4 Dec 2008 07:00
| For Immediate Release | 4 December 2008 |
Redhall Group plc
("Redhall" or the "Group")
Preliminary Results for the year ended 30 September 2008
Redhall Group plc, the specialist engineering support services group, announces its preliminary results for the year ended 30 September 2008.
Key points
* before amortisation of acquired intangibles
David Jackson, Chairman and Chief Executive of Redhall, commented:
"The Redhall name is now becoming synonymous with quality and delivery. We remain focused on our policy of investment in long term relationships in market sectors where support and development of critical assets is a client priority. Our key markets remain nuclear, oil, gas, petrochemical, defence and food and these offer long term growth opportunities. We will continue to seek complementary acquisitions and we have the financial capacity and management capability to continue to grow the business further. We have started the year well and with a strong order book. We look forward with confidence to the remainder of the year."
For more information please contact:
Redhall Group plc Tel: +44 (0)1924 385 386
David Jackson, Chairman and Chief Executive
Simon Foster, Chief Financial Officer
Altium, Financial advisers and Brokers to Redhall Tel : +44 (0) 161 831 9133
Phil Adams/Simon Lord/Paul Lines
Buchanan Communications Tel : +44 (0) 20 7466 5000
Tim Anderson / Isabel Podda / Ben Romney
Chairman's Statement
Introduction
To date we have developed the Group with periods of controlled stepped growth followed by periods of consolidation. The benefits of this policy are demonstrated by further significant growth in revenue and profit in this financial year. We remain focused on our policy of investment in long term relationships in market sectors where support and development of critical assets is a client priority. Our key markets remain nuclear, oil, gas, petrochemical, defence and food and these offer long term growth opportunities. We offer a direct delivery model and the recent acquisition of Chieftain Group plc ("Chieftain"), which will be discussed later in my report, extends the range and depth of that offering.
Trading Results
Revenue for the year ended 30 September 2008 increased by 52% to £86.7 million (2007: £57.0 million). Profit before tax was £4.6 million prior to the amortisation of acquired intangible assets, an increase of 95% on the 2007 figure of £2.4 million.
The operating margin achieved was 5.4% compared to 4.3% in 2007. Basic earnings per share stood at 16.9p compared to 11.4p in 2007, an increase of 48%. Diluted earnings per share stood at 16.6p, an increase of 49% at an effective tax rate of 16.7%.
Both our operating divisions have performed well in the year with Nuclear Services achieving revenue of £37.7 million and operating profit of £3.1 million at an operating margin of 8.2% (2007: 6.6%). Revenue for the period was up 33.5% and operating profit up 66.1%. Engineering Services contributed revenue of £49 million, operating profit of £3.8 million and a margin of 7.8% (2007: 7.2%). Revenue was up 70.1% and operating profit up 84.1%. This performance demonstrates the solidity of the two divisions combining to deliver a very satisfactory result for the Group.
Financial Position
The Group's strategy of cash backed organic growth alongside a policy of selected acquisition using an equity model rather than a debt model has put us in a strong position to continue our development during these turbulent economic times. Following the acquisition of Chieftain, effectively completed on 31 October 2008, we now have net assets in excess of £40 million and net cash on the balance sheet of in excess of £6 million. We believe that businesses that have pursued a policy of prudent balance sheet management during the recent buoyant times will benefit from opportunities presented by the credit crisis and we are in an excellent position should any opportunities arise.
We continue to turn profit into cash and we are delighted with this year's cash generation from operations of £5.8 million which represents 122% of our adjusted operating profit. Our cash position has been further enhanced since the year end by the acquisition of Chieftain which also has net cash on its balance sheet.
The Group's effective tax rate this year of 16.7% represents further use of the losses brought forward. Although a large percentage of these losses have been utilised we will continue to benefit from the remaining losses to a lesser degree, over the next two or three years, from the structure we have put in place.
Dividend
The Board has proposed the payment of a dividend of 4p per share for the year, of which 1.5p has already been paid as an interim dividend. The total dividend this year represents an increase of 78% on last year's dividend and is a reflection of the confidence of your Board in the future prospects of the business. Our dividend policy remains a minimum of three times cover. The final dividend of 2.5p per share will be paid to shareholders on 26 February 2009 who are on the register on 30 January 2009.
Acquisition
The acquisition of Chieftain was declared unconditional in all respects on 31 October 2008 and we currently have acceptances of 95.45% at the date of this statement. We have enacted the provisions of Part 28 of the Companies Act 2006 to enable the balance of the shares to be compulsorily purchased. This compulsory purchase is due to complete on 23 December 2008.
The Chieftain acquisition represents a major opportunity for the Group. In line with our previously stated strategy we have acquired a successful business which adds to our product and skill offering whilst extending our geographical reach in key markets. Chieftain provides geographical coverage in the oil, gas and petrochemical markets in the North East area and also gives us new skills at the Barrow nuclear site where the work is currently focused on the Astute class submarine programme. In addition, Chieftain has a well respected labour resource business which gives us both internal and external opportunities to deploy that labour to good effect. The additional fabrication facilities within Chieftain are currently well utilised supplying projects in the oil and gas and power generation industries and we will be looking to develop these further as the nuclear new build programme comes on stream.
This acquisition gives us the potential to significantly grow our earnings per share during the course of 2008/09. Eleven months of Chieftain's trading will be incorporated into our Group results for the year ending 30 September 2009.
Employees
The trading performance reported in this annual report can only be achieved by a workforce and management who are dedicated, trained to the highest level, operating in the safest manner possible and working efficiently. I would like to thank the staff for their continued efforts to make Redhall the chosen supplier and contractor within our key markets.
We continue to grow the quantity and quality of our workforce and management. This is an ongoing process which commenced at the end of September 2005 when the current management was appointed. We are pleased with the progress that we have made in this regard and are particularly pleased with the number of security cleared personnel that we now have in our organisation. This clearance enables a staff member to work in the highest category security area in the nuclear industry and remains one of our most valuable assets.
Strategy & Growth Prospects
Overall we are satisfied with the prospects of the business both for the coming year and the future. The Redhall name is now becoming synonymous with quality and delivery. It is interesting to note that we have recently been invited by three major clients to assist in programmes where other suppliers have fallen short. Our objective is to increase our reputation project by project and use the Redhall name to move up the supply chain to the level of Tier 2 supplier. We are currently tendering for some significant projects, success in which would enable the business to take a further step up. We need to remain patient as the achievement of this may take some time but I do believe all the building blocks are in place to enable this to happen over the next couple of years.
We currently have several major opportunities to take the business forward. We have recently received a purchase order for the first phase of blast protection work on the HEFF project at Aldermaston, a project totalling £8.3 million over the next three years. The acquisition of Chieftain has provided major opportunities at Barrow for both the Astute submarine programme and the new aircraft carrier programme. Sellafield and Aldermaston in particular provide further major opportunities. On the Humber Bank we have the prospect of additional major work in the carbon fibre market. We have had a slow start to the four year contract for the manufacture of Pond Furniture, but this contract is anticipated to accelerate in years 2, 3 and 4 and remains a key strength for the business.
We continue to grow the business organically, by acquisition and by strategic partnership. We anticipate that the relationship with ONET Technologies will start bearing fruit during the coming year and we are currently specified for £4 million of nuclear work with ONET.
We continue to seek complementary acquisitions and we have the financial capacity and management capability to continue to grow the business. Our order book currently stands at £110 million. This could be enhanced in the short term as we have some major prospects near to award. We look forward to updating shareholders on the progress of Redhall as the year develops.
Much has been said about the current credit crisis and economic downturn. For our part we are not seeing any major change in the opportunities afforded to our business. We have the occasional disappointment but these disappointments are balanced by other opportunities. Overall I am satisfied at this early stage of the year that we can achieve current management expectations and we have made a good start to the year.
3 December 2008
Business and Financial Review
Highlights
We are delighted to report on another exceptional year for Redhall. 2008 has been a year of consolidation as the two major acquisitions made in 2007, Steels Engineering Services Limited and Jex Engineering Company Limited, have been fully integrated into the Group. The strategic rationale underlying those acquisitions has started to bear fruit.
We have experienced growth in revenue and operating profit in both of our primary business segments and this has been achieved by organic growth in addition to the full year impact of the 2007 acquisitions. The growth in profit has been translated into cash with a further improvement this year in the adjusted operating profit to cash conversion rate to 122% from 106% in 2007.
The balance sheet has strengthened further and net assets now stand at £20.8 million (2007: £17.9 million) and the Group has net cash of £1.9 million.
The Board is proposing a final dividend for the year of 2.5p which brings the total for the year to 4.0p compared with 2.25p in 2007.
Business review
Trading
Since late 2005, Redhall has been transformed from a small niche engineering operation into a key provider of engineering services to blue chip organisations and the public sector in the UK and overseas. Our strategy of focusing on the direct delivery of integrated services to market sectors driven by financial, regulatory and security demands positions us well for the future.
Performance this year has been driven by growth across all of our market sectors where our reputation for solutions-based delivery is widely recognised. Revenues increased by 52% to £86.7 million whilst adjusted operating profit was up 95% to £4.7 million which was ahead of management's expectations. Adjusted operating margins reached 5.4% (2007: 4.3%) reflecting our strong performance on a number of major projects and our ability to control overheads whilst maximising the return from our resources.
Nuclear Services
| 2008 | 2007 | ||
| Revenue | £37.7m | £28.3m | +34% |
| Operating profit | £3.1m | £1.9m | +66% |
| Margin | 8.2% | 6.6% |
*Operating profits are stated prior to amortisation of acquired intangibles and central overhead
Nuclear Services has seen its third year of substantial growth with outperformance in both its civil and MOD markets.
Civil Nuclear
The civil nuclear market in the past three years under the guidance of the Nuclear Decommissioning Authority ("NDA") has seen substantial progress with an improved knowledge of the UK's key assets and liabilities. The NDA recently issued, for consultation, its draft business plan for the three year period to 2011, in which it sets out an increased budget of £8.6 billion, an increase of 8%.
We have modelled our operations to focus on three strategically important areas, high hazard waste and risk reduction, revenue generating commercial operations in reprocessing and decommissioning and clean-up. By necessity, these areas are principally at Sellafield where the NDA anticipates further increased expenditure is necessary over and above any agreed budget and from which we can benefit.
Our performance in 2008 on our key contracts has been recognised by Sellafield Limited. In waste interim storage (Sellafield Product Residue Store) our major contract was novated in April 2008 directly to Sellafield. This was in recognition of the quality of delivery in integrated project management of both critical manufacture and technical site installation. The project is being delivered early and on budget. In reprocessing and commercial operations (Thorp MASFE) the delivery of an exceptionally difficult project against a critical time deadline with a 100% quality score has led to further opportunities to extend our activities in this area. The success in manufacturing Sellafield Advanced Gas Cooled Reactor spent fuel containers and skips during the year led to an award of the four year Pond Furniture Framework Agreement in June 2008. This had a slow start but has the potential to provide a significant foundation of work over the life of the contract.
Whilst much of the NDA focus will be on Sellafield, our growing reputation is leading to contract opportunities elsewhere such as Trawsfynydd, Bradwell and Hartlepool. We will be looking to secure these on a selected basis both on our own account and with our French strategic partner ONET Technologies.
MOD Nuclear
In the MOD nuclear market, the Atomic Weapons Establishment ("AWE") is a growing opportunity. The Government has committed an investment of some £1 billion over three years to deliver its programme safely and effectively (which is expected to continue until 2020). AWE's remit covers the entire life cycle of the UK's nuclear deterrent from initial concept, assessment and design, through to component manufacture and assembly, in-service support, and finally decommissioning and disposal.
We work in partnership with AWE under a range of framework agreements, where our existing focus on technical delivery in the highest hazard area is most valued and where security, health and safety and environmental considerations are critical.
Our performance has been well ahead of expectations with a run rate of nearly three times compared to that when Steels was first acquired in January 2007 due to our ongoing development of resource and capability. We are also accessing selected manufacturing opportunities for the Group and signed a framework contract with AWE for the design, manufacture and installation of specialist blast protection and security schemes. As a result we are looking towards a number of major new build projects such as HEFF during 2009, where we are preferred supplier and others that are planned over the coming years. This should complement our existing foundation work.
The Group has a dedicated resource of nearly 400 personnel with direct nuclear capability both in technical site activities and bespoke manufacture. This has been further complemented by the acquisition of Chieftain. We believe that we are well placed to benefit not only from the immediate programmes of work for the NDA and AWE but also the MOD submarine and aircraft carrier programmes and in the medium term nuclear power generation new build.
Engineering Services
| 2008 | 2007 | ||
| Revenue | £49.0m | £28.8m | +70% |
| Operating profit | £3.8m | £2.1m | +84% |
| Margin | 7.8% | 7.2% |
*Operating profits are stated prior to amortisation of acquired intangibles and central overhead
Engineering Services produced another year of organic growth in all of our key markets including the oil and gas, petrochemical and food arenas. In oil and gas in particular, we have been selective in our tendering to ensure that margin is maximised and risk is managed. In food and chemical we benefited from large build programmes for most of our major clients which ran simultaneously.
With the addition of Chieftain, Redhall now has one of the strongest UK wide engineering capabilities which positions us well to expand our operations into the wider power generation and oil and gas sectors.
Oil and Gas
The market in the past 12 months has seen growth in the UK and overseas, driven in part by increases in oil commodity prices and the UK's position and dependence on increasing overseas energy supply. Onshore activity has been lifted in the maintenance and shutdown area driven by refinery efficiency or regulatory requirements. Tank maintenance, build and refurbishments have also moved on strongly for oil and gas storage given the UK's capacity remains constrained. The energy project arena continues to be an area of key focus and we anticipate further investment in the future.
Our specialist manufacturing operation, which designs, manufactures and installs bespoke blast and security protection schemes for the offshore and onshore markets, saw fewer larger orders during the year. Despite this, it grew its contribution for the third year running. The offshore repair and maintenance market was more buoyant and delivered a strong return. Since the start of the new year, the forward manufacturing order book has improved substantially to a record level and the business has the best visibility for many years.
Food, Chemical and Pharmaceutical
Our food, chemical and pharmaceutical operation located on the Humber Bank performed in line with expectations and has integrated well. Our strategy of investing in and gaining access to the speciality chemical market has paid dividends during a period when all the major food clients were engaged in new design and build and relocation projects. Its strategic geographic position and its local skilled capability is providing us with new opportunities for the Group as we seek to integrate Redhall's wider service offering.
In the year, we secured our first major chemical plant design and build for Bluestar Fibres. The £10 million project is progressing well and we expect the partnership approach with Bluestar to yield further opportunities both in the UK and overseas.
Financial review
The Group has adopted International Financial Reporting Standards this year. A transition report explaining the impact was issued on 14 April 2008 and those explanations are given again in the Consolidated Financial Statements.
Group income statement
| | 2008 | 2007 |
| | £000 | £000 |
| Revenue | 86,706 | 57,049 |
| Adjusted operating profit* | 4,719 | 2,430 |
| Net finance charge | (72) | (42) |
| Adjusted PBTA* | 4,647 | 2,388 |
| Tax | (777) | (308) |
| Retained profit | 3,602 | 1,974 |
| Adjusted basic EPS* | 17.78p | 11.86p |
| Adjusted diluted EPS* | 17.49p | 11.57p |
*Adjusted numbers exclude amortisation of acquired intangible assets.
Revenue has increased by 52% and adjusted operating profit by 95% reflecting an improvement in adjusted operating margin to 5.4% from 4.3% in 2007. The segmental analysis demonstrates that growth in revenue and operating profit and the improvement in operating margin have been achieved in both of our business segments.
The net finance charge is modest and reflects the net cash position of the Group throughout most of the year and the relatively small IAS 19 deficit in the defined benefit pension scheme at the start of the year.
The overall effective rate of corporation tax (ratio of tax charge to adjusted PBTA) has increased in the year to 16.7% from 12.9%, but remains less than the current full rate of 28%. This is due to the further utilisation of historical tax losses.
Adjusted basic and adjusted diluted earnings per share have increased by 50% and 51% respectively. As noted above, the Group is continuing to benefit from tax charges which are lower than the full rate of tax.
Cash flow and net funds
| | 2008 | 2007 |
| | £000 | £000 |
| Cash inflow from operating activities | 5,753 | 2,583 |
| Special pension contribution | - | (3,000) |
| Net finance charges | (26) | 27 |
| Income taxes | (254) | (602) |
| Dividends | (586) | (371) |
| Capital expenditure | (1,736) | (565) |
| New term loan | - | 5,000 |
| Others | (120) | (137) |
| Net cash inflow | 3,031 | 2,935 |
| Cash at year end | 6,689 | 3,658 |
| Borrowings at year end | (4,826) | (4,943) |
| Net funds/(borrowings) | 1,863 | (1,285) |
| Gearing | Nil | 7.2% |
Cash inflow from operations amounted to £5.8 million representing a cash conversion rate of 122% compared with 106% in 2007. Cash conversion is driven by the nature of our work and the payment terms negotiated with our clients. We will continue to seek to minimise our working capital investment particularly in high value long-term contracts and to adhere to agreed payment terms with our suppliers.
Our investment in capital expenditure has increased this year. We have previously reported that additional investment would be required as our businesses grew. This investment has included improvements and extensions to our workshop and operational office capacity and additional plant and equipment to better meet the technical demands of our clients. Further investment in capital expenditure is envisaged, but will only be executed when it can demonstrate a commercial return for the Group.
We closed the year with net funds of £1.9 million and nil gearing (2007: Net borrowings £1.3 million and gearing at 7.2%), a position of strength in the current economic climate.
Balance sheet
Shareholders' funds increased by £2.9 million in the year reflecting the principal elements of retained profit of £3.6 million less dividends paid of £0.6 million and movement in the pension scheme deficit of £0.2 million.
Pensions
The Group has a defined benefit pension scheme which was closed to new entrants in 1997, although it continues to make contributions for a small number of active members. A special contribution of £3.0 million was paid into the scheme in 2007 to extinguish the deficit reported in the latest formal triennial valuation performed at April 2006. Following the special contribution a deficit remained, as reported under IAS 19 on the Group balance sheet due to the more onerous assumptions which are required to be applied to the valuation of scheme liabilities under that accounting standard. The deficit reported at this year end has moved to £886,000 from £647,000 at 30 September 2007. This is due in large part to the fall in investment values at 30 September 2008, although this has been mitigated by a reduction in the scheme liabilities. In the current market, the value of investments is particularly volatile and significant swings occur on a day by day basis. However, the pension scheme is of a long-term nature and the portfolio of assets underlying the investments has been selected to match the maturity profile of the pension liabilities. Furthermore, actuarial advice is sought periodically by the Group and the scheme trustees to reconsider the asset portfolio and, where appropriate, to reallocate it to better reflect the longer term view of market conditions and changes in the liability profile.
Post balance sheet events
During October 2008 the Group completed the acquisition of Chieftain Group plc. On 31 October, we announced the admission to AiM of 8,163,266 new Redhall shares ("new shares") and as a consequence the Group acquired control of Chieftain from that date. The total purchase consideration and costs of the acquisition were some £20 million and were funded entirely from the proceeds of the new shares issued. Therefore immediately following the acquisition the enlarged Group net assets amounted to some £41 million (being £20.8 million at 30 September 2008 plus £20.0 million arising from new shares issued). The Directors review of the fair value of the net assets acquired or of the identification and valuation of Chieftain's intangible assets is ongoing, and will report further in this respect in our 2009 interim results.
Key performance indicators
The Board monitors the activities and performance of our trading subsidiaries through a system of internal control procedures which are summarised in the statement on Corporate Governance. At the Group level, key performance indicators and a comparison with the prior year are summarised below.
| 2008 | 2007 | |
| Adjusted operating profit margin | 5.4% | 4.3% |
| Net borrowings interest cover | 139 times | N/A |
| Work in hand and secured orders | £110m | £64m |
| Earnings per share: Adjusted basic Adjusted diluted All accident incident frequency rate | 17.78p 17.49p 5.2 | 11.86p 11.57p 7.4 |
Simon Foster Tony Price
Chief Financial Officer Chief Operating Officer
3 December 2008
Consolidated Income Statement
| Note | Year to 30 September 2008 | Year to 30 September 2007 | |||
| £000 | £000 | ||||
| Revenue | 1 | 86,706 | 57,049 | ||
| Cost of sales | (70,039) | (47,349) | |||
| Gross profit | 16,667 | 9,700 | |||
| Administrative expenses | (12,216) | (7,376) | |||
| Operating profit | 1 |
| 4,451 |
| 2,324 |
| Financial income | 2 |
| 1,295 |
| 951 |
| Financial expenses | 2 |
| (1,367) |
| (993) |
| Profit before tax | 4,379 | 2,282 | |||
| Adjusted PBTA* | 4,647 | 2,388 | |||
| Amortisation of acquired intangible assets | (268) | (106) | |||
| Profit before tax | 4,379 | 2,282 | |||
| Tax expense | (777) | (308) | |||
| Profit attributable to equity holders of the Parent Company | 4 | 3,602 | 1,974 | ||
| Earnings per share | 3 |
| |||
| Basic | 16.89p | 11.42p | |||
| Diluted | 16.62p | 11.14p |
* Adjusted PBTA is profit before tax and amortisation of intangible assets acquired with business combinations.
Consolidated Balance Sheet
| Note | As at 30 September 2008 | As at 30 September 2007 | |||
| £000 | £000 | ||||
| Assets | |||||
| Non-current assets | |||||
| Property, plant and equipment | 5,246 | 4,391 | |||
| Intangible assets | 1,403 | 1,565 | |||
| Purchased goodwill | 10,085 | 10,085 | |||
| Deferred tax assets | 480 | 393 | |||
| 17,214 | 16,434 | ||||
| Current assets | |||||
| Inventories | 433 | 303 | |||
| Trade and other receivables | 24,817 | 21,609 | |||
| Cash and cash equivalents | 6,689 | 3,658 | |||
| 31,939 | 25,570 | ||||
| Assets held for sale | 248 | - | |||
| Liabilities | |||||
| Current liabilities | |||||
| Trade and other payables | (22,220) | (18,450) | |||
| Finance lease liabilities | - | (9) | |||
| Borrowings | (491) | (116) | |||
| Current tax payable | (687) | (48) | |||
| (23,398) | (18,623) | ||||
| Non-current liabilities | |||||
| Borrowings | (4,335) | (4,827) | |||
| Retirement benefit obligations | (886) | (647) | |||
| (5,221) | (5,474) | ||||
| Net assets | 20,782 | 17,907 | |||
| Shareholders' equity | |||||
| Share capital | 4 | 5,331 | 5,331 | ||
| Share premium account | 4 | 1,116 | 1,116 | ||
| Merger reserve | 4 | 12,679 | 12,679 | ||
| Revaluation reserve | 4 | 785 | 804 | ||
| Other reserve | 4 | 141 | 37 | ||
| Retained earnings | 4 | 730 | (2,060) | ||
| Total equity | 20,782 | 17,907 |
Consolidated Statement of Recognised Income and Expense
| Year to 30 September 2008 | Year to 30 September 2007 | ||||
| £000 | £000 | ||||
| Gain on revaluation of properties | - | 112 | |||
| Actuarial (loss)/gain on pension scheme | (215) | 339 | |||
| Tax on items taken directly to or transferred from equity | (30) | 53 | |||
| Net income recognised directly in equity | (245) | 504 | |||
| Profit for the period | 3,602 | 1,974 | |||
| Total recognised income and expense for the period | 3,357 | 2,478 | |||
| Attributable to equity holders of the Parent Company | 3,357 | 2,478 | |||
Consolidated Cash Flow Statement
| Year to 30 September 2008 | Year to 30 September 2007 | ||||
| £000 | £000 | ||||
| Cash flows from operating activities | |||||
| Profit after taxation | 3,602 | 1,974 | |||
| Adjustments for: | |||||
| Depreciation | 501 | 349 | |||
| Amortisation of intangible assets | 281 | 106 | |||
| Difference between pension charge and cash contributions | (15) | (185) | |||
| Profit on disposal of property, plant and equipment | (1) | (1) | |||
| Share-based payments charge | 104 | 37 | |||
| Financial income | (1,295) | (951) | |||
| Financial expenses | 1,367 | 993 | |||
| Tax expense recognised in the income statement | 777 | 308 | |||
| Increase in trade and other receivables | (3,208) | (2,857) | |||
| Increase in inventories | (130) | (25) | |||
| Increase in trade and other payables | 3,770 | 2,835 | |||
| Cash generated from operations before special pensions contribution | 5,753 | 2,583 | |||
| Special pension contribution | - | (3,000) | |||
| Cash generated from operations | 5,753 | (417) | |||
| Interest paid | (376) | (136) | |||
| Income taxes paid | (254) | (602) | |||
| Net cash from operating activities | 5,123 | (1,155) | |||
| Cash flows from investing activities | |||||
| Acquisition of businesses net of cash acquired | - | (102) | |||
| Purchase of property, plant and equipment | (1,617) | (487) | |||
| Purchase of intangible assets | (119) | (78) | |||
| Proceeds from disposal of plant and equipment | 14 | 8 | |||
| Interest received | 350 | 163 | |||
| Net cash used in investing activities | (1,372) | (496) | |||
| Cash flows from financing activities | |||||
| Proceeds from issue of share capital | - | 27 | |||
| Proceeds from long-term borrowing | - | 5,000 | |||
| Cost of long-term borrowing | (125) | (57) | |||
| Payment of finance lease liabilities | (9) | (13) | |||
| Dividends paid | (586) | (371) | |||
| Net cash used in financing activities | (720) | 4,586 | |||
| Net increase in cash and cash equivalents | 3,031 | 2,935 | |||
| Cash and cash equivalents at beginning of period | 3,658 | 723 | |||
| Cash and cash equivalents at end of period | 6,689 | 3,658 |
Notes to the Financial Statements
1. Segment analysis
Segment information is presented in respect of the Group's business and geographical segments. The primary analysis, business segments, is based on the Group's management and internal reporting structure.
Business segments
Year to 30 September 2008
| | Revenue | | Operating profit before acquired intangible asset amortisation | | Acquired intangible asset amortisation | | Group operating profit |
| | £000 | | £000 | | £000 | | £000 |
| | | | | | | | |
| Nuclear Services | 37,736 | | 3,079 | | (53) | | 3,026 |
| Engineering Services | 48,970 | | 3,811 | | (215) | | 3,596 |
| Central costs | - | | (2,171) | | - | | (2,171) |
| | | | | | | | |
| Total continuing operations | 86,706 | | 4,719 | | (268) | | 4,451 |
| | | | | | | | |
| Financial income | | | 1,295 | | - | | 1,295 |
| Financial expenses | | | (1,367) | | - | | (1,367) |
| | | | | | | | |
| Group profit before tax | | | 4,647 | | (268) | | 4,379 |
| Tax | | | (854) | | 77 | | (777) |
| Group profit for the year | | | 3,793 | | (191) | | 3,602 |
Share based payment charges amounting to £104,000 (2007: £37,000) have been charged within central costs.
Year to 30 September 2007
| | Revenue | | Operating profit before acquired intangible asset amortisation | | Acquired intangible asset amortisation | | Group operating profit |
| | £000 | | £000 | | £000 | | £000 |
| | | | | | | | |
| Nuclear Services | 28,260 | | 1,854 | | (35) | | 1,819 |
| Engineering Services | 28,789 | | 2,070 | | (71) | | 1,999 |
| Central costs | - | | (1,494) | | - | | (1,494) |
| | | | | | | | |
| Total continuing operations | 57,049 | | 2,430 | | (106) | | 2,324 |
| | | | | | | | |
| Financial income | | | 951 | | - | | 951 |
| Financial expenses | | | (993) | | - | | (993) |
| | | | | | | | |
| Group profit before tax | | | 2,388 | | (106) | | 2,282 |
| Tax | | | (338) | | 30 | | (308) |
| Group profit for the year | | | 2,050 | | (76) | | 1,974 |
2. Financial income and expenses
| 2008 | 2007 | ||
| £000 | £000 | ||
| Financial income | |||
| Interest income | 350 | 163 | |
| Expected return on pension scheme assets | 945 | 788 | |
| 1,295 | 951 | ||
| Financial expenses | |||
| Interest on bank loans and overdrafts | (382) | (130) | |
| Interest payable in respect of lease finance | (1) | (6) | |
| Interest cost on pension scheme liabilities | (984) | (857) | |
| (1,367) | (993) |
3. Earnings per share
Basic earnings per share
The calculation of basic earnings per share of 16.89p (30 September 2007: 11.42p) is based on 21,323,434 shares (30 September 2007: 17,282,345) being the weighted average number of shares in issue throughout the period and on earnings of £3,602,000 (30 September 2007: £1,974,000).
Diluted earnings per share
The calculation of diluted earnings per share of 16.62p (30 September 2007: 11.14p) is based on profit for the period of £3,602,000 because there were no adjustments required (30 September 2007: £1,974,000 because no adjustments were required) and on 21,672,172 ordinary shares (30 September 2007: 17,721,920) as calculated below:
| 2008 | 2007 | ||
| £000 | £000 | ||
| Earnings: | |||
| Profit on ordinary activities after tax | 3,602 | 1,974 | |
| Adjusted profit | 3,602 | 1,974 | |
| Number | Number | ||
| Basic weighted average number of shares | 21,323,434 | 17,282,345 | |
| Dilutive potential ordinary shares arising from share options | 348,738 | 439,575 | |
| Adjusted weighted average number of shares | 21,672,172 | 17,721,920 |
Adjusted earnings per share
The Directors believe that helpful additional earnings per share calculations are earnings per share on adjusted bases (i.e. based on profit before amortisation of acquired intangible assets). The basic and adjusted weighted average numbers of shares are set out above. The adjusted earnings have been calculated as follows:
| 2008 | 2007 | ||
| £000 | £000 | ||
| Earnings: | |||
| Profit on ordinary activities after tax | 3,602 | 1,974 | |
| Amortisation of acquired intangible assets | 268 | 106 | |
| Tax on adjustments | (77) | (30) | |
| Adjusted profit | 3,793 | 2,050 | |
| Adjusted basic earnings per share | 17.78p | 11.86p | |
| Adjusted diluted earnings per share | 17.49p | 11.57p |
4. Statement of changes in equity
| Share capital | Share premium | Merger reserve | Revaluation reserve | Other reserve | Retained earnings | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 October 2006 | 3,664 | 1,110 | 294 | 703 | - | (4,066) | 1,705 |
| Revaluation of land and buildings | - | - | - | 112 | - | - | 112 |
| Income taxes relating to items charged directly to equity | - | - | - | (11) | - | 166 | 155 |
| Actuarial gain recognised in the pension scheme | - | - | - | - | - | 339 | 339 |
| Movement on deferred tax relating to pension liability | - | - | - | - | - | (102) | (102) |
| Profit for the year ended 30 September 2007 | - | - | - | - | - | 1,974 | 1,974 |
| Total recognised income and expense for the period | - | - | - | 101 | - | 2,377 | 2,478 |
| Shares allotted in connection with acquisitions | 1,646 | - | 12,935 | - | - | - | 14,581 |
| Cost of issuing shares | - | - | (550) | - | - | - | (550) |
| Employee share-based compensation | 21 | 6 | - | - | 37 | - | 64 |
| Dividends | - | - | - | - | - | (371) | (371) |
| At 30 September 2007 | 5,331 | 1,116 | 12,679 | 804 | 37 | (2,060) | 17,907 |
| Transfer between reserves in respect of depreciation on property revaluations | - | - | - | (26) | - | 26 | - |
| Income taxes relating to items charged directly to equity | - | - | - | 7 | - | (97) | (90) |
| Actuarial loss recognised in the pension scheme | - | - | - | - | - | (215) | (215) |
| Movement on deferred tax relating to pension liability | - | - | - | - | - | 60 | 60 |
| Profit for the year ended 30 September 2008 | - | - | - | - | - | 3,602 | 3,602 |
| Total recognised income and expense for the period | - | - | - | (19) | - | 3,376 | 3,357 |
| Employee share-based compensation | - | - | - | - | 104 | - | 104 |
| Dividends | - | - | - | - | - | (586) | (586) |
| At 30 September 2008 | 5,331 | 1,116 | 12,679 | 785 | 141 | 730 | 20,782 |
5. Post balance sheet events
On 22 October 2008, Redhall announced that its offer for Chieftain Group Plc had been declared unconditional as to acceptances. On 24 October 2008, further to the earlier announcement, and confirmation that at the Redhall General Meeting shareholders of Redhall passed the Resolution, amongst other things, to increase the authorised share capital of Redhall to 40,000,000 ordinary shares of 25 pence each in order to effect the placing in relation to the Offer, Redhall declared the Offer unconditional in all respects (save for Admission of its new shares to the AIM Market of the London Stock Exchange ("Admission"). On 31 October 2008, Redhall announced the Admission of 8,163,266 new shares and the commencement of unconditional dealings in those shares and as a consequence Redhall acquired control of Chieftain Group Plc from this date. The new Redhall Shares were placed with institutional investors by Altium at a price of 245 pence per share. Based on the placing price, the gross proceeds of the placing amounted to £20 million.
The shares in Chieftain are being acquired for cash in the period from 31 October 2008 and as at 3 December 2008 the Group owned or had received acceptances for 95.45% of the issued share capital. The total purchase consideration for the entire issued share capital of Chieftain including costs of acquisition are anticipated to amount to some £20 million. The Directors have not yet concluded their review of the fair value of the net assets acquired or of the identification and valuation of Chieftain's intangible assets, and therefore the disclosure of these at this time is clearly impracticable.
The financial information set out above for the years ended 30 September 2008 and 2007 ("the financial information"), has been prepared with consistent accounting policies and in accordance with International Financial Reporting Standards ("IFRS") in issue and as adopted by the European Union ("EU") and are effective at 30 September 2008, our first annual reporting date at which we are required to use IFRS as adopted by the EU.
The financial information does not constitute the statutory financial statements (as defined by S240 of the Companies Act 1985) for those years. The 2008 financial statements, upon which the auditors issued an unqualified opinion, have not yet been delivered to the Registrar.
The 2007 financial statements, which were prepared in accordance with applicable Accounting Standards in the United Kingdom (United Kingdom Generally Accepted Accounting Practice), have been delivered to the Registrar and included the auditors' report which was unqualified and did not contain a statement either under sections 237(2) or 237(3) of the Companies Act 1985.
The annual report and accounts for the year ended 30 September 2008 will be posted to shareholders. Copies will be available from the Company's registered office, 1 Red Hall Court, Wakefield, WF1 2UN.