12th Jul 2007 07:01
Scott Wilson Group plc12 July 2007 For Immediate Release 12 July 2007 SCOTT WILSON GROUP PLC - 2007 PRELIMINARY RESULTS Scott Wilson Group plc ("Scott Wilson" or "the Group"), the internationalconsultancy offering integrated professional services in the transportation,property, environment and natural resources sectors, today issues itspreliminary unaudited results for the 52 weeks ended 29 April 2007. Financial summary 2007 2006 ChangeRevenue including share of joint £261.0m £197.8m +32.0%venturesGroup revenue £249.5m £185.9m +34.2%Operating profit £14.7m £21.1m -30.1%Adjusted* operating profit £16.3m £10.5m +55.3%Adjusted* operating margin 6.2% 5.3% Total dividend per share 3.3p 2.5p +32.0% Highlights • Record results, on an adjusted basis, lead to 5 successive years of double-digit revenue growth • Strong organic revenue growth of 18% • Full year dividend 10% higher than indicated at the time of the IPO reflecting the strength of the Group's performance • Four acquisitions completed during the year - all successfully integrated and performing above management expectations • Gross pension deficit significantly reduced to £12.4m in 2007: (2006: £33.6m) • 2007/8 off to a good start with a record order book of £257m and two major contract wins: Greece Central Motorway Concession (fees of £13m) and Three Counties Alliance (fees of £8m). • Two acquisitions since the year end. DCL Consulting Engineers Limited, a building services consultancy based in the South West of England for a total potential consideration of £1.1m and McLay Collier, a property structural engineering consultancy based in Glasgow, announced today for a goodwill payment of £2.7m. * The Directors believe that the presentation of adjusted operating profit,adjusted operating margin and adjusted earnings per share assists with theunderstanding of the performance of the Group. - Adjusted operating profit is operating profit adjusted for the impact of non-recurring items, restructuring costs, amortisation of business combination intangibles and the Group's share of taxation in relation to joint ventures. - Adjusted operating margin is adjusted operating profit expressed as a percentage of revenue including share of joint ventures. - Adjusted earnings per share is earnings per share adjusted for the impact of non-recurring items, restructuring costs and amortisation of business combination intangibles. Reconciliations of these measures to operating profit, operating margin andearnings per share are set out in note 16 to the consolidated financialstatements. Geoff French, Chairman of Scott Wilson, commented: "These results demonstrate the Group's ability to take advantage of the buoyanttrading conditions that currently exist in our key markets. The broad range ofconsultancy services that we have established across multiple sectors hasincreased our competitive edge and enabled Scott Wilson to achieve annualdouble-digit organic growth once again. "During the year, we expanded our capability through selective acquisitions, allof which have been successfully integrated into the Group. I am delighted thatwe have been able to announce a further acquisition today. The broader scopethat we now have, together with our improved margins and record order book,means that the Board remains confident in its ability to deliver our strategicobjectives and to continue to enhance shareholder value." For further information please contact: Scott Wilson Group plc www.scottwilson.comGeoff French, Chairman 01256 310 200Stephen Kimmett, Finance Director 01256 310200Lak Siriwardene, Head of Communications 07824 311762 Financial DynamicsCharlie Armitstead 020 7269 7291Richard Mountain 020 7269 7291 A briefing for analysts and investors will take place today at 9.00am BST atFinancial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB.The presentation slides used at this briefing will be posted on the Group'swebsite (www.scottwilson.com/news) at 9.00am. Scott Wilson Group plc Scott Wilson Group plc, with over 5,500 members of staff, is an internationalconsultancy offering integrated professional services in the transportation,property, environment and natural resources sectors. It has doubled in size overthe past few years and from its UK base controls a network of some 80 offices. www.scottwilson.com CHAIRMAN'S STATEMENT INTRODUCTION I am pleased to report another year of excellent growth for the Group. Ourfinancial results show a continuing substantial improvement in revenue andadjusted* operating margins. We have made several selective acquisitions tobuild our expertise and coverage in our target sectors. In addition, our orderbook stands at record levels. These financial results for the Group haveexceeded market expectations, which were upgraded several times in the course ofthe year. MACRO-ECONOMIC ENVIRONMENT Global infrastructure expenditure is projected to rise by nearly 50 per centeach decade according to The Organisation for Economic Co-operation andDevelopment, the increase being fuelled by population growth, urbanisation andthe need for sustainability. China is spending US$160bn on new infrastructure projects every year. India isspending some 8 per cent of its GDP on roads, ports and airport expansions. Urbanisation, migration and increased commercial/leisure travel are placingincreasing demands on property and transport systems worldwide. Rapidglobalisation is also creating an urgent need for sustainability andenvironmental services. LONG TERM STRATEGY AND BUSINESS OBJECTIVES Scott Wilson provides global consultancy services to the transportation,property, environment and natural resources market sectors. The Group's majormarket is in the UK which accounts for over 70 per cent of its revenue.International businesses are based in China/Hong Kong, South East Asia, India,the Middle East, Eastern Europe and Southern Africa. Key elements to our five year strategy of growth and development include: - organic growth to be at least 10 per cent per annum; - adjusted* operating margin to be improved to at least 8 per cent; - working capital to be 80 days or less, calculated by reference to Group revenue; - overhead costs to be reduced to below 16.5 per cent of revenue; - adjusted* fully diluted EPS to grow by at least 15 per cent per annum; and - at least 30 per cent of work to be generated outside the UK. To further reduce the risks faced by the Group, we are also seeking to achieve abetter balance across our market sectors with term contracts accounting for 35per cent of total revenue, 80 per cent or more of revenue from existing orrecent clients and no single project accounting for more than 10 per cent of ourannual revenue. Acquisitions will be considered in support of these strategic objectives toprovide a better balance across our market sectors, to reduce our dependence ontransportation and to help maintain a diverse UK and international portfolio. We have made considerable progress over the last year on the key elements of ourstrategy. We have gained market share in the UK, we have added more focus to ourinternational work and we have achieved a significant improvement in the balanceacross our market sectors. Our recent acquisitions are integrating into thebusiness very well and have contributed considerably to the progress we havemade. Our Board of Directors monitors our progress by reference to a number of keyperformance indicators and performance last year is compared to our targets andour results for the previous year. RESULTS The adjusted* results for the year were notably ahead of the prior year.Revenue, including our share of joint ventures, increased by £63.2m (32 percent) to £261.0m, of which £36.0m (18.2 per cent) resulted from organic growthwith the remainder resulting from the acquisitions made in the course of theyear. Group revenues increased from £185.9m to £249.5m, a rise of 34.2 per cent. Group adjusted* operating profit increased by 55.3 per cent to £16.3m (2006:£10.5m) with the adjusted* operating margin improving from 5.3 per cent to 6.2per cent. This result was achieved in spite of trading losses and restructuringcosts of £1.6m incurred in the period in respect of the Group's businesses inSouthern Africa. Basic earnings per share are 13.86p (2006: 38.90p) and diluted earnings pershare are 13.35p (2006: 37.70p). However, as the Group only floated in March2006, the prior year comparatives have been recalculated on a proforma basisusing shares in issue at 30 April 2006 and assuming they were in issue for thewhole of that financial year and also assuming interest receivable at 5.0 percent on the flotation proceeds of £62.1m throughout the period. The current yearadjusted* fully diluted earnings per share of 14.48p includes prior year taxadjustments of £466,000. If they were excluded, adjusted* fully dilutedearnings per share would have been 15.10p. There was a net cash inflow from operations of £19.6m (2006: £12.6m) beforenon-recurring items, restructuring costs and pension payments of £23.4m (2006:£12.1m) in the year. This shows cash conversion of 120 per cent (2006: 120 percent) for adjusted* operating profit. DIVIDEND The Board recommends a final dividend of 2.3p per share for approval byshareholders to be paid on 5 October 2007 to Ordinary shareholders on theregister on 7 September 2007. The total dividend for the year of 3.3p is some10.0 per cent higher than the expectations set at flotation, reflecting thestrength of the Group's performance. It remains our intention to have a progressive dividend policy balancing growthin earnings, investment plans and dividend cover levels. PENSIONS The Group has completed all the actions disclosed in the Prospectus. The grossdeficit reduced in the period from £33.6m to £12.4m. This was a slightly greaterreduction than originally anticipated as external factors moved favourably, inaddition to the special pension payments made. ACQUISITIONS During the year and following the year end, we have continued our policy ofmaking selective acquisitions to build our expertise and diversity in our targetsectors. In May 2006, we acquired the minority interest in Scott Wilson PavementEngineering Ltd, a leading UK consultancy in the evaluation of highways, runwaypavements and rail track beds. In June 2006, the acquisition of Roscoe Postle Associates Inc of Canadasignificantly enhanced our position, client base and geographical coverage inthe mining sub-sector of natural resources. Ferguson McIlveen LLP was acquired in November 2006. This leading consultancy,headquartered in Northern Ireland, provides design consultancy services for theproperty, environment and transportation sectors. In December 2006 the acquisitions of Cameron Taylor Group Limited and DGPInternational Limited were completed. Cameron Taylor has significantly increasedthe Group's presence in the UK property sector. DGP has brought new skillswithin the nuclear, petrochemical and pharmaceuticals sub-sectors. Following the year end, we have acquired DCL Consulting Engineers Ltd andexchanged contracts on the acquisition of McLay Collier LLP. DCL, a buildingservices consultancy based in South West England, was acquired in May 2007.McLay Collier, who are based in Glasgow and operate in the property sector, willjoin the Group on 25 July 2007. These two acquisitions enhance the breadth ofour service offerings in these geographic areas. EMPLOYEES At the end of April 2007 we had over 5,500 staff, a significant increase fromthe 4,000 at 30 April 2006. We know that the quality of our employees is oneof the Group's key attributes. They remain critical to our reputation, ourcontinuing innovation and to the delivery of these record results. On behalf ofthe Board, I would like to record our thanks to all members of staff for theiroutstanding contributions over the last year. We were delighted that William Kemp, whose entire working career has been withScott Wilson, was awarded a MBE in The Queen's Birthday Honours for his servicesto civil engineering and music in North Derbyshire. We were equally delightedthat our John Harvey, the statutory appointed Mine Manager at Combe Down StoneMines, was also awarded a MBE for services to the mining industry and as deputyGaveller for the Forest of Dean (the Crown's Mineral Agent). AWARDS The recent major awards that we have won are a testament to the continuingdedication and talent of our staff. Our achievements were acknowledged by ourindustry peers through the award of the NCE/ACE 'Major Firm of the Year' and wehave also been recognised by the investment community over the past six monthsthrough the awards of 'New Company of the Year' (PLC Awards), 'Best InvestorRelations for a New Issue' (IR Magazine) and 'IPO of the Year' (SharesMagazine). CORPORATE AND SOCIAL RESPONSIBILITY We recognise the fundamental importance of sustainability and integrity to ourbusiness and are committed to continual improvement in our social, environmentaland ethical performance. This is supported in-house by having environmental,social inclusion and equality, health and safety skills in-house and by ourcorporate commitment to the UN Global Compact (the world's largest CSRinitiative). We also support our staff-led Millennium Project, a registered charity whichfocuses on the relief of poverty, hardship and distress among children indeveloping countries by encouraging staff participation. We also give corporatesupport as a patron to the RedR charity and its humanitarian relief efforts. OUTLOOK The Board has a clear strategic plan for the period up to 2012 and the Group iscurrently performing ahead of that plan. With the Group's order book standing atrecord levels and the integration of the recent acquisitions, the prospects forgrowth are excellent. The Group has re-negotiated and increased its banking facilities and hassignificant capacity to finance continued organic growth and further selectiveacquisitions. The Group is currently responding to an unprecedented global demand forinfrastructure. The growing economies of China and India are encouraging rapidurbanisation of their populations. Western economies continue to invest heavilyacross both public and private sectors on renewal and modernisation. Increasesin global trading, personal travel and endemic urban congestion are puttingenormous pressure on existing transport systems. Private investment in propertycontinues to be buoyant in many parts of the world and pressure on water,sources of energy and raw materials continues to grow. This is occurring againsta background of universal concern on climate change and growing demand forenvironmental protection and sustainability. The Board remains confident in its ability to deliver our strategic objectivesand to continue to enhance shareholder value. GEOFF FRENCH GROUP CHAIRMAN 12 July 2007 BUSINESS REVIEW REVIEW BY DIVISION The 2007 financial year has been characterised by the delivery of profitablegrowth, both organic within the Group's strategic framework and fromidentifying, delivering and integrating targeted acquisitions. Growth in revenue and operating profit has been ahead of the Board'sexpectations and we remain on course to achieve sustainable convergence inoperating margins across the business as forecast. The acquisitions have been principally in connection with the property sectorwhich has served to reduce the dominance of transportation and has providedadditional market risk mitigation by widening our offering into higher ratedservices. The Divisions are reporting a strong order book spread across the principalsectors and pipeline opportunities remain buoyant. UK Central Division has continued to be a major player in the roads sub-sectorby delivering significant projects for the Highways Agency (HA) primarilythrough the Early Contractor Involvement (ECI) procurement route in associationwith our blue chip contracting partners. The joint venture with Alfred McAlpine plc, 'AMScott' performed in line withexpectations. The AMScott brand is well regarded and will be in a strongposition for the two Managing Agent Contracts (MAC) that the HA has broughtforward for bidding in 2007/2008. In addition, the Division won a significantinnovative Three Counties (Derbyshire, Leicestershire and Nottinghamshire)Alliance Local Authority Framework Contract in the East Midlands which isforecast to deliver significant revenue over a three year period. The acquisition of DGP International Limited added considerably to the Group'soffering in nuclear, petrochemical and pharmaceuticals and increased theproperty portfolio in the industrial sub-sector. This has also provided highlevel resource to enable rationalisation of the Group's business activity in theNorth West of England. UK South Division has delivered considerably improved operating margins duringthe financial year as part of the strategy for convergence of operatingperformance benchmarked against other UK Divisions. Organic growth in resourcesis in line with the Board's expectations and the Division has deliveredincreased revenue with improved utilisation. The Division continues to work extensively in the transportation and propertysectors and has significant major projects in London, including Brent Cross/Cricklewood Redevelopment, West Hendon Regeneration and Holborn ViaductDevelopment. The Division's position in the property sector was enhanced by the acquisitionof Cameron Taylor Group and, since the year end, DCL Consulting which havebrought a step change to the Group's offering in the private sector and enhancedour client portfolio in the South of England and West Midlands. Scotland & Ireland Division has maintained a dominant position in roads inScotland. The acquisition announced today of McLay Collier is a further step inbalancing the sector portfolio bringing new resources and experience to enhancethe Group's growing workload and reputation in the property sector in Scotland. The Division has effectively doubled in size with the acquisition of FergusonMcIlveen. This has provided us with a strong presence in Belfast andstrengthened our position in the North of England in both the property andenvironment sectors. The acquisition complements existing investment in NorthernIreland where we have a strong market position in the roads sub-sector. Inaddition, we have maintained a solid position in the South of Ireland,particularly in the roads sub-sector. Within the UK Railways Division the year was dominated by the ongoing deliveryof several long term multidisciplinary major projects including West Coast RouteModernisation, Crossrail and Edinburgh Airport Rail Link. Additionally, therehas been the commencement of work on the East London Line. As a result, netrevenue during the year increased by 22 per cent, purely organically.International projects comprise approximately 10 per cent of revenue withprojects in Jamaica, Greece, Romania, Saudi Arabia and Australia. In addition, the Division was appointed to conduct preliminary engineering andpreparation of Parliamentary Orders on the Airdrie to Bathgate re-opening, whichis the new route from Glasgow to Edinburgh, one of the key priorities for railinvestment in the UK. The Division has maintained its position on a reduced list of Network Railframework consultants for Switch and Crossing Renewals and is currently biddingfor the next stage of the multifunctional engineering framework for the sameclient. There has been an increase of 20 per cent in staff numbers during the year andthe recruitment campaign continues to support planned growth in the sector. The International Division has developed an integrated trading model with fiveof the six regional businesses exceeding their revenue and profit budgets.Overall, revenue increased by 23 per cent, with improved margins. This result isparticularly encouraging despite including substantial trading losses andrestructuring costs in Southern Africa following the closure of long standingbusinesses in Zimbabwe, Botswana and Malawi. Modest operations were retained inZambia specifically for the mining sub-sector and in Mozambique to complete anumber of transport and infrastructure projects. In South Africa, the continuingbusiness was focused in Johannesburg. Growth has been particularly strong in the Middle East and India in addition toseveral major project commissions in the rest of the world managed from the UK. The Division was further boosted by the successful integration of the RPAacquisition which continues to produce double digit operating margins andprovides access to significant cross trading opportunities with a number ofglobal clients in the mining sub-sector. The UK managed projects focus predominantly on the fast growing NaturalResources sector in energy, water, mining and ground engineering where a seriesof major projects have been secured for global clients in South East Asia,Africa and South America. Projects include a power trading study on the Nile inSudan, Egypt and Ethiopia, new hydro-power scheme in Malaysia and Sierra Leone,a power investment programme for AES in Cameroon and ground engineering work forShell in Sakhalin. Transportation remains the largest sector by revenue and includes major roadsprojects in Greece, Poland, Serbia, India and Ethiopia with advice on PPP tollroads being provided for clients in China, Ukraine and in the United States.Port work is growing, centred in China and the Middle East with projects inDubai, Thailand, India and China. The Division is also active in airports fromcentres of excellence in the UK and Bangkok providing services in Qatar, Iraq,Antigua and China. The international property portfolio continues to expand particularly in Chinaand the Middle East. The Division continues to benefit from the property boom inthe Gulf and secured a series of high profile projects in Bahrain, including theNational Assembly Building and a number of major island based propertydevelopments where master planning, marine engineering, design and supervisionof commercial and residential property development can be offered. The smallest international sector is environment, which covers our planningcapability, landscaping, environmental management and waste management. Muchwork is done in support of the other sectors in response to continuing pressurefor sustainable solutions. However, a centre of master planning and landscapedesign has been developed in Shanghai which is now being used not only in Chinabut also in India and the Middle East. Access to high quality project work and international assignment opportunitiesis a significant factor in retaining, motivating and developing our technicalstaff. Established regional operations in China/Hong Kong, India, SE Asia, theMiddle East, Eastern Europe and Southern Africa, together with extensiveinternational projects, provide many opportunities for internal transfer andinternational working. FINANCIAL REVIEW Financial performance The financial performance demonstrates the strong organic revenue growth (18.2per cent) coupled with excellent first year contributions from our recentacquisitions which resulted in total revenue rising 32.0 per cent to £261.0m.Adjusted* profit margin improved from 5.3 per cent to 6.2 per cent with notablemargin improvements in both UK Central and UK South Divisions. Earnings per share Basic earnings per share are 13.86p (2006: 38.90p) and diluted earnings pershare are 13.35p (2006: 37.70p). However, as the Group only floated in March2006, the prior year comparatives have been recalculated on a proforma basisusing shares in issue at 30 April 2006 and assuming they were in issue for thewhole of that financial year and also assuming interest receivable at 5% on theflotation proceeds of £62.1m throughout the period. The current year adjusted*fully diluted earnings per share of 14.48p includes prior year tax adjustmentsof £466,000. If they were excluded adjusted* fully diluted earnings per sharewould have been 15.10p. Dividends At the time of flotation, the Board signalled that the Group intended tomaintain an appropriate level of dividend cover having regard to the level ofdividends paid by quoted peers, whilst taking into account growth in earningsand the Group's future expansion plans. It was estimated at that time that thefull year dividend for 2007 would be 3.00p. After an excellent first year'strading as a quoted company, the Board believes that it is appropriate toincrease the level of dividend and is recommending a final dividend of 2.30p(2006: nil) giving a full year dividend of 3.30p (2006: 2.50p). This representsa 10 per cent increase on expectations and is covered 4.1 times by the profitfor the 2007 financial year. Taxation The taxation charge, including that relating to joint ventures, amounts to £5.8m(2006: £6.4m) which represents an effective rate of 36.8% (2006: 33.3%). This ishigher than the UK statutory rate of 30% principally as a result of unrelievedlosses in Africa and a prior year tax adjustment, which added 3.1% and 2.9%respectively to the effective tax. Tax paid during the year was £1.2m (2006:£2.5m). This reduction is mainly due to tax relief on the special pensionpayments made during the year from which the Group will also benefit in thecurrent financial year. Finance costs The net finance costs changed considerably as a result of repaying bank debt andinjecting funds into the pension schemes from the flotation proceeds. The resultwas that the Group had net finance income of £0.7m in 2007 compared with netfinance costs of £2.1m in 2006. Pensions The Group has operated two defined benefit schemes, both of which are closed tonew members, and a defined contribution scheme throughout the period. During theperiod £16.6m was injected into the two defined benefit share schemes and on 1October 2006 the proposed changes to schemes, agreed ahead of flotation, tookeffect. Simultaneously, a salary sacrifice arrangement was implemented. As partof the acquisition of Ferguson McIlveen, the Group took on responsibility forits defined benefit scheme which at the time of acquisition had a gross deficitof £2.3m. This scheme is also closed to new members. The aggregate gross deficit at 29 April 2007 was £12.4m (2006: £33.6m). Cash flow Net cash inflow from operations totalled £19.6m (2006: £12.6m) influenced byrevenue growth of 18 per cent. Principally, as a result of the pension schemeinjection and the three major acquisitions made in the second half of the year,the Group moved from a net cash position of £27.0m at 30 April 2006 to a netdebt position of £14.7m at 29 April 2007. Treasury Financial instruments comprise borrowings, internal cash resources and tradedebtors and creditors arising from normal trading. The Group renegotiated itsbanking facilities during the year and now has committed composite facilities of£50m to finance continued organic growth, in line with our strategic plan, andacquisitions. Provisions As with other companies in our sector the Group maintains professional indemnityinsurance to provide cover against significant losses in the event ofprofessional negligence claims being made against a Group company. Although weendeavour to ensure client satisfaction and develop and maintain clientrelationships, it is not possible to eliminate contract claims. The Group willlook to defend claims but any such circumstances that may give rise to a claimare assessed and on the basis of advice received provision is made whereappropriate. Acquisitions During the financial year, we have completed four acquisitions in addition tobuying out the minority partners in Scott Wilson Pavement Engineering Ltd.Further information in respect of the acquisitions can be found within theChairman's Statement and the Review by Division. Post balance sheet events On 9 May 2007, the Group made contributions totalling £700,000 to the ScottWilson Shared Cost Section of the industry-wide Railways Pension scheme. Alsoon 9 May 2007, the Group acquired the entire share capital of DCL ConsultingEngineers Limited, a building services consultancy based in the South West ofEngland for a total potential consideration of £1.1m. On 5 July 2007, the Groupsold its freehold property in Glasgow for proceeds of £1.75m. With a carryingvalue of £900,000 and directly attributable disposal costs in the region of£25,000, the anticipated profit on sale is £825,000. On 11th July 2007,contracts were exchanged for the acquisition of McLay Collier LLP, a Glasgowbased practice which operates within the property sector, for a goodwill paymentof £2.7m plus a payment for net assets expected to be £0.7m. OUTLOOK In the UK and Irish construction markets, the Group continues to benefit fromencouraging growth. Major expenditure commitments are set to continue within therail sector, in road maintenance and in the airports development programme whichwill present substantial opportunities to the Group over the coming year. Thisis in addition to increased Government spending on nuclear decommissioning andon health and education, particularly under the PFI scheme. In the privatesector, investment in logistics and commercial space is expected to beparticularly strong and while new build residential and infrastructure haveappeared to slow in recent months, regeneration opportunities remain positive. Considerable investment continues to take place in Ireland. In Southern Ireland,transport investment continues to be high, focusing on the delivery of theNational Development Plan and investment in the property sector remains buoyant.In Northern Ireland, there is significant investment in the province resultingfrom the peace dividend, EU funding and investment from the private sector. TheNorthern Ireland Assembly has inherited an ambitious roads programme and we areinvolved in its delivery. Our acquisitions in 2006 have brought us exposure to new sub-sectors andposition us well to take advantage of anticipated continued growth inconsultancy fees in the residential, education and industrial sub-sectors and toincrease market share in health. New services derived from acquisitions willallow us to provide a fully integrated solution to the property sector whichmeets clients' aspirations for elegance, innovation, best value andsustainability in design. This will be a significant contributor in increasingmarket share. We continue to be a strong player in the environment sector with the latestmarket review showing that we are among the top 12 consultancies by feesrendered in 2006. Opportunities exist for further revenue growth in the sector.The rate high of growth currently being experienced in this is set to continueand we are well placed to capitalise on this in development-linked disciplinesconstituting the largest part of the market. Recent acquisitions havedramatically boosted our participation in the rapidly growing waste and resourcemanagement sub-sectors which are being driven by the EU Landfill Directive'srequirement for Local Authorities to divert waste away from landfill. We arecurrently working on waste PFI schemes for Lancashire, Derby, Derbyshire and a£600m scheme in Manchester, which is purported to be the largest in Europe. In International Division, the priority remains to continue to improve operatingmargins. The regional business model is settling in and the horizontal sharingof resources, expertise and clients is set to continue. The market opportunitiesremain enormous and we are ideally positioned to take advantage. The Group enters the new financial year with a more balanced sector splitfollowing the acquisitions made in the second half. The level of organic growthachieved exceeded the five-year Strategic Plan. This, together with the marginimprovement and order book of £257m, means that our prospects remain verypositive and we look to the future with confidence. HUGH BLACKWOODJOINT CHIEF EXECUTIVE12 JULY 2007 RON WALLJOINT CHIEF EXECUTIVE12 JULY 2007 STEPHEN KIMMETTFINANCE DIRECTOR12 JULY 2007 SCOTT WILSON GROUP PLC Preliminary unaudited results for the 52 weeks ended 29 April 2007 CONSOLIDATED INCOME STATEMENT (unaudited) For the 52 weeks ended 29 April 2007 52 weeks ended 29 April 2007 52 weeks ended 30 April 2006 Notes Adjusted* Note i Total Adjusted* Note i Total £'000 £'000 £'000 £'000 £'000 £'000ContinuingoperationsRevenue including 261,002 - 261,002 197,765 - 197,765share of jointventure revenuesLess: share of (11,472) - (11,472) (11,841) - (11,841)joint venturerevenuesGroup revenue 249,530 - 249,530 185,924 - 185,924Cost of sales (158,401) - (158,401) (117,964) - (117,964)Gross profit 91,129 - 91,129 67,960 - 67,960Administrative 3 (75,995) (1,210) (77,205) (58,843) 10,977 (47,866)expensesShare of result 3 1,164 (346) 818 1,380 (376) 1,004of joint venturesOperating profit 16,298 (1,556) 14,742 10,497 10,601 21,098Finance income 9 11,275 8,283Finance costs 10 (10,583) (10,400)Profit before 15,434 18,891taxationTaxation 11 (5,462) (6,040)Profit for the 9,972 12,941yearAttributable to:Equity holders of 9,986 12,527the CompanyMinority (14) 414interests 9,972 12,941Earnings pershare:From continuing 12 13.86p 38.90poperations -basicFrom continuing 12 13.35p 37.70poperations -diluted There were no discontinued operations in either year. *Before items described in note i below. Note i : Non-recurring items, restructuring costs, amortisation of businesscombination intangibles and the Group's share of taxation in relation to jointventures, as detailed further in note 3. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited)For the 52 weeks ended 29 April 2007 52 weeks 52 weeks ended ended 29 April 30 April 2007 2006 £'000 £'000Currency translation differences from translation of foreign operations (865) (381)Actuarial gains and losses on defined benefit pension schemes 3,555 (4,376)Tax on items recognised directly in equity (807) 1,427Deferred tax relating to unexercised share options 911 -Income/(expense) recognised directly in equity 2,794 (3,330)Profit for the year 9,972 12,941Total recognised income for the year 12,766 9,611Attributable toEquity holders of the Company 12,780 9,221Minority interests (14) 390 12,766 9,611 CONSOLIDATED BALANCE SHEET (unaudited)As at 29 April 2007 Notes 29 April 2007 30 April 2006 £'000 £'000 AssetsNon-current assetsNon-current assetsTangible fixed assets 17,342 13,847Goodwill 34,538 6,864Other intangible assets 15,908 1,333Investments in joint ventures 837 680Deferred tax assets 5,456 11,897 74,081 34,621Current assetsTrade and other receivables 99,514 65,483Current tax assets 1,314 1,089Cash and cash equivalents 13,689 33,067 114,517 99,639Total assets 188,598 134,260 Equity and LiabilitiesEquity attributable to equity holders of the CompanyIssued capital 95,168 86,277Other reserves (6,047) (6,074)Retained earnings (15,289) (28,426) 13 73,832 51,777Minority interests 74 971Total Equity 73,906 52,748Non-current liabilitiesBorrowings 3,801 2,304Provisions 3,767 -Retirement benefit obligations 12,449 33,577 20,017 35,881Current liabilitiesTrade and other payables 65,102 40,531Current tax liabilities - 474Borrowings 24,537 3,813Provisions 5,036 813 94,675 45,631Total liabilities 114,692 81,512Total Equity and Liabilities 188,598 134,260 CONSOLIDATED CASH FLOW STATEMENT (unaudited)For the 52 weeks ended 29 April 2007 Notes 52 weeks 52 weeks ended ended 29 April 30 April 2007 2006 £'000 £'000Cash flows from operating activitiesCash generated from operations 15 19,631 12,629Defined benefit pension plan contributions (23,415) (12,069)Dividends received from joint ventures 1,547 1,575Income tax paid (1,207) (2,510)Net cash flows from operating activities (3,444) (375)Cash flows from investing activitiesPurchase of tangible fixed assets (5,416) (6,946)Purchase of intangible assets (1,917) (995)Proceeds from sale of tangible fixed assets 183 6Acquisition of subsidiaries, net of cash and cash equivalents acquired (28,676) (606)Net cash flows from investing activities (35,826) (8,541)Cash flows from financing activitiesInterest received 548 154Interest and finance charges paid (762) (1,780)Proceeds from issue of Ordinary Shares, net of issue costs of £Nil (2006: 35 62,122£5.9m)Receipt of new loans and finance lease advances 24,513 5,831Repayment of loans and finance leases (4,518) (18,871)Dividends paid to equity shareholders (747) (1,334)Net cash flows from financing activities 19,069 46,122Net (decrease)/increase in cash and cash equivalents (20,201) 37,206Cash and cash equivalents at start of year 33,067 (4,154)Foreign exchange (51) 15Cash and cash equivalents at end of year 12,815 33,067 NOTES TO THE ACCOUNTS 1 Basis of preparation The financial information set out in this preliminary announcement has beenprepared in accordance with International Financial Reporting Standards (IFRS)as adopted for use in the European Union. The announcement is prepared on thebasis of accounting policies as set out in the previous year's financialstatements. The audit report on the full financial statements has yet to be signed andtherefore the financial information presented unaudited. The financial information set out in the announcement does not constitute theCompany's statutory accounts under the meaning of section 240 of the CompaniesAct 1985 for the periods ended 29 April 2007 or 30 April 2006. The financialinformation for the period ended 30 April 2006 is derived from the statutoryaccounts for that year which has been delivered to the Registrar of Companies.The auditors reported on those accounts; their report was unqualified and didnot contain a statement under section 237(2) or (3) of the Companies Act 1985.The statutory accounts for the period ended 29 April 2007 will be finalised onthe basis of the financial information presented by the Directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the Company's Annual General Meeting. This preliminary announcement was approved by the Board of Directors on 11 July2007. 2 Segment analysis The Group is an international consultancy offering integrated professionalservices and the Directors consider that the Group operates in this singlebusiness segment. The trading activities and performance of the Group aremanaged through five geographical divisions, UK Central, UK South, Scotland &Ireland, UK Railways and International. UK Central: consultancy services on projects in the Midlands and Northern regions of England and also the Group's pavement engineering consultancy business, which operates worldwide. UK South: consultancy services on property and transportation projects principally in London and the South of England. Scotland consultancy services on projects in Scotland, Northern& Ireland: Ireland, Republic of Ireland and the North East of England. UK Railways: railway-related consultancy services to infrastructure owners and train operators, principally in the UK. International: consultancy services on projects undertaken outside the UK, throughout the world, including both projects undertaken from the UK and those undertaken by the Group's overseas operations. Core: the Group's head office function, together with revenues, costs, assets and liabilities not allocated to any of the other segments. Segment results for the 52 weeks ended 29 April 2007: UK Central UK South Scotland & UK Railways International Core Total £'000 £'000 Ireland £'000 £'000 £'000 £'000 £'000Revenue including share of 75,324 56,938 22,146 43,030 63,564 - 261,002joint venturesSales to external 60,215 52,237 20,376 54,093 62,609 - 249,530customersSales to other segments 7,185 8,511 2,539 1,127 6,156 - 25,518Revenue from all sales 67,400 60,748 22,915 55,220 68,765 - 275,048Sales on behalf of other (2,398) (3,809) (770) (12,190) (6,351) - (25,518)segmentsGroup revenue 65,002 56,939 22,145 43,030 62,414 - 249,530Operating profit before 6,688 3,739 1,658 3,145 1,068 - 16,298non-recurring items,restructuring costs andamortisation of businesscombination intangiblesGroup's share of taxation (294) - - - (52) - (346)relating to joint venturesAmortisation of business (317) (286) (390) - (217) - (1,210)combination intangiblesOperating profit - segment 6,077 3,453 1,268 3,145 799 - 14,742resultFinance income 11,275Finance costs (10,583)Profit before taxation 15,434Taxation (5,462)Profit for the year 9,972 Share of result of joint ventures before taxation of £979,000 and £185,000 isincluded in UK Central and International respectively. Segment results for the 52 weeks ended 30 April 2006: UK Central UK South Scotland UK Railways International Core Total £'000 £'000 & Ireland £'000 £'000 £'000 £'000 £'000Revenue including share of 56,679 40,029 13,342 35,144 52,571 __ 197,765joint venturesSales to external 42,780 37,866 11,893 42,090 51,295 - 185,924customersSales to other segments 7,165 4,045 2,147 804 3,404 - 17,565Revenue from all sales 49,945 41,911 14,040 42,894 54,699 - 203,489Sales on behalf of other (3,236) (1,882) (698) (7,750) (3,999) - (17,565)segmentsGroup revenue 46,709 40,029 13,342 35,144 50,700 - 185,924Operating profit before 4,354 1,382 1,112 2,831 818 - 10,497non-recurring items,restructuring costs andamortisation of businesscombination intangiblesGroup's share of taxation (285) - - - (91) - (376)relating to joint venturesRestructuring costs - (471) - - - (220) (691)Loss relating to Basing - - - - - (780) (780)View Investments LtdGain arising on retirement - - - - - 13,546 13,546benefit plan changesCosts relating to - - - - - (1,098) (1,098)AdmissionOperating profit - segment 4,069 911 1,112 2,831 727 11,448 21,098resultFinance income 8,283Finance costs (10,400)Profit before taxation 18,981Taxation (6,040)Profit for the year 12,941 Share of result of joint ventures before taxation of £950,000 and £430,000 isincluded in UK Central and International respectively. 3 Non-Recurring Items, Restructuring Costs, Amortisation of BusinessCombination Intangibles and the Group's Share of Taxation in relation to JointVentures Note 52 weeks 52 weeks ended ended 29 April 2007 30 April 2006 £'000 £'000Restructuring costs 4 - (691)Operating loss relating to Basing View Investments Ltd 5 - (780)Gain arising on retirement benefit plan changes 6 - 13,546Costs relating to Admission 7 - (1,098)Amortisation of intangible assets acquired in business combinations (1,210) -Group's share of taxation relating to joint ventures 8 (346) (376)Total (1,556) 10,601 4 Restructuring costs In the 52 week period ended 30 April 2006, the Group incurred £0.7m redundancycosts resulting from restructuring in the UK South (£0.5m) and International(£0.2m) Divisions. 5 Loss relating to Basing View Investments Ltd On 15 March 2006, the Company acquired Basing View Investments Ltd (BVI), whichheld the 34.34 per cent interest in Scott Wilson Holdings Ltd not then held bythe Company and liabilities under various loan and redeemable share instruments.The Company immediately purchased, or funded the settlement of, all thoseliabilities. As described under 'Basis of Preparation' in note 2, the financialstatements of the Group consolidate the revenues, costs, assets, liabilities andcash flows of BVI and its subsidiaries throughout both the period for which theyare prepared and the comparative prior period. The operating (loss)/profitrelating to BVI substantially reflects exchange movements arising on thetranslation of US Dollar denominated liabilities, which have now been settled. 6 Gain arising on retirement benefit plan changes In March 2006, the trustees and substantially all of the members of the finalsalary (defined benefit) sections of the Scott Wilson Pension Scheme (SWPS)agreed, conditional on the Company's Admission to the Official List and thepayment of a minimum £1.6m special cash contribution into SWPS, to break thelink from 1 October 2006 between accrued pensionable service up to that date andfuture salary increases. Additionally, they agreed that from 1 October 2006active members would either pay increased contributions, accrue pension benefitat a reduced rate or switch into the Group's money purchase (definedcontribution) section. Also in March 2006, the trustees and substantially all of the members of theScott Wilson Shared Cost Section of the industry-wide Railways Pension Scheme(SWRPS), a defined benefit arrangement, agreed, conditional on the Company'sAdmission to the Official List and the payment of a £2.0m special cashcontribution into SWRPS, to break the link from 1 October 2006 between accruedpensionable service up to that date and future salary increases. The impact of these changes is to reduce the overall gross deficit on theseschemes by £13.5m. 7 Costs relating to Admission During the 52 week period ended 30 April 2006, costs of £1.1m were incurred inrelation to the Admission of the Company to the Official List. Additionally,costs of £4.8m were incurred in relation to the issue of additional OrdinaryShares at the time of Admission, which have been charged against the sharepremium. 8 Group's share of taxation relating to joint ventures The Group's share of tax in relation to joint ventures has been included as anadjustment in order to present operating profit before tax (which would havebeen arrived at under UK GAAP equity accounting), a measure which Scott Wilsonmanagement uses for internal performance analysis. Comparative figures havebeen reclassified accordingly. 9 Finance income 52 weeks ended 52 weeks ended 29 April 2007 30 April 2006 £'000 £'000Interest income on bank deposits 630 345Expected return on pension plan assets 10,645 7,938 11,275 8,283 10 Finance costs 52 weeks ended 52 weeks ended 29 April 2007 30 April 2006 £'000 £'000Interest on bank loans and overdrafts 452 723Interest on other loans 73 489Preference shares redemption premium 46 304Finance lease charges 350 264Unwind of discount on deferred consideration 104 -Interest on retirement benefit obligations 9,558 8,620 10,583 10,400 11 Taxation 52 weeks ended 52 weeks ended 29 April 2007 30 April 2006 £'000 £'000Current tax (85) 1,567Deferred tax 5,547 4,473 5,462 6,040 12 Earnings per share Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the weighted average number of Ordinary Sharesin issue during the period, excluding Ordinary Shares held by the Scott WilsonHoldings Ltd Employee Share Ownership Trust. The weighted average number of shares used in the calculation of earnings pershare amounts for the comparative period has been adjusted to reflect therestructuring under which each Ordinary Share in Scott Wilson Holdings Ltd wasexchanged for four Ordinary Shares in Scott Wilson Group plc. 52 weeks 52 weeks ended ended 29 April 30 April 2007 2006 £'000 £'000Profit attributable to equity holders of the Company 9,986 12,527Weighted average number of Ordinary Shares in issue (thousands) 72,047 32,203Basic earnings per share (p) 13.86p 38.90pWeighted average number of Ordinary Shares in issue (thousands) 72,047 32,203Dilutive effect of share options 2,418 1,025Dilutive effect of business combination deferred consideration shares 360 -Diluted weighted average number of Ordinary Shares in issue (thousands) 74,825 33,228Diluted earnings per share (p) 13.35p 37.70p 13 Reconciliation of changes in equity Total £'000At 30 April 2006 51,777Changes in equity in 2007:New shares issued net of issue costs 8,891Profit for the year 9,986Other movements 3,178At 29 April 2007 73,832 14 Dividends A dividend equivalent to 2.5p per Ordinary Share in relation to the 52 weeksended 30 April 2005, totalling £667,000, was declared in October 2005 (paid inJanuary 2006) and a dividend of 2.5p per Ordinary Share for the 52 weeks ending30 April 2006, totalling £667,000, was declared and paid in March 2006. Aninterim dividend for the 52 weeks ended 29 April 2007 of 1.0p per Ordinary Sharewas declared and paid in February 2007. No dividends have been declared by the Company subsequent to 29 April 2007. A final dividend for the 52 weeks ended 29 April 2007 of 2.3p per Ordinary Shareis being proposed by the Directors. As this dividend is subject to approval byshareholders at the Annual General Meeting, it is not reflected as a liabilityat 29 April 2007. 15 Cash generated from operations 52 weeks 52 weeks ended ended 29 April 30 April 2007 2006 £'000 £'000Operating profit 14,742 21,098Gain arising on retirement benefit plan changes - (13,546)Cost of Admission recognised through the Income Statement - 1,098Share of result of joint ventures (818) (1004)Movement on the acquisition of minority interests (117) -Loss on sale of tangible fixed assets 83 -Defined benefit pension plan current service cost 4,631 4,757Depreciation 3,030 2,176Amortisation 2,221 656Increase in receivables and prepayments (15,790) (14,722)Increase in payables and accruals 9,380 11,433Increase in provisions 1,802 632Share-based compensation expense 467 51Cash generated from operations 19,631 12,629 16 Reconciliation of adjusted Group results The Directors believe that the presentation of adjusted operating profit andadjusted operating margin assist with the understanding of the results of theGroup. Adjusted operating profit is operating profit adjusted for the impact ofnon-recurring items, restructuring costs, amortisation of business combinationintangibles and the Group's share of taxation in relation to joint ventures. Adjusted operating margin is adjusted operating profit expressed as a percentageof revenue including share of joint ventures. A reconciliation of these measures to Group operating profit is given below. Adjusted operating profit 52 weeks ended 52 weeks ended 29 April 30 April 2007 2006 £'000 £'000Statutory operating profit 14,742 21,098Restructuring costs - 691Loss relating to Basing View Investments Ltd - 780Gain arising on retirement benefit plan changes - (13,546)Costs relating to Admission - 1,098Amortisation of intangible assets acquired in business combinations 1,210 -Group's share of taxation relating to joint ventures 346 376Adjusted operating profit 16,298 10,497Adjusted operating margin 6.2% 5.3% Adjusted earnings per share The Directors believe that the presentation of adjusted earnings per shareassists with the understanding of the results of the Group. Adjusted earningsper share is earnings per share adjusted for the impact of non-recurring items,restructuring costs and amortisation of business combination intangibles. The weighted average number of shares used in the calculation of adjustedearnings per share amounts for the comparative period has been adjusted toreflect the restructuring under which each Ordinary Share in Scott WilsonHoldings Ltd was exchanged for four Ordinary Shares in Scott Wilson Group plc. 52 weeks ended 52 weeks ended 29 April 2007 30 April 2006 £'000 £'000Profit attributable to equity holders of the Company 9,986 12,527Restructuring costs - 691Loss relating to Basing View Investments Ltd - 780Costs relating to Admission - 1,098Gain arising on retirement benefit plan changes - (13,546)Amortisation of business combination intangibles 1,210 -Tax relating to non-recurring items, restructuring costs and amortisation of (363) 3,623business combination intangiblesAdjusted profit attributable to equity holders of the Company 10,833 5,173Weighted average number of Ordinary Shares in issue (thousands) 72,047 32,203Adjusted basic earnings per share (p) 15.04p 16.06pWeighted average number of Ordinary Shares in issue (thousands) 72,047 32,203Dilutive effect of share options 2,418 1,025Dilutive effect of business combination deferred consideration shares 360 -Diluted weighted average number of Ordinary Shares in issue (thousands) 74,825 33,228Adjusted diluted earnings per share (p) 14.48p 15.57p No options over the Ordinary Shares of the Company have been awarded since 29April 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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