27th Mar 2007 07:02
International Nuclear Solutions PLC27 March 2007 International Nuclear Solutions plc ("INS" or the "Company") Preliminary results for year ended 31 December 2006 INS, one of the largest providers of specialist nuclear engineering and designservices in the UK with more than 25 years of industry experience, todayannounces a 29% uplift in turnover and a 38% increase in its order book. Financial Highlights 2006 2005 Turnover £31.7m £24.6mOperating profit *£2.5m £2.2mProfit before tax *£2.5m £2.2mProfit after tax £1.0m £1.9mEarnings per share 1.68p 3.13pCash £2.7m £0.4m * before exceptional items of £832,000 in respect of the demerger from RoboticTechnology Systems plc ("RTS") and admission to AIM • Successful demerger from RTS and admission to AIM • Strong cash performance. £5.9m cash inflow from operating activities (2005 - £0.2m) and closing cash of £2.7m (2005 - £0.4m) • New office opened at Birchwood in Warrington • Strong order book up 38% to £12.7m reflecting significant new wins from British Nuclear Group and Carillion at Sellafield Chris Brown, Chairman of INS, said: "INS maintained its excellent track record of growth in 2006, and exceeded ourexpectations in terms of operating performance. Our strong opening order book,and the increasing activity levels in the nuclear industry, give us confidencethat the Group will continue to progress in 2007 As shareholders are aware, on 26 January 2007 Babcock International Group PLCannounced that it had acquired ordinary shares in INS representing 24.5% of theissued share capital. Discussions with Babcock are ongoing." 27 March 2007 Enquiries: International Nuclear Solutions plc Tel: 0161 222 5500Chris Brown, ChairmanTony Moore, CEO College Hill Tel: 020 7457 2020Matthew Smallwood Chairman's Statement Following the successful admission of International Nuclear Solutions plc ("INS") to the AIM market on 31 May 2006, I am pleased to be able to present theGroup's first set of annual accounts as an independent public company. As the transfer of INS Innovation Ltd (formerly RTS Innovation Ltd) to INS hasbeen accounted for in accordance with the principles of merger accounting, thefinancial statements are presented as if INS Innovation Ltd had been owned andcontrolled by INS for the full financial year. Turnover at £31.7m increased by 29% in 2006 compared with the previous year,with the commencement of several significant new contracts, notably the SPRS andB29 projects at Sellafield. Operating profit before exceptional items was 11.9%higher than 2005 at £2.5m, before exceptional administrative costs of £0.8m(2005 - £nil) relating to the demerger from Robotic Technology Systems PLC (RTS)and subsequent admission to AIM. Profit after tax and exceptional items was£1.0m, compared with £1.9m in 2005. INS produced a strong cash performance in 2006, with £5.9m cash inflow fromoperating activities, an increase in net funds of £2.4m, and closing cashbalances of £2.7m. Our order book, which stood at £11.4m at the end of June, grew to £12.7m by theend of 2006, and currently stands at £12.9m. Our total headcount at the end of2006 stood at 274. This is an increase of 23% in permanent staff, and 21% intotal from the position at the start of the year. A new project office has beenopened at Birchwood in Warrington, and we have also relocated our Greengarthoffice to new premises at the West Lakes Science Park near Sellafield. Major Corporate Events On 31 May 2006, INS was admitted to trading on AIM, and its share price closedon the first day of trading at 41.25p. The closing share price on 31 December2006 was 52.5p. Following the end of the 2006 trading period, on 18 January2007, INS announced that it had received an approach which may or may not leadto an offer for the Group. On 26 January 2007 Babcock International Group PLCannounced that it had acquired ordinary shares in INS representing 24.5% of theissued share capital at 63p and intended to progress discussions with the Boardregarding the possibility of making a cash offer for the balance of the issuedshare capital of INS. These discussions are still ongoing. Dividends As stated in the Admission Document, INS does not intend to pay a dividend forthe year ended 31 December 2006. The Board does, however, consider that adividend policy is likely to be introduced during 2007, consistent with thecontinuing strong cash performance of the Group. Outlook Our strong opening order book, and the increasing activity levels in the nuclearindustry, give us confidence that the Group will continue to progress in 2007.The Nuclear Decommissioning Authority (NDA) has announced that there is a smallincrease in funding in its 2007 budget. We are aware that there will be areduction in operating revenues to the NDA in future years as a result of theclosure of two Magnox stations at the end of 2006. This may in the course oftime affect the funding available to the NDA in future years. However, we viewthe future with confidence given the increasing overall demand for nucleardecommissioning expertise. Chris BrownChairman 27 March 2007 Operational Review The demerger from RTS was completed successfully with no adverse impact to thebusiness from either customers or operational matters. Staffing levels are up by 21% on the previous year, which is a significantachievement bearing in mind the shortage of skilled labour and an extremelybuoyant market place for professionals. A new project office has been opened at Birchwood in Warrington near to ourcustomer's office which has provided increased office capacity for the increasedwork load and staffing levels. We were successful in winning a number of important contracts during 2006 andthese include: • a 3 year framework contract from British Nuclear Group ("BNG") for engineering services and the supply of integrated equipment/systems for the Sellafield MOX fuel manufacturing facility. This contract is valued at c.£8 million over 3 years, • a contract from Carillion for the supply of integrated equipment/systems for the Sellafield Product and Residues Facility - the largest new build facility on the Sellafield site - valued at c.£15 million and likely to increase in value subject to agreement on the supply of additional support services for site commissioning of the facility, • a design and engineering contract from Edmund Nuttall for a new waste storage facility on the Sellafield site. The contract is valued at c.£1 million; and • a design and engineering contract for BNG valued in excess of £1.3 million. INS leads a consortium of three companies for this project. We have also been successful as part of a consortium tendering for the new MultiDiscipline Design House (MDDH) framework agreement. The three lead consortiummembers include INS, AMECNNC and DGP International. During 2005/6 INS developed its own technology for dealing with both radioactivesludge and solid waste at the various nuclear sites owned by the NDA. We are inthe process of registering a patent for the technology. We are one of fivecompanies selected by BNG to present their technology and an initial feasibilitystudy has been completed to identify the benefits of the technology and anestimate for the cost of implementation. During the year we secured significant business in the clean-up anddecommissioning of the high hazard legacy ponds and silos at Sellafield. INS iscurrently working on four of the major ponds and silos projects considered to beat the top of the NDA's decommissioning priorities at Sellafield. The Companyanticipates to win further work in the coming year both directly and inpartnership through INS' various alliances. The Atomic Weapons Establishment (AWE) at Aldermaston presents a majoropportunity for INS because it will require a significant amount of thespecialist design and engineering skills that INS possesses which are essentialfor some of the projects that are to be undertaken on its two sites. INS has long been focused on health, safety and environmental matters andachieved accreditation to the environmental standard ISO 14001 in December 2006. We believe that INS will continue to grow and diversify into new areas with theemphasis on further development of our consultancy business. Tony MooreChief Executive Officer 27 March 2007 Group profit and loss account for the year ended 31 December 2006 Year ended Year ended 31 December 2006 31 December 2005 £'000 £'000 Note Turnover 2 31,745 24,610 Cost of sales (26,007) (19,823) Gross profit 5,738 4,787 Distribution costs (364) (321)Administrative expenses (3,703) (2,229) Operating profit before exceptional charges 2,503 2,237 Exceptional administrative expenses included inadministrative expenses above 3 (832) - Operating profit 1,671 2,237 Interest receivable and similar income 41 16Interest payable and similar expenses (2) (1) Profit on ordinary activities before taxation 1,710 2,252 Taxation on profit on ordinary activities 4 (663) (303) Profit for the financial year 8 1,047 1,949 Earnings per share Basic earnings per share 5 1.68p 3.13p There were no other gains and losses other than those shown above. There was no difference between the reported profits and losses and historicalcost profit and losses in either the current or preceding financial year. The profit and loss account has been prepared using merger accounting and ispresented on a proforma basis as if the new holding company has been inexistence throughout both the current and prior periods. Group balance sheet at 31 December 2006 31 December 31 December Note 2006 2005 £'000 £'000 £'000 £'000Fixed assets Tangible assets 6 1,231 66 Current assets Debtors: amounts falling due withinone year 7,355 10,872 Cash at bank and in hand 2,734 364 10,089 11,236Creditors: amounts falling due within oneyear (9,780) (8,871) Net current assets 309 2,365 Net assets 1,540 2,431 Capital and reserves Called up share capital 7 623 - Merger reserve 8 (623) - Capital redemption reserve 8 50 - Other reserves 8 26 - Profit and loss reserve 8 1,464 2,431 Equity shareholders' funds 9 1,540 2,431 Group cash flow statement for the year ended 31 December 2006 Note Year ended Year ended 31 December 2006 31 December 2005 £'000 £'000 Net cash inflow from operating activities 10 5,908 210 Returns on investment and servicing of finance 11 39 15 Taxation paid (208) - Capital expenditure and financial investment 11 (1,405) (12) Equity dividends paid 12 (1,964) (2,000) Cash inflow/(outflow) before financing 2,370 (1,787) Financing Shares issued 50 - Shares redeemed (50) - Increase/(decrease) in cash 2,370 (1,787) Reconciliation of net cash flow to movement in net funds Year ended Year ended 31 December 2006 31 December 2005 £'000 £'000 Increase/(decrease) in net funds resulting from 2,370 (1,787)cash flows in the year Net funds at 1 January 364 2,151 Net funds at 31 December 2,734 364 Notes forming part of the financial statements for the year ended 31 December2006 1 Basis of preparation The financial information set out above does not constitute within the meaningof section 240 of the Company's Act 1985 the Company's statutory accounts forthe year ended 31 December 2006 or for the year ended 31 December 2005. Thefinancial information for 2005 is derived from the statutory accounts of INSInnovation Ltd for the year ended 31 December 2005 which have been delivered tothe Registrar of Companies. The auditors have reported on the 2006 accounts;their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2006 will bedelivered to the Registrar of Companies in the near future. The transfer of INS Innovation Ltd (formerly RTS Innovation Ltd) on 30 May 2006to International Nuclear Solutions plc has been accounted for in accordance withthe principles of merger accounting as set out in Financial Reporting Standard 6"Acquisitions and Mergers". The financial statements are therefore presented asif INS Innovation Ltd had been owned and controlled by International NuclearSolutions plc for the full financial year. Comparatives have been prepared as if the continuing operations of InternationalNuclear Solutions plc were in existence for the whole of 2005. 2 Turnover and profits All turnover and profits are derived in the UK. Turnover is wholly attributableto the principal activity of the Group. 3 Operating exceptional items: Administrative expenses Year ended Year ended 31 December 2006 31 December £'000 2005 £'000 Costs in connection with demerger from RTS and admission to AIM 832 - 4 Taxation Year ended 31 December Year ended 31 2006 December 2005Current tax £'000 £'000 £'000 £'000 UK Corporation tax - current year 658 300 - prior year adjustment 2 - 660 300Deferred taxOrigination and reversal of current year timing differences 5 1Origination and reversal of prior year timing differences (2) 2 3 3 Tax on profit on ordinary activities 663 303 The taxation charge for the period is significantly higher than the prior year.This is due to the availability of group tax relief when Innovation was part of the RTS group in 2005, and the tax treatment of certain costs in 2006 in respect of the demerger from RTS and the subsequent flotation of the Company. 5 Earnings per share Earnings per ordinary share has been calculated using the weighted averagenumber of shares in issue during the relevant financial years. The calculationsof basic earnings per share for the year are based upon a profit after tax of£1,047,000 (2005 - £1,949,000). The weighted average number of equity sharesused in the calculation of earnings per share for the current and comparativeperiod is 62,335,374. 2006 2005 Pence Pence Basic earnings per share 1.68 3.13Adjusted basic earnings per share (see below) 3.01 3.13 There is no difference between basic and fully diluted earnings per share. Earnings per share before the exceptional item has been calculated using theadjusted profit after tax as follows: 2006 2005 £'000 £'000 Profit after tax 1,047 1,949Exceptional item in administrative expenses (note 5) 832 - Adjusted profit after tax 1,879 1,949 6 Tangible assets Leasehold land Plant and Fixtures, and buildings machinery fittings and equipment Total £'000 £'000 £'000 £'000CostAt 1 January 2006 - 28 257 285Transfers (see below) 792 428 - 1,220Additions 34 398 90 522 At 31 December 2006 826 854 347 2,027 DepreciationAt 1 January 2006 - 26 193 219Transfers (see below) 109 228 - 337Charge for the year 45 131 64 240 At 31 December 2006 154 385 257 796 Net book valueAt 31 December 2006 672 469 90 1,231 At 31 December 2005 - 2 64 66 Transfers relate to assets purchased from former group companies. 7 Share capital Allotted, called up and Authorised 31 fully paid December 2006 31 December 2006 £'000 £'000 Ordinary shares of 1p each 1,000 623 Number of shares £'000 In issue at 1 January 2006 - -Issued in the year 62,335,374 623In issue at 31 December 2006 62,335,374 623 • On incorporation on 10 March 2006, the Company's authorised share capital was £100 divided into 100 ordinary shares of £1 each. One ordinary share of £1 was allotted on incorporation. • On 12 April 2006, the £1 share was sub divided into 100 £0.01 Ordinary Shares. The Company's authorised share capital was then increased from £100 to £60,000 by the creation of 990,000 new Ordinary Shares of £0.01 each and 5,000,000 redeemable preference shares of £0.01. • On 12 April 2006, 5,000,000 redeemable preference shares of £0.01 each were allotted and fully paid. • On 21 April 2006 5,000,000 redeemable preference shares of £0.01 each were redeemed by the Company for £50,000. Pursuant to a resolution of the shareholders of the Company all of the 5,000,000 redeemable preference shares of £0.01 in the capital of the Company were reclassified as Ordinary Shares of £0.01 each. • On 4 May 2006, pursuant to a resolution of the shareholders of the Company the authorised share capital was increased to £1,000,000 by the creation of 94,000,000 Ordinary Shares of £0.01 each. • On 30 May 2006, the entire issued share capital of INS Innovation Ltd (formerly RTS Innovation Ltd) was transferred from Robotic Technology Systems PLC to the Company in consideration for the issue of 62,335,274 Demerger shares to the qualifying shareholders, one ordinary share issued for every RTS share held. 8 Reserves Capital Profit and loss redemption account Merger reserve reserve Other reserves £'000 £'000 £'000 £'000 At 1 January 2006 2,431 - - -Profit for the financial year 1,047 - - -Dividend paid (1,964) - - -Reserve arising on demerger - (623) - -Share capital redemption (50) - 50 -Shares to be issued - - - 26 At 31 December 2006 1,464 (623) 50 26 9 Group reconciliation of movements in equity shareholders' funds Year ended Year ended 31 December 2006 31 December 2005 £'000 £'000 Equity shares issued 623 -Preference shares issued 50 -Preference shares redeemed (50) -Reserve arising on demerger (623) -Profit for the financial year 1,047 1,949Dividend paid (1,964) (2,000)Movement on other reserves relating to share options 26 - Net deduction from equity shareholders' funds (891) (51)Opening equity shareholders' funds 2,431 2,482 Closing equity shareholders' funds 1,540 2,431 10 Reconciliation of operating profit to net cash inflow from operatingactivities Year ended Year ended 31 December 2006 31 December 2005 £'000 £'000 Operating profit 1,671 2,237Depreciation 240 52Other non-cash charges 26 -Decrease in debtors 3,213 2,682Increase/(decrease) in creditors 758 (4,761) Net cash inflow from operating activities 5,908 210 11 Notes to the cash flow statement Year ended Year ended 31 December 2006 31 December 2005 £'000 £'000Returns on investment and servicing of financeInterest received 41 16Interest paid (2) (1) 39 15 Capital expenditure and financial investmentPayments to acquire tangible fixed assets (1,405) (12) (1,405) (12) 12 Dividends paid 2006 2005 £'000 £'000 Dividends paid 1,964 2,000 The dividends were paid to Robotic Technology Systems PLC, prior to demerger. 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