12th Sep 2006 07:00
Interior Services Group PLC12 September 2006 PROFITS LEAP AT INTERIOR SERVICES GROUP AS MARKETS CONTINUE TO THRIVE Interior Services Group plc ("ISG"), the construction services specialist, hastoday announced its preliminary results for the year ended 30 June 2006. 2006 2005 Profit before tax and goodwill up 89% £8.2m £4.3mProfit before tax up 54% £6.5m £4.3mFee income up by 83% £81.7m £44.7mMargin on fee income 10.0% 9.6%Gross value of work performed £746m £385mEarnings per share 19.33p 10.99pAdjusted earnings per share - before goodwill up 128% 25.49p 11.18pTotal dividend increased by 11% 10.00p 9.00pNet cash at year end £25.8m £34.1mOrder book at year end at record high £750m £630m David Lawther, Chief Executive of ISG, commented, " We are delighted with the Group's overall performance. We have deliveredsignificant organic and acquisition growth. Our businesses are reporting thattheir markets have a positive outlook. We are working on some of the Capital'smost prestigious projects. The prospects for the business are excellent." " Our strategy to diversify into the regions and to broaden our service offeringto customers in different market sectors is going well. We now have a much morebalanced business with strong regional coverage. We are in an excellent shape tobenefit from the growth opportunities that our markets offer." - ends - Date: 12 September 2006For further information please contact: Interior Services Group PLCDavid Lawther, Chief Executive 020 7392 5307Jonathan Houlton, Group Finance Director 020 7392 4905Web: www.isgplc.com cityPROFILESimon Courtenay 020 7448 3244 CHAIRMAN'S STATEMENT In my statement last year I commented that the 2005 results marked the end ofthe recent downturn in our performance. I am now pleased to report that this hasbeen borne out by our 2006 results as profits before tax and goodwill have risento £8.2m, including a first time contribution from the Propencity Group,compared to £4.3m for the year ended 30 June 2005. In addition, cash generationwas strong with a net cash inflow from operating activities increasing to £7.8min the year, in comparison to £0.5m in the prior year. These improvements haveenabled us to propose an increase in our annual dividend of 11% to 10p pershare. I would like to thank all our employees for their significant contribution tohelping us achieve our record set of results this year. This improvement in our financial well-being, which owes much to the currentstrength of the London fit out market, has enabled us to pursue actively ourpolicy of diversification from over reliance on this market. Early in the financial year we completed the acquisition of the regionally-basedPropencity Group. Not only has this acquisition broadened our geographicalspread to the East and North of England, but also our offering into such areasas social housing and retail. Trading in ongoing activities in Propencity hasbeen in line with our expectations, but due to the increased costs and prolongedclose out of Totty's activities in the high rise residential market, no deferredconsideration is payable. The integration with ISG is proceeding smoothly.Significant overhead savings have, as anticipated, been identified, with thecosts of reorganisation being borne in the first half of this year. In another important strategic step we are in the final stages of negotiation toacquire the Asian business in which we have for some time held 22%. Their officenetwork spread throughout the region will enable us to serve our internationalclientele in this fast growing region which should provide a furthercounterweight to our traditional reliance on London fit out. After 17 years David King, the founder of the business, decided to retire. Theculture and ethos of the business today reflects David's desire and drive tocreate and sustain a world class business. That ISG has maintained its positionas one of the leading fit out companies in the country, is a tribute to hisdedication to servicing clients and fostering staff. I am pleased to report thathe will continue to Chair our Asian business. I am delighted that David Lawther,previously our Finance Director, has become the new Chief Executive. The Boardhas worked closely with David for over five years and his knowledge of oursector, our clients and our people has made the transition seamless. I wouldalso like to welcome Jonathan Houlton as our new Finance Director, who brings awealth of industry experience to the Board, previously as Group Finance Directorof Wates Group. ISG has focused on becoming a more balanced business with a strong regionalpresence. Given the growth opportunities available in our markets the Board'soutlook for the year continues to be positive. Roy DantzicChairman12 September 2006 CHIEF EXECUTIVE'S STATEMENT This is my first statement as Chief Executive and I am pleased to announce arecord set of results as the improvement in performance reported in the firsthalf has continued. For the year ended 30 June 2006 profit before tax andgoodwill (as set out in Note 3) increased by 89% to £8.2m (2005 - £4.3m).Adjusted earnings per share (before goodwill) grew by 128% to 25.49p (2005 -11.18p). An interim dividend of 3.00p was paid in April 2006. A final dividend of 7.00pis proposed bringing the total to 10.00p (2005 - 9.00p), an increase of 11%.Subject to its approval at the AGM on the 18 December 2006, the final dividendwill be payable on 20 December to shareholders on the register on 24 November2006. The strong improvement in performance has been driven by a mix of organic andacquisition growth. Our existing operations increased profit contribution beforegoodwill by 53% to £6.6m (2005 - £4.3m). The profit contribution before goodwillfrom the Propencity Group, acquired in September 2005 for a consideration of£12.5m, was £1.6m. Financial Highlights In line with expectations, volumes increased by 94% to £746m (2005 - £385m).Similarly, fee income in the year increased by 83% to £81.7m (2005 - £44.7m).Year on year margin on fee income increased to 10% (2005 - 9.6%). The Propencitybusinesses generated volumes of £132m and fee income of £24.4m. ExcludingPropencity, volumes and fee income in the year increased by 59% and 28%respectively. The effective tax rate on adjusted profit excluding amortisation of goodwilldecreased to 18% (2005 - 34%), due to an adjustment to a prior year's UK taxprovision and the utilisation of tax losses brought forward. Throughout the year operating cash flow has remained strong with net cash inflowfrom operating activities increasing in the year to £7.8m (2005 - £0.5m),resulting in net cash at 30 June of £25.8m (2005 - £34.1m) net of a £8.2m loanto finance the Propencity acquisition and after £3.1m funding for ourdevelopment operations (2005 - nil). Group Net Assets increased to £20.1m (2005 - £14.8m). The acquisition of thePropencity Group has created a purchased goodwill of £38.9m after fair valueadjustments of £9.2m, principally relating to additional provisions required onthe close out of high-rise residential construction contracts undertaken byTotty Construction's Accommodation division. Within the Propencity Group thereare tax losses carried forward equivalent to a deferred tax asset of £4.9m whichhave not been recognised in the accounts. Strategic Developments Over the last 12 months Group key developments have focused on: •Taking advantage of the improvement in the UK markets in which the Group operates In London we have continued to invest in new teams to tackle the small to mediumsize fit out projects which provide strong growth potential and also improve ourresilience to fluctuations in the large scale fit out market. Despite thecompetitive nature of this market segment, the new business achieved its budgetfor the year generating a positive contribution. We believe there remains plentyof opportunity to continue to grow this business. We have established a new team to focus on technology related fit out andrefurbishment, particularly data centres. The team has been successful inwinning its first major project with JP Morgan Chase for a new data centre. We have expanded the InteriorExterior offering in the Regions to include newbuild and refurbishment services as well as fit out. The new management teambrought in during 2005 is now well established and starting to grow the businesswith volumes up 13% in the year, and increased growth is anticipated in theshort term. •Acquiring companies to counterbalance the group's strength in andreliance on the London fit out and commercial markets The acquisition of the businesses within Propencity has strengthened the groupin the following areas: -Totty Construction Group - a Leeds-based construction services group which hasincreased our geographical coverage and exposure to the public sector where, for example, they have a seven year Prison Refurbishment Framework agreement. -Jackson Construction Group - a construction services group, based in Ipswich, which has expanded our activity in the South East and widened our exposure to social housing. They currently have six Social Housing Framework agreements. -Dean and Bowes - predominately operates outside London and is a leading national fit out and refurbishment provider specialising in the retail market. Propencity's operating profit contribution before interest, tax and goodwill was£2.0m for the 9 month period. We anticipate a continued improved contributionfrom the constituent businesses for the current year. From September 2006 the former Propencity businesses will operate as ISG Totty,ISG Jackson and ISG Dean and Bowes, to further promote the ISG brand and itsassociated values outside London, while retaining the benefit of their existingbrand names. Within these businesses were several small property developmentactivities. Going forward we will manage these activities as a separate businessunit and will continue to fund such activities on a modest basis. •Positioning the Company to benefit from the expanding overseas markets In Asia we have worked with our partner, ISG Asia, to expand and return thebusiness to profitability. It now operates in Hong Kong, China, Singapore,Malaysia, Japan, Korea and, more recently, Dubai. In its interim results as at30 June 2006 it announced a profit before tax of S$0.6m (2005 - S$0.4m). In Junewe agreed terms to acquire 100% control of the operating entities of ISG Asia toensure that we are well positioned to participate in these growth markets.Subject to the consent of their shareholders and completion of due diligence,the acquisition is scheduled to complete in October 2006. Trading For the last two years the group has focused on being a leader in the UKconstruction services market-place, targeting demanding customers with missioncritical projects in new build, refurbishment or fit out, with ability toservice clients in Europe or Asia through joint venture or associated companies. Below is a summary of the fee income and gross value of work performed in the 12months to June 2006 and a summary of the forward order book: 12 months to June 2006 Fee Income Gross Value of Forward Order Work Performed Book 2006 2005* 2006 2005 2006 2005 £m £m £m £m £m £mLondon•Fit Out 24.7 18.2 265 135 269 217•Refurbishment 13.8 10.5 159 92 103 193•New Build 9.6 8.8 117 88 143 193Regions•Propencity 24.4 - 132 - 170 -•InteriorExterior 6.1 4.5 51 45 71 32Overseas•Asia 2.1 2.0 17 16 n/a n/a•Europe 1.0 0.7 5 9 n/a n/a--------------------------------------------------------------------------------Total 81.7 44.7 746 385 756 635-------------------------------------------------------------------------------- * Restated to include agency staffThe strong improvement in trading, which originated in the second half of thelast financial year, continued to gain momentum through the year. Volumes in thesecond half of the year increased to £420m from £326m in the first half. Profitbefore tax and goodwill increased from £3.6m in the first half to £4.6m in thesecond half. Fit Out London Fit Out had a very strong performance. Whilst volumes increased 96% yearon year to £265m (2005 - £135m), fee income rose 36% year on year to £24.7m(2005 - £18.2m) due largely to the higher mix of low margin constructionmanagement contracts in the year. Margins on fee income strengthened in the yeardespite the impact of significant salary inflation. Notable project deliverysuccesses were the new City Head Office for Dresdner Kleinwort Benson, thetrading floor for BP in Canary Wharf, a major project for Nomura in the City andthe impressive new grandstand complex at Ascot Racecourse (managed from London).The latter, opening for Royal Ascot, exemplifying our ability to ensure majorprojects are delivered to a tight time-scale with a high quality finish. Demandfor all levels of fit out remains strong with recent major project winstotalling £132m. These include major fit out projects for Shell, Morgan Stanley,Norton Rose and JP Morgan Chase. London Fit Out starts the current year with anincreased order book of £269m (2005 - £217m). Refurbishment London Refurbishment fee income grew strongly over the corresponding period lastyear, up 31% at £13.8m (2005 - £10.5m), albeit volumes were up 73% at £159m(2005 - £92m) again with an increased element of construction management work.With this growth, margins on fee income were maintained. Operationally,noticeable successes in the period were the delivery of a retail scheme forAllied London at the Brunswick Centre in Bloomsbury and a data centre for CSFB.Currently the Division's largest ongoing project is the refurbishment of theRoyal Festival Hall, with completion due in 2007. For the current year weanticipate lower volumes but offset by some additional growth in margins. As atJune 2006 Refurbishment has a forward order book of £103m (2005 - £193m), areduction on prior year due to the impact of winning two exceptionally largecontracts last year. New Build While the division had a strong first half, we experienced a slower second half,associated with the political uncertainty in the City Academy Programme and alsodevelopers selling on sites during the initial stages of construction. This ledto the cancellation of three projects where we had commenced work and a delay onthe recovery of staff, resulting in fee income only rising 9% year on year to£9.6m (2005 - £8.8m) and margins on fee income decreasing. The workload remainsdiversified in education, commercial, residential and leisure. Clients includeHermes, Audi, Telford College, Asticus and the Lawn Tennis Association.Consistent with the level of activity in the second half, New Build starts thecurrent year with a forward order book of £143m (2005 - £193m). We are targetingan increase in the level of activity in the second half of the current year. Regions InteriorExterior The division has had an excellent year. With the new team in Manchester offeringnew build and refurbishment as well as fit out, volumes and fee income havecontinued to grow strongly. Year on year fee income increased by 36% to £6.1m(2005 - £4.5m). The current workload is diversified across the educational,commercial office and leisure sectors. The growth is set to continue as recentwins have included major projects at Doncaster Racecourse, Nelson and ColneCollege and an office scheme for Cadburys. As a result, the business starts theyear with an increased order book of £71m (2005 - £32m). Propencity Included in the results is a first time contribution to fee income of £24.4mfrom Propencity Group on volumes of £132m. Trading in ongoing activities inPropencity was in line with our expectations, delivering an operating profit of£2.0m. Below is a summary of the individual business performances in Propencity. During the nine months, ISG Totty commenced a process of realignment. With therunning down of its Accommodation Division, ISG Totty is now re-focused onoffering its traditional core business of new build and refurbishment servicesto the public and commercial sectors (specialising in contracts below £5m so asnot to compete with the InteriorExterior offering in the Manchester region).During our ownership, ISG Totty's ongoing activity achieved a break even result.With the rebuilding of its order book and restructuring of its overhead base inthe first quarter of this year, it is envisaged that it will start to make ameaningful contribution in the second half of the current year. It starts theyear with an order book of £38m. In the South East, ISG Jackson had a successful nine months contributing over60% of Propencity profits in line with our expectations. During this period itsecured five Social Housing Framework agreements and has continued to grow itsorder book to record levels. At the start of the year it has an order book of£90m. ISG Dean and Bowes profit contribution through the nine months was in line withbudget, albeit seasonal, generating the majority of its profit prior toChristmas. It has participated in roll-out programmes for key clients such asT-Mobile, Argos and Primark. It has successfully continued to grow the businessfor the third consecutive year. During the period it has been focusing on retailand leisure fit out and refurbishment, working with new clients such as Next,Parkwood Leisure, The Mall Corporation and Timberland. At the start of the yearit has a record order book of £42m. Europe and Asia In Europe, working with our partner Alpha, we had a successful year. Fee incomeincreased by 43% while profit increased by 110% to £695k (2005 - £331k). Whilebenefiting from one exceptional recovery, there was underlying growth as weexpanded from Paris and Frankfurt, delivering projects in Amsterdam, Copenhagenand Brussels. In Asia, despite incurring continued start up costs in China and Dubai, thebusiness returned to profitability. The year end resulted in a profitcontribution for our 22% stake of £108k (2005 - loss £33k). Prospects With the current ongoing strong demand in the UK public and private sectors, andthe continuing strength in the international financial services markets, theoutlook for the group in 2006/2007 is encouraging. At the year end our total order book was £756m (2005 - £635m), with our in-yearorder book of £604m (2005 - £509m). We are budgeting for a continued increase inactivity this year and further recovery in margins. As in previous yearsprofitability will be biased towards the second half. The impending acquisitionof ISG Asia operations, coupled with our expansion in the UK Regions, willenhance our ability to service clients in the UK and the expanding markets ofAsia. While economies remain robust we will be well positioned to ensurecontinued growth. We look forward to updating shareholders on the progress thatwe make. David LawtherChief Executive12 September 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTYear ended 30 June 2006 UNAUDITED Note 2006 2005 £'000 £'000 Gross value of work performed 2 746,224 385,372Less: relating to construction management (106,921) (28,157)share of joint ventures' and associates' turnover (10,879) (8,237)-----------------------------------------------------------------------------------TURNOVER --------------------Existing operations 496,358 348,978Acquired operations 132,066 - --------------------Group turnover - continuing operations 2 628,424 348,978Cost of sales (597,523) (334,742)----------------------------------------------------------------------------------- Gross profit 30,901 14,236 --------------------Amortisation of goodwill (1,616) (60)Other administrative expenses (24,519) (11,494) --------------------Administrative expenses (26,135) (11,554)----------------------------------------------------------------------------------- OPERATING PROFIT --------------------Existing operations 4,312 2,682Acquired operations 454 - --------------------Operating profit - continuing operations 4,766 2,682Share of operating profit injoint ventures and associates 393 184----------------------------------------------------------------------------------- Total operating profit 3 5,159 2,866 (Loss) / profit on disposal of subsidiaries (2) 12 Net interest receivable and similar income 4 1,381 1,374----------------------------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2, 3 6,538 4,252Tax on profit on ordinary activities (1,460) (1,468)----------------------------------------------------------------------------------- PROFIT FOR THE FINANCIAL YEAR 5,078 2,784===================================================================================Basic earnings per ordinary share 6 19.33p 10.99p===================================================================================Diluted earnings per ordinary share 6 19.12p 10.93p=================================================================================== CONSOLIDATED BALANCE SHEET30 June 2006 UNAUDITED Note 2006 2005 * Restated £'000 £'000 FIXED ASSETSIntangible assets 38,157 901Tangible fixed assets 2,322 573Investment in associates 1,492 1,251-----------------------------------------------------------------------------------TOTAL FIXED ASSETS 41,971 2,725-----------------------------------------------------------------------------------CURRENT ASSETSStocks and work-in-progress 3,346 122Debtors: amounts falling due within one year 113,461 64,007Debtors: amounts falling due after more thanone year 5,726 6,098Cash at bank and in hand 38,215 34,149----------------------------------------------------------------------------------- 160,748 104,376 CREDITORS: amounts falling due within one year (174,383) (92,342)-----------------------------------------------------------------------------------NET CURRENT (LIABILITIES) / ASSETS (13,635) 12,034-----------------------------------------------------------------------------------TOTAL ASSETS LESS CURRENT LIABILITIES 28,336 14,759-----------------------------------------------------------------------------------CREDITORS: amounts falling due within one year (8,235) ------------------------------------------------------------------------------------TOTAL NET ASSETS 20,101 14,759===================================================================================CAPITAL AND RESERVESCalled up share capital 274 262Share premium account 12,096 9,574Other reserves 436 436Own shares (1,457) (1,569)Profit and loss account 8,752 6,056-----------------------------------------------------------------------------------TOTAL SHAREHOLDERS' FUNDS 7 20,101 14,759===================================================================================* Comparative figures have been restated (see note 1) CONSOLIDATED CASH FLOW STATEMENTYear ended 30 June 2006 UNAUDTIED Note 2006 2005 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 7,802 455Associates and joint ventures 162 121Returns on investments and servicing of finance 1,373 1,079Taxation (1,294) (413)Capital expenditure and financial investment (628) (232)Acquisitions and disposals (13,050) 3,537Dividends paid (2,480) (2,080)--------------------------------------------------------------------------------------Cash (outflow) / inflow before financing (8,115) 2,467 Financing:Issue of shares (net) 756 295Capital element of payments under hire purchase contracts (14) -Bank loans 11,614 -Repayment of long term debt (1,455) ---------------------------------------------------------------------------------------Net cash inflow from financing 10,901 295--------------------------------------------------------------------------------------Increase in cash in the year 9 2,786 2,762====================================================================================== Reconciliation of net cash flow to movement in net funds 2006 2005 £'000 £'000 £'000 £'000 Increase in cash in the year 2,786 2,762Cash inflow from debt financing (10,109) ---------------------------------------------------------------------------------------Change in net debt resulting from cash flows (7,323) 2,762Loans & hire purchase contracts acquiredwith subsidiary (1,012) -Change in net debt resulting from non-cashchanges (36) 72-------------------------------------------------------------------------------------- (8,371) 2,834Net funds brought forward 9 34,149 31,315--------------------------------------------------------------------------------------Net funds carried forward 9 25,778 34,149====================================================================================== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESYear ended 30 June 2006 UNAUDITED 2006 2005 £'000 £'000Profit for the financial year:Group 4,795 2,682Joint ventures and associates 283 102------------------------------------------------------------------------------- 5,078 2,784Currency translation differences arising: Subsidiaries 15 (8)Currency translation differences arising: Joint venturesand associates 17 6-------------------------------------------------------------------------------Total recognised gains and losses relating to the year 5,110 2,782=============================================================================== 1. ACCOUNTING POLICIES This preliminary announcement has been prepared on the basis of the accountingpolicies set out in the 2005 group accounts, with the exception of the adoptionof Financial Reporting Standard 21 Events After the Balance Sheet Date (FRS21)and the early adoption of Financial Reporting Standard 20 Share-based Payments(FRS20). All other accounting policies have been applied consistently during thecurrent and prior years. The adoption of FRS21 has resulted in the group restating its closing net assetsfor the prior periods to exclude dividends declared but not yet paid or approvedby the shareholders at the balance sheet date. As a result the closing netassets increased at 30 June 2005 by £1,660,000. The opening net assets at 1 July2004 increased by £1,380,000. The adoption of FRS20 has resulted in a charge to the profit and loss account of£66,000 for the year ended 30 June 2006 with a corresponding increase in equityas at 30 June 2006. The effect on the prior year was not material. Financial Reporting Standard 22 Earnings per Share (FRS22) and FinancialReporting Standard 25 Financial Instruments: disclosure and presentation (FRS25)were also adopted during the year but had no material impact on the results. 2. SEGMENTAL INFORMATION Gross value of work performed, turnover and profit before taxation may beanalysed as follows: Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000Gross value of work performed by origin anddestination:- United Kingdom 724,298 360,230- Europe 5,060 8,604- Asia 16,866 16,538-------------------------------------------------------------------------------- 746,224 385,372================================================================================Turnover by origin and destination: - United Kingdom 626,284 342,690- Europe 5,060 8,604- Asia 7,959 5,921-------------------------------------------------------------------------------- 639,303 357,215Less: Share of joint ventures' andassociates' turnover (10,879) (8,237)-------------------------------------------------------------------------------- 628,424 348,978================================================================================Profit / (loss) on ordinary activities beforetaxation: - United Kingdom 5,735 3,954- Europe 695 331- Asia 108 (33)-------------------------------------------------------------------------------- 6,538 4,252================================================================================Fee income, which is considered to be a key indicator, is derived as follows: Turnover 628,424 348,978Trade contractor costs recharged (548,254) (305,330)-------------------------------------------------------------------------------- 80,170 43,648 Interest receivable 1,512 1,079--------------------------------------------------------------------------------Total fee income 81,682 44,727================================================================================ The majority of net assets are held in the United Kingdom. The group has one class of business, which is to provide construction servicesto its customers in the UK and internationally. In accordance with industry practice, gross value of work performed includes£106,921,000 (2005 - £28,157,000) in respect of the construction costs ofprojects on which the company acts as construction manager. These constructioncosts are billed directly to the client and are not invoiced via the group. 3. RECONCILIATION OF ADJUSTED OPERATING PROFIT AND PROFIT BEFORE TAXATION AND GOODWILL Adjusted operating profit and profit before taxation and goodwill are derived as follows: Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 Group operating profit 5,159 2,866Amortisation of goodwill 1,616 60--------------------------------------------------------------------------------Adjusted operating profit 6,775 2,926================================================================================Profit before taxation 6,538 4,252Amortisation of goodwill 1,616 60Loss / (profit) on disposal of subsidiaries 2 (12)--------------------------------------------------------------------------------Profit before taxation and goodwill 8,156 4,300================================================================================ We use adjusted operating profit and profit before tax and goodwill as a measure to facilitate comparisons between years. 4. NET INTEREST RECEIVABLE AND SIMILAR INCOME Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000Group:Bank interest receivable 1,606 1,118Bank loans and overdrafts (478) (1)Finance charges payable on hire purchase contracts (2) -Discount on deferred consideration 185 289Capitalised interest (36) -Other interest receivable / (payable) 98 (38)Joint ventures and associates:Group share of interest receivable 8 6--------------------------------------------------------------------------------- 1,381 1,374================================================================================= 5. DIVIDENDS PAID AND PROPOSED Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 2006 Interim paid - 3.00p per ordinary share (2005 - 2.75p) 820 7002005 Final paid - 6.25p per ordinary share (2004 - 5.50p) 1,660 1,380--------------------------------------------------------------------------------Ordinary dividends on equity shares 2,480 2,080================================================================================2006 Proposed final dividend per ordinary share -7.00p (2005 - 6.25p) 1,920 1,660================================================================================ In accordance with FRS21, dividends are accounted for in the period in whichthey are paid and approved by the shareholders. Accordingly the final dividendproposed in respect of the year ended 30 June 2006 has not been included as aliability as at 30 June 2006. 6. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares duringthe year, determined in accordance with the provisions of FRS 22 Earnings pershare. Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares in issue on the assumption of conversion of alldilutive potential ordinary shares. The group has only one category of dilutivepotential ordinary shares, being share options granted where the exercise priceis less than the average price of the company's ordinary shares during the year. Adjusted basic earnings per share is calculated by dividing the earningsattributed to ordinary shareholders, pre-amortisation of goodwill and beforeprofit / loss on disposal of subsidiaries, by the weighted average number ofordinary shares during the year. We use adjusted earnings per share as a measureto facilitate comparisons between years. Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 Profit for the financial year 5,078 2,784---------------------------------------------------------------------------------Basic and diluted earnings attributable toordinary shareholders 5,078 2,784Amortisation of goodwill 1,616 60Loss / (profit) on disposal of subsidiaries 2 (12)---------------------------------------------------------------------------------Adjusted earnings attributable to ordinaryshareholders 6,696 2,832================================================================================= Number Number Weighted average number of ordinary shares 26,271,160 25,338,317Dilutive share options 285,170 123,329---------------------------------------------------------------------------------Diluted weighted average number of ordinary shares 26,556,330 25,461,646=================================================================================Basic earnings per ordinary share 19.33p 10.99p=================================================================================Diluted earnings per ordinary share 19.12p 10.93p=================================================================================Adjusted basic earnings per ordinary share 25.49p 11.18p=================================================================================Adjusted diluted earnings per ordinary share 25.21p 11.12p================================================================================= 7. RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS 2006 2005 £'000 £'000 Profit for the financial year 5,078 2,784Dividends paid (2,480) (2,080)Exchange differences 32 (2)Movement in own shares 112 4Proceeds from share issue 2,534 295Credit to equity for share based payments 66 ----------------------------------------------------------------------------------Net addition to shareholders' funds 5,342 1,001Shareholders' funds at 1 JulyAs previously stated 13,099 12,378Impact of FRS21 adoption * 1,660 1,380---------------------------------------------------------------------------------Opening shareholders' funds as restated 14,759 13,758---------------------------------------------------------------------------------Shareholders' funds at 30 June 20,101 14,759================================================================================= * see note 1 8. BORROWINGS Group Group Company Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Bank overdrafts 1,280 - - -Bank loans 11,109 - 8,042 -Obligations under hire purchase contracts 48 - - ---------------------------------------------------------------------------------- 12,437 - 8,042 -=================================================================================Analysis of repaymentsBank loans and overdraftswithin one year on demand 4,993 - 1,940 -between one and two years 1,940 - 1,940between two and five years 5,659 - 4,365 - Obligations under hire purchase contractswithin one year on demand 19 - - -between one and two years 15 - - -between two and five years 14 - - - Less: Unamortised finance costs of debtwithin one year on demand (48) - (48) -between one and two years (48) - (48) -between two and five years (107) - (107) ---------------------------------------------------------------------------------- 12,437 - 8,042 -================================================================================= 9. ANALYSIS OF NET FUNDS Acquisitions Other excluding cash non-cash 2005 Cash flow and overdrafts changes 2006 £'000 £'000 £'000 £'000 £'000 -------Cash at bank and in hand 34,149 4,066 - - 38,215Overdraft - (1,280) - - (1,280) ------- 2,786 -------Debt due after one year - (7,444) - - (7,444)Debt due within one year - (2,679) (950) (36) (3,665)Hire purchase contracts - 14 (62) - (48)-------------------------------------------------------------------------------------------- 34,149 (7,323) (1,012) (36) 25,778============================================================================================ 10. ACQUISITION OF SUBSIDIARIES On 28 September 2005 the group acquired 100% of the issued share capital ofPropencity Group Limited, a leading regional construction services company, fora fair value consideration before expenses of £12,458,000 satisfied by cash of£10,680,000 and the issue of 790,134 shares at a fair value of 225 pence. Thefair value of the ordinary shares has been calculated by reference to theaverage middle market quotation of each ordinary share on each of the five business days preceding completion. This business combination has been accounted for as an acquisition. The aggregate net liabilities acquired and their provisional fair values, based on the directors' initial assessment of net realisable value, are detailed below. Book value Fair value Fair value adjustments £'000 £'000 £'000 Tangible fixed assets 1,911 - 1,911Stocks 1,939 - 1,939Debtors and other receivables 38,091 (1,507) 36,584Creditors and other payables (54,827) (8,899) (63,726)Bank overdrafts (3,707) - (3,707)Bank loans and hire purchase contracts (1,012) - (1,012)Deferred taxation 1,281 1,179 2,460-----------------------------------------------------------------------------------Net liabilities acquired (16,324) (9,227) (25,551)-----------------------------------------------------------------------------------Goodwill 38,872-----------------------------------------------------------------------------------Total consideration 13,321=================================================================================== Satisfied by:Cash 10,680Shares 1,778Directly attributable costs 863----------------------------------------------------------------------------------- 13,321=================================================================================== The fair value adjustments principally relate to a re-assessment of provisionsrequired on a number of construction contracts undertaken by Totty Constructionlargely relating to the high rise residential market. No further contracts ofthis nature are to be undertaken by this business. The impact of theseprovisions has been to reduce the potential deferred consideration of £3.8m tonil. The group has a potential deferred tax asset of £6.2m, of which only £1.3mhas been recognised in the accounts. 11. STATUS OF FINANCIAL INFORMATION IN THIS ANNOUNCEMENT The financial information set out in the announcement does not constitute thecompany's statutory accounts for the years ended 30 June 2006 or 2005. Thefinancial information for the year ended 30 June 2005 is derived from thestatutory accounts for that year which have been delivered to the Registrar ofCompanies. The auditors reported on those accounts. Their report was unqualifiedand did not contain a statement under section 237 (2) or (3) of the CompaniesAct 1985. The statutory accounts for the year ended 30 June 2006 will befinalised on the basis of the financial information presented by the directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies following the company's Annual General Meeting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ISG.L