30 Oct 2009 07:00
| For immediate release | 30 October 2009 |
White Young Green plc
Results for the year ended 30 June 2009 and proposed restructuring and covenant deferral
White Young Green plc, international multidisciplinary consultant, announces its results for the year ended 30 June 2009, together with the terms and conditions of its proposed restructuring.
Operational summary:
Agreement in principle reached with lenders for a three year refinancing, subject to legal documentation and shareholder approval
£12m profit before taxation, exceptional and other items
Committed bond facilities for internationalising White Young Green plc
Strengthened senior leadership team
Good progress against implementing our three part strategy
Financial summary:
Net revenue decreased by 8% to £213.9m (2008: £232.1m)
Operating profit before exceptional and other items decreased by 36% to £17m (2008: £26.4m)
Operating loss after exceptional and other items of £123.7m (2008: £22.2m profit)
Exceptional and other items were £141m (2008: £4.2m)
Profit before taxation and before exceptional and other items was £12.1m (2008: £21m)
Reported loss before tax of £128.9m (2008: profit of £16.8m)
No dividend payment in financial year
Underlying earnings per share (before exceptional and other items) of 17.6p (2008: 31.6p)
Reported loss per share of 246p (2008: earnings of 28.4p)
Significant reduction in UK and Irish support services markets due to impact of global recession
* Exceptional and other items represent exceptional costs and the amortisation of acquired intangibles (customer relationships and order books).
Proposed restructuring:
The Company is pleased to announce the agreement of terms for a proposed capital restructuring which is subject to legal documentation and shareholder approval.
The proposed restructuring will provide the Group with a strengthened and sustainable long term capital structure enabling the Company to compete more effectively in the current challenging environment.
Commenting on the results and proposed restructuring, Non Executive Chairman Mike McTighe, said:
"Trading conditions remain challenging, although there are variations across the differing markets served by the Group. There remains a lack of confidence and liquidity in many areas in which we trade, but there are also some encouraging signs in respect of opportunities and new contract wins.
We have reached a constructive outcome with the lenders and we are pleased with their long term support. Given current market conditions, we recognise that the proposed financial restructuring is designed to ensure the stability of the Company. We have restructured operationally to focus on areas of strength and opportunity to be well positioned to benefit when overall economic conditions improve. We are investing, and will continue to invest to provide a strong platform for the future.
With a new leadership team and a restructured balance sheet White Young Green plc will be putting in place fundamental building blocks to enable the Company to benefit from profitable opportunities at home and internationally, while continuing to take a prudent and cautious view of the market. It has been a very difficult year from which we emerge better prepared to meet the challenges and address the opportunities of the future."
The White Young Green plc senior management team will provide briefings for analysts at Buchanan, 45 Moorgate, London EC2Y 9AE during Friday 30 October 2009. Please contact Tim Anderson on 020 7466 5000 for further information.
For further information, please contact:
White Young Green plc Tel: 0113 278 7111
Paul Hamer, Chief Executive Officer
David Wilton, Group Finance Director
Buchanan Communications Tel: 020 7466 5000
Tim Anderson / Lisa Baderoon
Chairman's statement
We have been through profound change in the last 12 months which has seen the company restructure its finances, operations, processes and senior leadership team to ensure it is focused on building a sustainable, strong and resilient long-term business that is better positioned to face the opportunities and challenges ahead. All of this being undertaken against the backdrop of a global recession.
The support services sector has seen a major decline in valuations, driven by the dramatic reduction in demand for services across infrastructure, private and residential investment and major publicly funded schemes. We, like our peers, have been heavily impacted by this market decline. In particular, the Group's overexposure and reliance on certain markets in the Republic of Ireland and its diversified Great Britain Engineering offering has markedly affected trading.
In early 2009 we developed a new strategy for the Group which focuses on creating a more efficient business structure that is fit for purpose, internationalising White Young Green plc core capabilities, and creating 'peaks of excellence' across critical and sustainable sectors.
Significant progress has been made in implementing this strategy although there remains much still to be done to build a stable operating platform to deliver predictable and sustainable results for the future and create future value for our stakeholders.
To create a fit for purpose business, we continue to restructure our business operations and balance sheet. We have addressed legacy issues and have acted to strengthen the underlying business infrastructure. During this process we have incurred very significant exceptional costs relating to redundancies, office closures, the write down of work in progress and trade receivables balances, provisions for professional indemnity claims, professional
fees, the impairment of goodwill, and other related costs.
I am delighted to report that we have now signed heads of terms with our Lenders regarding the terms of a three year financing facility. These heads of terms are not legally binding but have been approved by the credit committee of each bank. The level of debt on the balance sheet would be reduced significantly and the Lenders would subscribe for new ordinary shares and new preference shares in White Young Green plc. The completion of the proposed restructuring is conditional, inter alia, upon execution of documentation satisfactory to White Young Green plc and its Lenders and on the approval of White Young Green plc's shareholders at an Extraordinary General Meeting. It is expected that a shareholder circular containing further details of the restructuring and convening the EGM will be sent to shareholders in due course. Upon completion of the refinancing the Lenders would in aggregate own approximately 60.5 per cent of the issued ordinary share capital of White Young Green plc and we expect to move the company's share listing to the Alternative Investment Market.
All of our stakeholders recognise the importance of our employees and as part of the refinancing, we propose introducing additional equity incentives for directors and key employees. The ongoing support of our lenders and shareholders is welcome and the Board is pleased to have agreed, in principle, a long term financing facility that would include committed bonding facilities to support our international operations and that is appropriate for the group as a whole.
During the year White Young Green plc has made progress in diversifying its geographical presence and has also broadened its international service offering into core technical areas of expertise including engineering, project management, and environmental and planning consultancy services. In the last 12 months, we have developed in countries where we already have a strong project based foothold and reputation with clients. The Company registered and opened a new office in Kazakhstan and plans for opening an office in Ukraine are underway. The Middle East and Africa continued to show good growth and a new office in Pretoria is planned to be followed by one in Cairo in the next 12-18 months.
Despite some challenging issues, our commitment to quality was recognised by the industry. White Young Green plc were awarded a RoSPA Occupational Health and Safety Gold Medal Award for 2009 and named Consultant of the Year in the Contract Journal Construction Industry Awards 2008. We have also picked up numerous accolades and project awards this year throughout the business including the Building Awards Housing Project of the Year (Adelaide Wharf), British Construction Industry Award (BCIA) Best Building Award (The Yellow Building) and Royal Institute of British Architects (RIBA) Award (Curve Theatre, Highcross, Pond Meadow, Yellow Building, Tyneside Cinema).
To strengthen the executive team during the financial year, the Board appointed David Wilton, Group Finance Director and Graham Olver, Group Services Director and Company Secretary. Lastly, I took over as Non Executive Chairman of White Young Green plc in August this year.
The Board has concluded that the company should change its name from White Young Green plc to WYG plc to align the name and branding of the company with the other companies in the Group. A resolution to approve the change of name will be put to shareholders at the AGM.
With a refreshed Board, a new senior executive team, and proposals for a restructured balance sheet, White Young Green plc is in the process of putting in place the fundamental building blocks for the future. It has been a very difficult year for your company. However, we are emerging from it better prepared to meet the challenges and opportunities of the future.
THE RESTRUCTURING
The Company has been in extensive discussions with its Banks and has considered various means of re-balancing its capital structure and reducing the Company's level of net borrowings. This follows a lengthy period of negotiations that started in February 2009, when we published our interim results for the six months to 31 December 2008 and announced a potential breach of a banking covenant. The proposed restructuring involves the conversion to equity of a significant proportion of the Group's bank borrowings together with refinanced three year committed borrowing facilities. The Board believes that this proposed debt to equity exchange and the borrowing facilities would provide a material strengthening of the Company's capital structure and financial position.
This proposed restructuring comprises the following outline terms:
the proposed conversion of approximately £50m of the Group's indebtedness into new ordinary shares and new preference shares in the Company. In addition, the Company has agreement in principle with the lenders to put in place approximately £58m of refinanced debt facilities and €38m of committed bonding facilities, each with a three-year term.
on completion of the restructuring, the lenders would own approximately 60.5% of the enlarged issued ordinary share capital, while a new employee benefit trust would own approximately 24.5% and existing shareholders approximately 15%.
as part of the total reduction in borrowings of approximately £50m, the lenders will be issued £30m of preference shares for conversion of £30m of outstanding borrowings.
the proposed restructuring would require shareholder approval at an extraordinary general meeting, with the lenders having agreed to defer testing of covenants until after the extraordinary general meeting, or 14 December 2009, whichever is the earlier.
the purpose of the new employee benefit trust would be to provide share incentives for directors, key managers and employees.
once financed, the precise details of the proposed restructuring will be set out in more detail in a circular, to be sent to shareholders in due course.
the Directors intend, should the restructuring be approved by shareholders, to cancel the admission of the ordinary shares to the Official List and to trading on the London Stock Exchange's market for listed securities and to apply for admission of the ordinary shares to trading on AIM.
At the date of this announcement certain uncertainties exist which are disclosed in note 3 to the financial information.
BUSINESS REVIEW
The Business Review has been prepared by the Board for the members of White Young Green plc to provide a summary of the performance and financial position of the Group in the year to 30 June 2009, together with the underlying trends and factors which are likely to affect future performance.
The global economic recession has impacted many of our markets with the UK private sector and Republic of Ireland experiencing greatest downturn in demand. Investment in the private development sector has dropped sharply with many schemes cancelled or suspended and this is also mirrored across house-building infrastructure and land regeneration.
The imbalance of the Group's revenues between domestic and international markets has created severe trading impacts in Great Britain/Republic of Ireland and whilst swift management action has been taken to address this, we anticipate that some of the markets served will remain at depressed levels for the foreseeable future.
The year ended 30 June 2009 has been the most challenging in the history of White Young Green plc. We have implemented major changes to be fitter, stronger and better positioned to face the challenges ahead. Significant progress has been made in implementing our three-part forward strategy which is centred on creating a more focused and efficient business, internationalising our company and creating 'peaks of excellence' across critical and sustainable sectors. As previously announced, decisive action has been taken to re-structure our operations with significant reductions in headcount and the closure of offices as we concentrate on stronger, quality focused regional centres.
We have incurred substantial exceptional costs arising from the change programme and we continue to focus on working capital management and cash generation. Selective but necessary investment is being made in strengthening our management team and in information systems. Furthermore, improvements are being made to our governance framework.
Financial performance
In the year to 30 June 2009, gross revenue decreased by 7% to £261.6m (2008: £282.1m). Revenue attributable to third parties, on which we don't make a margin, decreased to £47.7m (2008: £50.0m). Net revenue, which reflects the value of work done by our people, decreased by 8% to £213.9m (2008: £232.1m).
The profit performance reflects both the challenging market conditions and the major restructuring of the Group. Operating profit before the amortisation of acquired intangibles and before exceptional costs (exceptional and other items), decreased by 36% to £17.0m (2008: £26.4m). There were no acquisitions completed during the year. Operating loss after exceptional and other items, was £123.7m (2008: £22.2m profit). Operating margin on net revenue was 7.9% (2008: 11.4%). The profit before taxation and exceptional and other items was £12.1m (2008: £21m) which is in line with the profit forecast announced in the Interim Management Statement on 18 May 2009. Exceptional and other items were £141.0m (2008: £4.2m).
It is worth noting that in the first half of the financial year Group generated operating profit before exceptional and other items of £12.1m and the comparable figure for the second half of the financial year was £nil.
Basic earnings per share were 17.6p (2008: 31.6p) adjusted for exceptional and other items referred to above.
Cash generated from operations decreased to £12.5m (2008: £31.0m) and represents 74% (2008: 117%) of operating profit before exceptional and other items. In May 2009, we converted €38m of debt into Sterling to reduce exposure taken earlier in the financial year to Euro denominated debt.
Net debt at the year end was £85.3m (2008: £68.2m) which represented a significant reduction from the half year figure of £91.5m. The reduction in the second half is a creditable performance bearing in mind the payment of £3.1m of additional consideration in respect of the acquisition of PH McCarthy Consulting Engineers Limited and the payment of £7.6m of exceptional cash costs arising on the restructuring of the Group. These net debt figures are consistent with those previously disclosed and include both cash balances held within our captive insurance company and restricted cash balances held predominantly within the International Business Unit. The net debt excluding these two categories at the year end was £88.7m. The comparable figures for 30 June 2008 and 31 December 2008 were £71.6m and £94.4m respectively. We believe that the revised definition presents a fairer view of the net debt position as it only reflects cash that is readily available to the Group.
Our Board is encouraged by the prospects for the future against a market which continues to be unpredictable and, at times, volatile. The order book now stands at £260m. We have changed the way we record and monitor our order book such that the disclosed figure reflects only secured contracts and approved purchases under framework orders. Within the order book are international orders of €153m. Comparable figures prepared on the same basis are not available for the previous year.
Dividend
As we continue to focus on the generation and preservation of cash, no final dividend is proposed. No interim dividend was paid. The terms of the proposed refinancing include a restriction prohibiting the payment of a dividend whilst the facilities remain outstanding and until the preference shares are redeemed in full.
Strategy
Our three-part strategy, adopted in January 2009, is to create a more focused and efficient business, internationalise our company and create 'peaks of excellence' across critical and sustainable sectors. The first part of the strategy is to create a "fit for purpose" Group. This has involved right sizing the business against the changing marketplace and has been largely completed. We have undertaken a further review of the work in progress and trade receivable position and have taken a substantial exceptional charge in respect of a provision against these balances at the year end in addition to the provision taken at the half year. We have also taken swift and substantial measures to reduce costs. This process started in the first half of the financial year and has been substantially completed by the year end. These necessary steps will ensure we emerge from the current economic recession with a leaner and more competitive shape, which will provide a fundamental platform for future growth. All five of our Business Units and head office have been involved in this process, particularly the UK Engineering and Ireland Business Units. Across the Group there have been significant headcount reductions and office closures. There has also been a focus on cash management, the strengthening of the management teams and the introduction of new processes and procedures to strengthen the governance environment.
The second part of the strategy is to internationalise White Young Green plc and continue to build on our international business in five key geographic regions where we have established a strong position across growing and funded markets. Initiatives have been undertaken to mobilise our comprehensive strengths, which have historically been focused on the UK and Republic of Ireland, into selected overseas markets on a cost effective and low risk basis. These initiatives are ongoing and are predicated on building our existing relationships with major blue-chip clients.
The third part of the strategy is to focus on the creation of 'peaks of excellence' by identifying and building on core areas of strength in the UK and overseas, whilst instigating cultural change and the retrospective integration of past acquisitions. This part of the strategy is at a relatively early stage although the culture of focusing on quality is now firmly embedded into the Group.
Acquisitions
In the past White Young Green plc has been a highly acquisitive company. There were no acquisitions during this financial year, but there were payments of additional consideration in respect of past acquisitions, totalling £8.0m.
Board
There have been extensive changes at Board level during the year. Denis Connery, Commercial Director and Company Secretary, and Lawrie Haynes, Chief Executive, left the Group on 5 November 2008 and 6 January 2009 respectively. Following Lawrie Haynes' departure, Peter Wood, the then Chairman, agreed to increase his time in the business and Paul Hamer, previously Chief Operating Officer, was promoted to Group Managing Director. On 10 February 2009, David Wilton was appointed Group Finance Director and Robert Hartley, the previous Finance Director, took on the role of Group Services Director in addition to his role as Company Secretary. On 11 March 2009, we unfortunately had to announce that Peter Wood would be stepping down as Chairman, and as a member of the Board, for personal and family reasons on 31 March 2009. At that time Brian Duckworth was appointed Non Executive Chairman until the Board made a long term appointment in due course. Paul Hamer was promoted to Chief Executive Officer. At the same time, Robert Hartley notified the Board of his intention to resign as Group Services Director and Company Secretary and to leave the Group which he subsequently did on 14 April 2009, when David Wilton took on the role of Company Secretary.
On 31 July 2009 Mike McTighe's appointment as Chairman was announced, as was Graham Olver's appointment as Group Services Director and Company Secretary, with effect from 3 August 2009. Brian Duckworth stepped down as Chairman and left the Board on 3 August 2009. On 31 July 2009, the Company also announced that after 12 years as a Non Executive Director, John Richardson has decided to retire from the Board. John has, as a consequence of the proposed refinancing, subsequently agreed to remain as a director of the Company until 31 December 2009 and will be seeking re-election at the next Annual General Meeting. We thank Brian for his major contribution to the development of White Young Green plc. The Board has initiated a search for two new Non Executive Directors, one of whom will be appointed as Chairman of the Audit Committee.
Employees
We are a people business and our success is wholly dependent upon the commitment and professionalism of our staff. The financial year was marked by a significant reduction in headcount across the Group and the introduction of labour cost-saving arrangements in the face of the global economic recession. Difficult decisions have had to be taken in the interests of the Group, none of which have been taken lightly by the Board. We remain committed to the attraction, development and retention of professional staff to enable us to deliver high quality services into the markets in which we operate.
Exceptional and other items
As previously announced, we have incurred substantial exceptional costs in the financial year. These exceptional costs arose predominantly from the restructuring of the Group, and relate to redundancies and office closure costs, the write down of work in progress and trade receivables balances, provisions for professional indemnity claims, professional fees arising in connection with a prospective offer and fees arising on the refinancing and the impairment of goodwill and other general restructuring costs. A significant element of the overall exceptional cost involves the creation of provisions and does not represent an immediate cash cost, and in the case of the goodwill impairment will not incur a cash cost in the future. The other items relate to the amortisation of customer relationship and order book intangible assets. The exceptional and other items are summarised below:
| Year to 30 June 2009 | |
| £m | |
| Employee termination costs | 9.0 |
| Office closure costs | 20.6 |
| Work in progress and trade receivables provisions | 20.5 |
| Professional indemnity claim provisions | 5.7 |
| Professional fees | 3.4 |
| Impairment of goodwill | 77.2 |
| Other restructuring costs | 2.0 |
| Finance costs | 0.4 |
| Exceptional items | 138.8 |
| Amortisation of acquired intangibles | 2.2 |
| Exceptional and other items | 141.0 |
Outlook
Trading conditions remain unpredictable and challenging, although there are variations across the differing markets served by the Group. There remains a lack of confidence and liquidity in many areas in which we trade, but there are also some early encouraging signs in respect of opportunities and new contract wins.
Trading for the financial year to date is in line with the Board's expectations.
We have restructured to focus on areas of strength and opportunity to be well positioned to benefit when overall economic conditions improve. We are investing, and will continue to invest to provide a strong platform for the future.
Operating performance by Business Unit
The operating performance in the year to 30 June 2009 reflected both the challenging market conditions, particularly in the second half of the financial year, and also the profound restructuring process across the Group. Gross revenue decreased by 7% to £261.6m (2008: £282.1m). Conditions in the private sector have been challenging and there is likely to be strong pressure on public sector spending in the short to medium term. In direct contrast, our international markets continue to experience strong demand and present a major Group opportunity for selective and sustainable growth.
WYG Engineering
WYG Engineering has experienced recessionary pressure in several of its markets which has resulted in an overall reduction of gross and net revenues. Against this backdrop, the management team has acted swiftly in restructuring the Business Unit into a more efficient operation, configured to align with client demand. Greater emphasis has been placed on reducing debtors and aged debtor levels and making efficiency improvements to our working practices.
Over the year, gross revenue reduced by 20% to £76.2m (2008: £94.8m), net revenue reduced by 21% to £69.3m (2008: £88.2m) and operating profit before exceptional and other items reduced by 60% to £2.1m (2008: £5.3m). Operating margin on net revenue decreased to 3% (2008: 6%) as a result of the reduction in revenue noted above.
In line with the Group's three-part strategy, our focus has been on creating 'peaks of excellence' across critical and sustainable sectors where we have a strong reputation, good experience and there is evidence of continued spending. These are education, health care, defence, regeneration, rail and highways.
We have taken decisive action to create a more efficient and streamlined business that is aligned to the changing demands of the market and, at the beginning of the financial year, we carried out a pre-planned operational re-structuring to create three primary divisions, Buildings, Rail and Highways.
Our Buildings division continues to enjoy an award winning reputation in key regional centres across Great Britain which underpin and complement the high quality capability and reputation that is led by Adams Kara Taylor (AKT) in London. A combination of quality and innovation has resulted in AKT, a strategic acquisition made by White Young Green plc in 2006, becoming critical to the success of a truly enviable range of award winning and iconic structures. Demand for this service remains, albeit at reduced volumes. Examples of our work include the Stirling Prize winner Peckham Library in London, the Phaeno Building in Germany, the Yellow Building in London and Pond Meadow in Guildford.
Across our other offices in Great Britain we continue to provide a high quality service and project delivery and to build our reputation for client care. We are recognised for this through award winning projects such as the Corby Rail Station Scheme which won the Institution of Highways and Transportation's Effective Partnership award.
Publicly funded development has also provided a sustainable income stream for us in health care, education and defence. NHS estates departments and local primary care have been significant sources of work particularly in acute hospitals. We have secured repeat and new business from this important sector through focus on client needs, delivery of service and deployment of key quality resources. We have developed long standing strategic corporate relationships, particularly with leading contractors, and have benefited from the Government's 'Building Schools for the Future' (BSF) initiative which has seen large scale investment. Key reputation enhancing projects were delivered in Nailsea, Nottingham and Burnley and further schemes have been won in Cheltenham and Essex BSF. Furthermore, we are supply chain partners in four teams for the second wave of the National Academies Framework.
White Young Green plc is ranked by leading industry journal, New Civil Engineer, as a top five consultant as defined by turnover in the defence sector. This is supported by an extremely diverse track record of skills and experience with the Navy, Army and RAF.
All this is in addition to projects secured with WYG Management Services which, as client adviser, complements our collective service offering. Although the location, mix and proportion of schemes will change as defence needs vary, we expect that investment in the estate will continue at or above current levels. In our Rail division, Network Rail's strategic business plan for 2007 set out ambitious levels of investment and growth. The implementation period was five years, and in 2008, it remained disappointingly slow with major opportunities slow to evolve into investigation and design stages. We are lead designer on a number of major projects including Edinburgh Waverley Station, Axminster, Tunbridge Wells, Edinburgh to Glasgow Improvement Programme (jointly with Transport for Scotland) and North London Lines. We are first tier suppliers on all of these significant schemes and, per National Rail's strategic business plan, we expect levels of spending to increase from January 2010 onwards.
Revenues in our Highways division have remained stable in the context of a reducing market. We expect the market to continue to soften but, due to the long term nature of our commissions, we do not anticipate any reduction in demand for our services.
In summary, the trading conditions across our markets have, and continue to be, mixed and challenging. However, WYG Engineering has created a platform for future success that should enable it to deliver sustainable profit and growth in future years.
WYG Environment Planning Transport
Our environmental, planning and transport planning activities were amalgamated in 2008 to form WYG Environment Planning Transport. These consulting services are largely focused on serving the early permission stages of site or project development. WYG Environment Planning Transport is one of the market leaders in the provision of these services and also provides one of the broadest ranges of services to this market.
Over the year, gross revenue decreased by 3% to £53.8m (2008: £55.3m), net revenue decreased by 1% to £45.6m (2008: £46m) and operating profit before exceptional and other items reduced by 20% to £6.3m (2008: £7.9m). Operating margin on net revenue fell to 14% (2008: 17%) largely as a result of low utilisation in those disciplines that experienced down turns in work.
We faced a challenging market environment, as the industry of site acquisition and development shrank in the face of credit shortages, falling demand for residential units and falling commercial rents. Despite these factors we have broadly maintained revenues and operating profitability while undertaking, in some specific areas, necessary restructuring.
The majority of our planning and environmental planning businesses have largely succeeded in maintaining revenues as we continue to work on longstanding client schemes and to enhance our position as one of the leading retail planning teams in the country; our transport planning revenues have grown during 2008/9 suggesting that we have gained market share of a falling market in this field. Some of our environmental consulting services - notably those linked to strict regulation and government penalty or incentive regimes, such as asbestos management and renewable energy, have also experienced considerable growth during the year.
Nearly 50% of our environmental work in 2007/08 related to the clean-up of brownfield land. This sector has experienced a reduction in fee income as instructions on new sites dried up in the second half of 08/09 and as site owners deferred clean up programmes. We have significantly reduced our headcount and introduced flexible working to align our resources and costs to the future demand for our services.
Environment
In Environment we have had a difficult and uneven year with volatile and unpredictable market conditions. However, our wide range of services and clients reduced the impact of the downturn across many parts of the business. Costs have been minimized and support services rationalized in order to maximize profitability.
In some disciplines, such as ecology, asbestos, noise and air, the order book has held up well and we consider that we have gained market share of consulting revenues from the competition. Other disciplines, which are heavily dependent on construction, such as geo-environmental services, have been restructured accordingly to manage a decreasing workload and, in addition to reduction in work volumes, pricing and profit margins have been affected. Against this backdrop, there appear to be signs for optimism; with visible pipelines in certain sectors and some large geo-environmental opportunities on the horizon.
With a new and efficient business structure, we are ready to respond in areas where the market recovers quickest, including investing in sustainability services which brings together a strong team to build on our current track record. We believe that this sector will grow steadily despite any recessionary focus in the wider economy, due to the rising regulatory burden concerning carbon and other aspects of climate change.
Planning
Against a very challenging economic background, WYG Planning & Design achieved a marginal increase in business compared with 2008. Profitability was, however, reduced as a result of recognising and writing down trade debtor balances and work in progress. The order book is down on 12 months ago but still stands at 80% of budgeted net revenues.
Our business has held up strongly in key sectors, notably retail, regeneration and public sector services. We continue to provide advice to retail developers on major schemes across the country. As regards public sector work, we have undertaken key projects for the Department for Communities and Local Government, providing research into and advising on improvements to the planning system; we have continued to provide support for many local authority clients in policy making, development control and master-planning. We provide services under a number of public sector framework agreements to central government in England and Wales and to the Regional Development Agencies. Towards the year end, the house building sector was beginning to show signs of recovery and our widely diversified portfolio of business activity has also held us in good stead with continuing demand for services in the health care, education, minerals, energy and private client sectors.
In line with the three-part strategy of creating a fit for purpose business, we made a limited number of redundancies mainly in our design teams, although our team in Milton Keynes, newly-established at the start of the year, has created a momentum which appears to bode well for the year ahead.
A growing feature of our business is the value to clients of being able to package a stream of specialist skills in support of development proposals so as to improve streamline delivery and coordinate management of project inputs.
Transport
During the year, orders and workload have remained steady although at a lower level than experienced in the previous year and the management team has taken speedy action to reduce costs through a small number of redundancies and removing non business critical expenditure.
Demand from certain key clients has remained strong during the recession including Sainsburys, Land Securities and National Grid Property. Public Sector bodies including county councils, district councils and the Highways Agency also continue to supply a steady flow of work.
As part of our strategy and in support of our existing client-base, a new transport planning operation was established in Edinburgh and this has a growing workload with a positive order book and provides advice for all Sainsbury's projects in Scotland.
Elsewhere in the UK, we continue to be appointed to advise major land owners and developers on strategic, sustainable urban extensions. We have been appointed by Land Securities as strategic transport advisers on their proposals for between 10,000 and 20,000 residential units at North Harlow. In Rugby, we have been appointed by a joint venture of BT, Arriva and Prologic to advise on development of a sustainable urban extension of over 6,000 residential units.
We have also been appointed by BT to advise on their site search for wind farm projects. Furthermore, we have advised McLaren on their proposals for a new production car factory of some 37,000 sqm in Woking.
On the international front, transport planning has made a senior appointment to service transport related work being commissioned by the European Commission. This is already bearing fruit with proposals submitted for a number of major projects and involvement of UK towns in demonstration schemes. We have also significantly enhanced our links with WYG International offices in Poland, the Gulf and Turkey.
Overall and against a mixed trading landscape, WYG Environment Planning Transport has continued to perform in its key markets and streamlined its wider operation to ensure it continues to provide a high-quality, value-added service to its clients in an efficient and effective manner.
WYG Management Services
WYG Management Services is the project management, property management, cost consultancy and safety management division of the Group. We are known to our clients through three brands; WYG Management Services, Tweeds and Trench Farrow. The utilisation of these well established and highly regarded brands in the market has proved a successful strategy in the face of the challenging trading conditions.
Over the year, gross revenue decreased by 18% to £28.5m (2008: £34.6m), net revenue decreased by 20% to £24.3m (2008: £30.4m) and operating profit before exceptional and other items reduced by 24% to £3.2m (2008: £4.2m). Operating margin on net revenue fell to 13% (2008: 14%).
Market sectors and trading conditions continue to vary across our client base with cost consultancy most exposed to the challenging economic cycle and the downturn in commercial and residential development. This has seen the proportion of revenue generated from the public sector increase to 64% from 46% last year. Whilst the proportion of our public sector turnover has increased in response to market conditions, we have been successful in transferring this additional workload to improve the balance in offices more dependent on private sector clients. Our forward strategy is to retain our private sector capability which is vital for when the market cycle returns to support this client base. Furthermore, much of our public sector projects are in support of estate rationalisation and development driving cost savings for Government. We are therefore less exposed to possible cuts in public spending as much of the work is in committed programmes to deliver savings in budget.
In line with the three part strategy to create a fit for purpose business, we have introduced flexible working arrangements and implemented redundancies in areas where we are experiencing a slow order book and have rationalized our operating centres to retain critical mass in key office locations which match client demand. We have also successfully transferred work previously undertaken by third parties to our in-house teams and allocated employees to sectors that continue to show solid demand. This puts us in the best position to retain skilled employees, ready for the upturn in key sectors such as commercial and residential development.
We have retained an involvement, albeit with a reduced input, in many of our major residential urban extension projects. It is pleasing to note that many of our residential development clients are now looking to re-engage on projects that have been delayed by market pressure over the last twelve months. We remain very active in the social and affordable housing market as many stock transfer and Residential Social Landlord projects have been unaffected by market downturn. We also continue to be successful in the Education sector having secured frameworks with Partnerships for Schools and directly with Local Education Authorities.
Whilst the corporate and end user office market remains slow, we have been appointed on re-planning projects as our existing clients look to make the most efficient use of their real estate. Some of the larger mixed use development schemes have been delayed in the current market; however we continue to work with these clients who are using our services to secure the most effective solution to their portfolio. In the North West of England we are working closely with Neptune Developments and have ongoing appointment as Employers Agent, Quantity Surveyor and Construction Design Management (CDM) for the Mann Island and New Brighton Developments in Liverpool.
WYG Management Services is a high quality, high value provider of client support and advisory services with much of our historic and recent workload generated through repeat business based on referral, reputation and long term client relationships. During the course of the year we secured a number of awards including the British Council of Offices for the redevelopment of 55 Baker Street for London and Regional Developments, whilst the Mountbatten Project at the University of Southampton secured a Royal Institute of British Architects award. Our understanding of innovative procurement in challenging circumstances was proved in the delivery of the Mountbatten Project. The redevelopment of the complex followed a devastating fire and created cutting edge research facilities for computer and opto-electronic schools. The University was an existing client and valued our forward thinking procurement proposals so much that our appointment was extended to include the installation and commissioning of the specialist research equipment. This expertise will stand us in good stead for the future.
We are building on this award winning track record to secure further business in new sectors and overseas markets to counteract the downturn in some of our clients' activities in the UK. This focus has resulted in increased activity overseas, as we look to build on existing WYG International presence in Poland, Russia and Turkey. In addition we are actively targeting the Middle East and North Africa having provided executive project management services for the £300m retail and leisure development of Cairo Festival City in Egypt. Furthermore, we continue to support Interhealth Canada and the Government of Turks & Caicos Islands in the development of two modern $80m hospitals on the islands of Grand Turk and Providenciales. These hospitals will become the basis of a full health care service where we are providing independent adviser services during construction and commissioning. Our direct invitation to be involved on this project followed the successful completion of an orthopaedic hospital for Interhealth Canada in Runcorn.
As a result of our planned diversification into new sectors, we have also been successful in our appointment to provide construction safety management services for the £1.25bn PFI project to widen the M25 motorway.
WYG Management Services continues to sustain and secure work across its key markets and through its ongoing reputation for high-quality services, will look to build on its position in the public sector and align itself for the private sector upturn.
WYG Ireland
The Irish economy has seen a severe and continued decline across all construction, development and infrastructure sectors over the last 12 months which has impacted WYG Ireland and the wider support services market.
Ernst & Young's Economic Eye Forecast (May 2009) predicts that the economy in the Republic of Ireland will shrink by 8.9% in 2009 with a modest contraction continuing into 2010 before a recovery in 2011.
Over the year, gross revenue decreased by 3% to £50.3m (2008: £52m), net revenue decreased by 8% to £43.1m (2008: £46.7m) and operating profit before exceptional and other items reduced by 45% to £3.8m (2008: £6.9m). Operating margin on net revenue fell to 9% (2008: 15%).
The impact of global recession on Northern Ireland's economy is not expected to be as severe as in the Republic of Ireland or indeed the rest of the UK. Predictions are that the local economy will decline by 2.9% in 2009 - comparing favourably with other areas of the UK, where it is expected to be in the region of 3.5%.
In addition, employment levels in the Republic of Ireland will not return to their peak period (2007) until the year 2021 compared to 2018 for a similar recovery in Northern Ireland. This means for many people throughout the whole of Ireland, the recession will have a significant impact on many individuals.
WYG Ireland has seen a decline in its revenues and profitability. During this period the management team has taken the necessary restructuring steps to ensure the cost base is in line with the current needs of the business and resource levels are aligned to the present and future anticipated workload.
During the course of the year we initiated a programme to reduce our cost base to reflect the market conditions with every facet of the business scrutinised.
This strident action required us to make some very tough decisions, particularly regarding employees, where we have reduced our total headcount by almost a third on the previous year. We also engaged in a rationalisation of our operational properties and this led to the closure of five offices.
These steps have been taken to ensure the business remains competitive during the recession and quickly capitalises on opportunities when the markets return to growth.
Within WYG Ireland, we have aligned ourselves very closely with the Group's three-part strategy which seeks to re-shape the business. In July 2008, we entered a new phase in our evolution with the introduction of an all Ireland discipline-led business model. This model supports our strategy of having technical excellence at the core of everything we do. We are now committed to working together to truly deliver a multi-discipline service to meet the needs of our existing and future clients.
Following the introduction of White Young Green plc's internationalising initiative, we have appointed an international director for Ireland and currently act as the Group sponsor for Poland. More recently, Ray Moore, the managing director of WYG Ireland has been appointed as the group lead on the Gulf region. We have already placed a number of people from our business overseas and we will look to win contracts in those areas as well as establishing ourselves further in the countries in which we already have a presence.
Like most businesses throughout Ireland, the global recession has had an impact on us. However, we are continuing to hold our own, particularly in Northern Ireland thanks to a number of recent contract wins, including an appointment for our project managers from the Northern Ireland Prison Service to manage the design and building programme of a new £200m 800-cell prison at the existing Magilligan site in Co. Londonderry. We have also secured some key projects in areas such as health and education - namely the redevelopment of Whiteabbey hospital in Co. Antrim and more recently, a major contract to provide civil and structural engineering and environmental consultancy services for the new £150m Desertcreat Training College near Cookstown.
There have also been some encouraging developments in the Republic of Ireland with the appointment of our mechanical and engineering, fire and sustainability consultants on the €350m redevelopment of the Electricity Supply Board headquarters in Dublin. Our environmental and planning team in Ireland continues to provide many sought after services. Statutory process requires environmental issues to become a core consideration for both development and operational businesses. As a result, there has been a strong retention of market interest in our services, particularly in environmental management systems and also due diligence services. Sustainability is a key pillar in development principles in Ireland and we are supporting our clients in addressing the challenges that they face in this area as well as influencing national approaches to the sustainability agenda. Notable project wins for the Environmental and Planning team this year have included the groundwater monitoring programme for the Environment Protection Agency, continued services on the Envirowise Programme, the regeneration of the former Maze Prison and Long Kesh security site, Co. Antrim, and a planning application including an Environmental Impact Statement for a 350 MW Powerplant for Lumcloon Energy, Ferbane, Co. Offaly.
It has been a challenging year for the entire Irish economy and within that context, WYG Ireland has re-shaped itself significantly to meet the challenges ahead. The business is built on the quality of its people and it is this key factor which will create future success when the economy returns to growth.
WYG International
WYG International provides social and economic regeneration consultancy together with the core technical skills of Engineering, Management Services and Environment, Planning and Transport. The Business Unit generated 20% of the gross revenue of the Group (2008: 16%).
Over the year, gross revenue increased by 16% to £52.8m (2008: £45.5m), net revenue increased by 52% to £31.7m (2008: £20.8m) but operating profit before exceptionals and other items reduced to £1.5m (2008: £2.1m). Operating margin on net revenue fell to 5% (2008: 10%) as we retained resource to ensure we were in the best possible position following transitions in Poland, Romania and Bulgaria. These transitions have now been successfully completed.
Our international order book has continued to grow in the year and now stands at £86m. New appointments in this period have included a migration project in Turkey, developing the economy in Serbia and a significant £8.3m project to improve the living conditions and rights of populations across Africa, the Caribbean and Pacific areas through management of migration.
We also prepared over the year for our move to a new Group regional structure which we implemented on 1 July 2009. In seeking to grow the international work of the Group significantly over the next few years we are focusing on our core areas of strength in Central and Eastern Europe, the Balkans and the Commonwealth of Independent States: and putting investment into accelerating our growth in the Middle East and Africa and in the Gulf.
Central and Eastern Europe
In Poland, diversification was a core requirement in response to a changing investment environment as the country mobilised EU Structural Funds to combat the economic downturn. As a result, we restructured the business to provide a more effective response to public and private sector clients in both the socio-economic and technical services sectors. This resulted in over 350 contract wins, with a total fee value of more than €21m.
Regionalisation was another important theme and business challenge. In a number of projects "Investment in People" advisory and training services were provided to Regional Labour Offices for the unemployed or those threatened by unemployment, as well as for staff and managers of enterprises seeking higher profitability and competitiveness. We also provided support to regional authorities in their efforts to accelerate badly needed investments in infrastructure, and especially in roads and transport and this work has included investment preparation (strategies, feasibility studies, Environmental Impact Assessments, financing plans), design (sections of regional and national road networks), and construction (supervision and project management services).
In Romania and Bulgaria, the transition was successfully achieved from English language, pre-EU accession programmes to locally procured projects, bid in local languages and financed mainly through the EU Structural and Cohesion Funds and Operational Programmes. In Romania, the team was strengthened significantly over the course of the year, particularly in respect of the business development and finance functions, making it largely self-sufficient. This team has established itself as one of the most successful in the area of socio-economic technical assistance projects in the country and at the end of the year was implementing a portfolio of projects with a combined value of €114.4m.
In Bulgaria the first half of the year was relatively difficult, with a scarcity of suitable projects. However, the second half of the year was more encouraging and a number of major proposals in the field of municipal infrastructure were submitted before the end of the year. A vocational training centre was established and while it has already successfully delivered a number of training courses, it will deliver the greatest benefit when the relevant measures under the National Rural Development Programme are launched.
New, high-profile private sector clients included Coca Cola, CEZ (the country's largest electrical supplier) and Petrol, related to preparation and management of projects for financing through the Human Resources Development Operation Programme. WYG Bulgaria was approved as Operational Programmes' Adviser for several municipalities, including the largest - Sofia Regional municipality.
Balkans
In Turkey and northern Cyprus there were several project wins, including four major projects with a total project value of €14.6m, involving the deployment of more than 100 consultants over the next four years and the establishment of 14 project offices within clients' premises. In addition, we secured a contract to assist the municipalities of Istanbul, Izmir, Ankara and Bursa to effectively manage the socio-economic and environmental problems resulting from migration and to rehabilitate and reintegrate street children. This is one of the largest EU-funded technical assistance projects in Turkey with a value of €8.1m.
Furthermore, we secured a €2.7m contract to establish Reception Centres for Asylum Seekers and Refugees and Removal Centres for Illegal Immigrants in seven Turkish cities. This is one of the larger EU-funded architectural design projects in the country. In northern Cyprus, the year saw the start of a four-year, €2m assignment to support rural development and a project to provide publicity and promote awareness of the European Union amongst the Turkish Cypriot community.
The Western Balkans remains a core market with the region receiving extensive allocations of financial support under the EU Instrument for Pre Accession Assistance (IPA). In late 2008 the first allocations for IPA 2007 and 2008 came on-stream for four of the seven Western Balkans territories (Croatia, Serbia, Kosovo, Bosnia and Herzegovina) and the remaining three (Albania, Macedonia, Montenegro) were released in late 2009.
Substantial pipelines of projects have been identified for the next 12-18 months, with strong prospects for continuation over the next 3-5 years. Whilst to date the focus of active procurement has been in the socio-economic sector, there are also many technical projects in the pipeline which we will be pursuing. New wins include a €5m project to support Regional Development Agencies in Serbia and a €1.3m education project in Montenegro to set up a national qualifications framework. New investments include the establishment of a representative office in Serbia, and the appointment of an additional two country representatives to support business development across the region.
Commonwealth of Independent States (CIS - former Soviet Union)
The CIS remained a core business region for us and in the period saw several new projects secured with a total value of €13.4m, including two of around €5m each in Ukraine covering assistance with the World Trade Organisation (WTO) accession and reform of the judiciary. Additional wins included a prestigious regional Water Governance project in Central Asia and the organisation of a business registration "One Stop Shop" in Tajikistan.
Diversification away from the EU was achieved by winning a World Bank financial reform project in Tajikistan and a project in Uzbekistan for preparation and preliminary design of a major water and wastewater sector loan for the Asian Development Bank.
Further diversification into technical services will be actively pursued in the coming year, particularly in Kazakhstan, where WYG Kazakhstan has been registered as a legal entity and a company office opened staffed by an experienced Associate Director. Plans for the formal registration of WYG Ukraine were commenced and will be completed next year.
Middle East and Africa (MEA)
The Middle East and Africa region continued to grow with total revenues close to €10m. In the technical services field these projects included a €10m integrated transport policy and implementation project in Algeria, a project to strengthen the capacity of the energy and power sector in the Congo (generating revenues of € 660k pa), and a €3.75m project management services contract with EIB to manage the design, procurement and implementation of a €90m water and sanitation project in Damascus, Syria.
Socio-economic projects included a new €9.7m assignment providing advice and support to regional institutions in the Africa-Pacific-Caribbean (ACP) on migration, a project to support provincial development plans in the Eastern Cape province in South Africa (generating €1.47m revenues/pa) and a €20m programme aimed at improving the business environment / climate in ACP countries.
Our new MEA team was assembled to target a significant (€189m) pipeline of opportunities in the next year and beyond.
Gulf
In the Gulf, WYG Engineering opened during the year, a branch office in Abu Dhabi which the Company are using as its spearhead into this region.
People
At the end of June 2009 we employed 2,768 people compared to 3,468 people 12 months ago.
In the face of global economic recession and the changing needs of our clients, during the past year we have stated our three part strategy. This involves the streamlining of our business operations and creating 'centres of excellence'. As a result, we have undergone extensive restructuring which regrettably has meant the loss of around 700 people across the Group and around a further 100 full time equivalent reductions by introducing part-time working opportunities. The job losses were undertaken only as a last resort when all other actions had been considered or instigated in mitigation of redundancy. In some areas of the Group, where it was commercially feasible to do so, we have been able to save jobs by accommodating increased flexible working practices, operating recruitment restrictions and reducing basic salaries. We thank our people for working with our business leaders in this regard.
None of the above actions alter our commitment to retain, engage and develop our people - the lifeblood of our business. During the year we continued to deliver on this promise by embedding our 'People First' approach and equipping our people with a range of best practice tools to ensure that they can flourish, whilst continuing to deliver quality services to our clients.
The 'People First' approach involves the Group wide implementation of:
defined job families for consulting, business services and leadership
career ladders within each defined job family showing a clear path for progression
generic job profiles to underpin the career ladders and personal development plans of our people
the WYG Competency Framework which identifies the critical skills and behaviours needed to deliver the corporate brand values of being dependable, imaginative and purposeful
new staff appraisal formats incorporating the WYG Competency Framework
A key concept of 'Quality Partner' has also been introduced across the Group, which utilises the 'People First' toolkit and links it to the ongoing transformation of White Young Green plc as a discipline-led business. It is the Quality Partner's remit to ensure that consistency of high quality service continues to be delivered across all our offerings aimed at securing even more repeat business and building on the already strong reputation of the Group. The link between consistent 'best in class' service delivery leading to high levels of client satisfaction and improved employee motivation underpins our rationale to promote the 'Quality Partner' concept.
Protecting the intellectual property that our people bring to our clients and their projects continues to be the focus of all our people strategies as we remain alert to the existence of the war for talent. Continuing with this analogy, our defences remain strong. In the interest of modernising our people management approach and in order to deal compassionately with the challenges flowing out of our restructuring programme, our operational HR team was bolstered in the year by the recruitment of two additional, professionally qualified HR people. The new recruits joined their operational colleagues to assist our business leaders in the delivery of our people management interventions, harnessing complete dedication and support from all our areas of the business to ensure that our people feel engaged and supported in the face of widespread change.
In the graduate market place, whilst our intake for new graduates has reduced since last year, we have taken the decision to continue with our formal Graduate Development Programme (GDP) in order to maintain the excellent reputation we have created as a graduate employer in our sector. This includes enhancements to our existing programmes encompassing organised networking and CPD events, Executive Director work-shadowing days and investment of both time and resources in the development of the Graduate Forum - a web-based communication tool accessed by our graduates at any given time from any White Young Green plc location. Graduates continue to be supported by rotation programmes on a bespoke basis enabling them to trial a range of disciplines to ensure the right long term career choices are made. Throughout the programme, advice and guidance is provided by mentors, coaches and a dedicated graduate support team. In addition there is a range of self-directed learning opportunities together with structured, on the job training to equip our trainees with the technical, interpersonal, organisational and leadership skills needed for future careers success in White Young Green plc. We are pleased that candidates from 'the Big Idea' programme have been able to secure positions in the Group. One of these graduates is currently experiencing life in Abu Dhabi and forging her international career in the process.
The Company has accredited learning and development agreements with the following professional bodies: the Institution of Civil Engineers, Chartered Institution of Building Services Engineers, Institution of Engineers' Ireland, Royal Institution of Chartered Surveyors and Chartered Institution of Water and Environmental Management. WYG is also a recognised learning partner of the Royal Town Planning Institute and continues working towards accreditation with many others.
We continue to invest appropriately in the development of our leaders and provide professional development support by modular and personal leadership development programmes to meet the succession needs of the business. Following successful evaluation of 2008/09 programmes, we have committed to continue the support for our business leaders for the coming year, incorporating the need to deliver our three part business strategy for the coming period and to take our people with us on that journey.
Learning and development has always played an important role across the business and continues to play a high profile this year as part of the ongoing commitment to helping our people fulfil their potential and improve job satisfaction. Our Learning and Development team has been extremely active in developing as many internal training solutions as possible in the prevailing economic climate and has played a key role in promoting knowledge sharing and knowledge management across the Group.
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2009
| Before | Before | ||||||
| exceptional | Exceptional | exceptional | Exceptional | ||||
| Note | and other items | and other items | Total | and other items | and other items | Total | |
| 2009 | 2009 | 2009 | 2008 | 2008 | 2008 | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Continuing operations | |||||||
| Revenue | 4 | 261,629 | - | 261,629 | 282,108 | - | 282,108 |
| Operating expenses | (244,649) | (140,634) | (385,283) | (255,712) | (4,194) | (259,906) | |
| Operating (loss)/profit | 16,980 | (140,634) | (123,654) | 26,396 | (4,194) | 22,202 | |
| Finance costs | 5 | (4,868) | (374) | (5,242) | (5,354) | - | (5,354) |
| (Loss)/profit before tax | 12,112 | (141,008) | (128,896) | 21,042 | (4,194) | 16,848 | |
| Tax credit / (charge) | 7 | (2,912) | 3,466 | 554 | (4,969) | 2,558 | (2,411) |
| (Loss)/profit attributable to equity shareholders | 9,200 | (137,542) | (128,342) | 16,073 | (1,636) | 14,437 | |
| (Loss)/earnings per share | 8 | ||||||
| Basic | 17.6p | (263.6p) | (246.0p) | 31.6p | (3.2p) | 28.4p | |
| Diluted | 17.7p | (264.1p) | (246.4p) | 30.4p | (3.1p) | 27.3p | |
| Dividend per share | 9 | ||||||
| Interim - proposed and paid | - | - | - | 3.2p | - | 3.2p | |
| Final - proposed | - | - | - | 6.3p | - | 6.3p | |
| - | - | - | 9.5p | - | 9.5p | ||
| Paid | 6.3p | - | 6.3p | 8.6p | - | 8.6p |
Details of exceptional and other items are given in note 6.
The accompanying notes to the Accounts are an integral part of this consolidated income statement.
CONSOLIDATED BALANCE SHEET
As at 30 June 2009
| 2009 | 2008 | ||
| Note | £'000 | £'000 | |
| Non-current assets | |||
| Goodwill | 10 | 43,472 | 115,625 |
| Other intangible assets | 12,699 | 15,203 | |
| Property, plant and equipment | 13,854 | 14,517 | |
| Investments | - | - | |
| Deferred tax assets | 275 | 1,933 | |
| Derivative financial instruments | 13 | 506 | |
| 70,313 | 147,784 | ||
| Current assets | |||
| Work in progress | 11 | 41,189 | 48,041 |
| Trade and other receivables | 12 | 64,076 | 81,621 |
| Tax recoverable | 3,919 | 2,260 | |
| Cash and cash equivalents | 10,896 | 17,427 | |
| 120,080 | 149,349 | ||
| Current liabilities | |||
| Trade and other payables | (72,399) | (79,977) | |
| Current tax liabilities | (704) | (1,490) | |
| Financial liabilities | 14 | (7,298) | (1,756) |
| (80,401) | (83,223) | ||
| Net current assets | 39,679 | 66,126 | |
| Non-current liabilities | |||
| Financial liabilities | 14 | (88,946) | (83,874) |
| Retirement benefit obligation | (4,126) | (1,843) | |
| Deferred tax liabilities | (3,586) | (4,127) | |
| Provisions, liabilities and other charges | 13 | (30,056) | (3,680) |
| (126,714) | (93,524) | ||
| Net (liabilities)/assets | (16,722) | 120,386 | |
| Shareholders' equity | |||
| Share capital | 2,648 | 2,583 | |
| Share premium account | 22,324 | 21,614 | |
| Merger reserve | 17,900 | 51,599 | |
| Hedging and translation reserve | 2,985 | 5,616 | |
| Retained earnings | (62,579) | 38,974 | |
| (16,722) | 120,386 | ||
The accompanying notes to the Accounts are an integral part of this consolidated balance sheet.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2009
| 2009 | 2008 | ||
| £'000 | £'000 | ||
| Operating activities (note 16) | |||
| Cash generated from/(used in) operations | 12,454 | 30,998 | |
| Interest paid | (5,322) | (5,304) | |
| Tax paid | (435) | (4,833) | |
| Net cash generated from/(used in) operating activities | 6,697 | 20,861 | |
| Investing activities | |||
| Proceeds on disposal of property, plant and equipment | 671 | 4,247 | |
| Purchases of property, plant and equipment | (6,372) | (6,476) | |
| Purchases of businesses in prior and current years | (7,985) | (29,538) | |
| Purchases of intangible assets (computer software) | (989) | (1,409) | |
| Cash balances acquired with businesses | - | 1,643 | |
| Dividends received | - | - | |
| Net cash (used in)/generated from investing activities | (14,675) | (31,533) | |
| Financing activities | |||
| Net proceeds on issue of ordinary share capital | 775 | 192 | |
| Equity dividends paid | (3,251) | (4,364) | |
| Repayments of borrowings | (94,341) | (1,242) | |
| Draw down of loan facilities | 94,605 | 31,665 | |
| Repayments of obligations under finance leases | (1,627) | (6,519) | |
| Purchase of own shares for Employee Benefit Trust | (776) | (622) | |
| Net cash generated from/(used in) financing activities | (4,615) | 19,110 | |
| Net (decrease)/increase in cash and cash equivalents | (12,593) | 8,438 | |
| Cash and cash equivalents at beginning of year | 17,042 | 8,604 | |
| Cash and cash equivalents at end of year | 4,449 | 17,042 | |
The accompanying notes to the Accounts are an integral part of this consolidated cash flow statement.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
| 2009 | 2008 | |
| £'000 | £'000 | |
| (Loss)/profit attributable to equity shareholders | (128,342) | 14,437 |
| Net exchange adjustments offset in reserves net of tax | (2,138) | 6,102 |
| Actuarial (losses)/gains on defined benefit pension schemes | (1,449) | 584 |
| (Losses)/gains on cash flow hedges | (493) | 201 |
| Tax on items taken directly to equity | 214 | (525) |
| Total recognised income and expense for the year | (132,208) | 20,799 |
The accompanying notes to the Accounts are an integral part of this consolidated statement of recognised income and expense.
NOTES TO THE FINAL RESULTS
1. GENERAL INFORMATION
White Young Green plc is incorporated and domiciled in England, the address of its registered office is Arndale Court, Headingley, Leeds, LS6 2UJ. The company is listed on the London Stock Exchange.
The principal activity of the Group in the period under review was that of consultant to the built, natural and social environment. The Group's revenue derives from activities in Great Britain, Ireland and the Group's International division.
The financial information, which comprises the Group income statement, Group statement of recognised income and expense, Group balance sheet, Group cash flow statement and related notes, is derived from the full Group financial statements for the year ended 30 June 2009 and does not constitute full accounts within the meaning of section 434 of the Companies Act 2006. This financial information has been agreed with the auditors for release.
The Group Annual Report and Accounts for the year ended 30 June 2009 on which the auditors have given an unqualified report (but which includes emphasis of matter relating to going concern) and which does not contain a statement under section 498 of the Companies Act 2006, will be delivered to the Registrar of Companies in due course, and made available to shareholders from 10 November 2009.
2. BASIS OF PREPARATION
The accounts have been prepared in accordance with International Financial Reporting Standards ("IFRS"), International Financial Reporting Interpretations Committee ("IFRIC") interpretations endorsed by the European Union ("EU") and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. These accounts have been prepared under the historical cost convention with the exception of derivative financial instruments and share based payments which are recognised at fair value. The Group's accounting policies have been consistently applied to all the years presented, unless otherwise stated. The Group has adopted IFRS8, operating segments, in the current financial year.
The preparation of accounts in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
The Group has recorded a category for 'exceptional and other items' in the income statement in 2009. In 2008, the Group did not record any exceptional items and the 'other items' disclosed in 2008 represented the amortisation of certain acquired intangible assets and research and development tax credits relating to prior years. These other items have been excluded from the 2009 definition of exceptional items as they are recurring in nature.
Exceptional items are those that are both material and non-recurring and whose significance is sufficient to warrant separate disclosure and identification within the consolidated financial statements and are disclosed within their relevant business segment within segmental reporting. Items that may give rise to classification as exceptional items include, but are not limited to, significant and material restructuring closures and reorganisation programmes, asset impairments, and the profit or losses on the closure of offices.
3. RESTRUCTURING
As a result of the risk of potential future covenant breaches, the Company announced in February 2009 that it had entered into negotiations with its main lenders, Lloyds Banking Group plc, Fortis Bank UK Branch and The Royal Bank of Scotland plc ('the Banks'). Since June 2009, the Banks have deferred testing of the covenants, agreed on a monthly basis.
Since that time, the Company has been in extensive discussions with the Banks and has considered various means of re-balancing its capital structure and reducing the Company's level of net borrowings. The proposed restructuring involves the conversion to equity of a proportion of the Group's bank borrowings together with three year borrowing facilities. The Board believes that this debt to equity conversion and the refinanced facilities would provide a material strengthening of the Company's capital structure and financial position.
This proposed restructuring comprises:
a conditional placing of new ordinary shares to the Banks in exchange for the conversion of a proportion of the Company's outstanding bank borrowings. The new ordinary shares subject to the placing to the Banks would represent, in aggregate, approximately 60.5% of the enlarged issued share capital of the Company;
a conditional issue of unlisted preference shares, with the Banks being issued preference shares in the form of 'A' preference shares and 'B' preference shares;
the gift by the Banks to the new employee benefit trust of the new 'B' preference shares for the purpose of enabling senior executive management to benefit from the new 'B' preference shares in due course;
the new employee benefit trust acquiring new ordinary shares as would represent approximately 24.5% of the enlarged issued share capital of the company;
the refinanced facilities, including term debt and working capital facilities and bonding facilities, that would be provided by the Banks;
should the restructuring be approved by shareholders, the cancellation of the admission of the ordinary shares to the Official List and to trading on the London Stock Exchange's market for listed securities and to apply for admission to trading on AIM; and
as necessary, a conditional waiver of the requirements of Rule 9 of the City Code on Takeovers and Mergers.
As part of the proposed banking facilities the Group would be required to meet certain financial covenant tests which will be tested at quarterly intervals over the term of the facilities.
Material uncertainties
The heads of terms for the proposed restructuring are not legally binding although they have been approved by the credit committee of each Bank. Further, the Banks have agreed to defer testing of certain financial covenants until the day after the Extraordinary General Meeting relating to the proposed restructuring, or 14 December 2009, whichever is the earlier.
Whilst the heads of terms have been approved by the credit committee of each Bank, the refinanced facilities are not currently committed and there remains the risk that the Banks could seek to renegotiate the agreed heads of terms or the proposed covenants. Should any further negotiations with the Banks prove unsuccessful then the Group may have insufficient liquidity shortly thereafter and may be unable to satisfy its existing financial covenants and/or service its existing borrowings.
The provision of the refinanced banking facilities is conditional on the completion of the proposed restructuring (including the proposed conversion of part of the existing debt into equity). This requires shareholder approval at an Extraordinary General Meeting, by a majority of 75% of those shareholders attending and voting (in person or by proxy). In the event that the necessary approvals are not obtained and the relevant resolutions are not passed, the refinanced banking facilities would not be made available and the Group would be required to re-enter negotiations with the Banks. Should these further negotiations prove unsuccessful then the Group would face being unable to satisfy its financial covenants and/or service its existing borrowings.
The Board has concluded that the status of the heads of terms and the conditions relating to the proposed restructuring, including the need for the requisite shareholder approval, represent material uncertainties which may cast significant doubt on the Group's ability to continue as a going concern.
However, after considering these uncertainties and in light of the recent forecasts of the Group, the Board has a reasonable expectation that the Group will be successful in finalising the proposed restructuring and for this reason considers it to be appropriate to continue to adopt the going concern basis in preparing the financial statements. The financial statements do not include adjustments that would result if the Group was unable to continue as a going concern.
4. SEGMENTAL INFORMATION
Business segments
IFRS 8 requires segment reporting to be based on the internal financial information reported to the chief operating decision maker. The group's chief operating decision maker is deemed to be the Executive Committee comprising Paul Hamer (Chief Executive Officer), David Wilton (Group Finance Director), Graham Olver (Group Services Director), Liz Zukowski (HR Director) and the managing directors of the Business Units: John Jenkins (Engineering), Neil Parison (International), Ray Moore (Ireland), David Crichton-Miller (Environment Planning Transport) and Clive Anderson (Management Services). Its primary responsibility is to manage the group's day to day operations and analyse trading performance. The group's segments are detailed below and are those segments reported in the group's management accounts used by the Executive Committee as the primary means for analysing trading performance. The Executive Committee assesses profit performance using profit before tax measured on a basis consistent with the disclosure in the group accounts.
The Group's operations are managed and reported by Business Units as follows.
Engineering, Management Services and Environment Planning Transport are skill based, operate mainly in Great Britain and address a range of different markets and clients. There is no material reliance on specific clients or on types of project and the Business Units are actively encouraged to make best use of their own skills whilst actively promoting, where applicable, the other skills within White Young Green plc, thereby maximising the opportunity to cross-sell.
The Business Unit in Ireland, which covers both Northern Ireland and the Republic of Ireland, is set up to provide clients with skills in Engineering, Management Services and Environment, Planning and Transport. In effect, it replicates the organisational structure in Great Britain.
The International Business Unit was originally established on the back of socio-economic service demand from major clients such as the EU, World Bank and the UK Department for International Development. It has established in-country operations in Poland, Russia, Romania, Bulgaria, Turkey, Abu-Dhabi, Kazakhstan and South Africa and, in addition to its traditional socio economic service, now provides technical services into those markets utilising the skills available across the rest of the White Young Green plc business.
Segment consolidation is based on the same accounting principles as for the Group as a whole. Inter-segment sales are charged at prevailing market prices.
The segment results for the year ended 30 June 2009 are as follows:
| Environment | |||||||
| Engineering | Management Services | Planning Transport | Ireland | International | Eliminations | Group | |
| 2009 | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | |||||||
| Gross revenue | 76,573 | 28,590 | 53,817 | 52,136 | 52,832 | (2,319) | 261,629 |
| Inter-segment | (415) | (85) | (21) | (1,798) | - | 2,319 | - |
| External gross revenue | 76,158 | 28,505 | 53,796 | 50,338 | 52,832 | - | 261,629 |
| Operating profit excluding exceptional and other items | 2,079 | 3,246 | 6,334 | 3,771 | 1,550 | - | 16,980 |
| Exceptional and other items | (37,279) | (7,473) | (10,790) | (62,692) | (22,400) | - | (140,634) |
| Operating loss | (35,200) | (4,227) | (4,456) | (58,921) | (20,850) | - | (123,654) |
| Finance costs | (5,242) | ||||||
| Loss before tax | (128,896) | ||||||
| Tax | 554 | ||||||
| Loss attributable to equity shareholders | (128,342) | ||||||
| Other information | |||||||
| Additions to property, plant and equipment and intangible assets | 2,450 | 743 | 1,435 | 1,607 | 1,684 | - | 7,919 |
| Depreciation and amortisation | 3,144 | 1,037 | 2,063 | 2,948 | 1,314 | - | 10,506 |
| Engineering | Management Services | Environment Planning Transport | Ireland | International | Eliminations | Group | |
| 2009 | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance sheet | |||||||
| Assets | |||||||
| Segment assets | 27,673 | 24,531 | 48,023 | 42,701 | 43,498 | - | 186,426 |
| Unallocated corporate assets | 5,427 | ||||||
| Group total assets | 191,853 | ||||||
| Liabilities | |||||||
| Segment liabilities | (30,194) | (8,270) | (13,555) | (22,799) | (37,969) | - | (112,787) |
| Unallocated corporate liabilities | (95,788) | ||||||
| Group total liabilities | (208,575) |
The segment results for the year ended 30 June 2008 are as follows:
| Environment | |||||||
| Engineering | ManagementServices | Planning Transport | Ireland | International | Eliminations | Group | |
| 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | |||||||
| Gross revenue | 97,459 | 35,373 | 55,791 | 53,646 | 45,506 | (5,667) | 282,108 |
| Inter-segment | (2,668) | (821) | (518) | (1,660) | - | 5,667 | - |
| External net revenue | 94,791 | 34,552 | 55,273 | 51,986 | 45,506 | - | 282,108 |
| Operating profit excluding exceptional and other items | 5,277 | 4,238 | 7,921 | 6,878 | 2,082 | - | 26,396 |
| Exceptional and other items | (802) | (478) | (1,280) | (1,506) | (128) | - | (4,194) |
| Operating profit | 4,475 | 3,760 | 6,641 | 5,372 | 1,954 | - | 22,202 |
| Finance costs | (5,354) | ||||||
| Profit before tax | 16,848 | ||||||
| Tax | (2,411) | ||||||
| Profit attributable to equity shareholders | 14,437 | ||||||
| Other information | |||||||
| Additions to property, plant and equipment and intangible assets | 5,382 | 1,553 | 3,425 | 847 | 658 | 11,865 | |
| Depreciation and amortisation | 3,308 | 954 | 2,105 | 2,890 | 644 | - | 9,901 |
| Management | Environment | ||||||
| Engineering | Services | Planning Transport | Ireland | International | Eliminations | Group | |
| 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance sheet | |||||||
| Assets | |||||||
| Segment assets | 62,876 | 33,132 | 57,673 | 91,722 | 47,526 | 292,929 | |
| Unallocated corporate assets | 4,204 | ||||||
| Group total assets | 297,133 | ||||||
| Liabilities | |||||||
| Segment liabilities | (31,111) | (7,596) | (11,205) | (14,714) | (25,952) | (90,578) | |
| Unallocated corporate liabilities | (86,169) | ||||||
| Group total liabilities | (176,747) |
5. FINANCE COSTS
| 2009 | 2008 | |
| £'000 | £'000 | |
| Interest on bank loans, guarantees and overdrafts | 4,731 | 4,593 |
| Interest on obligations under finance leases | 138 | 356 |
| Interest on loan notes | 3 | 46 |
| Interest on defined benefit scheme liabilities | 370 | 359 |
| 5,242 | 5,354 |
6. EXCEPTIONAL AND OTHER ITEMS
| 2009 | 2008 | |
| £'000 | £'000 | |
| Employee termination costs | 8,968 | - |
| Office closure costs | 20,602 | - |
| Work in progress and trade receivables provisions | 20,547 | - |
| Professional indemnity claim provisions | 5,650 | - |
| Professional fees | 3,440 | - |
| Impairment of goodwill | 77,184 | - |
| Other restructuring costs | 2,013 | - |
| Finance costs | 374 | - |
| Exceptional items | 138,778 | - |
| Amortisation of acquired intangible assets | 2,230 | 4,194 |
| Exceptional and other items | 141,008 | 4,194 |
White Young Green plc has incurred significant exceptional costs in the financial year. These exceptional costs arose predominantly from the restructuring of the Group, and relate to redundancies and office closure costs, the write down of work in progress and trade receivables balances, prospective offer costs, fees arising on the refinancing, the impairment of goodwill and other general restructuring costs.
The Board has implemented measures to reduce headcount in the financial year. These headcount reductions have been across the entire Group, but concentrated in the Engineering and Irish Business Units.
White Young Green plc has announced the closure of 17 regional offices in the UK and Republic of Ireland. A provision of £17.2m has been made as an exceptional cost in respect of vacant leasehold charges primarily made up of rent, rates and service charges payable by the Group over the remaining lease terms on vacated properties. The Group is actively seeking to sub-let these properties. In addition, the Group has provided £0.7m in respect of on-going cost obligations in closed locations and £2.7m for asset write offs.
When the half year results were announced on 25 February 2009, the Group reported an exceptional charge of £8m in respect of a provision against work in progress and trade receivables following a review of such balances. At the year end a further review was undertaken as part of the overall review of the Business Unit balance sheets and the Board now considers it necessary to provide a further £12.5m in respect of such balances. This review covered all receivable balances and was undertaken in the context of current market conditions and the Group restructuring. Where appropriate, efforts will be made to recover as much of these balances as possible.
The group's professional indemnity claim provision has been assessed on the likely scale of settlement payable by the group. The amounts classified as exceptional items include those costs that cover the insurance deductible payable on all outstanding claims.
The Group has incurred significant professional costs in connection with the refinancing. These costs are treated as exceptional.
The Group has reviewed the value of the goodwill arising upon past acquisitions carried on its balance sheets. Following this review, the Group has reduced the value of goodwill carried on the balance sheet in respect of all the Business Units. This impairment charge is an accounting matter and does not represent a cash cost.
Amortisation of acquired intangibles was classified as 'Other items' on the Income Statement last year. This year it has been included in exceptional and 'other' items.
7. TAX
| 2009 | 2008 | |
| £'000 | £'000 | |
| Current tax: | ||
| UK corporation tax on profits for the year at 28% (2008: 29.5%) | (2,206) | 3,479 |
| Adjustments in respect of prior years | - | (2,081) |
| Overseas tax on profits for the year | 335 | 1,289 |
| (1,871) | 2,687 | |
| Deferred tax: | ||
| Movement in deferred tax | 1,317 | (276) |
| (554) | 2,411 | |
| Tax on items charged to equity: | ||
| Deferred tax (charge)/credit related to share-based payments | (192) | (361) |
| Deferred tax (charge)/credit related to the actuarial gains and losses on retirement benefit schemes | 406 | (164) |
| 214 | (525) |
Tax for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
Factors Affecting the Current Tax Charge for the Year
The tax charge for the year is lower (2008: lower) than the standard rate of corporation tax in the UK when applied to reported profit. The differences are explained below:
| 2009 | 2008 | |
| £'000 | £'000 | |
| (Loss)/profit before tax | (128,896) | 16,848 |
| (Loss)/profit before tax multiplied by the standard rate of UK corporation tax rate of 28% (2008: 29.5%) | (36,089) | 4,970 |
| Expenses not deductible for tax purposes | 4,563 | 290 |
| Non-deductible acquired assets amortisation | 17,526 | 1,237 |
| Adjustments in respect of prior years | - | (2,081) |
| Enhanced expenditure | (428) | - |
| Fixed asset timing differences | 781 | - |
| Losses carried forward | 9,706 | - |
| Other temporary differences | (306) | (1,014) |
| Effect of different tax rates of subsidiaries operating in other jurisdictions | 2,376 | (715) |
| Total current tax (credit)/charge | (1,871) | 2,687 |
| Current year deferred tax - on amortisation of acquired intangibles | (505) | (1,163) |
| Current year deferred tax - other | 1,822 | 887 |
| Total tax (credit)/charge | (554) | 2,411 |
8. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
| 2009 | 2008 | |
| £'000 | £'000 | |
| Earnings for the purposes of basic and diluted earnings per share being profit for the year | (128,342) | 14,437 |
| Adjustment relating to exceptional items | 137,542 | 1,636 |
| Earnings for the purposes of basic and diluted adjusted earnings per share | 9,200 | 16,073 |
| 2009 | 2008 | |
| Number | Number | |
| Number of shares | ||
| Weighted average number of shares for basic earnings per share | 52,169,867 | 50,902,193 |
| Effect of dilutive potential ordinary shares: | ||
| Share options | (92,318) | 112,460 |
| Shares to be issued in respect of acquisitions | - | 1,892,929 |
| Weighted average number of shares for diluted earnings per share | 52,077,549 | 52,907,582 |
| Earnings per share | ||
| Basic | (246.0p) | 28.4p |
| Diluted | (246.4p) | 27.3p |
| Adjusted earnings per share | ||
| Basic | 17.6p | 31.6p |
| Diluted | 17.7p | 30.4p |
9. DIVIDENDS
| 2009 | 2008 | |
| £'000 | £'000 | |
| Amounts recognised as distributions to equity holders in the year: | ||
| Final dividend for the year ended 30 June 2008 of 6.3p (2007: 5.4p) per share | 3,251 | 2,713 |
| Interim dividend for the year ended 30 June 2009 of nil (2008: 3.2p) per share | - | 1,651 |
| 3,251 | 4,364 | |
| Proposed final dividend for the year ended 30 June 2009 of nil (2008: 6.3p) per share | - | 3,251 |
10. GOODWILL
| £'000 | |
| Cost | |
| At 1 July 2007 | 81,122 |
| Exchange differences | 4,991 |
| Recognised on acquisition of businesses - current year | 29,409 |
| Recognised on acquisition of businesses - prior year | 103 |
| At 1 July 2008 | 115,625 |
| Exchange differences | 3,220 |
| Recognised on acquisition of businesses - prior year | 1,811 |
| At 30 June 2009 | 120,656 |
| Accumulated impairment losses | |
| At 1 July 2007, 1 July 2008 | - |
| Impairment charge | (77,184) |
| Accumulated impairment losses at 30 June 2009 | (77,184) |
| Net book value | |
| At 30 June 2009 | 43,472 |
| At 30 June 2008 | 115,625 |
Goodwill is tested for impairment annually and whenever there are indications that it may have suffered an impairment. Goodwill is considered impaired to the extent that its carrying amount exceeds its recoverable amount, which is the higher of the value in use and the fair value less costs to sell of the cash generating unit (CGU) to which it is allocated. In the impairment tests of goodwill performed in 2009, the recoverable amount was determined based on the value in use calculations.
Management based the value in use calculations on cash flow forecasts derived from the most recent three year financial plans approved by the Board, including certain sensitivities in which the principal assumptions were those regarding sales growth and changes in direct costs.
Cash flows for the years beyond the three year financial plans for the CGUs to which significant amounts of goodwill were allocated were calculated as follows: cashflows in the fourth and fifth years and those thereafter were projected to grow at 2% per annum which does not exceed the long term growth rates in the principal end markets in the UK, Republic of Ireland and Europe.
Management applied discount rates to the resulting cashflow projections that reflect current market assessments of the time. Pre tax discount rates used in the annual impairment were 14%
During the financial period, impairments totalling £77,184,000 were recognised in relation to the goodwill allocated across all CGUs.
In all CGUs there has been a deterioration in the markets which caused the impairment of £14,421,000 in International, £17,423,000 in Engineering, £2,592,000 in EPT, £2,394,000 in Management Services and £40,354,000 in Ireland.
Management has assessed the sensitivity of the recoverable amounts to key assumptions to be as follows: a one percentage point increase in the pre-tax discount rate of 14% would reduce the recoverable amount by £6.2m; a one percentage point fall in operating margin across all BUs would reduce the recoverable amount by £17.1m; and a one percentage point fall in the assumed long term growth rate of 2% would reduce the recoverable amount by £4.5m.
11. WORK-IN-PROGRESS
| | | |
| | 2009 | 2008 |
| | £’000 | £’000 |
| Work-in-progress | 55,255 | 48,751 |
| Provision | (14,066) | (710) |
| Net work-in-progress | 41,189 | 48,041 |
The value of work in progress comprises the costs incurred on a contract plus an appropriate proportion of overheads and attributable profit. Profit is recognised on a percentage completion basis when the outcome of a contract or project can be reasonably foreseen. Provision is made in full for estimated losses.
12. TRADE AND OTHER RECEIVABLES
| 2009 | 2008 | |
| £'000 | £'000 | |
| Amounts falling due within one year | ||
| Amounts receivable on contracts | 66,627 | 76,897 |
| Less: provision for impairment of trade receivables | (9,178) | (3,486) |
| Trade receivables - net | 57,449 | 73,411 |
| Prepayments and accrued income | 3,896 | 4,621 |
| Amounts owed by subsidiary undertakings | - | - |
| Other receivables | 2,731 | 3,589 |
| 64,076 | 81,621 | |
13. PROVISIONS, LIABILITIES AND OTHER CHARGES
| Claims | Redundancy | Vacant Leasehold | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| At June 2007 | 2,785 | - | - | 2,785 |
| Additional provisions | 1,896 | - | - | 1,896 |
| Utilised during the year | (1,001) | - | - | (1,001) |
| At June 2008 | 3,680 | - | - | 3,680 |
| Additional provisions | 8,626 | 8,968 | 17,210 | 34,804 |
| Utilised during the year | (2,731) | (5,697) | - | (8,428) |
| At June 2009 | 9,575 | 3,271 | 17,210 | 30,056 |
Professional indemnity claims
Provisions are made for current and estimated obligations in respect of claims made by contractors and the general public relating to accident or other insurable risks as a result of the business activities of the Group. These include claims held by the Group's captive insurance company, Oakdale Insurance Company Limited. In the prior year accounts the provision for professional indemnity claims was presented within accruals as the liability was not considered significant for separate disclosure.
Redundancy
Provision is made for current estimated future costs of redundancy and ex gratia payments to be made where this has been communicated to those employees concerned.
Vacant properties
The group has a number of vacant leasehold properties, with the majority of the head leases expiring within the next five years. Provision has been made for the residual lease commitments together with other outgoings, after taking into account potential sub-tenant arrangements and assumptions relating to later periods of vacancy.
14. FINANCIAL LIABILITIES
| 2009 | 2008 | |
| £'000 | £'000 | |
| Current | ||
| Bank overdrafts | 6,447 | 385 |
| Obligations under finance leases | 851 | 1,131 |
| Loan notes | - | 240 |
| 7,298 | 1,756 | |
| Non-current | ||
| Bank loans | 88,485 | 82,592 |
| Obligations under finance leases | 461 | 1,282 |
| 88,946 | 83,874 | |
| Financial liabilities are repayable as follows: | ||
| On demand or within one year | 7,298 | 1,756 |
| In the second year | 431 | 807 |
| In the third to fifth years inclusive | 88,515 | 83,067 |
| 96,244 | 85,630 | |
15. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
| 2009 | 2008 | |
| £'000 | £'000 | |
| (Loss)/profit attributable to equity shareholders | (128,342) | 14,437 |
| Net exchange adjustments offset in reserves net of tax | (2,138) | 6,102 |
| Actuarial (losses)/gains on defined benefit pension schemes | (1,449) | 584 |
| (Loss)/gains on cash flow hedges | (493) | 201 |
| Share-based payments | (2,424) | (242) |
| New share capital issued, net of expenses | 775 | 15,264 |
| Tax on items taken directly to equity | 214 | (525) |
| Equity dividends paid | (3,251) | (4,364) |
| Net (reduction from)/addition to shareholders' equity | (137,108) | 31,457 |
| Equity attributable to equity shareholders at beginning of year | 120,386 | 88,929 |
| (Deficit)/equity attributable to equity shareholders at end of year | (16,722) | 120,386 |
16. CASH GENERATED FROM OPERATIONS
| 2009 | 2008 | |
| £'000 | £'000 | |
| (Loss)/profit from operations | (123,654) | 22,202 |
| Adjustments for: | ||
| Depreciation of property, plant and equipment | 6,977 | 4,652 |
| Amortisation of intangible assets | 3,529 | 5,249 |
| Impairment of goodwill/investments | 77,184 | - |
| (Profit)/loss on disposal of property, plant and equipment | 201 | (858) |
| Share options (credit)/charge | (1,648) | 1,214 |
| Operating cash flows before movements in working capital | (37,411) | 32,459 |
| Decrease/(increase) in inventories | 8,818 | (4,666) |
| Decrease/(increase) in receivables | 22,267 | (5,648) |
| Increase in payables | 18,780 | 8,853 |
| Cash generated from/(used in) operations | 12,454 | 30,998 |
| Interest paid | (5,322) | (5,304) |
| Tax paid | (435) | (4,833) |
| Net cash generated from/(used in) operating activities | 6,697 | 20,861 |
17. ANALYSIS OF CHANGES IN NET DEBT
| At | Other | At | |||
| 1 July | Cash | non-cash | 30 June | ||
| 2008 | flows | Acquisitions | items | 2009 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Cash and cash equivalents | 17,427 | (6,531) | - | - | 10,896 |
| Bank overdrafts | (385) | (6,062) | - | - | (6,447) |
| Bank loans due after one year | (82,592) | (504) | - | (5,389) | (88,485) |
| Loan notes due within one year | (240) | 240 | - | - | - |
| Finance leases and hire purchase contracts | (2,413) | 1,627 | - | (526) | (1,312) |
| (68,203) | (11,230) | - | (5,915) | (85,348) | |
| Add back cash in restricted access accounts | (3,412) | 52 | - | - | (3,360) |
| (71,615) | (11,178) | - | (5,915) | (88,708) |
The net debt has been restated to show the Oakdale and restricted WYG International balances.
Other non-cash movements represent currency exchange differences and finance lease creditor movements.
18. RELATED PARTY TRANSACTIONS
There have been no changes in the nature of related party transactions as described in the 2008 Annual Report and Accounts and there have been no new related party transactions disclosed in the 2009 Annual Report and Accounts which have had a material effect on the financial position or performance of the group in the year ended 30 June 2009.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
In accordance with Rule 4.1.12 of the Disclosure and Transparency Rules, the following responsibility statement is given by each of the directors: namely Mike McTighe, Non Executive Chairman; Paul Hamer, Chief Executive Officer; David Wilton, Group Finance Director; Graham Olver, Group Services Director and Company Secretary; Robert Barr, Non Executive Director and John Richardson, Non Executive Director. The directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the accounts in accordance with applicable law and regulations.
Company law requires the directors to prepare accounts for each financial year. Under that law the directors have prepared the Group and Parent Company accounts in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. Under Company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.
In preparing those accounts, the directors are required to:
Each of the directors, whose names and functions are listed above, confirm that to the best of their knowledge, the Group financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and the Directors' Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the accounts and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group accounts, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Annual Report and Accounts will be published on the Group's website. The maintenance and integrity of the Group's website is the responsibility of the directors. The work carried out by the auditors does not include consideration of these matters. Legislation in the UK governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.