1st Mar 2007 07:03
Keller Group PLC01 March 2007 For immediate release Thursday, 1 March 2007 Keller Group plc Preliminary results for the year ended 31 December 2006 Keller Group plc ("Keller" or "the Group"), the international ground engineeringspecialist, is pleased to announce its preliminary results for the year ended 31December 2006. Highlights include: • Revenue of £920.2m (2005: £731.0m) up 26%, mainly reflecting 20% like-for-like organic growth • Operating margin increased to 9.7% (2005: 7.3%), with significant improvements across the Group • Profit before tax up 72% to £83.7m (2005: £48.8m) - another record year • Earnings per share, before the benefit of a one-off tax credit, up 89% to 79.0p (2005: 41.8p). Basic earnings per share increased to 84.8p • Cash generated from operations of £98.3m, 94% of EBITDA, prior to investing £26.4m on acquisitions and £29.4m on capital expenditure • Board review of dividend policy • Total 2006 dividend per share increased by 30% to 15.6p (2005: 12.0p) • Thereafter, intention to increase dividends by 15% p.a. for the foreseeable future, subject to maintaining three times' dividend cover Justin Atkinson, Keller Chief Executive said: "This was another outstanding year for the Group, in which all four of ourdivisions increased their profitability and significantly improved theiroperating margins. In addition to the very strong organic growth generatedacross all our main markets, the three acquisitions made in 2006 performed evenbetter than we expected at the time of purchase. "Our increased scale and strong business model mean we are ideally placed tocontinue to perform well in our chosen markets and, whilst the outstanding 2006result is unlikely to be matched this year, we are confident that 2007 will beanother good year for the Group." For further information, please contact: Keller Group plc www.keller.co.ukJustin Atkinson, Chief Executive 020 7616 7575James Hind, Finance Director SmithfieldReg Hoare/Rupert Trefgarne 020 7360 4900 A presentation for analysts will be held at 9.15 for 9.30am at the offices of Smithfield, 10 Aldersgate Street, London EC1A 4HJ Print resolution images are available for the media to download from www.vismedia.co.uk Chairman's Statement Results 2006 marked a step change for Keller: building on previous years' successes andtaking full advantage of buoyant conditions in most of our global markets, wesignificantly increased the scale of our operations and achieved ourhighest-ever margin. Group revenue rose by 26% to £920.2m (2005: £731.0m), mainly reflectingexcellent organic growth. Profit before tax was up 72% to £83.7m (2005: £48.8m)and earnings per share before the benefit of a one-off tax credit grew to 79.0p(2005: 41.8p), in part reflecting a reduction in the underlying tax rate to 37%from 41%. Earnings per share have now grown at a compound annual growth rate of19% since flotation some 12 years ago. Our operating margin increased to itshighest-ever level of 9.7% from 7.3%, reflecting significant improvements in allof our geographic regions. Cash flow and net debt The very strong trading result was supported by an increase in cash generatedfrom operations to £98.3m (2005: £73.5m). Net debt at the end of the year stoodat £38.6m (2005: £40.9m), which is stated after expenditure of £26.4m onacquisitions (net of cash and debt acquired) and a £4.0m one-off cashcontribution into the UK pension scheme. Capital expenditure of £29.4m (2005:£15.7m) was higher than in recent years, as we modernise and expand ourequipment fleets in order to take advantage of the strong demand in most of ourmarkets. Dividends The Board has reviewed the Group's dividend policy in light of the substantialincrease in profits in the last two years. Given these excellent results and ourconfidence in the Group's future prospects, the Board intends to increase thedividend for the year by 30% and thereafter, by 15% per annum for theforeseeable future, subject to maintaining three times' dividend cover. Whilstour policy is to reward shareholders with progressive dividends and to maintaina comfortable dividend cover, we will also continue to reinvest our cash flow inthe growth of the Group, as we have successfully done to date. The Board is therefore recommending a final dividend of 11.4p per share (2005:8.2p). This brings the total dividend for the year to 15.6p (2005: 12.0p). Thefinal dividend will be paid on 29 June 2007 to shareholders on the register at 1June 2007. Pensions The UK defined benefit pension scheme was closed for future benefit accrual witheffect from 31 March 2006, when active members were transferred to a new definedcontribution arrangement. To help reduce the scheme deficit, the Group made aone-off cash contribution of £4.0m in April 2006. The pre-tax deficit reduced to£6.8m at the year end on an IAS 19 basis (2005: £11.9m). Strategy In 2006 we made good progress against our strategic objective of furtherconsolidating our global leadership in specialist ground engineering. We madethree acquisitions - Phi in the UK, Anderson in the US and Piling Contractors inAustralia. The last of these reinforced our leading position in this very strongmarket. All three acquisitions made excellent first-time contributions and theirmanagement and staff have adjusted well to life under Keller's ownership. We also pressed forward in our programme of introducing new solutions andextending the use of our existing technologies and methods around the world, asis demonstrated by the impressive organic growth rates achieved. In 2007, we aim to continue to make strategic advances within our core business.We are often seen as a preferred buyer of businesses within our industry, mainlybecause of what we can offer in return - strong financing, access to newtechnologies, a supportive culture and an excellent reputation. We will continueto take advantage of the opportunities presented by a highly fragmentedindustry, both in the US, where we have a long tradition of making goodacquisitions, and in other areas where either we are currently under-representedor where we see growth potential. As in the past, our approach will be measuredand sure-footed. People Building success upon success has only been possible because of the skill,commitment and effort which can be found in abundance throughout our businesses.I am proud of what our employees have achieved and I believe that they, in turn,take pride in belonging to a world-class organisation in which they are wellrespected, where their contribution is recognised and where they can influencethe future. On behalf of shareholders and the Board, I thank all our employeesfor making 2006 such a successful year. Outlook Looking ahead, we see potential for further growth in all of our markets. In theshort term, we expect to see some further contraction in the residential sectorin the US, at least in the first half of 2007. Our US non-residential order bookhas recently eased from its peak, which may signal some weakening in thisbuoyant sector in the second half, although the order book remains at anhistorically high level. Outside the US, we continue to see plenty ofopportunities and we expect to see good growth. Our Group-wide current order book remains strong, which gives us a soundplatform for the year ahead. Our increased scale and strong business model meanwe are ideally placed to continue to perform well in our chosen markets and,whilst the outstanding 2006 result is unlikely to be matched this year, we areconfident that 2007 will be another good year for the Group. Operating Review This was another outstanding year for the Group, in which all four of our majordivisions increased their profitability and significantly improved theiroperating margins, whilst continuing to gain market share. In addition to the organic growth generated across all our main markets, thethree acquisitions made in 2006 performed even better than we expected at thetime of purchase. Conditions in our major markets In North America, the public infrastructure and particularly the commercialsector remained extremely buoyant, with 2006 non-residential expenditure as awhole around 13% higher than the previous year(1). As expected, the residentialsector contracted as the year progressed, with housing starts for single-familyhomes ending the year some 15% down on 2005(2). Taken as a whole, constructionexpenditure in the US increased by around 5% year on year(1). In Europe, Germany experienced a long-awaited recovery in construction output,whilst activity levels in Keller's other main Continental European markets -France, Spain and Eastern Europe - remained high and the UK showed continuedimprovement. The Middle East saw high levels of construction activity, whilst the Group's FarEast markets once again offered good opportunities. Australia saw a significantincrease in expenditure on infrastructure, fuelled in part by the boom in miningand related activities. Despite robust competition, in 2006 the Group continued to gain market share andto outperform the competition in most of its markets. (1) Data published by the US Census Bureau of the Department of Commerce on 31 January 2007.(2) Monthly housing starts published by the National Association of Home Builders in January 2007. Operations North America The 2006 performance of our North American operations surpassed our highestexpectations at the start of the year, beating their previous records forrevenue and profit. Revenue of £476.9m (2005: £399.9m) was 19% ahead, withoperating profit of £64.1m (2005: £42.1m) up by 52%. Hayward BakerHayward Baker had another excellent year across most of its regions and helpedin part by a very strong contribution from Donaldson, its September 2005acquisition. Given the large number of contracts which Hayward Baker undertakesin any one year (almost 1,500 in 2006) it is pleasing to report furtherimprovement in its contract performance. Whilst strong market conditions haveassisted, this improvement also reflects a refinement of Hayward Baker'sapproach to risk management over the past two years. Amongst the projects worked on by Hayward Baker in 2006 were a number oftunnel-related projects on the West Coast, where the company has a solid trackrecord of performance on similar projects. Specialty grouting services wereprovided under the $10.2m (£5.2m) Lower North Outfall Sewer Rehabilitationcontract, to stabilise the soil above an existing sewer tunnel for the City ofLos Angeles; and under the $9.4m (£4.8m) Gold Line contract, to stabilisetunnelling works for the Metro Gold Line Eastside Extension. Also on the WestCoast, Hayward Baker contributed to a large and complex off-shore vibroreplacement test project in San Francisco Bay for the seismic upgrade of the BayArea Rapid Transit tube system - the deepest in-service vehicular tube in theworld. The strength of Hayward Baker's product range has been improved with the launchduring the year of its vibro piers system, which was developed as a fast andeconomic treatment for the support of lighter loads. The system is provingpopular and looks set to make a growing contribution in 2007 and beyond. CaseCase had an outstanding year, which saw the completion of several large andtechnically demanding projects, on time and to budget. These included thetwo-year $20m (£10.2m) contract to install four shafts to provide intake waterfor the Elm Road Generating Station near Milwaukee, Wisconsin. Each shaft had adiameter of 4.5 metres and a depth of 45 metres, establishing a record for thelargest rock shafts ever installed by Case. The ability to continually stretch boundaries to deal with ever more complexground problems depends not only on the technical skills of our people but alsoon the power and durability of our equipment. Investment in Case's large drillrigs has further improved productivity and has been an important element in thesuccess of many of the large jobs undertaken in 2006, such as the foundationsfor the new Goldman Sachs building in New York. Investment in the fleet has alsoenabled Case to expand its product offering to include secant pile walls - thesecontinuous earth retention walls formed by interlocking, concrete-filled shaftsare gaining in popularity in the US, following extensive development and use inEurope. McKinneyWhilst again working on some 1,500 contracts in the year, McKinney took on morelarge jobs, increasing by around 50% its average job size to $60,000 (£31,000).It again worked in collaboration with other US Group companies on a number ofprojects where it was able to bring complementary expertise or resources. TheMurano Tower project in Philadelphia, undertaken in joint venture with Case, isone such project, where the requirement for different-sized caissons to supportthis 42-storey luxury condominium development played to the respective strengthsof Case and McKinney. With its high contract volume, McKinney usually has its fair share of notableprojects. In 2006 these included the foundations for the new 100,000-seaterDallas Cowboys Football Stadium and the foundations for several "safe houses" inNew Orleans, where the pump operators for the local storm water system will beable to ride out future hurricanes without leaving their work stations. AndersonThe latest of the Group's US acquisitions, Anderson, had a very good first threemonths under Keller's ownership. Anderson, purchased for an initial $22m(£11.8m) including the assumption of debt, is a provider of heavy foundations,serving the commercial, industrial and public infrastructure markets on the WestCoast of the US. It represents an excellent strategic fit with our other USfoundation businesses and will assist our growth on the West Coast, where wewere formerly under-represented in heavy foundations. We are pleased with theprogress of its integration into the Group, with a migration to the Group'sprincipal reporting and accounting systems now well underway. SuncoastAfter a very strong first half, the downturn in the residential market wasclearly felt in the second half of the year, particularly in the states ofCalifornia and Arizona, where Suncoast's slab-on-grade revenue was down 32% onthe previous second half. This downturn, although severe, compares favourably toa fall of 39% in the number of residential building permits for these statesacross the same period. In contrast, residential sales in Texas remainedresilient for most of the year. Timely management action, in reducing the headcount and cutting capacity in theface of reduced volumes and increased pricing pressure, helped to protectslab-on-grade margins. Throughout the year there was strong demand for commercial high rise products,which resulted in Suncoast reporting revenue slightly ahead of the previous yearand a good profit. In the second half, Suncoast added to its range the WAFFLEMAT system - a newproduct which is particularly effective in medium expansive soils. Both this andSuncoast's existing slab-on-grade system are alternatives to traditionalfoundation methods, offering good product substitution opportunities whichshould enable the business to continue to grow market share over the longerterm, notwithstanding the difficult market conditions which Suncoast faces in2007. Continental Europe & Overseas Our Continental Europe & Overseas business reported a very good performance,with revenue of £255.0m (2005: £204.8m) up some 24% on the previous year. It isparticularly pleasing that the improvement was so evenly spread across thecountries represented within the division. Operating profit was 41% above theprevious year at £17.9m (2005: £12.7m). Our French business had an excellent year, in which its share of the domesticground improvement market continued to grow, largely in the commercial andresidential sectors. Further progress was made in extending our French exportmarkets, with several large contracts awarded across North Africa and in theFrench West Indies. In Spain, Keller-Terra saw another substantial increase in revenue in 2006, butwith some weakening of its excellent margins. Measures have now been taken tostrengthen our resources and key business processes to handle this rapidlygrowing business, which has trebled its revenue in the four years under Keller'sownership. In Central and Eastern Europe, our operations in Austria had a very busy year,with projects including ground improvement works for the new Klagenfurt footballstadium, which will be used as a venue for the 2008 European Championship.Further advances were made in Eastern Europe, particularly Poland, where ourorganic growth again exceeded that of the market. In addition to extending ourrange of ground improvement techniques, we undertook some of our first heavyfoundations work in this region - a key element of our strategy for growing thebusiness in this area - and made good progress on our first project in Ukraine.Revenue in Germany grew by around 10% which, combined with increased margins,produced a significantly improved result. Whilst much of the increased demandrelated to new commercial structures, such as logistics centres, several largeinfrastructure projects in which we have been involved over recent years,including tunnel stabilisation works in Leipzig and Cologne, helped to maintainhigh levels of activity throughout 2006. The Middle East reported a very good result, with an excellent contribution fromSaudi Arabia, where we were engaged on a big foundations project for a powerstation, and good results from Bahrain and UAE. The trend for man-made islandsin the Gulf area produced many related contracts, including foundations forlarge hotel complexes on Palm Jumeirah and for a luxury residential developmentcomprising six 20-storey towers on the Amwaj Islands, off the Bahrain coast. In the Far East, several ongoing contracts, such as Malaysia's StormwaterManagement and Road Tunnel project and development of the Universal Terminal onJurong Island, Singapore, underpinned a growing stream of work, whilst in Indiawe strengthened our resources in order to benefit from an expected growth indemand for our services. UK Revenue in the year was 38% up on the previous year at £123.2m (2005: £89.2m),with an operating profit of £3.2m (2005: loss of £0.3m). KGEKeller Ground Engineering (KGE) doubled its previous year's operating profit onrevenue some 40% ahead, including around £9m of revenue from Phi, to report itsbest-ever year. The foundation support division had an excellent year. Amongst the projectscompleted was the installation of foundations for a major distribution facilityadjacent to the Dartford Crossing in Kent. KGE was able to optimise the originalpiled scheme by utilising a range of engineering techniques: driven piles inareas of weak soil, with ground improvement by dynamic compaction and vibroreplacement in areas of shallow fill overlay. This 'value engineering' deliveredsubstantial reductions in programme time and cost. Another major contract in 2006 was at Mere Park in Surrey, where the site of aformer sand and gravel quarry is being re-developed into an 'urban village'.Backfilling of the former quarry and the installation of some 16,000 linearmetres of vibro stone columns has enabled around 350 new homes to be built indifficult ground conditions. The geotechnical division had a quieter, but on-budget year, performing well onsome demanding projects. These included work for the Parliamentary WorksDepartment, improving the foundations beneath Westminster Hall, to enable themain public entrance to the Palace of Westminster to be relocated there. Thedivision was also involved in a major new hotel at Heathrow's Terminal 5, whereit provided temporary anchor support for the retaining walls to a basement carpark. An already very good year was topped off by an excellent contribution from Phi,the retaining wall specialist acquired in April 2006 for an initialconsideration of circa £6m, net of cash acquired. KGE's existing earth retentionactivities were re-branded and assimilated into Phi and the enlarged business isnow fully integrated into the Group. MakersThe volume shortfall in social housing experienced in 2005 was largely recoveredin 2006, to give a break-even result for the year. Social housing projectsundertaken during the year included internal refurbishment works under apartnering arrangement with the Epping Forest District Council as part of itsDecent Homes programme. Also, internal and external refurbishment works werecarried out at the Coldharbour Estate in the London Borough of Greenwich, wherea programme to upgrade some 470 individual properties was completed on time andto budget. The performance on this project helped to secure Makers' position asone of four contractors appointed by the London Borough of Greenwich as theirstrategic partners for a period of four years. Australia Revenue of £65.1m (2005: £37.1m) was some 75% above the previous year, whilstoperating profit increased nearly four-fold to £7.0m (2005: £1.8m). This record result from our Australian businesses included five months'contribution from Piling Contractors, whose performance exceeded ourexpectations at the time of acquisition. With its strong links with civilengineering, infrastructure and mining, Piling Contractors is taking fulladvantage of the current boom in these sectors in Australia. One of the largestfoundations projects performed in the region in 2006 was a A$40m (£16.3m)contract performed by a joint venture including Piling Contractors to install adiaphragm wall and sheet piling for a bypass near the airport at Tugun on theNew South Wales/Queensland borders. Another significant contract for PilingContractors was the Inner Northern Busway project in Brisbane. Our other Australian businesses also took full advantage of the strong marketand completed a higher than average number of large contracts. These includedthe Rapid Expansion project at Port Hedland - the 16th project performed byFrankipile for BHP Billiton over the past 15 years - and the foundations for thenew Melbourne Convention Centre, which at A$14.5m (£5.9m) was the largestcontract ever undertaken by Vibropile. The ground engineering business, in its third year of operations, continued tomake good strides in introducing new techniques to the market. For example, itcompleted what is thought to be the first compensation grouting contract in thesouthern hemisphere on the Perth Metro Rail project and introduced Keller's drysoil mixing technology to Australia for a railway upgrade in Newcastle and forroad stabilisation at the Waterfront City project in Melbourne. Securing the future During our busiest year ever, we have not lost sight of the need to sustain ourbusiness by continuing to invest time and money in modernising our equipmentfleets, updating our methods of work, recruiting people with great potential,providing training, motivation and a safe work environment for our employees andreinforcing our strong relationships with industry partners - be they customers,consultants, suppliers or standard-setters. We will continue to invest in allthese aspects of our business which we see as being crucial to our continuedsuccess. Financial review Trading results 2006 was an outstanding year for Keller, with revenue, profits and margins allat record highs. All four geographic regions contributed to this result with allreporting significant improvements in both revenue and margins. Group revenue increased by 26% in the year to £920.2m, mainly reflecting verystrong organic growth in most of the Group's main markets, together with a goodcontribution from acquisitions. Movements in reported revenue and profits werenot significantly influenced by fluctuations in foreign currency exchange rates.The average US dollar exchange rate against sterling was US$1.84, compared toUS$1.82 in 2005, while the average euro exchange rate was €1.47, versus €1.46 in2005. Stripping out the effects of acquisitions and currency movements, theGroup's 2006 revenue was 20% up on 2005. Operating profit was £89.1m, up from £53.1m in 2005. Unsurprisingly, thisincrease was largely due to the US, which represents over half the Group interms of both revenue and profits. However, results in Continental Europe &Overseas were also up significantly, while Australia increased its operatingprofit almost four-fold, helped by the acquisition of Piling Contractors inAugust 2006. Taken together, the UK businesses returned to respectableprofitability after recording a small loss in 2005. Makers reported a break-evenresult in the year as a whole. Adjusting for the effect of acquisitions andcurrency movements, the Group's operating profit was 59% up on 2005. Operating margins increased to a record high of 9.7%, from 7.3% in 2005 whichitself was a record at the time. This substantial increase reflects significantimprovements in all our geographic regions, together with, as reported at theinterims, the impact of one-off claims income totalling £5m received in the USin the first half. Interest The net interest charge increased from £4.3m in 2005 to £5.4m in 2006, with thebenefit of lower average borrowings being more than offset by higher interestrates, particularly on US dollar-denominated debt. The majority of the Group'sborrowings are US dollar-denominated, in order to provide a hedge against theGroup's US dollar denominated net assets, and bear interest at floating rates.The average interest rate paid on US dollar borrowings increased from 4.3% to6.1%. Interest cover is very comfortable at around 20 times EBITDA. Tax The Group's underlying effective tax rate was 37%, down from 41% in 2005. Thisdecrease is largely due to the benefit from an intra-group financialrestructuring during the year, as a result of which the Group no longer incurstaxable losses (after central costs and interest) in the UK. Following thisrestructuring it is now anticipated that prior year UK tax losses, which totalnearly £13m, can be utilised against future UK taxable profits. Consequently,the Group has recognised a £3.8m deferred tax asset in respect of these losses,which has resulted in a one-off tax credit in the 2006 income statement. The Group's underlying effective tax rate remains high compared to most UKdomiciled businesses, reflecting the fact that the vast majority of the Group'sprofits are earned in relatively high tax jurisdictions, in particular the USwhere the effective federal and state tax rates total nearly 40%. Earnings and dividends Earnings per share before the one-off tax credit increased by 89% to 79.0p.Including the benefit of the one-off tax credit, earnings per share were 84.8p.The Board has reviewed the Group's dividend policy in light of the substantialincrease in profits in the last two years. Given these excellent results and ourconfidence in the Group's future prospects, the Board intends to increase thedividend for the year by 30% and thereafter, by 15% per annum for theforeseeable future, subject to maintaining three times' dividend cover. The Board is therefore recommending a final dividend of 11.4p per share. Thetotal dividend paid out of 2006 profits will be 15.6p. This is covered 5.1 timesby earnings per share before the one-off tax credit. Cash flow In 2006, the Group continued its excellent record of converting profits intocash. Net cash inflow from operations, stated after a £4.0m one-off contributioninto the Group's UK defined benefit pension scheme, was £98.3m, representing 94%of the Group's EBITDA. Year-end working capital, at £54.8m, was only £4.3mhigher than the previous year's level, despite the three acquisitions in theyear and the Group's organic growth. Capital expenditure was £29.4m, about twice the level of recent years. Thissignificant increase was necessary following the Group's substantial growthwhich, historically, had not been matched by increases in capital expenditure.The additional capital has been targeted either at geographies which haveexcellent growth prospects or where a lack of available equipment wasconstraining the ability to undertake work. After proceeds from the sale ofproperty, plant and equipment, net capital expenditure in the year was £27.4m. Financing Year-end net debt decreased to £38.6m at the end of 2006 from £40.9m at 31December 2005, despite the additional capital expenditure and spending £26.4m onacquisitions (net of cash and debt acquired) in the year. Net debt at the yearend was less than 0.4 times EBITDA. Based on net assets of £159.1m, gearing was24%, down from 35% at the beginning of the year. The Group's debt and committed facilities mainly comprise a US$100m privateplacement, repayable US$30m in 2011 and US$70m in 2014, and an £80m syndicatedrevolving credit facility expiring in 2011. At the year end, the Group also hadother committed and uncommitted borrowing facilities totalling around £40m. TheGroup therefore has sufficient available financing to support our strategy ofgrowth both through organic means and targeted, bolt-on acquisitions. Pensions The Group has defined benefit pension arrangements in the UK, Germany andAustria. The last actuarial valuation of the UK scheme, which has been closed tonew members since 1999, was as at 5 April 2005. At this date, the market valueof the scheme's assets was £17.3m and the valuation concluded that the schemewas 61% funded on an ongoing basis. The Group closed its UK defined benefit scheme for future benefit accrual witheffect from 31 March 2006 and the existing active members transferred to a newdefined contribution arrangement. To help reduce the deficit in the scheme, theGroup made a one-off cash contribution of £4.0m in April 2006 and agreed todouble its regular contributions to £1.2m a year with effect from January 2006.The level of contributions will be reviewed at the time of the next actuarialvaluation, currently scheduled for April 2008. The year-end 2006 IAS 19 valuation of the UK scheme showed assets of £25.7m,liabilities of £32.5m and a pre-tax deficit of £6.8m. In Germany and Austria, the defined benefit arrangements only apply to certainemployees who joined the Group prior to 1998. There are no segregated funds tocover these defined benefit obligations and the respective liabilities areincluded on the Group balance sheet. All other pension arrangements in the Group are of a defined contributionnature. Consolidated income statementfor the year ended 31 December 2006 ------------------------------------------------ ----- -------- -------- 2006 2005 Note £m £m------------------------------------------------ ----- -------- --------Revenue 3 920.2 731.0Operating costs (831.1) (677.9)------------------------------------------------ ----- -------- --------Operating profit 3 89.1 53.1Finance income 2.3 1.5Finance costs (7.7) (5.8)------------------------------------------------ ----- -------- --------Profit before taxation 83.7 48.8------------------------------------------------ ----- -------- --------Taxation before one-off tax credit (30.7) (19.8)One-off tax credit 3.8 ------------------------------------------------- ----- -------- --------Total taxation 4 (26.9) (19.8)------------------------------------------------ ----- -------- --------Profit for the period 56.8 29.0------------------------------------------------ ----- -------- --------Attributable to:Equity holders of the parent 55.7 27.3Minority interests 1.1 1.7------------------------------------------------ ----- -------- -------- 56.8 29.0------------------------------------------------ ----- -------- --------Basic earnings per share 5 84.8p 41.8pEarnings per share before one-off tax credit 5 79.0p 41.8pDiluted earnings per share 5 83.7p 41.6pDiluted earnings per share before one-off tax credit 5 78.0p 41.6p------------------------------------------------ ----- -------- -------- Consolidated statement of recognised income and expensefor the year ended 31 December 2006 ----------------------------------------------------- -------- -------- 2006 2005 £m £m----------------------------------------------------- -------- --------Foreign exchange translation differences (8.0) 8.6Actuarial losses on defined benefit pension schemes (0.1) (5.9)Tax on items taken directly to equity 0.1 1.8----------------------------------------------------- -------- --------Net (expense)/ income recognised directly in equity (8.0) 4.5Profit for the period 56.8 29.0----------------------------------------------------- -------- --------Total recognised income and expense for the period 48.8 33.5----------------------------------------------------- -------- --------Attributable to:Equity holders of the parent 47.9 32.1Minority interests 0.9 1.4----------------------------------------------------- -------- -------- 48.8 33.5----------------------------------------------------- -------- -------- Consolidated balance sheetAs at 31 December 2006 --------------------------------------------------- ---- -------- -------- 2006 2005 Note £m £m--------------------------------------------------- ---- -------- -------- Assets Non-current assetsIntangible assets 57.5 55.7Property, plant and equipment 114.6 90.4Deferred tax assets 7.9 5.7Other assets 8.8 ---------------------------------------------------- ---- -------- -------- 188.8 151.8--------------------------------------------------- ---- -------- -------- Current assetsInventories 25.5 24.4Trade and other receivables 221.7 194.6Cash and cash equivalents 25.2 25.9--------------------------------------------------- ---- -------- -------- 272.4 244.9--------------------------------------------------- ---- -------- -------- Total assets 461.2 396.7--------------------------------------------------- ---- -------- -------- Liabilities Current liabilitiesLoans and borrowings (6.8) (7.2)Current tax liabilities (9.4) (11.0)Trade and other payables (192.4) (168.5)--------------------------------------------------- ---- -------- -------- (208.6) (186.7)--------------------------------------------------- ---- -------- -------- Non-current liabilitiesLoans and borrowings (57.0) (59.6)Employee benefits (18.8) (21.2)Deferred tax liabilities (6.2) (5.5)Other liabilities (11.5) (6.5)--------------------------------------------------- ---- -------- -------- (93.5) (92.8)--------------------------------------------------- ---- -------- -------- Total liabilities (302.1) (279.5)--------------------------------------------------- ---- -------- -------- Net Assets 159.1 117.2--------------------------------------------------- ---- -------- -------- Equity Share capital 6.6 6.6Share premium account 37.1 36.4Capital redemption reserve 7.6 7.6Translation reserve (4.5) 3.3Retained earnings 105.6 57.2--------------------------------------------------- ---- -------- -------- Equity attributable to equity holders of the parent 7 152.4 111.1Minority interests 6.7 6.1--------------------------------------------------- ---- -------- -------- Total equity 159.1 117.2--------------------------------------------------- ---- -------- -------- Consolidated cash flow statementfor the year ended 31 December 2006 --------------------------------------------------------- -------- -------- 2006 2005 £m £m--------------------------------------------------------- -------- --------Cash flows from operating activitiesOperating profit 89.1 53.1Depreciation of property, plant and equipment 13.4 11.8Amortisation of intangible assets 2.4 0.1Profit on sale of property, plant and equipment (0.6) (0.1)Other non-cash movements 0.2 0.5Foreign exchange (gains)/losses (0.2) 0.1--------------------------------------------------------- -------- --------Operating cash flows before movements in working capital 104.3 65.5Movement in long-term liabilities and employee benefits (1.7) (2.2)(Increase)/decrease in inventories (3.0) 1.7Increase in trade and other receivables (30.6) (32.4)Increase in trade and other payables 29.3 40.9--------------------------------------------------------- -------- --------Cash generated from operations 98.3 73.5Interest paid (6.2) (5.1)Income tax paid (30.7) (18.8)--------------------------------------------------------- -------- --------Net cash inflow from operating activities 61.4 49.6--------------------------------------------------------- -------- --------Cash flows from investing activitiesInterest received 1.1 1.2Proceeds from sale of property, plant & equipment 2.0 1.9Acquisition of subsidiaries, net of cash acquired (26.4) (7.8)Acquisition of property, plant & equipment (29.4) (15.7)Acquisition of other non-current assets (2.6) ---------------------------------------------------------- -------- --------Net cash outflow from investing activities (55.3) (20.4)--------------------------------------------------------- -------- --------Cash flows from financing activitiesProceeds from the issue of share capital 0.8 0.4New borrowings 6.6 1.0Repayment of borrowings (3.6) (11.0)Payment of finance lease liabilities (2.1) (0.1)Dividends paid (9.0) (8.2)--------------------------------------------------------- -------- --------Net cash outflow from financing activities (7.3) (17.9)--------------------------------------------------------- -------- --------Net (decrease)/increase in cash and cash equivalents (1.2) 11.3Cash and cash equivalents at beginning of period 23.3 11.1Effect of exchange rate fluctuations (1.8) 0.9--------------------------------------------------------- -------- --------Cash and cash equivalents at end of period 20.3 23.3--------------------------------------------------------- -------- -------- --------------------------------------------------------- -------- -------- 2006 2005 £m £m--------------------------------------------------------- -------- --------Analysis of closing net debtCash in hand 25.1 25.9Short term deposits 0.1 -Bank overdrafts (4.9) (2.6)--------------------------------------------------------- -------- --------Net cash 20.3 23.3Bank and other loans (56.1) (59.0)Loan notes due within one year - (2.8)Finance leases (2.8) (2.4)--------------------------------------------------------- -------- --------Closing net debt (38.6) (40.9)--------------------------------------------------------- -------- -------- 1. Basis of preparation The Group's 2006 results have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS"). The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2006 or 2005 but is derivedfrom the 2006 accounts. Statutory accounts for 2005 have been delivered to theRegistrar of Companies, and those for 2006, prepared under IFRS as adopted bythe EU, will be delivered in due course. The auditors have reported on thoseaccounts; their reports were (i) unqualified, (ii) did not include references toany matters to which the auditors drew attention by way of emphasis withoutqualifying their reports and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985. The Company has adopted the amendments to IAS 39 and IFRS 4 in relation tofinancial guarantee contracts, which apply to periods commencing on or after 1January 2006. Where Group companies enter into financial guarantee contracts to guarantee theindebtedness or obligations of other companies within the Group, these areconsidered to be insurance arrangements, and accounted for as such. In thisrespect, the guarantee contract is treated as a contingent liability until suchtime as it becomes probable that the guarantor will be required to make apayment under the guarantee. Accordingly the amendments have not had any impacton the financial statements. 2. Foreign currencies The exchange rates used in respect of principal currencies are: 2006 2005--------------------------------------------------------- -------- --------US dollar: average for year 1.84 1.82US dollar: year end 1.96 1.72Euro: average for year 1.47 1.46Euro: year end 1.49 1.45Australian dollar: average for year 2.45 2.39Australian dollar: year end 2.49 2.36--------------------------------------------------------- -------- -------- 3. Segmental analysis Revenue, operating profit and capital employed may be analysed as follows: --------------------- ------- ------- ------- ------- ------- ------- 2006 2006 2005 2005 2006 Operating Capital 2005 Operating Capital Revenue profit employed Revenue profit employed £m £m £m £m £m £m--------------------- ------- ------- ------- ------- ------- -------United Kingdom 123.2 3.2 7.5 89.2 (0.3) (7.0)North America 476.9 64.1 130.3 399.9 42.1 116.9ContinentalEurope & Overseas 255.0 17.9 57.2 204.8 12.7 51.7Australia 65.1 7.0 17.0 37.1 1.8 7.4--------------------- ------- ------- ------- ------- ------- ------- 920.2 92.2 212.0 731.0 56.3 168.9Central itemsand eliminations - (3.1) (52.9) - (3.2) (51.7)--------------------- ------- ------- ------- ------- ------- ------- 920.2 89.1 159.1 731.0 53.1 117.2--------------------- ------- ------- ------- ------- ------- ------- In the opinion of the Directors the Group operates only one class of business. 4. Taxation The taxation charge comprises: 2006 2005 £m £m------------------------------------------------------- ------- -------Current tax expenseCurrent year 29.7 23.8Prior years (0.1) 0.1------------------------------------------------------- ------- -------Total current tax 29.6 23.9------------------------------------------------------- ------- -------Deferred tax expenseCurrent year 0.9 (3.6)Prior years:One-off tax credit (3.8) -Other 0.2 (0.5)------------------------------------------------------- ------- -------Total deferred tax (2.7) (4.1)------------------------------------------------------- ------- ------- 26.9 19.8------------------------------------------------------- ------- ------- The one-off tax credit arose following an intra-group financial restructuringduring the year, as a result of which the Group no longer incurs taxable losses(after central costs and interest) in the UK. Following this restructuring, itis now anticipated that prior year UK tax losses can be utilised against futureUK taxable profits. Consequently, the Group has recognised a £3.8m deferred taxasset in respect of those losses, which has resulted in a one-off tax credit inthe 2006 income statement. The total UK tax charge for the year was £2.8m (2005:£nil). 5. Earnings per share Basic and diluted earnings per share are calculated as follows: ------------------------------------ -------- -------- -------- -------- 2006 2006 2005 2005 Basic Diluted Basic Diluted £m £m £m £m------------------------------------ -------- -------- -------- --------Earnings (after tax and minorityinterests) being net profitsattributable to equity holders of the parent 55.7 55.7 27.3 27.3------------------------------------ -------- -------- -------- -------- No. of No. of No. of No. of shares shares shares shares millions millions millions millions------------------------------------ -------- -------- -------- --------Weighted average of ordinary shares in issue during the year 65.6 65.6 65.3 65.3Add: Weighted average of shares under option during year - 1.6 - 1.5Add: Weighted average of ownshares held - 0.1 - 0.1Less: no. of shares assumedissued at fair value during year - (0.8) - (1.4)------------------------------------ -------- -------- -------- --------Adjusted weighted averageordinary shares in issue 65.6 66.5 65.3 65.5------------------------------------ -------- -------- -------- -------- Pence Pence Pence Pence------------------------------------ -------- -------- -------- --------Earnings per share 84.8p 83.7p 41.8p 41.6p------------------------------------ -------- -------- -------- -------- Earnings per share before the one-off tax credit of 79.0p (2005: 41.8p) iscalculated based on earnings of £55.7m (2005: £27.3m) less the one-off taxcredit of £3.8m (2005: £nil) and the weighted average number of ordinary sharesin issue during the year of 65.6 million (2005: 65.3 million).Diluted earnings per share before the one-off tax credit of 78.0p (2005: 41.6p)is calculated based on earnings of £55.7m (2005: £27.3m) less the one-off taxcredit of £3.8m (2005: £nil) and the adjusted weighted average number ofordinary shares in issue during the year of 66.5 million (2005: 65.5 million). 6. Dividends payable to equity holders of the parent Ordinary dividends on equity shares: ------------------------------------------------------------- ------ ------ 2006 2005 £m £m------------------------------------------------------------- ------ ------Amounts recognised as distributions to equity holders in theperiod:Interim dividend for the year ended 31 December 2006 of 4.2p(2005: 3.8p) per share 2.8 2.5Final dividend for the year ended 31 December 2005 of 8.2p(2004: 7.3p) per share 5.3 4.8------------------------------------------------------------- ------ ------ 8.1 7.3------------------------------------------------------------- ------ ------ The Directors have proposed a final dividend for the year ended 31 December 2006of £7.5million, representing 11.4p (2005:8.2p) per share. The proposed dividendis subject to approval by shareholders at the Annual General Meeting on 21 June2007 and has not been included as a liability in these financial statements. 7. Reconciliation of movements in equity attributable to equity holders of the parent ------------------------------------------------------------- ------ ------ 2006 2005 £m £m------------------------------------------------------------- ------ ------Equity at start of period 111.1 85.4Total recognised income and expense 47.9 32.1Dividends to shareholders (8.1) (7.3)Shares issued 0.7 0.4Share based payments 0.8 0.5------------------------------------------------------------- ------ ------Equity at end of period 152.4 111.1------------------------------------------------------------- ------ ------ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Keller