Renew Holdings Regulatory News (RNWH)

6 Jun 2006 07:03

Renew Holdings PLC06 June 2006 Renew Holdings plc("Renew" or the "Group") Interim Results for the six months ended 31 March 2006 Renew, the specialist construction services business, today announces a strongimprovement in cash backed profits for the period and a strengthened order book. Financial Highlights • Turnover from ongoing operations of £162m (2005: £165m) • Cash backed operating profit of £1.4m (2005: £0.7m) • Profit before tax of £1.8m (2005: £0.1m) • Earnings per share of 3.01p (2005: 0.25p) • Interim dividend of 0.4p (2005: nil) Operational Highlights • No exceptionals, legacy contract provisions reconfirmed • Results reflect growing impact of new management controlmechanisms in place • Increased order book of £226m in specialist sectors • Appointment of Group Finance Director • Acquisition of PPS Electrical strengthening presence inNuclear sector Roy Harrison, Chairman, commented: "The Group continues to make progress, benefiting from its focus on the coremarket sectors in which it has particular skills and experience. This isreflected in the order book, which is growing both in terms of quality andscale. Trading into the second half has been satisfactory and gives the Boardconfidence that this progress will be sustained for the full year." 6 June 2006 Enquiries: Renew Holdings plc Tel: 020 7522 3200Brian May, Chief ExecutiveJohn Samuel, Finance Director College Hill Tel: 020 7457 2020Matthew GregorowskiMark Garraway CHAIRMAN'S STATEMENT Introduction The performance during the first half of the year is in line with the Board'sexpectations. The Group continues to make progress, benefiting from its focuson the core market sectors in which it has particular skills and experience.Brian May is providing the experience and leadership missing over recent yearsand has quickly restored the confidence of our staff, providing clear directionand support. At the end of last year the Board expressed its confidence that the legacycontract exposures which have so negatively impacted the Group's results overthe past two years were fully provided for and were consistent with the expectedlevel of cash recoverable from those contracts. It is the Board's view thatthis is still the case and robust procedures are in place to manage risk. Thereare no exceptional items in these results. Results and dividend Group turnover from ongoing operations for the six months ended 31 March 2006was £162.4m (2005: £165.1m) and operating profit for the period was £1.4m (2005:£0.7m). These results reflect the growing impact of the management controlmechanisms established last year to focus on lower risk contracts. Profitbefore tax was £1.8m (2005: £0.1m). Earnings per share were 3.01p (2005: 0.25p). Shareholders' funds have increased by 13% since last year end and now stand at£5.4m. Cash balances at 31 March were £8.2m. In accordance with the progressive policy indicated last year, the Board isdeclaring an interim dividend of 0.4p per share (2005: nil) to be paid on 7 July2006 to shareholders on the register as at 16 June 2006. Acquisition The Group is pleased to announce that it has acquired PPS Electrical Limited, anelectrical contractor specialising in asset support for the nuclear sector, fora cash consideration of £650,000. This acquisition will significantlystrengthen the Group's capability as a multi-disciplined site contractor for thenuclear industry. The acquisition is expected to be modestly earnings enhancing. Board As we announced at the time of our trading update in March, on 1 May John Samueljoined the Board as Group Finance Director and Philip Underwood stepped downfrom the Board to concentrate on running VHE Construction and Shepley Engineers. Outlook The Board is satisfied by the progress being made throughout the Group. Tradinginto the second half gives the Board confidence that this progress will besustained for the full year. Roy Harrison, Chairman 6 June 2006 CHIEF EXECUTIVE'S REVIEW Review of operations I am pleased to report further progress in the first half of the year, withGroup turnover from ongoing operations of £162.4m and corresponding cash backedoperating profit of £1.4m. The majority of the Group's turnover is now beinggenerated from longer-term framework agreements and negotiated contracts,improving the quality of earnings while strengthening relationships with keyclients. Since my last review, the Group has continued to strengthen its risk managementprocesses, particularly in the area of contract selectivity. The Group's orderbook at 31 March of this year was £226m, of which approximately 70% is repeatbusiness. 75% of new orders booked in the first half fall within our corespecialist areas of activity, and this proportion is expected to increase as theGroup continues to pursue this strategy. None of the Group's activities has been loss making in the period. Performancein the Land Remediation, Nuclear, Social Housing and Retail sectors has beenencouraging with over 50% of the Group's new orders generated in the first halfof the year being achieved in these areas. For example, in Social Housing,Allenbuild is now working with five of the top six housing associations in theUK. Genesis Housing Group, part of the Gentect Housing consortium of whichAllenbuild is a member, was also awarded the highest allocation of funds (£139m)to help deliver 84,000 new homes over the next two years as part of theGovernment's £3.9bn investment in the National Affordable Housing Programme. In the half year, the Group won a £15.5m pre-sold project to develop over 92,000sq.ft of office, production and warehousing facilities on a six-acre site inLancashire. Following the identification and purchase of the site by the Group,VHE Construction carried out remediation works on the brownfield site andAllenbuild is delivering the construction works, which are due to complete inNovember. This is an excellent example of the benefits of offering our clientsintegrated services through our portfolio of businesses. Net cash outflow from operating activities was £8.5m. This was in line with theGroup's budget and the Group anticipates an improved cash position at the yearend. The net outflow includes an increase in stock and work in progress of £4.7mon the development site in Lancashire. This contract is separately funded by a£4m loan which is not included as an operating cash inflow. This loan isexpected to increase as the project progresses and will be repaid from theproceeds of the sale. During the first half of the year, the realisation ofsurplus property assets has continued with the sale of a London property forbook value and the repayment of the associated debt. Further realisations areanticipated in the second half of the year. Acquisition The Group has completed the acquisition of PPS Electrical Limited, a privatelyowned electrical contractor based in Barrow-in-Furness, specialising in the areaof nuclear work. PPS will become a subsidiary of Shepley Engineers Limitedestablishing the combined business as the largest mechanical and electricalcontractor on the Sellafield site and strengthening Shepley's capabilities as amulti-disciplined site contractor for the nuclear industry. The acquisitionprice is £650,000 which will be met from the Group's existing cash resources.In the year ended 31 December 2005, PPS recorded sales of £3.3m and a profitbefore taxation of £121,000. Net assets were £375,000. Prospects The order book is growing in both quality and scale and in our chosen specialistmarkets. These offer good opportunities for growth and profitability, while theoverall risk profile of the Group is much improved. I am pleased with theprogress the Group is making towards delivering reliable and growing profits. Brian May, Chief Executive 6 June 2006Group profit and loss accountfor the six months ended 31 March 2006 Notes Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 Restated Unaudited Unaudited Audited £000 £000 £000 Turnover: Group and share of joint 179,363 227,320 457,750venturesLess share of joint ventures' (1,150) (2,113) (2,714)turnoverOngoing operations 162,442 165,111 330,113Discontinuing operations 1 15,771 20,641 39,052Total continuing operations 178,213 185,752 369,165Discontinued operations 1 - 39,455 85,871Group turnover 178,213 225,207 455,036Cost of sales (including exceptional 1 (160,613) (204,995) (437,409)items)Gross profit 17,600 20,212 17,627Administrative expenses (including 1 (16,210) (19,497) (37,689)exceptional items)Other operating income - - 53Group operating profit /(loss) 1,390 715 (20,009)Income from joint ventures - - -Ongoing operations before 1,390 1,355 2,687exceptionalsExceptional items 1 - (2,220) (19,845)Ongoing operations after 1,390 (865) (17,158)exceptionalsDiscontinuing operations 1 - (2,142) (8,351)Total continuing operations 1,390 (3,007) (25,509)Discontinued operations 1 - 3,722 5,500Total operating profit/(loss) before 1,390 715 (20,009)interest, including share of jointventuresProfit on disposal of subsidiary 1 - - 22,300companiesProfit on ordinary activities before 1,390 715 2,291interestInterest receivable 569 328 921Interest payable (661) (656) (1,597)Other finance income / (charges) - 505 (240) (440)FRS 17 pensionProfit on ordinary activities before 1,803 147 1,175taxationTaxation on profit on ordinary 3 - - 899activitiesProfit for the period 1,803 147 2,074 Basic and diluted earnings per share 4 3.01p 0.25p 3.46p Basic and diluted earnings / (loss) 4 3.01p (5.95p) (42.76p)per share on continuing operations Proposed dividend 5 0.40p - 0.20p group statement of total recognised gains and lossesfor the six months ended 31 March 2006 Notes Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 Restated Unaudited Unaudited Audited £000 £000 £000 Profit for the period 1,803 147 2,074Exchange movements in reserves 64 (67) (171)Net movements relating to defined 2 (1,126) (103) (2,222)benefit pension schemeTotal recognised gains and losses 741 (23) (319)since last annual report Group balance sheetat 31 March 2006 Six months Six months Year ended ended ended Notes 31 March 31 March 30 September 2006 2005 2005 Restated Unaudited Unaudited Audited £000 £000 £000Fixed assetsIntangible assets: Goodwill 4,450 4,753 4,602Tangible assets 14,663 16,169 14,930Investments - 30 -Investments in joint ventures:Loans to joint ventures 439 444 438Share of gross assets 8,361 9,495 9,704Share of gross liabilities (4,805) (4,905) (5,276) 3,995 5,034 4,866 23,108 25,986 24,398Current assetsStocks and work in progress 6 13,651 16,574 9,573Debtors: due after more than one year 5,850 8,252 5,751 due within one year 73,655 87,698 72,836Current asset investments - assets 3,182 7,375 6,089held for resaleCash at bank and in hand 8,194 9,823 13,590 104,532 129,722 107,839 Creditors: amounts falling due 6 (109,608) (134,122) (115,020)within one year Net current liabilities (5,076) (4,400) (7,181) Total assets less current 18,032 21,586 17,217liabilities Creditors: amounts falling dueafter more than one yearLong-term debt (8,363) (8,363) (8,363)Other creditors (4,252) (6,066) (4,058)Net assets excluding pension 5,417 7,157 4,796liability Pension liability 2 - (2,065) - Net assets 5,417 5,092 4,796 Share capital 5,990 5,990 5,990Share premium account 5,893 5,893 5,893Capital redemption reserve 3,896 3,896 3,896Revaluation reserve 73 489 73Profit and loss account (10,435) (11,176) (11,056)Equity shareholders' funds 7 5,417 5,092 4,796 Group cash flow statementfor the six months ended 31 March 2006 Notes Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 Unaudited Unaudited Restated Audited £000 £000 £000Net cash outflow from operating activities 8 (8,538) (21,849) (25,338) Returns on investments and servicing offinanceNet interest paid (92) (218) (676) Taxation - - - Capital expenditure and financial investmentPayments to acquire tangible fixed assets (507) (659) (640)Proceeds on sale of tangible fixed assets 58 142 225Proceeds on sale of current asset 2,907 -investments -Loans repaid by joint venture 871 155 200 3,329 (362) (215) Acquisitions and disposalsProceeds from sale of subsidiaries and - - 21,343businessesProceeds from sale of shared equity loans - 1,894 1,894Cash disposed on disposal of subsidiaries - - (3,380)and businesses - 1,894 19,857 Equity dividends paid to shareholders (120) - - Cash outflow before financing (5,421) (20,535) (6,372) FinancingShort term development funding 6 3,953 - -Movement in short-term borrowings (3,600) 3,600 3,600Finance lease payments (328) (240) (623) 25 3,360 2,977 Decrease in cash during the period (5,396) (17,175) (3,395) Notes to the Accounts Note 1: Discontinued / discontinuing operations & exceptional items (a) Discontinued and discontinuing operations Discontinued operations and the profit on disposal of subsidiary companies in2005 relate to the activities of Bullock Construction Limited which was sold on16 September 2005. Discontinuing operations in the periods relate to the activities of YJLConstruction (excluding YJL Infrastructure) and a division of Britannia JoineryLimited, which were in the process of being closed down. These activities wereshown as discontinuing as they did not meet the definition of discontinued asdefined by FRS3. (b) Operating exceptional items The operating profit/(loss) in the prior periods included the following amountsthat the Directors regarded as exceptional because of their value and nature,but which did not fall to be recorded as non-operating exceptional items underthe requirements of FRS 3. Six months ended 31 Six months ended 31 Year ended 30 September March 2006 March 2005 2005 Unaudited Unaudited Audited Ongoing Discon-tinuing Ongoing Discon-tinuing Ongoing Discon-tinuing £'000 £'000 £'000 £'000 £'000 £'000Reduction in pension deficit (i) - - - - 3,650 -following settlements ofliabilitiesCost of incentives to members (i) - - - - (1,111) -connected to the settlements - - - - 2,539 - Contract losses on specific (ii) - - (1,875) (1,024) (15,437) (4,758)problem contracts incepted inprior yearsImpairment of fixed assets (iii) - - - - (1,749) -and current asset investmentsRedundancy and reorganisation (iv) - - (345) (864) (454) (1,289)costsOther non-recurring costs (v) - - - - (4,744) -Discontinuing activities (vi) - - - (254) - (2,045)operating loss preexceptional costsClosure costs (vi) - - - - - (259) - - (2,220) (2,142) (19,845) (8,351) (i) Defined benefit pension scheme During the year ended 30 September 2005 the Directors made a number of offers todeferred members of the scheme to transfer their entitlements under the definedbenefit scheme to a defined contribution arrangement and a number of offers topensioners of the scheme to buy out certain benefits attributable under thescheme. The figure recorded above shows the movement on the FRS17 actuarialdeficit relating to these transfers and the costs reflect the sums paid tofacilitate these transfers. (ii) Contract losses During the year ended 30 September 2005, the Group suffered a number ofcontractual issues that related to contracts procured during or before 2002/2003where the difficulties relating to these contracts were not identified in theprior period or became more apparent in the year ended 30 September 2005 asnegotiations to resolve the contract terms progressed. (iii) Impairment of fixed assets and current asset investments Provision was made in the year ended 30 September 2005 against the carryingvalue of three properties to reflect their market value as at 30 September 2005. (iv) Redundancy and reorganisation costs During the year ended 30 September 2005 a number of exceptional costs, whichprimarily related to redundancies, were incurred as a result of reorganisationswithin the Group which did not constitute a fundamental reorganisation asdefined by FRS 3. In the period to 30 September 2005 these costs related to thereorganisation of Allenbuild and the closure of YJL Construction. (v) Other non-recurring costs During the year ended 30 September 2005, the Group incurred £4.7m ofnon-recurring costs in respect of the resolution of legacy non-contract issues. (vi) Discontinuing activities and closure costs The losses of the discontinuing operations were included as part of theexceptional items in 2005. In addition, provision was made for the remainingcosts of closure of YJL Construction's contracting division. Note 2: Defined benefit pension scheme As at 30 September 2005, the FRS 17 valuation, prepared by Barnett Waddingham,Consulting Actuaries, showed a surplus of £1,628,000, which was not recorded asan asset in the accounts in accordance with the requirements of FRS 17 as therewas, and is, no expectation that the surplus will result in a reduction incontributions or a refund from the scheme. No updating FRS 17 valuation hasbeen performed for these interim accounts and the Directors consider that theposition shown at 30 September 2005 should be maintained in the accounts at 31March 2006. As the balance sheet position of the pension scheme has been maintained at £nilduring the period all contributions have been shown as part of the movements inthe Group Statement of Total Recognised Gains and Losses. Note 3: Taxation on profit on ordinary activities Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 Unaudited Unaudited Audited £000 £000 £000Current tax:UK corporation tax on profits for the period - - -Adjustments in respect of previous periods - - 1 - - 1Foreign tax - - -Total current tax - - 1Deferred tax - - 898Taxation credit on profit on ordinary - - 899activities The Group and Company have unused tax losses available to carry forward against future taxableprofits, although a significant element of these losses relates to activities which are notforecast to generate the level of profits needed to utilise these losses. A deferred tax assetof £1,474,000 has been recognised to the extent considered reasonable by the Directors andincluded in Debtors: due within one year. This is in respect of losses where recovery can bereasonably expected within twelve months of the balance sheet date. The amount has beenmaintained at the same level as 30 September 2005. Note 4: Earnings per share Six months ended Year ended Earnings 2006 EPS Earnings 2005 EPS Earnings 2005 EPS 31 March 31 Weighted March average Weighted 31 March number of average Weighted shares number of average shares number of shares £'000 '000 Pence £'000 '000 Pence £'000 '000 Pence Basic and diluted 1,803 59,899 3.01 147 59,899 0.25 2,074 59,899 3.46earnings per share Basic and diluted 1,803 59,899 3.01 799 59,899 1.33 2,584 59,899 4.31earnings per share oncontinuing operations preexceptional items Basic and diluted - 59,899 - (4,362) 59,899 (7.28) (28,196) 59,899 (47.07)earnings / (loss) pershare on exceptionalitems Basic and diluted 1,803 59,899 3.01 (3,563) 59,899 (5.95) (25,612) 59,899 (42.76)earnings / (loss) pershare on continuingoperations afterexceptional items Basic and diluted - 59,899 - 3,710 59,899 6.19 27,686 59,899 46.22earnings per share ondiscontinued operations There are no options with a dilutive effect. The earnings on discontinued operations, for the year ended 30 September 2005,includes the profit on the sale of Bullock Construction Ltd of £22,300,000. Basic and diluted earnings per share for both net profit and profit fromcontinuing operations have been disclosed in accordance with the requirements ofFRS 22 (Earnings per share) which will be applicable for the Group for the yearending 30 September 2006. Note 5: Dividends The proposed interim dividend is 0.4p per share (2005 interim: nil, 2005 final paid: 0.2p).This will be paid out of the Company's available distributable reserves to shareholders onthe register on 16 June 2006, payable on 7 July 2006. This dividend has not been accrued inthe six months ended 31 March 2006, in accordance with the requirements of FRS 21 (Eventsafter the balance sheet date) and FRS 25 (Financial instruments: disclosure andpresentation), both of which will be applied by the Group in respect of the accounts for theyear ending 30 September 2006, and have therefore been treated as applicable for theseinterim accounts. These standards require that dividends payable are recorded only whenpaid and are shown as a movement in equity rather than as a charge to profit. An adjustmenthas been made to restate the accounts for the year ended 30 September 2005 and to accountfor the proposed dividend of £120,000 as a movement through reserves in the current period. Note 6: Development fundingIncluded in Creditors: amounts falling due within one year is £3,953,000 which relates to a shortterm loan taken out to fund a development. The loan is secured by a first charge on a developmentproperty which is included in stock and work in progress at its cost to date of £4,702,000. Theproperty on this development is being constructed by the Group under normal contractual terms. Abinding agreement to sell the building on completion of the construction has been signed with anindependent third party which has lodged an amount of £2.0m in escrow. In accordance with theGroup's normal accounting policies, profit is being recognised on the construction element of thecontract but profit on the development aspect of the contract will only be recorded on sale. Note 7: Reconciliation of movements in Group shareholders' funds Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 Restated Unaudited Unaudited Audited £000 £000 £000 Profit for the period 1,803 147 2,074Dividends (120) - - 1,683 147 2,074Other recognised net gains and losses for the year (1,062) (170) (2,393)Share issue - - -Share buyback - - -Net movement on shareholders' funds 621 (23) (319) Opening shareholders' funds 4,796 5,115 5,115Closing shareholders' funds 5,417 5,092 4,796 Note 8: Net cash outflow from operating activities Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 Unaudited Unaudited Audited £000 £000 £000 Operating profit/(loss) 1,390 715 (20,009)Depreciation 735 1,380 2,657Amortisation of subsidiary goodwill 152 152 303Profit on sale of fixed assets (19) (50) (78)Impairment of fixed assets - - 450Impairment of current asset investments - - 1,299Increase in stocks and work in progress (4,078) (7,933) (932)(Increase)/decrease in operating debtors and (918) 7,228 7,705prepaymentsDecrease in creditors and accruals (5,243) (22,167) (12,952)Decrease in pension deficit - (625) (3,552)Cash contributions to defined benefit scheme (621) (643) (1,457)Profit on sale of shared equity loans - (412) (412)Foreign exchange and other non-cash movements 64 506 1,640Net cash outflow from operating activities (8,538) (21,849) (25,338) Note 9: Basis of preparation (a) The accounts for the six months ended 31 March 2006 and the equivalent period in 2005 have not been audited or reviewed by the Company's auditors. They have been prepared on a going concern basis in accordance with applicable accounting standards consistent with the accounting policies set out in the 2005 Annual Report, as updated for the adoption of FRS 21 (Events after the balance sheet date), FRS 22 (Earnings per share), and FRS 25 (Financial Instruments : disclosure and presentation). The interim report was approved by the Directors on 5 June 2006. (b) The abridged information in this statement relating to the year ended 30 September 2005 is derived from full accounts upon which the auditors issued an unqualified opinion and which did not contain a statement under S237(2) of the Companies Act 1985 and which have been delivered to the Registrar of Companies. (c) The Group continues to have net current liabilities at the period end and has incurred a cash outflow during the period. The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. This interim statement is being sent to all shareholders and is also available upon request from theCompany Secretary, Renew Holdings plc, 39 Cornhill, London EC3V 3NU, or via the websitewww.renewholdings.com This information is provided by RNS The company news service from the London Stock Exchange