Our primary objective in this financial year is to settle this dispute equitably and to take the business forward with the considerable opportunities available to us in our chosen market sectors.

David Jackson

Chairman and Chief Executive

7 December 2011

Business Review

Energy

The second half of the financial year under review saw a considerable improvement in the trading performance of this division with operating margin in the second half returning to a more normal 8.2%. Revenue in the year was down by 20.1% at £48.8 million and adjusted operating profit at £2.4 million was down 52% from the comparative of £5.0 million. Vivergo obviously had an effect on the trading result of this division but the underlying business remains strong and it has recovered well. The economic climate in civil nuclear and oil and gas remains competitive, although our niche offerings assist our financial performance in difficult market conditions.

In Civil Nuclear our change of senior operational management is beginning to have a positive effect. Under Helen Simms' leadership we have completed the task of rationalising the nuclear business, reducing costs and making ourselves more competitive. We have unlocked doors at Sellafield that were previously closed to us and we have formed new relationships with Hertel, Nuvia and the ACKtiv Nuclear joint venture between Atkins, Carillion and Jacobs.

The principal contract undertaken in the year was the Multi-disciplinary Site Works (MDSW) contract at Sellafield which has now been extended until the end of September 2012. The other contract of significance during the period was the Fellside Boiler contract for Worley Parsons worth £5 million also at Sellafield. A small but significant order undertaken in the year was the provision for the first time of nuclear design services to a Sellafield project. We are aware that the client was delighted with the quality of that service and we hope to expand our design service offering to Sellafield further in 2012.

Our nuclear new build relationship with Nuvia had led to us being part of a successful partnership led by Nuvia for a major framework contract for Magnox to support the decommissioning programme across several former nuclear power generation sites. This is a major decommissioning contract over a five year term involving several suppliers although our specific workload has yet to be quantified.

In Nuclear New Build we have made significant progress working with our partner Nuvia on the bidding process at Hinkley Point C for pipework contracts relating to the Balance of Nuclear Island and the Balance of Plant. The UK nuclear new build programme now appears to be a reality although, in essence, is probably 12-18 months behind the original plan due to the earthquake in Fukushima and the Weightman Report on the impact of that disaster on the programme.

The joint venture with ACPP is also progressing well and has now bid for the first package of work at Hinkley Point C which is for the provision of Pond Liners and is worth in the region of £25 million to Redhall. The civils contractor, for which there is currently a short list of three, should be appointed during the first half of the 2012 calendar year and we would hope to be receiving indications of our potential involvement on that project before the end of next year.

We are currently seeking a third partnership for the nuclear new build programme to assist us in the supply of Shield and Security Doors to the Nuclear Island. The first contract at Hinkley Point C is worth approximately £50 million.

In Oil and Gas, as last year, the activity levels in offshore exploration are high and at onshore refineries more subdued. Booth Industries are currently undertaking work in blast protection for five different offshore oil rigs and have enquiries from several others. In addition to new build opportunities, the refurbishment market is also strong and the demand for replacement doors and spare parts is high.

Our tankage business has grown and we have won a further extension of our tankage contract at the Valero (formerly Chevron) UK Terminals and have won work for the first time in the power sector with Scottish and Southern Electric at Ferrybridge. We have successfully completed our first new build tank for our client Greenergy, providing us with an excellent reference site for future projects. We have strengthened our risk management procedures in relation to major projects whilst also ensuring we have a more balanced risk portfolio in our order book. Our recent term contract award with GDF Suez where we are providing maintenance services under a term contract for five years is a good example of this. We have undertaken a number of small shutdowns during the course of the financial year 2010/11 but we see an upturn in larger shutdowns during 2012 worth in excess of £10 million.

Defence

We saw another strong performance from the Group's Defence division in 2010/11 with revenue up 18.7% at £28.6 million and adjusted operating profit up £0.4 million to £3.6 million. Adjusted operating margin, although slightly down from the comparative, remains excellent at 12.7%. The core of our work in this division is with two clients, AWE at Aldermaston and Burghfield and, BAE Systems at Barrow.

At AWE we continue to play an important part in the delivery of significant turnkey projects which will be on-going until at least 2014. In addition we continue to work on the upgrade of existing facilities and we have won £18 million worth of work on re-kit in the last six months for delivery during the current year and next. We continue to work at the highest level in the most demanding areas and with a safety record in our Nuclear businesses that now shows in excess of four million man hours without a reportable accident. We have been chosen as a platinum partner by AWE which is a tremendous accolade for a business of our size. We continue to service the needs of AWE with the utmost diligence and trust that we can continue this relationship for many years hence.

At Barrow we continue to be an important sub-contractor to BAE Systems on the Astute Submarine programme and our work in the year performed in line with expectations. We are currently working on Boats 3, 4 and 5 and we are aware that long lead items for Boats 6 and 7 are already being manufactured. It is anticipated that this programme will take us through until 2020. We were pleased to win additional work in the year on the Astute programme for pipework services.

The successor programme for the replacement of the Vanguard Submarine Class passed an initial gate in May 2011. This is the first step in a significant approvals process but if approved, would potentially give the yard at Barrow work until 2035.

We are further developing our relationship with Interserve for tankage work and undertook projects in the year in the Falklands and Ascension Islands. We are seeking to expand our services to other Ministry of Defence territories.

Process

The Process division remains the most challenging within the Redhall Group, however, we are hopeful that 2011/12 will be a turning point. In the year under review revenue was down 20.4% at £34.0 million. Adjusted operating profit stood at £0.5 million, down 61.5% from the comparative of £1.3 million. This has been a particularly difficult year in Process with many of the major clients cutting back severely on their spend and in some cases, mothballing their plants. However, we did undertake successfully a key technical project for Nestlé and developed in the year new client relationships with Morrisons Supermarkets on the food provision side, Nestlé Purina and SSI, the Thai steel manufacturer.

I am encouraged by the capital programmes of key clients like Kelloggs and Mars in the coming year and also by the on-going relationship with Nestlé, Cadbury and McCains in the food sector. We believe our turnkey offering gives us significant competitive advantage on these larger work programmes.

In the chemical sector, I am delighted that we have been given preferred bidder status for the five year term maintenance contracts at Huntsman Tioxide and Huntsman Polyurethane on Teesside. This contract will commence on the 1 January 2012 and is anticipated to be worth approximately £25.0 million over the term period.

Summary

We have started well in the first period of the new financial year. We have a strengthening order book with good margin potential and I am expecting a continuation of the performance in Energy and Defence and an improvement in the performance of Process.

David Jackson

Chairman and Chief Executive

7 December 2011

Consolidated Income Statement

* Adjusted profit before tax is profit before tax and amortisation of intangible assets acquired with business combinations.

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

1. 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 summarised 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.

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

Year to 30 September 2011

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

Exceptional items totalled £11,254,000 of which £8,345,000 related to a provision against the previously reported Vivergo contract including an estimate of the legal and professional fees to secure recovery of the remaining contract balance. This matter is more fully explained in the Chairman's Statement. The balance of exceptional items amounting to £2,909,000 related to the restructuring of the Group and of its senior management and comprised provisions against other contracts of £1,960,000; integration and associated restructuring costs of £500,000 in connection with establishing the Redhall Nuclear business unit the benefits of which are noted in the Chairman's Statement; and head office restructuring costs of £449,000 which include the costs payable in connection with the resignation of the former chief executive. Those exceptional items relating to contract provisions have been charged against revenue, and all other items have been charged to administrative expenses. A tax credit of £3,038,000 has arisen in connection with these items resulting in a net, post tax charge of £8,216,000.

Share based payment credits amounting to £38,000 (2010: charges £124,000) have been credited to central costs.

Year to 30 September 2010

Adjusted operating profit is stated before exceptional items and amortisation of intangible assets acquired with business combinations. Exceptional items comprised aborted acquisition costs of £443,000 and reorganisation costs of £1,358,000.

Geographical segments

All of the Group's assets and capital expenditure originate in the United Kingdom.

Analysis of revenue by category

Practically all of the Group's revenue is considered to be contract revenue as defined by IAS11.

Customers accounting for more than 10% of revenue

One customer, (2010: two) in the Defence segment accounted for revenue of £17.3 million (2010: £15.3 million and £20.9 million respectively).

2. Financial income and expenses

* Includes £150,000 of pension administration expenses paid for by the Company (2010: £150,000).

3. Tax expense

4. Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

The net deferred tax liability at the year-end and movement during the year is analysed as follows: