27 Sep 2010 07:00
WYG plc
27 September 2010
Results for the year ended 30 June 2010
WYG plc ("WYG" or the "Group")
WYG, the global infrastructure and advisory services specialist, announces its results for the year ended 30 June 2010.
Operational summary:
·; Year of great change at WYG: good progress in implementing the three-part strategy
·; Refinancing completed to provide a more robust financial platform for the future development of the Group
·; Comprehensive strategic review: operations reshaped from a geographic business unit structure to one based on capability such that each area of activity is managed on a global basis
·; Divestment of UK rail business
·; New Commercial Development & Operations Process developed
·; Growth in international revenue and development of global business
·; UK and Irish markets remain very challenging
Financial summary:
·; Decrease in revenue to £220.6m (2009: £261.6m)
·; Adjusted operating profit of £7.2m* (2009: £17.0m)
·; Net debt of £33.9m (2009: £85.3m before the refinancing) reflecting strong cash generation through improved working capital management
·; Decrease in adjusted profit before tax to £2.0m* (2009: £12.1m)
·; International revenue increased to £65.3m (2009: £52.8m) - order book stands at £75.5m
·; Decrease in net order book to £215m at 30 June 2010 (2009: £260m)
·; Exceptional and other items charge of £23.8m in respect of redundancies and office closure costs, the further write down of WIP and trade receivable balances in Ireland, the write off of a significant investment in the management information systems upgrade and the impairment of goodwill
·; Loss before tax of £21.9m (2009: £128.9m)
·; Loss per share of 31p (2009: 223.6p)
* Adjusted operating profit is operating profit before exceptional and other items. Adjusted profit before tax is profit before tax before exceptional and other items.
For further information, please contact:
WYG plc
Paul Hamer, Chief Executive Officer
David Wilton, Group Finance Director Tel: 0113 278 7111
Arbuthnot Securities (Nomad & Broker)
Nick Tulloch/Ed Gay Tel: 0207 012 2100
Chairman's Statement
This year was one of great change at WYG. A major capital restructuring was successfully completed, the future strategic direction and organisation of the Group was established and costs were significantly reduced in response to the very difficult market conditions in the UK and Ireland. Good progress was made in implementing the three-part strategy which we embarked on in January 2009. This focuses on creating a more efficient business structure that is fit for purpose, globalises our core capabilities and creates "peaks of excellence" in our chosen markets and geographies.
Against this background, Group revenue reduced from £261.6m to £220.6m and operating profit before exceptional and other items from £17.0m to £7.2m. Cash generation, however has been strong.
The global markets in which we operate have proved more resilient than some of our domestic markets and I am pleased to report that international revenue has grown by £12.6m to £65.4m.
Refinancing
In January 2010, shareholders approved the terms of a fundamental refinancing of the Group. Under the terms of the refinancing approximately £52.9m of the Group's indebtedness was converted into new ordinary and preference shares. We agreed a new three year £58.25m debt facility with our lenders and a €38.0m committed bonding facility to support our international business. This is a more robust and stable financial platform for the future development of the Group.
The Board recognises that WYG's business is founded on the talent and commitment of our employees who continue to work with clients to deliver exceptional standards of client service. Therefore an important element of the refinancing was the allocation of 24.5% of the ordinary shares to an employee benefit trust to reward and incentivise existing and future staff. I am pleased to report that all employees who were employed on permanent contracts at the time of our refinancing were eligible to participate in the new incentive scheme.
As a consequence of the refinancing, which reduced the proportion of shares in public hands, WYG's shares are now traded on AIM rather than the Official List of the London Stock Exchange. Given the current position of the Company, the Board takes the view that the reduced costs and increased flexibility associated with trading on AIM make it a more appropriate market for WYG's shares.
Strategic Review
A comprehensive strategic review was conducted in the year. This highlighted a number of areas where we can build on our strong market position and some new areas where we have the skills and resources to attain a substantial place in the market. To do this we began the process of reshaping our operations away from a geographic business unit structure to one based on capability such that each area of activity is managed on a global basis. This process is now substantially complete and is providing a catalyst across the Group to stimulate increased international collaboration. Our ambition is that the Group operates in a seamless and "boundary-less" manner on a global platform across all our operations to meet the needs and ambitions of our clients.
Going forward, the business will be focused and report in four key market segments, namely;
·; Buildings & Critical Infrastructure
·; Transport Solutions
·; Energy, Sustainability & Environment and
·; Risk & Assurance Services
During the financial year steps were taken to reduce capacity and costs having regard to prevailing market conditions. Employee numbers reduced by 620 net during the year.
The strategic review also highlighted a number of opportunities for us to operate more efficiently from fewer office locations, with fewer indirect staff and to de-risk the business further. Following the year end therefore, we have also initiated a programme to rationalise our UK property portfolio and reduce the ratio of indirect to direct staff in line with sector and industry norms to create a more competitive and flexible cost base.
On 30 June 2010 we completed the transfer of our rail business to Amey for a nominal consideration. We were a relatively small operator in this market and the Board concluded that the core UK railway engineering industry was not an area of strategic focus for us going forward.
As part of the strategic review we established our Commercial Development & Operations Process (CDOP). This is a framework that supports business operations over the entire lifespan of a project from opportunity through to learning from experience. It is designed to ensure that we deliver value-for-money, quality services and we target our resources and manage professional and contractual risk more effectively.
Finally, we changed the Company's name from White Young Green plc to WYG plc on 18 December 2009 to align the name and branding of the Company with the other companies in the Group.
Building on Client Success
As trusted partners to our clients, our dedicated professionals provide in-depth expertise to deliver solutions to some of our markets' most sophisticated assignments and are committed to improving the quality of the built, natural and social environment.
In the year, we won a four-year, €15.3 million project that builds on a previously secured €15.1m project to restore and upgrade the transport, environment and energy infrastructure across the Western Balkans. These two projects now represent WYG International's largest ever single programme of work.
In addition, we have opened overseas offices in Bosnia and Herzegovina, a subsidiary company in Croatia and we expect to form a further subsidiary company in South Africa soon to support our growth in these countries.
Although domestic markets have been and remain very challenging, we continue to maintain and grow strong relationships with our domestic clients. Earlier this year, we were appointed by the Ministry of Defence to provide professional and technical support services for property and construction projects under a four-year framework.
During the year our people and work have been recognised with some major awards including awards from the Institution of Civil Engineers, BREEAM (BRE Environmental Assessment Method) and the Royal Institute of British Architects Award 2010.
Board
On 31 July 2009, my appointment as Chairman of the Board was announced, as was Graham Olver's appointment as Group Services Director and Company Secretary, both with effect from 3 August 2009. Robert Barr was appointed Senior Independent Non Executive Director. Brian Duckworth stepped down as Chairman and left the Board on 3 August 2009 and John Richardson, having indicated his intention to retire, delayed his retirement until 31 January 2010 to support completion of the refinancing. I would like to thank Brian and John for their service with WYG. David Jeffcoat was appointed to the Board on 16 December 2009 and is the new Chairman of the Audit & Risk Committee.
Outlook
Whilst we expect our domestic market to remain very challenging and unpredictable for the foreseeable future, we are encouraged by the way in which some important international markets for our services are holding up and this should partially mitigate the effect of the difficulties in the UK and Irish markets. Looking ahead, our ambition is to continue on our journey which will see us offering technical expertise across global markets and to capture market share by delivering technical excellence to our existing and new clients in each of our chosen markets. It is a critical thread of our three-part strategy to leverage our international position to create greater geographical and end-market diversity, particularly across the international private sector.
Although I am pleased with the progress made during the year to reshape the Group so that it continues to successfully compete on a global platform, I expect ongoing focus on cost and structural efficiency over the next 12 months. The much awaited outcome of both the comprehensive spending review and the strategic defence spending review continues to induce paralysis across both the public and private sector markets. The likelihood therefore is that, despite our international success, the short-term future will remain very challenging for the Group.
Mike McTighe
Chairman
27 September 2010
Business Review
The Business Review has been prepared by the Board for the members of WYG to provide a summary of the performance and financial position of the Group in the year to 30 June 2010 and the underlying trends and factors which are likely to affect future performance.
Operational Performance - Overview
The Group successfully completed its refinancing on 8 January 2010 which has created a three year financial platform from which the Board can build a sustainable and robust business model that is operationally structured to optimise both core technical and socio-economic skills across chosen geographical markets.
Since refinancing, the Board set out to restructure the Group to underpin further its three-part strategy. At the heart of the restructuring, the Board is focused on de-risking the business to create a flexible and competitive operating cost base.
Trading conditions in many of the Group's domestic markets were generally challenging during the financial year and there remains ongoing uncertainty around UK public sector spending. The Group therefore continues to focus on optimizing performance across our established international operating businesses.
WYG Management Services and WYG Environment Planning Transport traded broadly in line with Board expectations during the financial year. WYG International performed strongly with significant new appointments being gained during the year and its results were ahead of Board expectations. This international performance is at the heart of the Group's three-part strategy and the Board will continue to build on this success going forward. Within WYG Engineering, the buildings business traded in line with expectations but the UK rail business performed relatively poorly and this business was divested on 30 June 2010. Market conditions in Ireland continued to deteriorate during the first half of the calendar year and, as a result, the financial performance of WYG Ireland was significantly behind Board expectations.
The Group has enhanced its working capital management procedures and has made considerable progress in the area of credit control where cash generation is significantly ahead of expectations and working capital levels are markedly improved from the past.
As part of the Group's ongoing restructuring and de-risking process, a number of key strategic decisions were taken in the period, particularly around the Republic of Ireland and Engineering businesses, resulting in the Group incurring substantial exceptional costs during the financial year. Decisions like these are never easy and resulted in 620 net headcount reduction across the Group during the year. Going forward, further improvements to the operating cost base will be generated through a focussed programme of UK office consolidations and additional service efficiency gains. These steps will result in further exceptional costs in the year to come.
With our three year finance facility in place, we also reviewed our business information system requirements and during the year took the difficult decision to mothball the management information systems upgrade initiative that commenced in December 2007. After a thorough review we decided it was no longer proportionate to the shape and structure of the Group's operation. Instead we are developing our information system based on the current platforms and the Board is confident that the system can be significantly enhanced at a reasonably modest cost and relatively low implementation risk.
Financial Performance
In the year to 30 June 2010, gross revenue decreased by 16% to £220.6m (2009: £261.6m). Revenue attributable to third parties, on which we do not make a margin, decreased to £27.6m (2009: £47.7m). Net revenue, which reflects the value of the work done by our own people, decreased by 10% to £193m (2009: £213.9m).
The profit performance continues to reflect the challenging market conditions in the majority of the Group's markets and the ongoing restructuring of the Group. Operating profit before exceptional and other items, decreased by 58% to £7.2m (2009: £17.0m).
The operating loss after exceptional and other items was £10.2m (2009: £123.7m). The operating margin on net revenue before exceptional and other items was 3.2% (2009: 6.5%). Profit before taxation and before exceptional and other items was £2.0m (2009: £12.1m). Exceptional and other items were £23.8m (2009: £141.0m).
Basic earnings per share were 4.6p (2009: restated 16p) adjusted for the exceptional and other items referred to above. Cash generated from operations was £9.5m (2009: £12.5m) and represents 133% (2009: 73%) of operating profit before exceptional and other items.
Net debt at the year end was £33.9m. This figure is stated after the refinancing which was completed on 8 January 2010 and hence it is difficult to compare with the prior year. The proforma balance sheet published with the interim results for the six months to 31 December 2009 on 25 February 2010 disclosed a proforma net debt figure of £38.1m. Bearing in mind that the Group incurred cash costs of c£6.5m in aggregate in respect of professional and other fees paid after completion of the refinancing, the year end net debt figure reflects a strong cash performance and is significantly ahead of expectations. Net debt excluding cash balances held within our captive insurance company and restricted cash balances held predominantly within the international business unit was £36.6m.
The order book now stands at £215m (2009: £260m).
Dividend
No final dividend is proposed.
Strategy
The Board introduced the Group's three-part strategy in January 2009 to:
1. create a more focused and efficient business
2. globalise the Group and
3. create "peaks of excellence" across critical and sustainable sectors
Good progress has been made on all three fronts but particularly on internationalising the Group. Traditionally WYG's international presence was focused on providing programme management and policy advice to countries and communities impacted by social issues, environmental emergencies, ethnic strife and political turmoil. WYG helps to stabilize and improve living conditions in impoverished regions and establish basic human infrastructure services.
Since the introduction of the Group's three-part strategy, the objective has been to build on the traditional international service lines by enhancing technical capabilities. Revenue generated overseas has been encouraging as the global markets in which the Group operates have proved more resilient than some domestic markets.
The Board intends to continue building on the Group's existing operations in key countries to optimise global opportunities while concentrating on being "best in class" in our chosen markets.
The Group has restructured its internal operations into capabilities in order to match our expertise to the best opportunities regardless of geography; this has removed duplication of effort and provided leadership that can enhance technical excellence and client delivery. Further reshaping will be required as we continue our rationalisation and consolidate our offices and enhance our ability to operate from super-centres that operate more collaboratively across the global arena.
Employees
At our heart we are a people business and as we move through the implementation of our three-part strategy we acknowledge that we have to retain our talented professionals and help them find fulfilling work. We also want to provide the means for them to deliver their skills and knowledge to add value for our clients.
At the end of June 2010 we employed 2,148 permanent employees compared to 2,768 twelve months ago. This net reduction masks the investment in a number of growing business areas. The transfer of around 100 colleagues to Amey from our UK rail business and the reduction of non fee-earning staff in other parts of the business where we sought to improve efficiency are included in this figure.
Whilst the financial year proved challenging with domestic operational streamlining taking place we have focused on maintaining a positive employment climate and will continue to recruit selectively and to develop the skills of individuals and the new capability areas within the Group as a whole.
Exceptional and Other Items
The Group incurred substantial exceptional costs in the financial year. These arose predominantly from the restructure of the Group and related to redundancies, fees arising on the refinancing and office closure costs, the further write down of WIP and trade receivables balances in Ireland as this part of the business was restructured, the write-off of the significant investment in the management information systems upgrade and the impairment of goodwill. The exceptional costs were partially offset by the gain recognised on the conversion of debt to equity as part of the restructuring. A significant element of the exceptional and other items did not represent a cash cost in the financial year. Other items relate to the amortisation of customer relationship and order book intangible assets. The exceptional and other items are summarised below:
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Employee termination costs | 4,705 | 8,968 |
| Office closure costs | 3,457 | 20,602 |
| Work in progress and trade receivables provisions | 7,291 | 20,547 |
| Professional indemnity claim provisions | - | 5,650 |
| Professional fees | - | 3,440 |
| Impairment of goodwill | 6,920 | 77,184 |
| Impairment of management information system | 7,963 | - |
| Gain on debt restructuring | (14,854) | - |
| Other restructuring costs | 259 | 2,013 |
| Transaction fees | 6,524 | 374 |
| Exceptional items | 22,265 | 138,778 |
| Amortisation of acquired intangible assets | 1,574 | 2,230 |
| Exceptional and other items | 23,839 | 141,008 |
Operating performance by Business Unit
WYG Engineering
WYG Engineering, consisting of consultancy services in buildings and infrastructure, rail, highways and the specialist structural engineering firm of Adams Kara Taylor (AKT) is a service provider in the fields of civil and structural; mechanical and electrical; flood and drainage; highways and utility design. These services deliver design solutions for new, revamped or upgraded buildings, developments, infrastructure and other facilities, such as energy generation or recycling facilities.
Over the year ending June 30, 2010, gross revenue decreased by 30% to £53.2m (2009: £76.2m), net revenue decreased by 30% to £48.4m (2009: £69.3m) and operating profit before exceptional and other items reduced by 31% to £1.4m (2009: £2.1m). Operating margin on net revenue remained unchanged at 3%.
Against this backdrop, the management team has acted in restructuring the business. Greater emphasis has been placed on reducing debtors and aged debtor levels and in making efficiency improvements to our working practices.
We continue to work on many high profile projects, a number of which have won prestigious awards, including:
·; the UK Pavilion at the World Expo 2010 in Shanghai by Heatherwick Studio and AKT won the Royal Institute of British Architects' (RIBA) prestigious RIBA Lubetkin Prize for the most outstanding work of international architecture
·; Institution of Civil Engineers (ICE) Award 2010 for Sheffield storm damage sites scheme
·; The RIBA Awards 2010 for Newcastle City Library, Great North Museum and Teesside Infinity Bridge projects and
·; the Institution of Structural Engineers National Award 2009 for Manchester's City Tower and Piccadilly Plaza projects
WYG Environment Planning Transport (EPT)
Our environmental, planning and transport planning activities are largely focused on serving the early permission stages of site or project development (in contrast to the subsequent construction stages) and we provide a broad range of services to this market. Our business has a mix of clients, encompassing all the sectors that typically are involved in seeking to extend or change the use of land - including commercial and residential real estate developers, energy producers, manufacturers, retailers, public sector landlords, such as local, police and health authorities, and major central governmental departments, such as Defence Estates and Her Majesty's Courts Service.
Over the year ending June 30, 2010, gross revenue decreased by 15% to £45.5m (2009: £53.8m), net revenue decreased by 17% to £37.8m (2009: £45.6m) and operating profit before exceptional and other items reduced by 48% to £3.3m (2009: £6.3m). Operating margin on net revenue fell to 9% (2009: 14%) largely as a result of low utilisation in those disciplines that experienced reduced levels of work.
Nevertheless, despite a challenging economy, EPT's consultants have contributed to some of the most significant schemes and developments within our industry sectors over the last year, illustrating the depth of expertise and experience within our business.
WYG Management Services
Our Management Services business is the project management, property management, cost consultancy and safety management discipline of the Group. We experienced challenging trading during the period with the extended recessionary period affecting most of our sectors. We took action to align our cost base and this included reducing our headcount and property portfolio to reflect the anticipated reduction in revenue in our domestic markets.
Over the year ending June 30, 2010, gross revenue decreased by 13% to £24.9m (2009: £28.5m), net revenue decreased by 19% to £19.7m (2009: £24.3m) and operating profit before exceptional and other items reduced by 60% to £1.3m (2009: £3.2m). Operating margin on net revenue fell to 7% (2009: 13%) largely as a result of low utilisation in those disciplines that experienced downturns in work.
During the year, we remained active in the social and affordable housing market as many stock transfer and Residential Social Landlord projects have been unaffected by the property market downturn. We have in fact seen growth in this sector and won important new clients in London such as Circle Anglia Housing and London Borough of Barking and Dagenham.
Also, we reinforced our position as a key supplier of consultancy services to the UK defence sector with our appointment by Defence Estates to provide professional and technical support services for property and construction projects under a four year framework. This principal support provider contract covers Defence Estates operations throughout the UK; in addition, we are receiving instructions to support the Ministry of Defence in some international locations.
To counteract the downturn in some of our clients' domestic activities we have increased our overseas activities as we look to build on our existing presence in Poland and Turkey. We continue to invest in and to develop our people and we continue to position ourselves for future growth supporting the diversification into international territories.
WYG Ireland
The Irish economy has been in deep recession and quarterly GDP growth in the Republic of Ireland was negative throughout 2009. The reduction in construction market activity during 2009/10 has severely affected the financial performance of WYG Ireland.
Over the year, gross revenue decreased by 37% to £31.7m (2009: £50.3m), net revenue decreased by 38% to £26.6m (2009: £43.1m) and operating profit before exceptional and other items reduced by 106% to a loss of £0.2m (2009: £3.8m profit). Operating margin on net revenue fell to -1% (2009: 9%).
Although we see trading in Ireland being challenging for the next few years, we have completed a substantial restructuring programme and believe the business is correctly sized for the current order book.
We have seen an overall decline in our turnover and profit however some parts of the business delivered strong performances during the year, notably our mechanical, electrical and management services teams. Significant project wins include the Public-Private Partnerships Schools Bundle 2 which reached financial close in June 2010. We provided civil/structural and mechanical/electrical engineering services for four schools with total capital value of €33m. Additional project wins include the appointment of our water services team by Fingal County Council as designers for the €10m expansion of Swords Wastewater Treatment Plant. Further opportunities are anticipated as part of the Water Investment Programme across the Republic of Ireland. We were also pleased by the re-appointment of our environmental team, to the Groundwater Monitoring Programme for 2010. The project, awarded by the Environmental Protection Agency aims to satisfy Ireland's obligations in respect of the monitoring requirements of the Water Framework Directive for groundwater.
WYG International
WYG International provides programme management, policy advice and technical consulting services across the built, natural and social environment in Eastern Europe, the Middle East, Africa, and Asia. We have continued to demonstrate strong growth and in the year generated 30% of the gross revenue of the Group (2009: 20%). International was significantly ahead of budget for operating profit and cash generation.
Over the year, gross revenue increased by 24% to £65.4m (2009: £52.8m, with growth of 15% delivered in 2009), net revenue increased by 90% to £60.3m (2009: £31.7m) and operating profit before exceptional and other items reduced by 14% to £1.3m (2009: £1.6m). With increased financing costs, operating margin on net revenue also reduced to 2% (2009: 5%), reflecting the structural changes made in the previous year. Net of investments in our new regions, operating margin in our core regions held up at 5%. Our international order book is strong and now stands at £75.5m. In addition we have a further £146m of value in proposals and pre-qualifications already submitted which demonstrates strong underlying demand in our core international markets.
Central and Eastern Europe
Central and Eastern Europe continued to play an important role in our international portfolio. We maintained our "top three" market position in Poland where we delivered one of our strongest performances to date, recording revenues of £20.2m (€24.5m). During the last 12 months, the key emphasis has been on the quality of delivery of services. Flagship projects included the design of sections of the S-7 highway in Poland, technical assistance for meeting Schengen requirements in Bulgaria and support for the reform of public administration and the improvement of public policy formulation in Romania.
Balkans
In Turkey, we maintained our clear leadership position in the European Commission (EC) market. We secured three new contracts with an aggregate estimated project value of £7m (€8m). Turkey and northern Cyprus is a core market in the region with Turkey being the single largest beneficiary under the EU Instrument for Pre Accession Assistance (IPA).
The Western Balkans remains a core market with the region receiving extensive allocations of EU financial support. Building upon the success of the existing £12.5m (€15.1m) project of work in the EC funded Infrastructure Projects Facility, we have secured a major extension of the existing contract in both time and value to give for this first phase of the programme an estimated total project value of £25m (€30.2m) through to 2014. In addition, as part of an international consortium, we were also awarded the contract for the £12.4m (€15m), second phase of the programme to restore and upgrade transport, environment and energy infrastructures across the Western Balkans. This contract extension and further contract award confirmed our leadership position in this market.
Further contract awards include two projects in Croatia to support the national education system (£2.6m/€3.1m); two projects in Kosovo to support rural development and the social welfare system (£2.1m/€2.6m) as well as education for social inclusion in Serbia (£1.5m/€1.8m) and support to the export sector in Bosnia and Herzegovina (£1.1m/€1.3m).
Commonwealth of Independent States (Former Soviet Union)
The Commonwealth of Independent States (CIS) is another core business region for us and the period saw the successful implementation and management of many current projects including, two EC projects in Ukraine valued at c£4.1m (€5m) each covering assistance with preparations for accession to the World Trade Organisation (WTO) and reform of the judiciary.
Diversification away from the EC continues with a contract award from the European Bank of Reconstruction and Development (EBRD) in Tajikistan, and the appointment to a second framework contract on climate change with the Asian Development Bank (ADB).
Middle East and Africa
Performance in the Middle East and Africa (MEA) exceeded budget expectations with a total turnover of £10.8m (€12.3m) for the year.
Market conditions varied throughout the region with a marked increase in opportunities in the Middle East, which we targeted and exploited with two recent wins in Syria in June 2010 totalling £9.0m (€10.9m). In Central Africa, tender opportunities have been low with a much slower than expected roll out of the EDF 10 programme. The setting up of WYG South Africa legal entity was commenced during the year with the establishment of our regional headquarters in Pretoria supported by project offices in Durban and East London.
Gulf
In the Gulf, despite tough market conditions, we have made carefully targeted investments which have enabled us to contribute to a number of the region's most exciting, ambitious and challenging projects. These consist of several high profile government and private sector schemes, including the provision of services on Masdar, a district cooling plant for a major hospitality and mixed-use development, technical design reviews, and major cultural and heritage projects.
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2010
|
|
| Before |
|
| Before |
|
|
|
|
| exceptional | Exceptional |
| exceptional | Exceptional |
|
|
|
Note | and other items | and other items | Total | and other items | and other items | Total |
|
|
| Unaudited | Unaudited | Unaudited | Audited | Audited | Audited |
|
|
| 2010 | 2010 | 2010 | 2009 | 2009 | 2009 |
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Continuing operations |
|
|
|
|
|
|
|
| Revenue | 4 | 220,620 | - | 220,620 | 261,629 | - | 261,629 |
| Operating expenses |
| (213,468) | (17,315) | (230,783) | (244,649) | (140,634) | (385,283) |
| Operating loss |
| 7,152 | (17,315) | (10,163) | 16,980 | (140,634) | (123,654) |
| Finance costs | 5 | (5,176) | (6,524) | (11,700) | (4,868) | (374) | (5,242) |
| Loss before tax |
| 1,976 | (23,839) | (21,863) | 12,112 | (141,008) | (128,896) |
| Tax credit | 7 | 1,112 | 35 | 1,147 | (2,912) | 3,466 | 554 |
| Loss attributable to equity shareholders |
| 3,088 | (23,804) | (20,716) | 9,200 | (137,542) | (128,342) |
|
|
|
|
|
|
|
|
|
| Loss per share | 8 |
|
|
|
|
|
|
| Basic |
| 4.6p |
| (31.0p) | 16.0p |
| (223.6p) |
| Diluted |
| 4.5p |
| (31.0p) | 16.0p |
| (223.6p) |
|
|
|
|
|
|
|
|
|
Details of exceptional and other items are given in note 6.
The accompanying notes to the preliminary statement are an integral part of this consolidated income statement.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2010
|
|
| |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Loss attributable to equity shareholders | (20,716) | (128,342) |
| Other comprehensive income: |
|
|
| Net exchange adjustments offset in reserves net of tax | 348 | (2,138) |
| Actuarial losses on defined benefit pension schemes | (204) | (1,449) |
| Losses on cash flow hedges | - | (493) |
| Tax on items taken directly to equity | 57 | 214 |
| Other comprehensive income for the year | 201 | (3,866) |
| Total comprehensive income for the year | (20,515) | (132,208) |
CONSOLIDATED BALANCE SHEET
As at 30 June 2010
|
|
| Unaudited | Audited |
|
|
| 2010 | 2009 |
|
| Note | £'000 | £'000 |
| Non-current assets |
|
|
|
| Goodwill | 10 | 36,830 | 43,472 |
| Other intangible assets |
| 10,361 | 12,699 |
| Property, plant and equipment | 11 | 6,276 | 13,854 |
| Deferred tax assets |
| 259 | 275 |
| Derivative financial instruments |
| - | 13 |
|
|
| 53,726 | 70,313 |
| Current assets |
|
|
|
| Work in progress | 12 | 30,146 | 41,189 |
| Trade and other receivables | 13 | 42,210 | 64,076 |
| Tax recoverable |
| 1,590 | 3,919 |
| Cash and cash equivalents |
| 15,451 | 10,896 |
|
|
| 89,397 | 120,080 |
| Current liabilities |
|
|
|
| Trade and other payables |
| (57,331) | (72,399) |
| Current tax liabilities |
| (913) | (704) |
| Financial liabilities | 15 | (534) | (7,298) |
|
|
| (58,778) | (80,401) |
| Net current assets |
| 30,619 | 39,679 |
| Non-current liabilities |
|
|
|
| Financial liabilities | 15 | (48,795) | (88,946) |
| Retirement benefit obligation |
| (3,912) | (4,126) |
| Deferred tax liabilities |
| (3,476) | (3,586) |
| Derivative financial instruments |
| (760) | - |
| Provisions, liabilities and other charges | 14 | (26,278) | (30,056) |
|
|
| (83,221) | (126,714) |
| Net assets/(liabilities) |
| 1,124 | (16,722) |
|
|
|
|
|
| Shareholders' equity |
|
|
|
| Share capital | 16 | 5,648 | 2,648 |
| Share premium account | 16 | 37,920 | 22,324 |
| Preference share capital | 16 | 19,440 | - |
| Merger reserve |
| 17,900 | 17,900 |
| Currency translation reserve |
| 3,333 | 2,985 |
| Retained earnings |
| (83,117) | (62,579) |
| Total shareholders' equity/(deficit) | 1,124 | (16,722) | |
The accompanying notes to the preliminary statement are an integral part of this consolidated balance sheet.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 30 June 2010
|
| Share capital | Share premium | Merger reserve | Hedging and translation reserve | Retained earnings | Total |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance as at 1 July 2008 (audited) | 2,583 | 21,614 | 51,599 | 5,616 | 38,974 | 120,386 |
| Loss for the year | - | - | - | - | (128,342) | (128,342) |
| Other comprehensive income: |
|
|
|
|
|
|
| Cash flow hedges | - | - | - | (493) | - | (493) |
| Currency translation differences | - | - | - | (2,138) | - | (2,138) |
| Actuarial movements on defined benefit pension schemes | - | - | - | - | (1,449) | (1,449) |
| Tax on items taken directly to equity | - | - | - | - | 214 | 214 |
| Other comprehensive income for the year | - | - | - | (2,631) | (1,235) | (3,866) |
| Total comprehensive income for the year | - | - | - | (2,631) | (129,577) | (132,208) |
| Proceeds on issue of share capital | 65 | 710 | - | - | - | 775 |
| Share based payments charge | - | - | - | - | (2,424) | (2,424) |
| Dividends | - | - | - | - | (3,251) | (3,251) |
| Transfers | - | - | (33,699) | - | 33,699 | - |
| Balance at 30 June 2009 (audited) | 2,648 | 22,324 | 17,900 | 2,985 | (62,579) | (16,722) |
| Balance as at 1 July 2009 (audited) | 2,648 | 22,324 | 17,900 | 2,985 | (62,579) | (16,722) |
| Loss for the year | - | - | - | - | (20,716) | (20,716) |
| Other comprehensive income: |
|
|
|
|
|
|
| Currency translation differences | - | - | - | 348 | - | 348 |
| Actuarial movements on defined benefit pension schemes | - | - | - | - | (204) | (204) |
| Tax on items taken directly to equity | - | - | - | - | 57 | 57 |
| Other comprehensive income for the year | - | - | - | 348 | (147) | 201 |
| Total comprehensive income for the year | - | - | - | 348 | (20,863) | (20,515) |
| Issue of share capital | 22,440 | 15,596 | - | - | - | 38,036 |
| Share based payments charge | - | - | - | - | 325 | 325 |
| Dividends | - | - | - | - | - | - |
| Balance at 30 June 2010 (unaudited) | 25,088 | 37,920 | 17,900 | 3,333 | (83,117) | 1,124 |
Treasury shares of £7.5m (2009 £0.7m) have been netted against retained earnings representing shares held by the Employee Benefit Trust. The market value of these shares at 30 June 2010 was £4.1m (2009: £0.3m). The treasury shares were gifted to the Employee Benefit Trust by the Group's lenders as part of the restructuring on 8 January 2010 and this capital contribution of £6.8m has been netted against retained earnings.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2010
|
|
| Unaudited | Audited |
|
|
| 2010 | 2009 |
|
|
| £'000 | £'000 |
| Operating activities (note 17) |
|
|
|
| Cash generated from operations |
| 9,482 | 12,454 |
| Interest paid |
| (3,998) | (5,322) |
| Transaction fees |
| (6,524) | - |
| Tax received/(paid) |
| 3,388 | (435) |
| Net cash generated from operating activities |
| 2,348 | 6,697 |
|
|
|
|
|
| Investing activities |
|
|
|
| Proceeds on disposal of property, plant and equipment |
| - | 671 |
| Purchases of property, plant and equipment |
| (4,053) | (6,372) |
| Purchases of businesses in prior and current years |
| (412) | (7,985) |
| Purchases of intangible assets (computer software) |
| (261) | (989) |
| Net cash used in investing activities |
| (4,726) | (14,675) |
|
|
|
|
|
| Financing activities |
|
|
|
| Net proceeds on issue of ordinary share capital |
| - | 775 |
| Equity dividends paid |
| - | (3,251) |
| Repayments of borrowings |
| (44,384) | (94,341) |
| Draw down of loan facilities |
| 58,543 | 94,605 |
| Repayments of obligations under finance leases |
| (804) | (1,627) |
| Purchase of own shares for Employee Benefit Trust |
| - | (776) |
| Net cash used in financing activities |
| 13,355 | (4,615) |
|
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents |
| 10,977 | (12,593) |
| Cash and cash equivalents at beginning of year |
| 4,449 | 17,042 |
| Cash and cash equivalents at end of year |
| 15,426 | 4,449 |
The accompanying notes to the preliminary statement are an integral part of this consolidated cash flow statement.
NOTES TO THE FINAL RESULTS
1. GENERAL INFORMATION
WYG plc is incorporated and domiciled in England, the address of its registered office is Arndale Court, Headingley, Leeds, LS6 2UJ. The company's shares are traded on AIM, a market operated by the London Stock Exchange plc.
The principal activity of the Group during the year ended 30 June 2010 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 contained within this preliminary announcement, which comprises the Group income statement, Group statement of comprehensive income, Group balance sheet, Group cash flow statement and related notes, is derived from the full Group financial statements for the year ended 30 June 2010 and does not constitute the Company's statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 30 June 2009 is derived from the statutory accounts for 2009 which have been delivered to the Registrar of Companies. The auditors have reported on the 2009 statutory accounts; their report was unqualified and included an emphasis of matter in relation to going concern. The statutory accounts for 2010 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies and issued to shareholders in December 2010.
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. They have been separately identified as they represent an investment in the future performance of the Group and are not considered to be 'business as usual' expenses and have a varying impact on different businesses and reporting periods.
This preliminary statement is unaudited.
2. BASIS OF PREPARATION
The statutory accounts for 2010 are prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted for use in the European Union. The accounting policies (that comply with IFRS) used by WYG plc ('the Group') are consistent with those set out in the 2009 Annual Report and Accounts, except as noted below. A full list of accounting policies will be presented in the 2010 Annual Report.The following significant new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 July 2009:
·; IFRS 3 (revised), 'Business combinations', and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates', and IAS 31, 'Interests in joint ventures', are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The adoption of this standard has not had a significant impact for the Group.
·; IAS 1 (revised), 'Presentation of financial statements'. The most significant change within IAS 1 (revised) is the requirement to produce a statement of comprehensive income setting out all items of income and expense relating to non-owner changes in equity. There is a choice between presenting comprehensive income in one statement or in two statements comprising an income statement and a separate statement of comprehensive income. The Group has elected to present comprehensive income in two statements. In addition, IAS 1 (revised) requires the statement of changes in shareholders' equity to be presented as a primary statement. The other revisions to IAS 1 have not had a significant impact for the Group.
·; IFRS 8 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting' and requires the disclosure of segment information on the same basis as the management information provided to the chief operating decision-maker. The adoption of this standard in the prior year has not resulted in a change in the Group's reportable segments.
·; IFRIC 19, 'Extinguishing financial liabilities with equity instruments'. The interpretation is effective for annual periods beginning on or after 1 July 2010 but has been early adopted by the Group.
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 July 2009, but are not relevant to the Group:
·; IFRIC 13, 'Customer loyalty programmes'.
·; IFRIC 15, 'Agreements for the construction of real estate'.
·; IFRIC 16, 'Hedges of a net investment in a foreign operation'.
·; IFRIC 17, 'Distributions of non-cash assets to owners'.
·; IFRIC 18, 'Transfers of assets from customers'.
·; IAS 39 (amendment), 'Financial instruments: recognition and measurement'.
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2009 and have not been early adopted by the Group:
·; IFRS 9, 'Financial instruments', issued in December 2009. This addresses the classification and measurement of financial assets and is likely to affect the Group's accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The Group is yet to assess IFRS 9's full impact.
·; Revised IAS 24, 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. Earlier application, in whole or in part, is permitted.
·; 'Classification of rights issues' (Amendment to IAS 32), issued in October 2009. The amendment should be applied for annual periods beginning on or after 1 February 2010. Earlier application is permitted.
·; 'Prepayments of a minimum funding requirement' (Amendments to IFRIC 14), issued in November 2009. The amendments are effective for annual periods beginning 1 January 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented.
The various other minor amendments to existing standards have no impact on the Group's results at 30 June 2010.
3. GOING CONCERN
In the financial statements for the year ended 30 June 2009, information was given on the then proposed restructuring with the Group's main lenders, Lloyds TSB Banking Group plc, Fortis Bank UK Branch and The Royal Bank of Scotland plc which was intended to re-balance the Group's capital structure and reduce the level of net borrowings. The restructuring was completed on 8 January 2010. It comprised:
·; the conversion of £22.9m of debt held by the lenders in exchange for 29,993,441 post-consolidation new ordinary shares;
·; the conversion of £30m of additional debt held by the lenders in return for 27.6m 'A' preference shares with a nominal value of £27.6m and 2.4m 'B' preference shares with a nominal value of £2.4m;
·; re-financed three-year lending facilities totalling £58.25m comprising £50m of term debt and £8.25m of working capital facilities;
·; committed bonding facilities of €38m.
As part of the restructured banking facilities the Group is required to meet certain financial covenant tests including leverage, interest cover and cash flow cover which are tested at quarterly intervals over the term of the facilities.
The Group has been in compliance with the requirements of its banking covenants since the restructuring was completed in January 2010.
The Directors' latest financial projections demonstrate that the Company is able to successfully operate within its current banking facilities and satisfy its covenant requirements for at least twelve months from the date of approval of these financial statements.
The Group continues to forecast that its future borrowing requirements will be well within the level of its overall facilities.
In the current uncertain economic environment, the Directors remain vigilant to the fact that it is the nature of the Group's business that there can be unpredictable variations in the timing of cash flows and trading performance that can increase the pressure on the agreed covenant structure, particularly from June 2011 when the basis of calculating the covenants is tightened in accordance with the terms of the facilities agreed in January 2010, thus reducing the available headroom against the associated covenant thresholds.
In this regard, the Group retains the support of its lenders and the Directors believe that, if required, it will be possible to put in place renewed or renegotiated covenants in due course.
On this basis, the Directors confirm their belief that it is appropriate to use the going concern basis of preparation for the Group financial statements.
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: Neil Parison (International), Ray Moore (Ireland), David Crichton-Miller (Engineering and 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 operating profit 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 available within the wider Group, 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 WYG 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 2010 are as follows:
|
| Engineering | Management Services | Environment Planning Transport | Ireland | International | Group |
|
| 2010 | 2010 | 2010 | 2010 | 2010 | 2010 |
| Unaudited | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Revenue |
|
|
|
|
|
|
| Gross revenue | 53,408 | 24,947 | 45,495 | 32,703 | 65,351 | 221,904 |
| Inter-segment | (232) | (21) | (14) | (1,017) | - | (1,284) |
| External gross revenue | 53,176 | 24,926 | 45,481 | 31,686 | 65,351 | 220,620 |
| Operating profit excluding exceptional and other items | 1,433 | 1,295 | 3,302 | (216) | 1,338 | 7,152 |
| Exceptional and other items (note 6) | (4,058) | (1,186) | (3,061) | (21,446) | (2,418) | (32,169) |
| Exceptional item - gain on debt restructuring | - | - | - | - | - | 14,854 |
| Operating loss | (2,625) | 109 | 241 | (21,662) | (1,080) | (10,163) |
| Finance costs |
|
|
|
|
| (11,700) |
| Loss before tax |
|
|
|
|
| (21,863) |
| Tax |
|
|
|
|
| 1,147 |
| Loss attributable to equity shareholders |
|
|
|
|
| (20,716) |
| Other information |
|
|
|
|
|
|
| Additions to property, plant and equipment and intangible assets | 1,052 | 459 | 999 | 696 | 1,184 | 4,390 |
| Depreciation and amortisation | 1,371 | 651 | 1,427 | 1,285 | 1,158 | 5,892 |
|
| Engineering | Management Services | Environment Planning Transport | Ireland | International | Group |
| Unaudited | 2010 | 2010 | 2010 | 2010 | 2010 | 2010 |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance sheet |
|
|
|
|
|
|
| Assets |
|
|
|
|
|
|
| Segment assets | 16,040 | 20,858 | 43,992 | 18,048 | 37,812 | 136,750 |
|
|
|
|
|
|
|
|
| Unallocated corporate assets |
|
|
|
|
| 6,373 |
| Group total assets |
|
|
|
|
| 143,123 |
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
| Segment liabilities | (20,694) | (6,020) | (12,503) | (19,292) | (32,632) | (91,141) |
| Unallocated corporate liabilities |
|
|
|
|
| (50,858) |
| Group total liabilities |
|
|
|
|
| (141,999) |
The segment results for the year ended 30 June 2009 are as follows:
|
| Engineering | Management Services | Environment Planning Transport | Ireland | International | Group |
| Audited | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Revenue |
|
|
|
|
|
|
| Gross revenue | 76,573 | 28,590 | 53,817 | 52,136 | 52,832 | 263,948 |
| 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 (note 6) | (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) |
|
| Engineering | Management Services | Environment Planning Transport | Ireland | International | Group |
| Audited | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 |
|
| £'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 |
|
|
|
|
| 3,967 |
| Group total assets |
|
|
|
|
| 190,393 |
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
| Segment liabilities | (30,194) | (8,270) | (13,555) | (22,799) | (37,969) | (112,787) |
| Unallocated corporate liabilities |
|
|
|
|
| (94,328) |
| Group total liabilities |
|
|
|
|
| (207,115) |
5. FINANCE COSTS
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Interest on bank loans, guarantees and overdrafts | 3,954 | 4,357 |
| Transaction costs (note 6) | 6,524 | 374 |
| Interest on obligations under finance leases | 44 | 138 |
| Interest on loan notes | - | 3 |
| Interest on defined benefit scheme liabilities | 406 | 370 |
| Fair value losses on financial instruments - interest rate swaps | 772 | - |
|
| 11,700 | 5,242 |
6. EXCEPTIONAL AND OTHER ITEMS
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Employee termination costs | 4,705 | 8,968 |
| Office closure costs | 3,457 | 20,602 |
| Work in progress and trade receivables provisions | 7,291 | 20,547 |
| Professional indemnity claim provisions | - | 5,650 |
| Professional fees | - | 3,440 |
| Impairment of goodwill | 6,920 | 77,184 |
| Impairment of capitalised software development costs | 7,963 | - |
| Gain on debt restructuring | (14,854) | - |
| Other restructuring costs | 259 | 2,013 |
| Transaction costs | 6,524 | 374 |
| Exceptional items | 22,265 | 138,778 |
| Amortisation of acquired intangible assets | 1,574 | 2,230 |
| Exceptional and other items | 23,839 | 141,008 |
The Group has incurred substantial exceptional items in the financial year. These arose predominantly from the restructure of the Group and related to redundancies, transaction costs due to refinancing and office closure costs, the further write down of WIP and trade receivables balances in Ireland as this part of the business is restructured, the write off of the capitalised software development costs and the impairment of goodwill in Ireland (note 10). The exceptional costs were partially offset by the gain recognised on the conversion of debt to equity as part of the restructuring (note 16). A significant element of the exceptional and other items do not represent a cash cost in the financial year. Other items relate to the amortisation of customer relationships and order book intangible assets.
7. TAX
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Current tax: |
|
|
| UK corporation tax on profits for the year at 28% (2009: 28%) | 67 | (2,206) |
| Adjustments in respect of prior years | (1,750) | - |
| Overseas tax on profits for the year | 629 | 335 |
|
| (1,054) | (1,871) |
| Deferred tax: |
|
|
| Movement in deferred tax | (93) | 1,317 |
|
| (1,147) | (554) |
| Tax on items charged to equity: |
|
|
| Deferred tax credit related to share-based payments | - | (192) |
| Deferred tax charge related to the actuarial gains and losses on retirement benefit schemes | 57 | 406 |
|
| 57 | 214 |
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 credit for the year is higher (2009: lower) than the standard rate of corporation tax in the UK when applied to reported loss. The differences are explained below:
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Loss before tax | (21,863) | (128,896) |
| Loss before tax multiplied by the standard rate of UK corporation tax rate of 28% (2009: 28%) | (6,122) | (36,089) |
| Expenses not deductible for tax purposes | - | 4,563 |
| Non-deductible acquired assets amortisation | - | 17,526 |
| Adjustments in respect of prior years | (1,750) | - |
| Enhanced expenditure | (420) | (428) |
| Fixed asset timing differences | (60) | 781 |
| Losses carried forward | 5,260 | 9,706 |
| Other permanent and temporary differences | 560 | (306) |
| Effect of different tax rates of subsidiaries operating in other jurisdictions | 1,478 | 2,376 |
| Total current tax credit | (1,054) | (1,871) |
| Current year deferred tax - on amortisation of acquired intangibles | (429) | (505) |
| Current year deferred tax - other | 336 | 1,822 |
| Total tax credit | (1,147) | (554) |
8. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Earnings for the purposes of basic and diluted earnings per share being loss for the year | (20,716) | (128,342) |
| Adjustment relating to exceptional and other items | 23,804 | 137,542 |
| Earnings for the purposes of basic and diluted adjusted earnings per share | 3,088 | 9,200 |
|
| Unaudited | Restated |
|
| 2010 | 2009 |
|
| Number | Number |
| Number of shares |
|
|
| Weighted average number of shares for basic earnings per share | 66,914,123 | 57,386,853 |
| Effect of dilutive potential ordinary shares: |
|
|
| Share options | - | - |
| Weighted average number of shares for diluted earnings per share | 66,914,123 | 57,386,853 |
|
|
|
|
| Loss per share |
|
|
| Basic | (31.0p) | (223.6p) |
| Diluted | (31.0p) | (223.6p) |
|
|
|
|
| Adjusted earnings per share |
|
|
| Basic | 4.6p | 16.0p |
| Diluted | 4.5p | 16.0p |
The 2009 figures have been restated to reflect the impact of the share restructuring in January 2010 (see note 16).The number of shares used for the calculation of diluted adjusted earnings per share has been increased by 1,252,067 to 68,166,190 to reflect the impact of dilutive share options.
9. DIVIDENDS
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Amounts recognised as distributions to equity holders in the year: |
|
|
| Final dividend for the year ended 30 June 2009 of nil (2008: 6.7p) per share | - | 3,251 |
| Interim dividend for the year ended 30 June 2010 of nil (2009: nil) per share | - | - |
|
| - | 3,251 |
| Proposed final dividend for the year ended 30 June 2010 of nil (2009: nil) per share | - | - |
10. GOODWILL
|
| £'000 |
| Cost |
|
| At 1 July 2008 (audited) | 115,625 |
| Exchange differences | 3,220 |
| Recognised on acquisition of businesses - prior year | 1,811 |
| At 1 July 2009 (audited) | 120,656 |
| Exchange differences | (134) |
| Recognised on acquisition of businesses - prior year | 412 |
| At 30 June 2010 (unaudited) | 120,934 |
|
|
|
| Accumulated impairment losses |
|
| At July 2008 (audited) | - |
| At 1 July 2009 (audited) | (77,184) |
| Impairment charge | (6,920) |
| Accumulated impairment losses at 30 June 2010 (unaudited) | (84,104) |
|
|
|
| Net book value |
|
| At 30 June 2010 (unaudited) | 36,830 |
| At 30 June 2009 (audited) | 43,472 |
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 2010, the recoverable amount was determined based on the value in use calculations.
The value in use calculations are based on cash flow forecasts derived from the most recent one year financial plans approved by the Board.
Cash flows for the years beyond the one year financial plans for the CGUs to which significant amounts of goodwill were allocated were calculated as follows: cash flows from years two and 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.
Discount rates were applied to the resulting cash flow 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 £6.9m were recognised in relation to the goodwill allocated to Ireland following further restructuring in that business. In the prior period, impairments totalling £77.2m were recognised in relation to the goodwill allocated across all CGUs.
11. PROPERTY, PLANT AND EQUIPMENT
|
| Short leasehold improvements | Motor vehicles | Office furniture and equipment | Assets under construction | Total |
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
| Cost |
|
|
|
|
|
| At 1 July 2008 (audited) | 9,221 | 2,686 | 13,123 | 1,464 | 26,494 |
| Additions | 1,526 | 213 | 2,018 | 3,141 | 6,898 |
| Exchange differences | 50 | 40 | 324 | - | 414 |
| Reclassifications | - | (59) | 45 | - | (14) |
| Disposals | (8) | (1,815) | (363) | - | (2,186) |
| At 30 June 2009 (audited) | 10,789 | 1,065 | 15,147 | 4,605 | 31,606 |
| Additions | 621 | 121 | 504 | 2,883 | 4,129 |
| Exchange differences | (24) | (16) | (164) | - | (204) |
| Reclassifications | - | - | - | (7,488) | (7,488) |
| Disposals | (266) | (383) | (2,495) | - | (3,144) |
| At 30 June 2010 (unaudited) | 11,120 | 787 | 12,992 | - | 24,899 |
|
|
|
|
|
|
|
| Accumulated depreciation |
|
|
|
|
|
| At 1 July 2008 (audited) | 2,891 | 1,774 | 7,312 | - | 11,977 |
| Charge for the year | 3,244 | 138 | 3,595 | - | 6,977 |
| Exchange differences | 31 | 24 | 168 | - | 223 |
| Reclassifications | 18 | (43) | 11 | - | (14) |
| Disposals | (8) | (1,145) | (258) | - | (1,411) |
| At 30 June 2009 (audited) | 6,176 | 748 | 10,828 | - | 17,752 |
| Charge for the year | 1,052 | 129 | 2,164 | - | 3,345 |
| Exchange differences | (22) | (17) | (131) | - | (170) |
| Reclassifications | - | - | - | - | - |
| Disposals | (117) | (288) | (1,899) | - | (2,304) |
| At 30 June 2010 (unaudited) | 7,089 | 572 | 10,962 | - | 18,623 |
|
|
|
|
|
|
|
| Net book value |
|
|
|
|
|
| At 30 June 2010 (unaudited) | 4,031 | 215 | 2,030 | - | 6,276 |
| At 30 June 2009 (audited) | 4,613 | 317 | 4,319 | 4,605 | 13,854 |
At 30 June 2010, £7.5m of assets under construction relating to software development costs were transferred to intangible assets and impaired (note 6).
12. WORK IN PROGRESS
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Work-in-progress | 41,255 | 55,255 |
| Provision | (11,109) | (14,066) |
| Net work-in-progress | 30,146 | 41,189 |
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.
13. TRADE AND OTHER RECEIVABLES
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Amounts falling due within one year |
|
|
| Amounts receivable on contracts | 45,261 | 66,627 |
| Less: provision for impairment of trade receivables | (10,253) | (9,178) |
| Trade receivables - net | 35,008 | 57,449 |
| Prepayments and accrued income | 4,745 | 3,896 |
| Other receivables | 2,457 | 2,731 |
|
| 42,210 | 64,076 |
14. PROVISIONS, LIABILITIES AND OTHER CHARGES
|
|
| |||
|
| Claims | Redundancy | Vacant Leasehold | Total |
|
| £'000 | £'000 | £'000 | £'000 |
| At June 2008 (audited) | 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 (audited) | 9,575 | 3,271 | 17,210 | 30,056 |
| Additional provisions | 3,107 | 4,705 | 2,020 | 9,832 |
| Utilised during the year | (3,598) | (6,126) | (3,886) | (13,610) |
| At June 2010 (unaudited) | 9,084 | 1,850 | 15,344 | 26,278 |
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 and other insurable risks arising as a result of the business activities of the Group. These include claims payable by the Group's captive insurance company, Oakdale Insurance Company Limited.
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, the majority of which are under 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 assumptions relating to later periods of vacancy.
15. FINANCIAL LIABILITIES
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Current |
|
|
| Bank overdrafts | 25 | 6,447 |
| Obligations under finance leases | 509 | 851 |
|
| 534 | 7,298 |
| Non-current |
|
|
| Bank loans | 48,719 | 88,485 |
| Obligations under finance leases | 76 | 461 |
|
| 48,795 | 88,946 |
|
|
|
|
| Financial liabilities are repayable as follows: |
|
|
| On demand or within one year | 534 | 7,298 |
| In the second year | 76 | 431 |
| In the third to fifth years inclusive | 48,719 | 88,515 |
|
| 49,329 | 96,244 |
16. SHARE CAPITAL
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Issued and fully paid: |
|
|
| Ordinary: |
|
|
| 52,964,456 ordinary shares of 5p each | - | 2,648 |
| 52,964,456 deferred ordinary shares of 4p each | 2,119 | - |
| 35,289,886 new ordinary shares of 10p each | 3,529 | - |
|
| 5,648 | 2,648 |
As a result of the restructuring that took place on 8 January 2010, the share reorganisation is reflected as follows:
Ordinary shares
|
| Number of shares in issue | Par Value | Share capital £'000s | Share premium £'000s | Merger reserve £'000s |
| At 1 July 2008 | 51,664,456 | 5p | 2,583 | 21,614 | 51,599 |
| Executive options | 1,300,000 | 5p | 65 | 710 | - |
| Reclassification | - |
| - | - | (33,699) |
| At 30 June 2009 | 52,964,456 |
| 2,648 | 22,324 | 17,900 |
|
|
|
|
|
|
|
| At 1 July 2009 | 52,964,456 | - | 2,648 | 22,324 | 17,900 |
| Sub division of shares | 52,964,456 | - | - | - | - |
| Share consolidation | (47,668,011) | - | - | - | - |
| New ordinary shares issued to the lenders | 21,362,330 | 10p | 2,136 | 11,108 | - |
| New ordinary shares issued to the Employee Benefit Trust | 8,631,111 | 10p | 864 | 4,488 | - |
| At 30 June 2010 | 88,254,342 |
| 5,648 | 37,920 | 17,900 |
Preference shares
|
| Number of shares in issue | Preference share capital £'000s |
|
|
|
|
| At 1 July 2008 and 2009 | - | - |
| 'A' preference shares issued to the lenders | 27,600,000 | 18,016 |
| 'B' preference shares issued to the Employee Benefit Trust | 2,400,000 | 1,424 |
| At 30 June 2010 | 30,000,000 | 19,440 |
Share Capital Restructuring
During the financial year each ordinary share has been subdivided into one new ordinary share of one penny nominal value and one deferred share of four pence nominal value. The deferred shares have no voting or dividend rights and, on a return of capital, will have the right to receive the amount paid up only in very limited circumstances.
Subsequent to this subdivision the new ordinary shares were consolidated into ordinary shares of ten pence each on the basis of one post consolidation ordinary share for every ten ordinary shares.
Debt for Equity Swap
On 8 January 2010, the Group announced a restructuring of its existing borrowing facilities of £109.1m with its lenders. The transaction resulted in total drawn borrowings of £92.6m being restructured as new borrowings of £39.7m (with a total new facility of £58.2m) and an equity component (the conversion of £52.9m of the Group's indebtedness) consisting of new ordinary shares and preference shares.
The principal terms of the restructuring, were as follows:
·; The conversion of borrowings of £22.9m in exchange for 29,993,441 new ordinary shares. Of these, 21,362,330 shares were issued directly to lenders, with 8,631,111 shares issued to the new Employee Benefit Trust (EBT) under direction of the lenders.
·; The conversion of borrowings of £30.0m in return for 27.6m 'A' preference shares with a nominal value of £27.6m and 2.4m 'B'' preference shares with a nominal value of £2.4m.The lenders were issued 'A' shares and have directed the Group to issue the 'B' shares to the new EBT;
Preference Shares
As described above, preference shares with a nominal value of £30.0m were issued by the Group as part of the re-financing process. The key terms of the preference shares are as follows;
·; The redemption of the preference shares is at the Group's sole discretion;
·; The holders of the preference shares are entitled to a premium on redemption on nominal value - a 10% premium is payable if the shares are redeemed in the first three years after issuance, a 30% premium is payable if redemption occurs in year four and a 50% premium is payable if redemption occurs in year five or thereafter;
·; Dividends are only payable on the preference shares if the Group declares ordinary dividends. In this case, the holders are entitled to a dividend equal to one per cent of the ordinary dividend. The Group is unable to pay an ordinary dividend until it has first paid the preference dividend;
·; The preference shares carry no voting rights;
·; On wind up, repayment of the preference shares up to their nominal value ranks ahead of repayment of any amounts to the ordinary shareholders.
The preference shares issued as part of the re-financing have been recorded as equity.
Gain on debt for equity swap
The Group has recognised an exceptional gain of £14.9m in the year ending 30 June 2010, representing the difference between the carrying value of £52.9m of the borrowings converted and the fair value of £38.0m of the ordinary and preference shares issued to the lenders at the date of the debt for equity swap.
The gain on conversion includes the value of the 8,631,111 ordinary shares and the 'B' preference shares issued to the new EBT as the substance of the transaction is a transfer of these shares to the bank in its capacity as a lender, followed by a contribution of the shares to the EBT by the bank in its new capacity as a shareholder.
In calculating the fair value of the preference shares of £19.4m, management has assumed that they will be redeemed within three years and that a 10% redemption premium will be payable.
This cash outflow of £33.0m has been discounted at 19% which represents an appropriate discount rate for this class of share. The valuation of the ordinary shares has been calculated based on the closing share price of £0.62 at the date on which the transaction was approved resulting in a fair value of £18.6m.
17. CASH GENERATED FROM OPERATIONS
|
| Unaudited | Audited |
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Loss from operations | (10,163) | (123,654) |
| Adjustments for: |
|
|
| Depreciation of property, plant and equipment | 3,345 | 6,977 |
| Amortisation of intangible assets | 2,547 | 3,529 |
| Impairment of goodwill/investments | 6,920 | 77,184 |
| Impairment of intangible assets | 7,488 | - |
| Gain on debt restructuring | (14,854) | - |
| Loss on disposal of property, plant and equipment | 875 | 201 |
| Share options charge/(credit) | 325 | (1,648) |
| Operating cash flows before movements in working capital | (3,517) | (37,411) |
| Decrease in inventories | 10,037 | 8,818 |
| Decrease in receivables | 19,220 | 22,267 |
| (Decrease)/increase in payables | (16,258) | 18,780 |
| Cash generated from operations | 9,482 | 12,454 |
| Interest paid | (3,998) | (5,322) |
| Transaction fees | (6,524) | - |
| Tax received/(paid) | 3,388 | (435) |
| Net cash generated from operating activities | 2,348 | 6,697 |
18. ANALYSIS OF CHANGES IN NET DEBT
|
| At |
| Other | At |
|
| 1 July | Cash | non-cash | 30 June |
|
| 2009 | flows | items | 2010 |
|
| Audited |
|
| Unaudited |
|
| £'000 | £'000 | £'000 | £'000 |
| Cash and cash equivalents | 10,896 | 4,555 | - | 15,451 |
| Bank overdrafts | (6,447) | 6,422 | - | (25) |
| Bank loans due after one year | (88,485) | (14,159) | 53,925 | (48,719) |
| Finance leases and hire purchase contracts | (1,312) | 804 | (77) | (585) |
| Net debt | (85,348) | (2,378) | 53,848 | (33,878) |
| Add back cash in restricted access accounts | (3,360) | 601 | - | (2,759) |
| Unrestricted net debt | (88,708) | (1,777) | 53,848 | (36,637) |
The net debt has been restated to show restricted balances held in Oakdale Insurance Company Limited and WYG International Limited.
Other non-cash movements represent currency exchange differences, the debt for equity swap and finance lease creditor movements.
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 Commercial Director and Company Secretary; Robert Barr, Senior Independent Non Executive Director, David Jeffcoat, Non Executive Director and Chairman of the Audit and Risk Committee 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:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the accounts; and
• prepare the accounts on a going concern basis, unless it is inappropriate to presume that the Group will continue in business.
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. 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.