Shearwater Regulatory News (SWG)

RNS Number : 3055O

Scott Wilson Group plc

28 June 2010

 

28 June 2010

 

SCOTT WILSON GROUP PLC

Preliminary Results for the 52 week period ended 2 May 2010

 

CONTINUED GROWTH IN INTERNATIONAL BUSINESS

UNDERPINS RECORD RESULTS

 

Highlights

 

	2010	2009
Revenue, including share of joint ventures	£340.4m	£360.0m
Adjusted* operating profit	£23.9m	£22.6m
Adjusted* operating margin	7.0%	6.3%
Operating profit	£21.4m	£10.7m
Total equity of the Group	£63.3m	£78.8m
Order book	£243.7m	£291.0m
Net cash/(debt) at year end	£0.8m	(£18.3m)
Committed bank facility	£70.0m	£70.0m

 

·; Lower revenue in line with expectations, reflecting economic pressures in the UK, primarily in the property related market

 

·; Solid growth sourced from the international market with revenue representing 37 per cent of total Group revenue (2009: 31 per cent)

 

·; Margin performance maintained by maximising cost efficiencies across the Group

 

·; Net debt eliminated (2009: £18.3m)

 

·; Pension deficit reduced to £63.3m from £79.0m at the interim

 

·; Diversified business model, robust order book and strong balance sheet provide confidence that the Group can continue to respond effectively to market developments

 

 

The Board has announced today that it has recommended a proposal for the acquisition of the entire issued and to be issued share capital of the company for 210 pence per share in cash by Universe Bidco Limited, a wholly owned subsidary of URS Corporation, a fully integrated global engineering, construction and technical services organisation, via a scheme of arrangement. The offer price of 210 pence per share is inclusive of any dividends payable in respect of the period ended 2 May 2010. Accordingly, the Board does not currently intend to propose a final dividend for the period ended 2 May 2010. If the acquisition does not complete within the anticipated timeframe, the Board will then consider whether to declare a dividend for that period.

 

Geoff French, Chairman of Scott Wilson, commented:

 

"Despite the recent severe economic conditions in many of our markets, Scott Wilson has achieved record profit levels as well as erasing our net debt position. These achievements demonstrate the resilience of our business model and our ability to manage the business effectively in a challenging market. The continuing growth of our international business, which now accounts for 37 per cent of Group revenue, reflects many years of investment in international markets. The Group continues to work on some of the largest infrastructure projects around the world. While the outlook in the UK remains uncertain, the range and depth of our technical expertise across our market sectors combined with our geographic spread provides us with the flexibility to react to market conditions as they develop."

 

For further information, please contact:

 

Scott Wilson Group plc Hugh Blackwood, Group Chief Executive Sean Cummins, Group Finance Director Lak Siriwardene, Head of Communications	020 7798 5187 020 7798 5245 07824 311762
Financial Dynamics Charlie Armitstead	020 7269 7275

 

A conference call for analysts will take place today at 9.00am BST. The dial in number is +44 (0)20 7162 0125 and participants should quote 869569 for access.

 

The presentation slides used on the call will be posted on the Group's website (www.scottwilson.com/news) at 9.00am.

 

* The Directors believe that the presentation of adjusted operating profit, adjusted operating margin, adjusted profit before taxation and adjusted earnings per share assists with the understanding of the performance of the Group.

 

·; Adjusted operating profit is operating profit adjusted for recurring adjustments, (2009: together with redundancy costs and an exceptional contract loss).

·; Adjusted operating margin is adjusted operating profit expressed as a percentage of revenue including share of joint ventures.

·; Adjusted profit before taxation is profit before taxation adjusted for recurring adjustments, (2009: together with redundancy costs and an exceptional contract loss).

·; Adjusted earnings per share is earnings per share adjusted for recurring adjustments, (2009: together with redundancy costs, an exceptional contract loss and prior year research and development tax credits).

 

Reconciliations of these measures to operating profit, operating margin and earnings per share are set out in notes 9 and 13 to the Consolidated Financial Statements.

Scott Wilson Group plc

 

Scott Wilson Group plc is a global integrated design and engineering consultancy for the built and natural environments. With its headquarters in the UK, the Group has a worldwide network of 80 offices and over 5,500 staff. Scott Wilson offers Strategic Consultancy and multi-disciplinary professional services in the Railways, Buildings & Infrastructure, Environment & Natural Resources and Roads Sectors.

 

www.scottwilson.com

 

 

Chairman's Statement

 

Operations and Strategy

 

The Group has continued to demonstrate its ability to respond to changes in our markets and has produced record profit levels, partly as a result of an unusually high contribution from our joint ventures. Overall, global demand for our services remains strong but there are significant differences both geographically and across market sectors. These are addressed in more detail in the Chief Executive's Report.

 

Our international business has continued to grow rapidly and we were delighted to receive The Queen's Award for Enterprise: International Trade 2010. This was a prestigious and important independent corroboration of the significant growth we have achieved in our international markets. Major project wins in Saudi Arabia, Turkey, Poland, Uganda, USA, Angola, Hong Kong and India and across many different market sectors have emphasised how our diversity continues to serve us very well.

 

This international growth has almost totally offset a reduction in our UK business, despite some excellent major project wins in that market. However, some rationalisation of our staffing levels has been necessary to match capacity with weakened demand in some sectors.

 

During the year we made considerable efforts to reduce our debtor book and we are pleased that these have shown significant results - with net debt eliminated at the year end. This significant improvement is a great tribute to the efforts of the management teams throughout the Group.

 

Our revenue in the last year was a little below the prior year, as we had expected, but margins have been maintained, our order book remains strong and our liquidity has improved significantly. We continue to win major projects both internationally and in the UK and thus demonstrate our ability to react effectively to the changing markets we are experiencing.

 

Pensions

 

The Group will conclude today a 60 day consultation process with its staff on a proposal to close its main defined benefit scheme to future accrual. We are now working with the trustees of the scheme to finalise the documentation with an effective date targeted for 1 October 2010. This change would help to reduce the volatility of the pension scheme deficit in future years.

 

Dividend

 

The Board has announced today that it has recommended a proposal for the acquisition of the entire issued and to be issued share capital of the company for 210 pence per share in cash by Universe Bidco Limited, a wholly owned subsidary of URS Corporation, a fully integrated global engineering, construction and technical services organisation, via a scheme of arrangement. The offer price of 210 pence per share is inclusive of any dividends payable in respect of the period ended 2 May 2010. Accordingly, the Board does not currently intend to propose a final dividend for the period ended 2 May 2010. If the acquisition does not complete within the anticipated timeframe, the Board will then consider whether to declare a dividend for that period.

 

Employees

 

At the end of April 2010 we had over 5,500 staff across the world. This number is a little lower than at the half year as we have continued to stabilise and re-balance the business in reaction to our changing markets.

 

Once again this has not been an easy year for our staff, especially those in the market sectors that have been affected most adversely. We remain grateful for the flexibility that they continue to demonstrate.

 

We are pleased that major project wins continue to provide our staff with the opportunity to demonstrate their skill, commitment and knowledge. They remain critical to our reputation and our continuing development.

 

Corporate Responsibility

 

We remain fundamentally committed to ensuring continual improvement in our social, environmental and ethical performance, a commitment that is enhanced by the environmental, social inclusion, equality and health and safety skills that we have in-house.

 

We continue to support the UN Global Compact, the world's largest CSR initiative.

 

As our staff-led Scott Wilson Millennium Project, a registered charity, celebrates its 10th anniversary, we continue to increase our support for the ambitious plans the charity has for projects to relieve poverty, hardship and distress among children in developing countries.

 

We are also proud to continue giving corporate support as a patron of the charity RedR and its humanitarian relief efforts.

 

The Group has prepared a standalone Corporate Responsibility Report again this year which provides considerably more details of all of these activities.

 

Awards

 

Scott Wilson and its projects have continued to win many prestigious awards. In addition to the Queen's Award for Enterprise: International Trade 2010, these have included:

 

·; British Expertise International Awards 2009/2010: Major Project of the Year - Breakwater at Costa Azul LNG Terminal

·; Association for Consultancy and Engineering: Engineering Excellence Awards 2010, Infrastructure Award - Breakwater at Costa Azul LNG Terminal

·; British Expertise International Awards 2009/2010: Environmental Impact Award - National Industrial Symbiosis Programme

·; The Saltire Society Awards 2009 - Clackmannanshire Bridge

·; Ground Engineering Awards: Sustainability Award - SEACAP 21 Slope Stabilisation Trials

·; RTPI Planning Awards 2009: Planning Consultancy of the Year

 

Other awards were won by Downe Hospital in Northern Ireland, the RoadGard Highway Warning System, the Scott Building at the University of Plymouth, Goodfellows at Bury St Edmunds, Markham Vale, Greengauge Affordable Housing, Shoreditch High Street Bridge, Harold Hill Fire Station, Solais, House, Dickens Heath mixed use development and the Three Counties Alliance.

 

Outlook

 

Overall, the outlook has not changed significantly over the last year. Globally the demand for infrastructure and our services remains strong, driven in part by the continuing trend of urbanisation. The UK remains a leading global provider of consultancy services and Scott Wilson continues to play a growing role as demonstrated by the Queen's Award. The Group is well established in many parts of the world including China, India and Eastern Europe - all markets which continue to grow strongly and we see significant opportunities for growth in other international markets.

 

The economic challenges facing the new UK government are clear but the way that they intend to address those challenges is still being clarified. Private sector work continues to recover slowly and some investment in the energy, waste and rail sectors is expected. For the other sectors the position in the UK is still under review and the unusually high level of contribution from our joint ventures in the last financial year is not expected to recur. Overall, we do not expect any growth in our UK business over the next year.

 

We maintain the view that our diversified business model, strong order book and improved financial strength provide the basis for us to continue to respond effectively and promptly to market developments as they unfold.

 

 

Geoff French

Group Chairman

28June 2010

 

 

Business Review - Chief Executive's Report

 

Over the past year, Scott Wilson has clearly demonstrated its ability to perform effectively in the most challenging of economic environments. The organisation has been able to rely on its sector and geographic diversity to concentrate resources on those business areas which offer the best prospects during recessionary times.

 

The main thrust of our strategy over the past twelve months has been to make the most of the fiscal stimulus in the difficult UK market and to accelerate expansion of our international activity. This process is continuing and for the financial year as a whole, 37 per cent of Group revenue has been sourced outside the UK compared to 31 per cent during the previous year.

 

This change is helped by the clarity provided by our market facing management structure, the 'integrated global enterprise', which has now been operating for twelve months and is adding enormously to the effectiveness of the business.

 

Furthermore, the streamlining of our functions and overheads as part of the management restructuring process is beginning to bring significant efficiencies and cost reductions to the business and this is clearly reflected in the annual results.

 

Review by Region

 

UK & Ireland

 

The UK & Ireland Region is managed through five Sector businesses, namely Strategic Consultancy, Railways, Buildings & Infrastructure, Environment & Natural Resources and Roads. Market conditions across the Sectors have been highly variable throughout the year with shifting focus towards international markets either in collaboration with our regional businesses or in new territories.

 

Strategic Consultancy Sector

	2009/2010	2008/2009
Revenue	£26.9m	£26.4m
Adjusted* operating profit	£3.2m	£4.0m
Adjusted* operating margin	11.7%	15.3%

 

Strategic Consultancy has performed well during the year, given the continued turbulence in its main market in the UK. Revenue was close to expectation with operating margin, although under pressure, holding up well across most parts of the business.

 

The Sector has enjoyed especially strong growth within its Intelligent Transport Systems team and in transport modelling. The appointment of a Global Head of Maritime has underpinned the continued growth in this sub-sector, where increasing emphasis is being placed upon international projects in the oil & gas market, as well as bulk handling facilities for the mining industry.

 

Continued investment in our Programme and Project Management capability has led to a number of notable successes, including the role of Client Programme Manager for the Al Haramain High Speed Rail Project in Saudi Arabia. The Sector has also benefitted from further growth in our strategic advisory services, particularly in relation to infrastructure investment, where activity has been especially strong in France, Canada and increasingly Russia and the USA, in sub-sectors as diverse as highways, high speed rail and aviation. Further international diversification is being targeted in specific areas.

 

The gradual upturn in the UK private sector development market over the coming year is expected to prove beneficial for the Transport Consultancy sub-sector, where a significant proportion of its business has traditionally been obtained from UK public sector framework contracts. Evidence of this upturn is already beginning to emerge, particularly in the South East of England.

 

The Middle East will continue to provide a primary area of focus for programme and project management roles on major projects where significant opportunities exist in the transportation and energy sectors in particular. Scott Wilson's oil & gas business should also continue to expand, building on its successful involvement with the State Oil Company of Angola and with other oil & gas projects around the world from Asia to the Americas. Whilst the future of the UK aviation market looks uncertain, here too, development of the sub-sector's range of international projects is expected.

 

Strategic Consultancy is proving extremely valuable within the context of the global market by providing an entry opportunity at the high value front end of major projects.

 

Railways Sector

	2009/2010	2008/2009
Revenue	£40.5m	£43.9m
Adjusted* operating profit	£0.3m	£1.1m
Adjusted* operating margin	0.8%	2.6%

 

The Railways Sector has experienced some marked differences in the various segments of the rail market during the year and has been adapting accordingly.

 

The Sector's strategy to increase its capability in metros, including the acquisitions of Benaim and TLP in 2008, has proved very successful with an outstanding position secured on Crossrail, which is providing opportunities across all five Sectors and commissions undertaken in Hong Kong, Australia, Armenia and Nigeria.

 

The pressure on Network Rail to reduce costs following the Office of the Rail Regulator determination has made securing work and generating acceptable returns increasingly difficult. Whilst the Sector plans to continue in this market, its reliance is reducing. The Sector has restructured its business to reflect these market pressures and has taken the opportunity to streamline the business and to remove cost.

 

The growing demand for rail around the world is being driven by the environmental agenda, increased urbanisation and the freight that is associated with the demand for raw materials. Railways has worked closely with all Regions and Sectors in order to maximise the benefits of the integrated global enterprise model, with the transfer and secondment of staff, increased penetration of the Hong Kong market and project wins around the world. The Railways Sector has undertaken commissions in no fewer than 25 countries during the year.

 

The acquisition of Benaim has gone from strength to strength with increasing collaborative efforts with the rest of the Group, notably, in conjunction with the Roads Sector, securing a major commission on the Izmit Crossing in Turkey on what will be the world's second longest suspension bridge, at approximately 3km.

 

Buildings & Infrastructure Sector

	2009/2010	2008/2009
Revenue	£55.8m	£74.8m
Adjusted* operating profit	£1.0m	£2.4m
Adjusted* operating margin	1.8%	3.2%

 

The UK and Ireland property market has experienced a decline of unparalleled proportions over the last eighteen months and the Sector business has been forced to respond with a major restructuring programme. Additionally, focussed action has been taken in order to optimise the split of work from public and private clients. The breadth of services on offer and the wide range of prime markets addressed by the Sector help to minimise the risks associated with the significant cuts in public spending in the UK following the June 2010 budget. There are already some signs of confidence returning in the private sector in the south of England and this should help to offset the impact of potential public spending cuts.

 

In spite of the downturn in the UK property market, the Sector has seen very high levels of enquiries coming through in the year and there have been some very notable project wins, such as the Mersey Tidal Power Feasibility Study, the Office of Government Commerce Framework, extension of the Bombardier factory in Belfast, the Defence Estates Framework, the Heathrow Energy Centre, data centres in the UK and overseas, and the large Nash Mills residential scheme. There have also been notable wins in the waste, waste management and waste to energy markets. The Sector's long track record in prisons and SLAM (Single Living Accommodation Modernisation for the Ministry of Defence) brought further commissions during the year and, somewhat encouragingly, several new clients requested further collaboration with them on projects in various market sectors.

 

Buildings & Infrastructure is increasingly working with other Sectors and Regions to cross-sell multi-disciplinary design skills and to add critical mass, value and experience to joint bidding and delivery teams. Crossrail has provided one such opportunity and collaboration across the Group will be essential for delivery of significant volumes of work in the nuclear decommissioning and new-build arenas. In addition, cross-Sector collaboration on large ports and airports projects in the UK and overseas continues to provide significant volumes of work. A global aviation initiative is currently being launched to harness more effectively the variety of relevant skills that exist across the Group.

 

The international market is becoming increasingly important to the Sector business for growth and profitability. The Sector has also taken the opportunity during the year to invest in new technologies and offerings such as fire engineering, Building Integrated Modelling (BIM) and security consultancy. These have been targeted to enhance the existing multi-disciplinary offering and to provide new niche areas of business going forward.

 

Environment & Natural Resources Sector

 

	2009/2010	2008/2009
Revenue	£63.2m	£68.4m
Adjusted* operating profit	£4.3m	£2.9m
Adjusted* operating margin	6.9%	4.2%

 

The Environment & Natural Resources (ENR) Sector comprises five sub-sectors, namely Power, Mining, Water, Geoservices and Environment.

 

The Power sub-sector continues to perform well with increased opportunities in the UK and internationally. Within the UK, the Sector is particularly active in the nuclear sector both on commissioning and new build. The Hydro team continues to be busy worldwide with new projects in Africa and Asia. The Thermal team are active on a number of international power projects in Greece, Pakistan and Nigeria with major opportunities developing in the Gulf. The renewable energy agenda continues to be a growth area in the UK and we are currently positioning for opportunities in offshore wind.

 

The Mining sub-sector continues to grow with a new office opened in Denver, Colorado. The Mining group has established itself as one of the top five global providers of advisory services to investment banks and mining companies. Major projects have been secured recently in Azerbaijan, Canada, USA, Kazakhstan, Mauritania and Tanzania.

 

The Water sub-sector was restructured at the start of the year. Revenue has stabilised with a diversified portfolio of work for public and regulated bodies. Positions have been secured on frameworks, particularly in Scotland and Northern Ireland. Emphasis has been placed on securing international commissions and a major waste water treatment works in Abu Dhabi has recently been completed.

 

The Geoservices sub-sector continues to deliver on major projects in the Roads and Railways Sectors and maintains strong external workload through direct clients. Checking of the Crossrail Sprayed Concrete Lining package has recently been secured directly from Mott MacDonald. Geohazards input on major projects for global clients remains strong, particularly in the Mining sub-sector.

 

The Environment sub-sector is benefiting from re-organisation by re-focussing its services on a national basis. The business has been marginally affected by the downturn in the property sector. However, it has a broad client base and has seen increased actively in other sectors, particularly the transport and energy sectors. The Climate Change and Sustainability agendas continue to grow in importance with an increasing number of commissions. The group is providing significant planning and environmental support for a growing number of internal and external clients.

 

Roads Sector

	2009/2010	2008/2009
Revenue	£60.5m	£64.8m
Adjusted* operating profit	£10.8m	£9.3m
Adjusted* operating margin	17.8%	14.4%

 

The Roads Sector has performed exceptionally well during the year with good success in the closing out of the joint venture arrangement in the highways maintenance markets and with the major roads team in England benefitting from projects being accelerated under the Government's fiscal stimulus regime. By contrast the major roads team in Scotland and Ireland performed well in difficult circumstances with an absence of fiscal stimulus and government departments actively reining in capital budgets.

 

The Roads Sector is involved in a range of major projects including M1 Junctions 10 to 13 and Junctions 25 to 28, A46 Trunk Road dualling, A421 Trunk Road dualling, A6 SEMMS (South East Manchester Link Road to Airport), M8 DBFO and the Carlisle Northern Distributor Roads. The completion of the Area 7 MAC (June 2009) saw the end of this seven year contract and work continues on the contractual reconciliation and settlement.

 

The Research Consultancy and Specialist Surveys (RCSS) Business Unit based at Nottingham continues to perform very well. The business has a portfolio of projects ranging from high level research activities to operational and network projects for both the road and rail markets. RCSS is looking to expand internationally, particularly in Australia and Europe.

 

The Roads Sector is working closely with the Europe Region to identify new markets and is pursuing opportunities in Sweden, Slovakia and Germany. The Sector continues to support roads related work in the Middle East regional business.

 

International Regions

 

The restructuring of Scott Wilson's management to establish four distinct regional businesses outside the UK & Ireland: Asia Pacific, Europe, India and Middle East, each one with clearly defined management structures, has been a major focus during the year. Each Region now has Sector-facing teams aligned with the global integration strategy of the Group. The India and Europe Regions performed exceptionally well during the year, both in revenue and operating margins, as have the China and Hong Kong operations of the Asia Pacific Region. The Middle East business is finally settling down after a turbulent period of project deferment and ensuing operational inefficiency.

 

Asia Pacific

	2009/2010	2008/2009
Revenue	£40.8m	£34.2m
Adjusted* operating profit	£1.8m	£1.7m
Adjusted* operating margin	4.4%	4.9%

 

The China and Hong Kong operations have increased revenue significantly over the previous year. The Hong Kong office has won a number of Mass Transit Rail commissions, the most recent of which was announced in April. These excellent results continue to be heavily influenced by the strategic acquisition of Benaim which has significantly enhanced the Group's profile in heavy civil engineering and the design and build markets. The China business goes from strength to strength and our role as Project Managers at Wuxi Rail Terminal is seen as a significant step forward in our involvement with major Chinese infrastructure projects. The Malaysia office is returning to profitability after a difficult year but the loss of political stability in Thailand has, unfortunately, resulted in the reduction of our Thai operations and negatively impacted on regional profitability. The growing Australian business, aimed primarily at the buoyant rail and port markets has now completed the design of the major port expansion work in Botany Bay and is engaged in rail activity in both the transportation and mining sectors. In all markets, public sector projects have dominated the works in progress as the private sector struggles to regain the momentum lost in former years. Overall, the performance of the Asia Pacific Region has been influenced by a failing Thai economy and investment in a growing Australian venture, coupled with the excellent growth in China and Hong Kong. The Region is expected to continue to grow as planned in both absolute and contribution terms in coming years.

 

Europe

	2009/2010	2008/2009
Revenue	£29.8m	£26.0m
Adjusted* operating profit	£3.3m	£1.2m
Adjusted* operating margin	11.2%	4.4%

 

Despite much of the continent suffering from the effects of economic recession, activity in the Europe Region has grown in the period yielding excellent results. Both revenue and adjusted* operating margin have improved significantly during the year. In Poland, the major Odra Flood Protection Study in Wrocław was a significant project win in the year as was the study into the E65 High Speed Rail link from Warsaw to the Slovak border, together with the contract to supervise the construction of the A4 motorway from Rzeszów to the Ukrainian border. Independent engineer roles in Greece and Serbia for new motorways also continue to be positive contributors. Elsewhere contracts were won for the design and supervision of the modernisation of the railway network in Lithuania and the design management of the upgrading of two sections of the motorway network in Italy. Outside Europe, the Region has taken on advisory work of a major motorway concession in Kazakhstan and has been commissioned for the upgrading the road network in Mozambique, This reflects the continuing success of the strategy to diversify the Region's activities by both sector and geography.

 

India

	2009/2010	2008/2009
Revenue	£10.4m	£8.1m
Adjusted* operating profit	£2.0m	£1.1m
Adjusted* operating margin	19.6%	12.9%

 

India, although small in overall terms, continues to excel by every measure. Activities have started to diversify away from purely road infrastructure into the water, power distribution, ports and airports markets as the Indian operations are developed in line with the Group's global integration strategy. Notable projects during the year include the Master Planning study of the Delhi to Mumbai Industrial Corridor, the new deep water port in Dhamra and road projects being undertaken in every state in the country. Exports from India to Sri Lanka and Mozambique feature in this year's results for the Region as the Group seeks to leverage further the low cost base of our 750 Indian Staff.

 

Middle East

	2009/2010	2008/2009
Revenue	£12.5m	£13.4m
Adjusted* operating profit	(£2.8m)	(£1.1m)
Adjusted* operating margin	(22.2%)	(8.1%)

 

The Middle East business has been significantly affected by the faltering in Dubai of major clients and a general loss of business confidence in the Region during the year. Fortunately, exposure in Dubai was small compared with overall Group revenue but considerable in relation to our revenue in the Region. Measures to resize and refocus the business to address the needs of a less volatile market have been taken with a view to providing a stable platform for the coming year. An important part of this has been to align the Region with the Group's global integration strategy and focus business development initiatives within the identified sectors across the Region as a whole. This restructuring has resulted in some favourable project wins, such as Haramain High Speed Rail Project in Saudi Arabia, Dubai Metro Stations & Viaducts and Diyar Al Muharraq, Bahrain.

 

Outlook

 

Although short term pressures will continue across a number of UK sectors, Scott Wilson is exceptionally well placed to benefit from longer term trends across the industry.

 

The demand for infrastructure development remains high particularly in the rapidly growing economies of China and India. Population growth, urbanisation and increased human expectation continue to drive the need for water, food, energy, transportation and minerals.

 

Looking forward in the UK, a modest recovery in the private sector will help to offset potential reductions in publicly funded infrastructure development. However, new opportunities for consultancy services are emerging particularly in the energy sector across the new nuclear programme and renewables including mini-hydro, offshore wind and tidal power schemes. The incoming government has expressed support for rail and is already pushing ahead with plans for High Speed 2. There is also growing confidence that Crossrail will continue albeit with reduced scope or an extended programme.

 

In the international market, we are seeing a trend towards larger, more complex, infrastructure projects, mainly privately funded with urgency on delivery. This plays to the strengths of the Scott Wilson global footprint where we can provide a long history of knowledge of culture, language and technical practice in a variety of developing countries. Increasingly, we are able to participate in these mega-projects in collaboration with a range of world class organisations.

 

Through our Strategic Consultancy Sector we will continue to access these global projects at an early stage and help provide high-intellect, integrated services across their life span from conception to commissioning and operation.

 

In line with our successful track record of extracting significant added value from niche acquisitions by leveraging our global footprint and strong brand reputation, we will continue to seek suitable bolt on acquisitions to help deliver our global strategy in our Sectors and Regions.

 

Looking forward, we acknowledge and accept the challenges but there are enormous opportunities for our management and our staff to add to our track-record and reputation as an emerging integrated global enterprise providing high quality services to the infrastructure market worldwide.

 

 

Hugh Blackwood

Group Chief Executive

28 June 2010

 

 

Business Review - Finance Report

 

Revenue

 

Revenue, including our share of joint ventures, reduced to £340.4m in the year, reflecting the economic pressures being experienced in the UK where sales were 14 per cent lower, the shortfall being primarily in the property related market. In line with our stated strategic objectives, strong growth in the international arena has provided some mitigation, with a 13 per cent increase in activity year-on-year, driven by excellent development in China and India, whilst being more selective in the Middle East. International revenue in the year was £125.9m which represents 37 per cent of total Group activity.

 

Adjusted* operating profit at £23.9m is at record levels, assisted by a £5.3m contribution from joint ventures, much of which has arisen during the settlement of a long term contract in the Roads sector. Profit and operating margin in the UK has held up well, particularly in the light of reduced turnover. Disappointingly however, in the International Regions performance was held back due to significant losses in the Middle East and Thailand where project deferrals and delays made resource planning more of a challenge and consequently we experienced low levels of staff utilisation for an extended period of time. The adjusted* operating profit margin improved to 7 per cent.

 

Interest rates continue to be low, which combined with a lower average net borrowing position throughout the year, resulted in the cost of borrowings being £1.1m, a significant reduction compared to the prior year. The notional finance charge on the Group's pension schemes continues to be volatile and as highlighted in last year's report, we have seen an adverse swing in the year of £3.3m, resulting in finance costs overall being sharply higher than the corresponding period.

 

The adjusted* tax charge, including that relating to joint ventures, was £6.2m, which is an effective tax rate of 30.2 per cent. We continue to benefit from research and development credits, which together with unrelieved foreign taxes largely offset the impact of disallowed expenses and losses in overseas entities.

 

In early 2009, the Company purchased 3.2m of its own shares, which has had a positive impact on the average number of shares in issue throughout the current year, reducing to 72.8m. Therefore, despite the reduction in the profit attributable to shareholders, adjusted* diluted earnings per share of 19.25p are at a similar level to last year.

 

 

Borrowings

 

We are delighted to report that the Group moved to a modest net cash position at the year end. The significant positive movement in net debt in the year of £19.0m has been achieved through a relentless focus on working capital management. Notwithstanding the natural pressures that come with increased levels of international activity, our key performance indicator, Capital Utilisation Days, has reduced from 85 to 75 days, contributing to an overall reduction in working capital of £3.7m. Other factors that have assisted in the excellent cash generation include a much lower investment in capital expenditure, lower deferred consideration on historic acquisitions and positive currency movements on overseas cash balances.

 

The Group has a £70.0m committed credit facility which expires in April 2011 and throughout the year, we have operated comfortably within the covenant requirements in the facility agreement. As we look towards the renewal of our committed credit lines during the course of the current year, early discussions with our primary lender confirm the belief of the Directors that we shall continue to have recourse to adequate funding to meet our strategic ambitions.

 

Pensions

 

The Group operates two defined benefit schemes, both of which are closed to new members, and a defined contribution scheme. The aggregate deficit on the defined benefit schemes at 2 May 2010 was £63.3m, which is a £15.7m improvement compared to the position reported at the half year, but is an adverse movement from the deficit as at 3 May 2009.

 

The ongoing financial crisis has caused the yield on AA-rated Corporate Bonds to be quite volatile. Having peaked last May at just over 7 per cent, they have steadily reduced, ending the year at 5.6 per cent. This movement of 1.4 per cent alone has resulted in an increase in the valuation of liabilities of approximately £78m. Therefore, despite an investment return on assets of 23 per cent, the overall net impact is an adverse movement in the deficit over the year of £39.1m. The key assumptions applicable at each balance sheet date are detailed in note 11.

 

IFRS Results

 

On an IFRS basis, Group revenue reduced by £19.2m to £326.6m, reflecting a balance of good growth in the international market and lower activity in the UK. Profit before taxation at £18.0m is a considerable improvement from the £9.4m achieved last year, primarily due to a reduced level of restructuring charges. Diluted earnings per share were 18.3p.

 

 

Sean Cummins

Group Finance Director

28 June 2010

 

SCOTT WILSON GROUP PLC

 

Preliminary audited results for the 52 weeks ended 2 May 2010

CONSOLIDATED INCOME STATEMENT (AUDITED)

 

		52 weeks ended	53 weeks ended
		2 May 2010	3 May 2009
	Notes	£'000	£'000
Continuing operations
Revenue including share of joint venture revenues		340,406	360,000
Less: share of joint venture revenues		(13,786)	(14,211)
Group revenue		326,620	345,789
Cost of sales		(192,323)	(216,269)
Gross profit		134,297	129,520
Administrative expenses		(117,518)	(122,007)
Share of result of joint ventures		3,826	3,210
Profit on disposal of available-for-sale investments		838	-
Operating profit		21,443	10,723
Finance income	6	11,102	14,734
Finance costs	7	(14,540)	(16,051)
Profit before taxation		18,005	9,406
Taxation	8	(4,442)	(1,645)
Profit for the period		13,563	7,761
Attributable to:
Equity holders of the Company		13,319	7,693
Minority interests		244	68
		13,563	7,761
Earnings per share:
From continuing operations - basic	9	18.33p	10.27p
From continuing operations - diluted	9	18.30p	10.17p

There were no discontinued operations in either period.

The Directors have presented a more detailed Income Statement in note 2.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (AUDITED)

		52 weeks ended	53 weeks ended
		2 May 2010	3 May 2009
		£'000	£'000
Profit for the period		13,563	7,761
Exchange differences on translation of foreign operations		1,486	1,630
Actuarial losses on defined benefit pension schemes		(39,903)	(7,670)
Tax relating to components of other comprehensive income		11,173	2,213
Deferred tax relating to unexercised share options		-	(605)
Other comprehensive expense for the period		(27,244)	(4,432)
Total comprehensive (expense) / income for the period		(13,681)	3,329
Attributable to:
Equity holders of the Company		(13,925)	3,261
Minority interests		244	68
		(13,681)	3,329

 

 

CONSOLIDATED BALANCE SHEET (AUDITED)

 

		2 May 2010	3 May 2009	27 April 2008
	Notes	£'000	£'000	£'000
Non‑current assets
Goodwill		42,360	42,849	37,706
Other intangible assets		11,919	14,790	14,786
Property, plant and equipment		18,090	20,250	20,157
Investments in joint ventures		-	1,328	1,113
Deferred tax assets		17,952	7,056	6,932
		90,321	86,273	80,694
Current assets
Trade and other receivables		118,767	124,607	115,858
Current tax assets		1,747	1,586	-
Cash and cash equivalents		14,855	10,382	19,233
		135,369	136,575	135,091
Total assets		225,690	222,848	215,785
Current liabilities
Trade and other payables		77,917	78,671	79,408
Derivative financial instruments		866	2,107	633
Current tax liabilities		505	421	2,414
Borrowings		13,270	27,067	22,995
Provisions		4,734	8,094	7,011
		97,292	116,360	112,461
Net current assets		38,077	20,215	22,630
Non‑current liabilities
Trade and other payables		-	127	-
Derivative financial instruments		380	959	-
Borrowings		809	1,588	3,253
Provisions		278	331	982
Deferred tax liabilities		381	493	-
Retirement benefit obligations	11	63,273	24,163	19,940
		65,121	27,661	24,175
Net assets		63,277	78,827	79,149
Equity
Issued capital		99,576	99,118	98,645
Own shares		(1,934)	(2,116)	-
Other reserves		(2,324)	(3,737)	(5,310)
Retained loss		(32,741)	(14,916)	(14,423)
Equity attributable to equity holders of the Company		62,577	78,349	78,912
Minority interests		700	478	237
Total equity		63,277	78,827	79,149

 

 

CONSOLIDATED STATEMENT OF CHANGE IN EQUITY (AUDITED)

 

	Issued capital £'000	Own shares £'000	Other reserves £'000	Retained earnings £'000	Total £'000	Minority interests £'000	Total equity £'000
At 3 May 2009	99,118	(2,116)	(3,737)	(14,916)	78,349	478	78,827
Total comprehensive income for the period	-	-	1,486	(15,411)	(13,925)	244	(13,681)
Issue of Ordinary Shares from Treasury	458	1,192	-	-	1,650	-	1,650
Adjustment to deferred consideration	-	-	(96)	-	(96)	-	(96)
Equity-settled share-based compensation	-	-	-	451	451	-	451
Own shares acquired in the period	-	(1,010)	-	-	(1,010)	-	(1,010)
Translation differences (net of tax)	-	-	-	-	-	1	1
Dividends declared on Ordinary Shares	-	-	-	(2,842)	(2,842)	-	(2,842)
Dividends paid to minority interests	-	-	-	-	-	(23)	(23)
Other movements	-	-	23	(23)	-	-	-
At 2 May 2010	99,593	(1,951)	(2,324)	(32,741)	62,577	700	63,277
At 27 April 2008	98,645	-	(5,310)	(14,423)	78,912	237	79,149
Total comprehensive income for the period	-	-	1,695	1,566	3,261	68	3,329
Issue of new Ordinary Shares	473	-	(97)	-	376	-	376
Equity-settled share-based compensation	-	-	-	755	755	-	755
Own shares acquired in the period	-	(2,116)	-	-	(2,116)	-	(2,116)
Translation differences (net of tax)	-	-	(25)	14	(11)	87	76
Additions to minority interests	-	-	-	-	-	121	121
Dividends declared on Ordinary Shares	-	-	-	(2,828)	(2,828)	-	(2,828)
Dividends paid to minority interests	-	-	-	-	-	(35)	(35)
At 3 May 2009	99,118	(2,116)	(3,737)	(14,916)	78,349	478	78,827

 

 

CONSOLIDATED CASH FLOW STATEMENT (AUDITED)

 

		52 weeks ended	53 weeks ended
		2 May 2010	3 May 2009
	Notes	£'000	£'000
Cash flows from operating activities
Cash generated from operations	12	33,959	15,409
Defined benefit pension plan contributions		(4,938)	(5,463)
Dividends received from joint ventures		3,238	5,327
Tax paid		(5,358)	(5,026)
Net cash generated from operating activities		26,901	10,247
Cash flows from investing activities
Interest received		113	342
Purchase of property, plant and equipment		(3,545)	(5,252)
Purchase of intangible assets		(1,148)	(2,296)
Proceeds from sale of property, plant and equipment		97	58
Proceeds from disposal of available for-sale investments		2,258	-
Acquisition of subsidiaries, net of cash and cash equivalents acquired		(1,244)	(7,629)
Net cash used in investing activities		(3,469)	(14,777)
Cash flows from financing activities
Interest and finance charges paid		(1,377)	(1,763)
Proceeds from issue of Ordinary Shares, net of issue costs of £Nil (2009: £Nil)		-	38
Purchase of Ordinary Shares		(1,010)	(2,116)
Receipt of new loans and finance lease advances		533	8,961
Repayment of loans and finance leases		(12,806)	(10,762)
Dividends paid to equity shareholders		(2,842)	(2,828)
Net cash used in financing activities		(17,502)	(8,470)
Net increase/(decrease) in cash and cash equivalents		5,930	(13,000)
Cash and cash equivalents at beginning of period		5,221	18,279
Foreign exchange		846	(58)
Net cash and cash equivalents at end of period		11,997	5,221

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1. BASIS OF PREPARATION

The financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs). This announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in July 2010.

 

The financial information set out in the announcement does not constitute the Company's statutory accounts under the meaning of section 435 of the Companies Act 2006. The financial information for the period ended 3 May 2009 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for the period ended 2 May 2010 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in this preliminary announcement and in the Company's full financial statements to be published in July 2010. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Finance Report.

 

As discussed in the Business Review, certain of the business sectors in which the Group operates continue to be challenging as a result of the financial situation in the UK and overseas. The current economic conditions create some uncertainty particularly over the future demand for the Group's services and the recoverability of debtors and WIP from customers impacted by market conditions. 

 

The Group has taken actions to restructure its business to meet expected demand and opportunities in each sector, and demand for the Group's services overall has remained strong. The Group has continued to trade profitably and the Group order book at the balance sheet date stands at £244m (2009: £291m).

 

Cash flow during the period has reduced net debt to £nil at the balance sheet date (2009: £18m). The Group's £70m bank facility is committed until April 2011, subject to compliance with covenants which require the Group to maintain certain financial ratios (net debt to EBITDA, interest cover and debtor days). Based on the budget for the current financial year and forecasts thereafter, the Group has adequate headroom in relation to its facility level and its financial covenant compliance.

 

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing this announcement.

This preliminary announcement was approved by the Board of Directors on 28 June 2010.

 

2. DETAILED CONSOLIDATED INCOME STATEMENT

		52 weeks ended 2 May 2010				53 weeks ended 3 May 2009
			Recurring	Other			Recurring	Other	Total
			adjustments	adjustments			adjustments	adjustments
		Adjusted*	Note (i)	Note (ii)	Total	Adjusted*	Note (i)	Note (ii)
Continuing operations	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue including share of joint venture revenues		340,406	-	-	340,406	360,000	-	-	360,000
Less: share of joint venture revenues		(13,786)	-	-	(13,786)	(14,211)	-	-	(14,211)
Group revenue		326,620	-	-	326,620	345,789	-	-	345,789
Cost of sales		(192,323)	-	-	(192,323)	(213,544)	-	(2,725)	(216,269)
Gross profit		134,297	-	-	134,297	132,245	-	(2,725)	129,520
Administrative expenses		(116,484)	(1,034)	-	(117,518)	(114,123)	(3,622)	(4,262)	(122,007)
Share of result of joint ventures		5,293	(1,467)	-	3,826	4,480	(1,270)	-	3,210
Profit on disposal of available-for-sale investments		838	-	-	838	-	-	-	-
Operating profit		23,944	(2,501)	-	21,443	22,602	(4,892)	(6,987)	10,723
Finance income	6	11,027	75	-	11,102	14,734	-	-	14,734
Finance costs	7	(14,540)	-	-	(14,540)	(15,376)	(675)	-	(16,051)
Profit before taxation		20,431	(2,426)	-	18,005	21,960	(5,567)	(6,987)	9,406
Taxation	8	(6,177)	1,735	-	(4,442)	(6,945)	2,474	2,826	(1,645)
Profit for the period		14,254	(691)	-	13,563	15,015	(3,093)	(4,161)	7,761
Attributable to:
Equity holders of the Company		14,010	(691)	-	13,319	14,947	(3,093)	(4,161)	7,693
Minority interests		244	-	-	244	68	-	-	68
		14,254	(691)	-	13,563	15,015	(3,093)	(4,161)	7,761
Earnings per share:
From continuing operations - basic	9	19.28p	(0.95)p	-	18.33p	19.95p	(4.13)p	(5.55)p	10.27p
From continuing operations - diluted	9	19.25p	(0.95)p	-	18.30p	19.76p	(4.09)p	(5.50)p	10.17p

 

There were no discontinued operations in either period.

* Before items described in note (i) and note (ii) below:

Note (i): Recurring adjustments ‑ amortisation of business combination intangibles, changes in the fair value of derivative financial instruments, retention bonuses arising from acquisitions and the Group's share of taxation in relation to joint ventures, as detailed further in note 3.

Note (ii): Other adjustments - redundancy costs, an exceptional contract loss and prior year research and development tax credits, as detailed further in note 4.

 

3. RECURRING ADJUSTMENTS - AMORTISATION OF BUSINESS COMBINATION INTANGIBLES, CHANGES IN THE FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS, RETENTION BONUSES ARISING FROM ACQUISITIONS AND THE GROUP'S SHARE OF TAXATION IN RELATION TO JOINT VENTURES

	52 weeks ended	53 weeks ended
	2 May 2010	3 May 2009
	£'000	£'000
Amortisation of business combination intangibles	(2,372)	(2,785)
Changes in the fair value of derivative financial instruments	1,413	(1,487)
Retention bonuses arising from acquisitions	-	(25)
Group's share of taxation relating to joint ventures	(1,467)	(1,270)
	(2,426)	(5,567)
Taxation	1,735	2,474
Total	(691)	(3,093)

 

Changes in the fair value of derivative financial instrument

The Group has entered into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange risk, which do not qualify for hedge accounting under IAS 39. When the commercial transaction to which they relate is reflected in the Income Statement, the financial impact of the associated instruments is reflected in the adjusted results. The timing impact of the requirement to mark-to-market derivatives relating to future transactions, not yet reflected in the Income Statement, is captioned as 'Changes in the fair value of derivative financial instruments' and not reflected in the adjusted results. Amounts relating to the revaluation of exchange rate derivative financial instruments are included in administrative expenses, amounts relating to the revaluation of interest rate derivative financial instruments are included in finance income or costs.

Retention bonuses arising from acquisitions

The amounts recorded reflect retention bonuses arising from acquisitions, which management consider an integral cost of making the acquisition.

Group's share of taxation relating to joint ventures

The Group's share of tax in relation to joint ventures has been included as an adjustment in order to present operating profit before tax (which would have been arrived at under UK GAAP equity accounting), a measure which Scott Wilson management uses for internal performance analysis.

 

4 OTHER ADJUSTMENTS - REDUNDANCY COSTS, CONTRACT LOSS AND PRIOR YEAR RESEARCH AND DEVELOPMENT TAX CREDITS

	52 weeks ended	53 weeks ended
	2 May 2010	3 May 2009
	£'000	£'000
Redundancy costs	-	(4,262)
Contract loss	-	(2,725)
	-	(6,987)
Taxation	-	2,826
Total	-	(4,161)

 

Redundancy costs

In the 53 weeks ended 3 May 2009, redundancy costs related to costs incurred as a result of the Group's restructuring to re‑align its resource requirements to market demand.

Contract loss

In the 53 weeks ended 3 May 2009, contract loss related to an exceptional loss incurred on an overseas contract, which has been postponed indefinitely.

Taxation

In the 53 weeks ended 3 May 2009, the exceptional taxation credit relates to the redundancy costs and contract loss (£1,956,000) together with the benefit of research and development tax credits relating to prior periods (£870,000). The research and development tax credits reflected here represent the benefit of a retrospective claim covering five financial years. The Group anticipates benefitting from research and development tax credits on an ongoing basis and an additional year's benefit is reflected in the adjusted tax charge.

 

5 SEGMENT ANALYSIS

 

The Group has adopted IFRS 8 Operating Segments with effect from 4 May 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board to allocate resources to the segments and to assess their performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required the Group to identify two sets of segments (business and geographical), using a risks and returns approach, with the Group's system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. As a result, following the adoption of IFRS 8, the identification of the Group's reportable segments has changed.

 

In prior years, segment information reported externally was analysed on the basis of activities undertaken by each of the Group's geographical operating divisions, UK Central, UK South, Scotland & Ireland, UK Railways and International.

 

The trading activities and performance of the Group are now managed through five core market-facing sectors and four overseas regions.

 

The five sectors are Strategic Consultancy, Railways, Buildings & Infrastructure, Environment & Natural Resources and Roads. The five sectors cover the UK, Ireland and the Rest of the World (excluding the four overseas regions defined below).

 

The four overseas regions are Asia Pacific, Europe, India and the Middle East.

 

Information regarding the Group's operating segments is reported below. Amounts reported for the prior year have been restated to conform to the requirements of IFRS8 and the change in the management of the trading activities and performance described above.

 

Sales between sectors and regions are made on an arm's length basis.

 

Segment revenue and results

 

Segment revenue and results for the 52 weeks ended 2 May 2010:

 

	Revenue including share of joint venture revenues	Sales to external customers	Sales to other segments	Revenue from all sales	Sales on behalf of other segments	Group revenue	Adjusted* operating profit	Operating profit - segment result
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Strategic Consultancy	26,917	25,412	5,279	30,691	(3,774)	26,917	3,155	3,277
Railways	40,451	46,432	734	47,166	(6,715)	40,451	306	302
Buildings & Infrastructure	55,789	49,539	11,754	61,293	(5,504)	55,789	990	508
Environment & Natural Resources	63,189	51,298	16,537	67,835	(4,646)	63,189	4,349	3,494
Roads	60,544	58,614	4,103	62,717	(13,190)	49,527	10,750	9,721
Asia Pacific	40,829	40,795	1,306	42,101	(2,123)	39,978	1,790	1,672
Europe	29,781	28,675	1,808	30,483	(2,620)	27,863	3,349	3,214
India	10,386	10,311	189	10,500	(114)	10,386	2,034	2,034
Middle East	12,520	15,544	215	15,759	(3,239)	12,520	(2,779)	(2,779)
	340,406	326,620	41,925	368,545	(41,925)	326,620	23,944	21,443
Finance income								11,102
Finance costs								(14,540)
Profit before taxation								18,005
Taxation								(4,442)
Profit for the period								13,563

 

 

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment result represents the profit earned by each segment together with an allocation of central administrative costs. Finance income, finance costs and taxation expense are not allocated to a segment.

 

Share of result of joint ventures before taxation of £5,293,000 is included in Roads (£4,652,000), Asia Pacific (£80,000) and Europe (£561,000).

 

Segment revenue and results for the 53 weeks ended 3 May 2009:

 

	Revenue including share of joint venture revenues	Sales to external customers	Sales to other segments	Revenue from all sales	Sales on behalf of other segments	Group revenue	Adjusted* operating profit	Operating profit - segment result
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Strategic Consultancy	26,367	24,505	3,696	28,201	(1,834)	26,367	4,046	2,481
Railways	43,936	57,207	525	57,732	(13,796)	43,936	1,131	225
Buildings & Infrastructure	74,781	69,915	13,097	83,012	(8,231)	74,781	2,401	(2,815)
Environment & Natural Resources	68,368	58,338	13,045	71,383	(3,015)	68,368	2,903	709
Roads	64,822	52,586	5,989	58,575	(4,295)	54,280	9,324	7,818
Asia Pacific	34,226	29,942	2,224	32,166	(1,609)	30,557	1,687	1,344
Europe	25,981	25,476	5,923	31,399	(5,418)	25,981	1,150	1,091
India	8,117	8,233	177	8,410	(293)	8,117	1,050	1,050
Middle East	13,402	19,587	1,205	20,792	(7,390)	13,402	(1,090)	(1,180)
	360,000	345,789	45,881	391,670	(45,881)	345,789	22,602	10,723
Finance income								14,734
Finance costs								(16,051)
Profit before taxation								9,406
Taxation								(1,645)
Profit for the period								7,761

 

Share of result of joint ventures before taxation of £3,972,000 and £508,000 is included in Roads and Asia Pacific respectively.

 

 

6. FINANCE INCOME

	52 weeks ended	53 weeks ended
	2 May 2010	3 May 2009
	£'000	£'000
Interest income on bank deposits	370	349
Gain on interest rate derivative financial instruments	75	-
Expected return on pension plan assets	10,657	14,385
	11,102	14,734

 

7. FINANCE COSTS

	52 weeks ended	53 weeks ended
	2 May 2010	3 May 2009
	£'000	£'000
Interest on bank loans and overdrafts	1,074	1,228
Interest on other loans	123	131
Finance lease charges	257	407
Unwind of discount on deferred consideration	56	155
Loss on interest rate derivative financial instruments	-	675
Interest on retirement benefit obligations	13,030	13,455
	14,540	16,051

 

 

8. TAXATION

		52 weeks ended	53 weeks ended
		2 May 2010	3 May 2009
		£'000	£'000
Current tax	- current year	4,064	2,601
	- prior year	202	(2,401)
Deferred tax	- current year	173	(340)
	- prior year	3	1,785
		4,442	1,645
Tax reconciliation
Profit before taxation		18,005	9,406
Taxation at the standard rate of tax in the UK		5,041	2,634
Tax effects of:
Income not included for tax purposes		-	114
Expenses not deductible for tax purposes		517	528
Utilisation of losses not previously recognised		(391)	(474)
Current year losses not recognised		524	153
Effect of tax included within joint venture profit		(1,056)	(915)
Rate adjustment relating to overseas earnings		(190)	5
Overseas tax not relieved		488	-
Changes in recognition of deferred tax		(264)	216
Tax credit for research and development		(432)	-
Adjustment in respect of prior periods		205	(616)
Total tax charge		4,442	1,645

 

The standard rate of tax in the UK for the 52 weeks ended 2 May 2010 was 28 per cent (2009: 28 per cent). There were no material changes during the 52 weeks ended 2 May 2010 in the tax rates applicable to profits taxed in countries other than the UK.

Included in the total tax charge for the year is a credit of £268,000 (2009: £4,030,000) relating to amortisation of intangible assets acquired in business combinations and changes in the fair value of derivative financial instruments (2009: together with retention bonuses arising from acquisitions, restructuring costs, an exceptional contract loss and prior year research and development tax credits.

 

9. EARNINGS PER SHARE

 

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period, excluding Ordinary Shares held in treasury or by the Scott Wilson Holdings Ltd Employee Share Ownership Trust.

	52 weeks ended 2 May 2010				53 weeks ended 3 May 2009
		Recurring	Other			Recurring	Other
		adjustments	adjustments			adjustments	adjustments
	Adjusted*	Note (i)	Note (ii)	Total	Adjusted*	Note (i)	Note (ii)	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Profit attributable to equity holders of the Company	14,010	(691)	-	13,319	14,947	(3,093)	(4,161)	7,693
Weighted average number of Ordinary Shares in issue ('000)	72,644	72,644	72,644	72,644	74,918	74,918	74,918	74,918
Basic earnings per share (p)	19.28	(0.95)	-	18.33	19.95	(4.13)	(5.55)	10.27
Weighted average number of Ordinary Shares in issue ('000)	72,644	72,644	72,644	72,644	74,918	74,918	74,918	74,918
Dilutive effect of share options	123	123	123	123	451	451	451	451
Dilutive effect of business combination deferred consideration shares	-	-	-	-	254	254	254	254
Diluted weighted average number of Ordinary Shares in issue ('000)	72,767	72,767	72,767	72,767	75,623	75,623	75,623	75,623
Diluted earnings per share (p)	19.25	(0.95)	-	18.30	19.76	(4.09)	(5.50)	10.17

 

* Before items described in note (i) and note (ii) below.

Note (i): Recurring adjustments - amortisation of business combination intangibles, changes in the fair value of derivative financial instruments and retention bonuses arising from acquisitions, as detailed further in note 3.

Note (ii): Other adjustments - redundancy costs, an exceptional contract loss and prior year research and development tax credits, as detailed further in note 4.

 

Adjusted earnings per share

The Directors believe that the presentation of adjusted earnings per share assists with the understanding of the results of the Group. Adjusted earnings per share is earnings per share adjusted for the impact of amortisation of business combination intangibles and changes in the fair value of derivative financial instruments (2009: together with retention bonuses arising from acquisitions, redundancy costs, an exceptional contract loss and prior year research and development tax credits).

	52 weeks ended	53 weeks ended
	2 May 2010	3 May 2009
	£'000	£'000
Profit attributable to equity holders of the Company	13,319	7,693
Amortisation of business combination intangibles	2,372	2,785
Changes in the fair value of derivative financial instruments	(1,413)	1,487
Retention bonuses arising from acquisitions	-	25
Redundancy costs	-	4,262
Contract loss	-	2,725
Tax relating to amortisation of business combination intangibles, changes in the fair value of derivative financial instruments, retention bonuses arising from acquisitions, redundancy costs and an exceptional contract loss, and prior year research and development tax credits	(268)	(4,030)
Adjusted profit attributable to equity holders of the Company	14,010	14,947
Weighted average number of Ordinary Shares in issue ('000)	72,644	74,918
Adjusted basic earnings per share (p)	19.28	19.95
Weighted average number of Ordinary Shares in issue ('000)	72,644	74,918
Dilutive effect of share options	123	451
Dilutive effect of business combination deferred consideration shares	-	254
Diluted weighted average number of Ordinary Shares in issue ('000)	72,767	75,623
Adjusted diluted earnings per share (p)	19.25	19.76

No options over the Ordinary Shares of the Company have been awarded since 2 May 2010.

 

10. DIVIDENDS

 

A dividend equivalent to 2.67p per Ordinary Share in relation to the 53 weeks ended 3 May 2009, totalling £1,949,000, was declared in September 2009 and paid in October 2009.

An interim dividend for the 52 weeks ended 2 May 2010 of 1.33p per Ordinary Share, totalling £958,000, was declared and paid in February 2010.

The total cost of the dividends stated above is net of the amounts paid to the Scott Wilson Holdings Ltd Employee Share Ownership Trust.

No dividends have been declared by the Company subsequent to 2 May 2010.

The Board has announced today that it has recommended a proposal for the acquisition of the entire issued and to be issued share capital of the company for 210 pence per share in cash by Universe Bidco Limited, a wholly owned subsidary of  URS Corporation, a fully integrated global engineering, construction and technical services organisation, via a scheme of arrangement. The offer price of 210 pence per share is inclusive of any dividends payable in respect of the period ended 2 May 2010. Accordingly, the Board does not currently intend to propose a final dividend for the period ended 2 May 2010. If the acquisition does not complete within the anticipated timeframe, the Board will then consider whether to declare a dividend for that period.

 

11. RETIREMENT BENEFIT OBLIGATIONS

 

Defined benefit schemes

There are two funded defined benefit retirement plans in which certain of the Group's employees participate, both of which are now closed to new members:

• the final salary (defined benefit) section of the Scott Wilson Pension Scheme; and

• the Scott Wilson Shared Cost Section of the industry-wide Railways Pension Scheme.

Differences between the expected return on assets and the actual return on assets have been recognised as an actuarial gain or loss in the Condensed Consolidated Statement of Comprehensive Income in accordance with the Group's accounting policy.

 

The movements in the retirement benefit obligations are:

 

	52 weeks ended 2 May 2010 £'000	53 weeks ended 3 May 2009 £'000	52 weeks ended 27 April 2008 £'000
At the start of the period	(24,163)	(19,940)	(12,449)
Current service cost	(1,772)	(2,946)	(4,396)
Interest cost	(13,030)	(13,455)	(10,928)
Expected return on assets	10,657	14,385	13,880
Experience losses	-	(4,175)	(27)
Actuarial gains/(losses) due to:
- Assets	26,621	(52,155)	(13,953)
- Liabilities	(66,524)	48,660	326
Employer contributions	4,938	5,463	7,607
At the end of the period	(63,273)	(24,163)	(19,940)
Represented by:
Plan assets	202,064	163,722	198,824
Plan liabilities	(265,337)	(187,885)	(218,764)
	(63,273)	(24,163)	(19,940)

 

The principal assumptions underlying the actuarial assessments of the present value of the plan liabilities are:

	2 May 2010	3 May 2009	27 April 2008
Inflation rate	3.50%	3.40%	3.80%
Future salary increases	3.50%	4.40%	4.80%
Future pension increases	3.45%	3.35%	3.70%
Discount rate	5.65%	7.05%	6.25%

 

Mortality assumptions for the plan are as follows:

Life expectancy at 65	2 May 2010	3 May 2009	27 April 2008
Future pensioners - male	88.3	88.3	88.3
Current pensioners - male	87.1	87.0	87.0
Future pensioners - female	91.1	91.0	91.0
Current pensioners - female	90.0	89.8	89.8

 

12. CASH GENERATED FROM OPERATIONS

	52 weeks ended	53 weeks ended
	2 May 2010	3 May 2009
	£'000	£'000
Operating profit	21,443	10,723
Share of result of joint ventures	(3,826)	(3,210)
Loss on sale of tangible fixed assets	8	49
Profit on disposal of available for-sale investments	(838)	-
Defined benefit pension plan current service cost	1,772	2,946
Depreciation	5,685	5,388
Amortisation	4,057	4,634
Decrease/(increase) in receivables and prepayments	6,102	(5,927)
Decrease in payables and accruals	(38)	(522)
(Decrease)/increase in provisions	(857)	573
Share‑based compensation expense	451	755
Cash generated from operations	33,959	15,409

 

13. RECONCILIATION OF ADJUSTED GROUP RESULTS

 

The Directors believe that the presentation of adjusted operating profit, adjusted operating margin and adjusted profit before taxation assist with the understanding of the results of the Group.

Adjusted operating profit is operating profit adjusted for the impact of amortisation of business combination intangibles and changes in the fair value of derivative financial instruments (2009: together with retention bonuses arising from acquisitions, the Group's share of taxation in relation to joint ventures, redundancy costs and an exceptional contract loss).

Adjusted operating margin is adjusted operating profit expressed as a percentage of revenue including share of joint ventures.

Adjusted profit before taxation is profit before taxation adjusted for the impact of amortisation of business combination intangibles and changes in the fair value of derivative financial instruments (2009: together with retention bonuses arising from acquisitions, the Group's share of taxation in relation to joint ventures, redundancy costs and an exceptional contract loss).

A reconciliation of these measures to Group operating profit is given below:

	52 weeks	53 weeks
	ended	ended
	2 May 2010	3 May 2009
	£'000	£'000
Statutory operating profit	21,443	10,723
Amortisation of intangible assets acquired in business combinations	2,372	2,785
Retention bonuses arising from acquisitions	-	25
Group's share of taxation relating to joint ventures	1,467	1,270
Changes in fair value of forward foreign exchange contracts	(1,338)	812
Redundancy costs	-	4,262
Exceptional contract loss	-	2,725
Adjusted operating profit	23,944	22,602
Net finance costs	(3,513)	(642)
Adjusted profit before taxation	20,431	21,960
Adjusted operating margin	7.0%	6.3%

 

 

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