Renew Holdings Regulatory News (RNWH)

22 May 2007 07:01

Renew Holdings PLC22 May 2007 Renew Holdings plc("Renew" or the "Group") Interims Results for the half year ended 31 March 2007 Renew, the specialist construction services business, today announces a robustset of interim results, with Group cash and profit before tax up more than 70%and a 50% increase in the interim dividend. Financial Highlights H1 2007 H1 2006 % increaseTurnover (ongoing operations) £172.7m £162.4m 6Operating profit £2.1m £1.4m 50Profit before tax £3.1m £1.8m 72Earnings per share 5.1p 3.0p 70Dividend per share 0.6p 0.4p 50Cash £27.0m £8.2m 229 Operational Highlights • Strategy delivering higher quality work flow within specialist areas• Specialist Engineering turnover up by 23%• Specialist Building margins up by 50%• Order book up to £228.7m, 67% of new orders from repeat business• Two year £25m framework in Nuclear business• Three new Social Housing frameworks Roy Harrison, Chairman, commented: "I am pleased to report that in the first half of the year the Group hasdelivered a robust set of interim results, a testament to the excellent progressbeing made across all of the Group's activities. The quality of earnings has shown major improvement evidenced by an increase inboth profits and cash generation. This positive momentum has continued into thesecond half and the Board is confident of sustaining this progress throughoutthe remainder of the year." 22 May 2007 Enquiries: Renew Holdings plc Tel: 020 7522 3200Brian May, Chief ExecutiveJohn Samuel, Finance Director College Hill Tel: 020 7457 2020Matthew Gregorowski CHAIRMAN'S STATEMENT Introduction I am pleased to report that in the first half of the year the Group hasdelivered a robust set of interim results, a testament to the excellent progressbeing made across all of the Group's activities. As outlined at the end of lastyear, in line with the Group's strategy, the business has been aligned into twodistinct business streams, namely Specialist Engineering and SpecialistBuilding. In these results we report revenues and profits accordingly for thefirst time. The focus on specialist markets within these two business streams, in which theGroup has excellent skills and experience and enjoys good market positions, isresulting in higher profitability and cash flow as the quality of the Group'searnings and work flow continues to improve. All the Group's businesses aretrading profitably and once again there are no exceptional items in theseresults. Further progress has been made in improving the control mechanisms in placeacross the Group, which gives the Board confidence in its future performance. InHealth & Safety, a key area of focus for all of our businesses, we havecontinued to make good progress during the period. Results and dividend Group turnover from ongoing operations for the six months ended 31 March 2007was £172.7m (2006: £162.4m), a 6% increase over the corresponding period lastyear. Profit before tax for the period was up 72% to £3.1m (2006: £1.8m) withearnings per share up 70% to 5.1p (2006: 3.0p). The Group's cash position as at 31 March was £27.0m, a major improvement overthe previous period which reflects the cash backed nature of our earnings andthe continuing realisation of surplus assets. Shareholders' funds have increasedby 31% since the end of the last financial year and now stand at £7.0m. In accordance with the Group's progressive policy, the Board is declaring aninterim dividend of 0.6p per share (2006: 0.4p), an increase of 50%, to be paidon 9 July 2007 to shareholders on the register as at 8 June 2007. Group strategy Under the sound leadership of our Chief Executive, Brian May, the Group ismaking excellent progress in line with its strategic objectives. During theperiod we have continued to improve margins in our Specialist Buildingactivities which have grown by 50% on similar levels of turnover. In SpecialistEngineering turnover has improved by 23%, whilst margins have been maintained attarget levels. As previously indicated, part of the strategy of developing our SpecialistEngineering activities is to consider complementary acquisitions. The Group islooking at a number of opportunities and has appointed a corporate developmentofficer to assist in this regard. Outlook The Group's focus on its two core business streams is bringing success. Theorder book is slightly up on the same period last year at £228.7m (2006:£223.2m) but the quality of earnings has shown major improvement evidenced by anincrease in both profits and cash generation. This positive momentum hascontinued into the second half and the Board is confident of sustaining thisprogress throughout the remainder of the year. Roy Harrison, Chairman22 May 2007 CHIEF EXECUTIVE'S REVIEW Introduction Our strategy of seeking growth in Specialist Engineering whilst increasingmargins in Specialist Building has resulted in improved results for the period.New work flow in our Specialist Engineering activities increased to 25% of thetotal order intake whilst Specialist Building has maintained a stable workstream. Margins in Specialist Engineering have been maintained at target levelswith volumes increasing, whilst we are improving margins in Specialist Buildingon steady volumes. 67% of our work is repeat business and 69% was generated from longer-termframework agreements and negotiated contracts. 79% of orders received were inour specialist markets. These are all well above our internal performancetargets. PPS Electrical, the acquisition made in June 2006 by our Nuclear business, hasbeen successfully integrated into the Group's activities and is performing inline with expectations, delivering margins which are in line with our SpecialistEngineering activities. We continue to make progress in settling outstanding legacy contract claims, andremain confident that the level of provisions is sufficient and prudent inrespect of the potential risks of non-recovery. Review of operations Specialist Engineering In Nuclear, we were recently awarded a third framework contract at Sellafield.This Multi Disciplinary Site Wide contract, to provide mechanical and electricalservices and minor civil works across the site as a primary contractor, is worthan expected £25m over the next two years, with an option for a further two yearextension thereafter. Due to the nature of this contract, we have elected toinclude only half of the expected contract value in the current order book of£228.7m. In Land Remediation, we were re-awarded a three year framework contract worth£10m per annum with National Grid Properties, to carry out remediation works ona number of their redundant sites. We have also recently secured a three yearframework with the North West Development Agency. Specialist Building In Social Housing, we were awarded a £15.5m contract for Metropolitan HousingAssociation, and were subsequently appointed to their framework contract, takingthe number of social housing frameworks awarded during the first half to three.We now have framework agreements with six leading Housing Associations in theSouth East for the delivery of their new build programmes. In Retail, we secured contracts with Tesco in Didcot, Ilminster and Birmingham,together with a £5m contract for a new store shell in Maesteg, furtherstrengthening our excellent relationship with this client. We also completed anew B&Q store in Folkestone. In Science & Education, we gained two further contract awards fromGlaxoSmithKline, our biggest repeat business customer in the science sector. Wewere also awarded a £7.5m project for the University of London and projects atImperial College and South Bank University. In Restoration and Refurbishment, we have seen strong demand for projects in thehigh quality residential market. We secured a £7.6m high quality residentialrefurbishment project for Cadogan Estates, a long established client,incorporating works on the retained facade. Work also commenced on the £5.8mrefurbishment of the Queen Elizabeth law courts in Liverpool and a £2.6m projectat the Victoria & Albert Museum. We have also been appointed to upgrade twoLondon underground stations for Metronet. Property and central activities During the period, we completed the sale of our development project inLancashire to Wichford PLC for a consideration of £15.5m. The relateddevelopment loan was redeemed from the proceeds of the sale, leaving the Groupdebt free. The Group continues its strategy of selling its historic property portfolio bothin the UK and US. We realised over £3m from our UK and US property holdingsduring the period. Further to the sale of our head office building in London last year, the Groupwill be relocating its head office to Yorkshire during the summer. Prospects I am pleased by the growth achieved by our Specialist Engineering business andby the improvement in margins being delivered by our Specialist Buildingbusiness. The progress the Group is making is very satisfying. I remainconfident of delivering further improvement in the second half of this year andin our prospects for the future. Brian May, Chief Executive22 May 2007 Group Profit and Loss Accountfor the six months ended 31 March 2007 Notes Six months ended Year ended 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Turnover: Group and share of joint ventures 173,085 179,363 365,266Less share of joint ventures' turnover (114) (1,150) (2,823)Ongoing operations 172,653 162,442 341,698Discontinuing operations 1 318 15,771 20,745Group turnover 2 172,971 178,213 362,443Cost of sales (153,654) (160,613) (328,393)Gross profit 19,317 17,600 34,050Administrative expenses (17,246) (16,210) (30,577)Profit on ordinary activities before interest 2 2,071 1,390 3,473Interest receivable 895 569 1,561Interest payable (239) (661) (1,437)Other finance income - FRS 17 pension 350 505 1,042Profit on ordinary activities before taxation 2 3,077 1,803 4,639Taxation on profit on ordinary activities 4 - - 1,349Profit for the period 3,077 1,803 5,988 Basic earnings per Ordinary Share 5 5.14p 3.01p 10.00pDiluted earnings per Ordinary Share 5 5.07p 3.01p 9.95p Proposed dividend 6 0.60p 0.40p 0.80p Group Statement of Total Recognised Gains and Lossesfor the six months ended 31 March 2007 Notes Six months ended Year ended 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Profit for the period 3,077 1,803 5,988Dividend paid (479) (120) (360)Exchange movements in reserves (96) 64 (119)Net movements relating to defined benefit pension scheme 3 (890) (1,126) (6,175)Movement on deferred tax relating to the defined pension scheme - - 1,186Total recognised gains and losses since last annual report 1,612 621 520 Group Balance Sheetat 31 March 2007 Notes 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000Fixed assetsIntangible assets: Goodwill 4,368 4,450 4,527Tangible assets 3,513 14,663 3,819 Investments in joint ventures:Loans to joint ventures 645 439 561Share of gross assets 4,246 8,361 4,429Share of gross liabilities (1,664) (4,805) (1,722) 3,227 3,995 3,268 11,108 23,108 11,614Current assetsStocks and work in progress 5,222 13,651 18,673Debtors: due after more than one year 4,298 5,850 4,346 due within one year 70,666 73,655 77,093Current asset investments - assets held for - 3,182 -resaleCash at bank and in hand 27,022 8,194 19,735 107,208 104,532 119,847 Creditors: amounts falling due within one (106,965) (109,608) (121,555)year Net current assets/(liabilities) 243 (5,076) (1,708) Total assets less current liabilities 11,351 18,032 9,906 Creditors: amounts falling due after morethan one yearLong-term debt - (8,363) -Other creditors (1,605) (4,252) (1,821)Net assets excluding pension liability 9,746 5,417 8,085 Pension liability 3 (2,769) - (2,769) Net assets 6,977 5,417 5,316 Capital and reservesShare 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 73 73Share based payments reserve 7 49 - -Profit and loss account (8,924) (10,435) (10,536)Equity shareholders' funds 8 6,977 5,417 5,316 Group Cash Flow Statementfor the six months ended 31 March 2007 Notes Six months ended Year ended 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Net cash inflow/(outflow) from operating 9 18,028 (5,631) 10,661activities Returns on investments and servicing of financeInterest received 895 569 1561Interest paid (239) (661) (1,437) 656 (92) 124TaxationNet corporation tax paid - - (36) Capital expenditure and financial investmentPayments to acquire tangible fixed assets (365) (507) (1,291)Proceeds on sale of tangible fixed assets 145 58 393Loans (advanced to)/repaid by joint ventures (110) 871 (149) (330) 422 (1,047) Acquisitions and disposalsAcquisition of a subsidiary, net of cash - - (664)acquiredCash obtained on acquisition of subsidiaries - - 65and businesses - - (599) Equity dividends paid to shareholders (479) (120) (360) Cash inflow/(outflow) before financing 17,875 (5,421) 8,743 FinancingShort term development funding (9,795) 3,953 9,795Repayment of mortgage - - (8,363)Movement in short-term borrowings (298) (3,600) (3,600)Finance lease payments (318) (328) (686) (10,411) 25 (2,854) Increase/(decrease) in cash during the period 7,464 (5,396) 5,889 NOTES TO THE ACCOUNTS Note 1: Discontinuing operations Discontinuing operations relate to the activities of YJL Construction which arein the process of being closed down. Note 2: Segmental analysis Six months ended Year ended 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Turnover is analysed as follows: Building 120,943 128,185 262,889Engineering 34,501 28,086 54,553Property and central activities 17,323 7,321 27,079Discontinuing operations 318 15,771 20,745Turnover: Group and share of joint ventures' turnover 173,085 179,363 365,266Less: Share of joint ventures' turnover (114) (1,150) (2,823)Group turnover 172,971 178,213 362,443 Analysed as to:Ongoing operations 172,653 162,442 341,698Discontinuing operations 318 15,771 20,745Group turnover 172,971 178,213 362,443 Analysis of profit on ordinary activities before interest: Building 1,513 1,038 2,603Engineering 1,717 1,413 2,810Property and central activities (1,159) (1,061) (1,940)Discontinuing operations - - -Profit on ordinary activities before interest 2,071 1,390 3,473Net financing income 413 1,166 1,006Profit on ordinary activities before taxation 3,077 1,803 4,639 Note 3: Defined benefit pension scheme As at 30 September 2006, the FRS 17 valuation, prepared by Barnett Waddingham,Consulting Actuaries, showed a net deficit of £2,769,000 after a deferred taxcredit of £1,186,000, which was recorded as a liability in the accounts inaccordance with the requirements of FRS 17. No updating FRS 17 valuation hasbeen performed for these interim accounts and the Directors consider that theposition shown at 30 September 2006 should be maintained in the accounts at 31March 2007. As the balance sheet position of the pension scheme has been maintained at £(2,769,000) during the period, contributions to reduce the deficit have beenshown as part of the movements in the group statement of total recognised gainsand losses. Note 4: Taxation on profit on ordinary activities Six months ended Year ended 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000Current tax:UK corporation tax on profits for the period - - -Adjustments in respect of previous periods - - (74) - - (74)Foreign tax - - (2)Total current tax - - (76)Deferred tax - - 1,425Taxation credit on profit on ordinary - - 1,349activities The Group and Company have unused tax losses available to carry forward againstfuture taxable profits, although a significant element of these losses relatesto activities which are not forecast to generate the level of profits needed toutilise these losses. A deferred tax asset of £2,899,000 has been recognised tothe extent considered reasonable by the directors and included in Debtors: duewithin one year. This is in respect of losses where recovery can be reasonablyexpected within twelve months of the balance sheet date. The amount has beenmaintained at the same level as 30 September 2006. Note 5: Earnings per ordinary share Six months ended Year ended 2007 2006 2006 31 March 31 March 30 September Weighted Weighted Weighted average average average number number number Earnings of shares EPS Earnings of shares EPS Earnings of shares EPS £000 '000 Pence £000 '000 Pence £000 '000 Pence Basic earnings per 3,077 59,899 5.14 1,803 59,899 3.01 5,988 59,899 10.00shareDilutive effect of - 765 (0.07) - - - - 254 (0.05)share optionsDiluted earnings 3,077 60,664 5.07 1,803 59,899 3.01 5,988 60,153 9.95per share Note 6: Dividends The proposed interim dividend is 0.6p per share (2006: 0.4p). This will be paidout of the Company's available distributable reserves to shareholders on theregister on 8 June 2007, payable on 9 July 2007. In accordance with FRS21dividends are recorded only when paid and are shown as a movement in equityrather than as a charge in the profit and loss account. Note 7: Share based payments reserve FRS 20 Share based payments requires a fair value to be established for anyequity settled share based payments. Fair value has been independently measuredusing a Black-Scholes valuation model. The fair value determined at the grantdate of the equity settled share based payments is expensed on a straight-linebasis over the vesting period, based on the Group's estimate of shares that willeventually vest. In total 1,284,196 share options are in issue with a vestingperiod of 3 years. 522,292 of these options were issued during the period and£49,000 has been charged to administrative expenses. There is no impact on netassets since an equivalent amount is credited to the share based paymentsreserve. Note 8: Reconciliation of movements in Group shareholders' funds Six months ended Year ended 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Profit for the period 3,077 1,803 5,988Dividends (479) (120) (360) 2,598 1,683 5,628Movement in share based payments reserve 49 - -Other recognised gains and losses for the period (986) (1,062) (5,108) Net movement in shareholders' funds 1,661 621 520 Opening shareholders' funds 5,316 4,796 4,796Closing shareholders' funds 6,977 5,417 5,316 Note 9: Net cash inflow/(outflow) from operating activities Six months ended Year ended 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Operating profit 2,071 1,390 3,473Depreciation 563 735 1,523Amortisation of subsidiary goodwill 159 152 306Share based payments 49 - -Profit on sale of fixed assets (37) (19) -Decrease/(increase) in stocks and work in progress 13,170 (4,078) (9,551)Decrease/(increase) in operating debtors and 6,460 (918) (866)prepaymentsDecrease in current asset investments - 2,907 16,643Decrease in creditors and accruals (3,867) (5,179) (1,152)Defined benefit pension scheme contributions charged 48 - 68to operating profitContributions to defined benefit scheme (588) (621) (1,246)Realisation of joint venture assets - - 1,463 Net cash inflow/(outflow) from operating activities 18,028 (5,631) 10,661 This information is provided by RNS The company news service from the London Stock Exchange