18th Nov 2005 07:00
GSH Group PLC18 November 2005 GSH Group plc Maiden Final Results 2005 Introduction GSH Group plc ("GSH"), the international provider of bespoke facilitiesmanagement and energy management solutions, announces final results for the yearended 31 July 2005. Operational Highlights: - Admission to AIM in April 2005 - Strong performance from core UK business - Development of international business with significant contract wins in USA and Continental Europe - Sales of energyplus up 96% as European environmental legislation is introduced - Strong order book with a number of major new contact wins since the year end Financial Highlights: - Turnover increased to £118.6 million, up by 16% - Profit before tax and flotation expenses rose to £4.5 million, up 27% - Basic adjusted earnings per share of 15.6 pence, up 39% - Recommended final dividend of 6.5p - Cash reserves at year end £6.3 million Bob Gilbert, Chairman of GSH said "This has been an excellent start to life as alisted company and I am confident that we will deliver further progress andgrowth in the future. Our strategy will continue to focus on organic growth ofour existing activities while also enhancing our operations through selectiveacquisitions. We are in a strong position and expect to continue our excellentperformance of recent years". For further information, please contact: GSH Group plc Tel: 01782 200455David Simons, Chief Financial Officer Bell Pottinger Corporate & Financial Tel: 020 7861 3932Ann-marie WilkinsonSarah Landgrebe CHAIRMAN'S STATEMENT This is my first report as Chairman in what has been an important year for theCompany. After 110 years as a private company the Group was successfullyadmitted to the Alternative Investment Market (AIM) on 21 April 2005. Colin Tennent, CEO and David Simons, CFO have worked closely together over thelast 5 years delivering outstanding growth, profitability and cash generationfor the Group and I am very pleased to be working alongside them. Thenon-executive directors bring a wealth of experience and I would like to takethis opportunity to thank the Board for their support. FINANCIAL RESULTS I am delighted to report another very strong trading performance and anotheryear of record results. Group turnover has increased by 16% to £118.6 million(2004: £101.8 million) and profit before tax (and flotation expenses) hasincreased by 27% to £4.5 million (2004: £3.5 million). The business continues to be cash generative with a cash flow from operatingactivities of £6.1 million (2004: £4.1 million) and cash reserves at theyear-end of £6.3 million. TRADING REVIEW During the year significant progress has been made in developing and upgradingour range of services and client delivery and the Group has been awarded anumber of major contracts. We have seen substantial growth in the UK, particularly from sales of energyplus, our contract energy management solution, which increased 141% in the period. In addition, we have continued to enhance the scope and length of existing contracts where possible. Examples are our contracts with Hewlett Packard, which has now been extended from 1 to 5 years, and T Mobile where the original contract of 3.5 years has been extended by a further 5 years. I am also pleased to report strong growth in our international businesses duringthe year. The US operation has added two significant contracts including GVAWilliams and, since the year end, Douglas Developments Corporation. As a directresult of new business wins the Group now employs over 100 people in the US. OurBenelux operations have also achieved a major milestone by winning their firstcontract worth over £1 million per annum. This is with Schiphol Airport and iscurrently for three years. The Group's strategy remains focused on the growing trend towards contracted-outfacilities management with an estimated market worth £96 billion in the UK,growing in the year to March 2005 by 5%. PEOPLE One of the main reasons for the flotation of the Group was to retain and rewardexisting employees and continue to attract high quality new staff. We have astrong management team across all our operating divisions with well qualifiedand experienced technical staff delivering the various services we provide. Over300 of our employees either own shares or have share options in the Group. I would like to extend my personal thanks to all our staff for their valuedcontribution during the period. They are key to our success and our good resultsare a reflection of their hard work and efforts. OUTLOOK The Group enters the new year in a strong financial position, with a goodbusiness pipeline in all of the markets in which we operate. I believe that weare in a very strong position and there are many exciting opportunities aheadfor both organic and acquisitive growth. This has been an excellent start to life as a listed company and I am confidentthat with the support of my Board and the staff, we will deliver furtherprogress and growth in the future. Bob GilbertChairman CHIEF EXECUTIVE'S REVIEW INTRODUCTION 2005 was yet another excellent year for the Group. We are now in a strongerposition, both operationally and financially, than at any other time in our longhistory. The key to this success is our focus on the continued provision of innovativesolutions for our customers underpinned by the quality and commitment of ourpeople. UK In 2003 we restructured the business to recognise the customer requirements indifferent market sectors. In 2004 we refocused this business, exiting the verysmall contracts and refining its branch structure. This has worked exceptionallywell and in 2005 we have seen improving margins and cash flow. We have redefined our client dedicated service delivery model to our largerclients such as HBOS, HP, Channel 4 and many others. This continues to go fromstrength to strength with turnover growth of 31% and client retention of 94%.Our Regional business ensures that we retain the opportunity to grow the smallercontracts through targeted marketing efforts. INTERNATIONAL I am particularly pleased with the progress made by our overseas businesses inContinental Europe and the USA. International now accounts for 16% of groupturnover, an increase on last year. In the USA, our order book has increased during the year from $33 million to $63million representing 14 new contracts awarded in the period. In April 2005 we were appointed by GVA Williams, a privately held real estateadvisory services firm, to provide maintenance services to commercial officebuildings on the eastern seaboard. In addition we have been awarded a contractto supply services under the General Services Administration (GSA) FederalSupply schedule, effective August 2005. We have also recently been awarded an energy management contract with IKEA atits flagship store in Elizabeth, New Jersey. The agreement is an extension ofGSH's successful working relationship with IKEA in the UK and demonstrates ourexpanding international capability. We have also seen robust growth from our businesses in the Netherlands andBelgium where the combined order book has grown by 25% to €113 million. InAmsterdam, we were awarded a 3 year contract with Schiphol Airport servicing275,000 square meters of the buildings. This is a prestigious contract for theGroup, worth over £1 million, and a major appointment for our European business. energyplus In June 2005 we launched our new Energy Bureau, designed to maximiseconservation and improve sustainability and help businesses in the UK andRepublic of Ireland tackle soaring energy costs.This facility is an in-house centre of excellence devoted to improving clients'energy performance and to help counter the wholesale price increases in gas andelectricity of 60% and 50% respectively in the past year. The opening of the Bureau coincides with new legislation designed to supportefficient sustainable building management. In January 2006, the European EnergyPerformance of Buildings Directive (EPBD), and new Part L Building Regulationsare due to come into force. The effect will be to tighten the requirements forrecord-keeping and introduce energy certification of buildings. From a corporatereporting perspective, UK quoted companies face greater transparency in thereporting of environmental issues. SUSTAINABILITY GSH is at the forefront of sustainable development in the FM sector becoming thefirst major player in the sector to join forces with Forum for the Future as aFoundation Corporate Partner. The Forum's Business Partners are selectedaccording to their commitment to continuous improvement of their environmentaland social performance and include Marks & Spencer, HBOS and Vodafone Groupamong others Working closely with the Forum, GSH will embrace the implications ofsustainability in all areas of corporate activity and at all levels. The Forumhas an International reputation for driving improvements in the sustainabilityperformance of businesses. GSH will gain expertise in good sustainabilitypractice which will be implemented internally and shared with its extensiveclient base. INNOVATION Innovation in our service delivery and technology is a core differentiator forGSH. We continue to drive new services and imaginative use of Information andCommunications Technology (ICT) to provide our clients with value-added servicesthat deliver genuine benefits. During this past year we have introduced several new initiatives includingweb-based statutory certification, environmental monitoring and balancedscorecard reporting. As with all our ICT-based services, these are deliveredfrom our centralised and integrated contract management system, Maximo. Our Statutory Logbook system provides on-line storage and interrogation ofstatutory certificates against building and assets, an important facility forour customers. All of this information is available on-line and in real-time 24-hours per dayto our clients through our Portal technology, which has been upgraded to providesimpler access to more information and has been extended to incorporate newservices. A number of state of the art service initiatives are available via our newEnergy Bureau including: electronic bill processing, half-hourly data collectionand a 'dashboard' demonstrating utility performance at site. Real-time dataretrieval is also carried out on a large scale from small electric users. Inaddition, we have developed a 'Smart Box' that can be fitted at site to monitorall utility readings and any other items of mechanical or electrical equipment.This is particularly useful for critical equipment or remote locations. Smartbox is one of our key environmental monitoring innovations. Linked throughGPRS wireless technology, Smartbox monitors, for example, lighting usage,security, temperatures and humidity. Information is collected centrally andavailable for interrogation through our Portal and wireless Blackberry handhelddevices. Consequently, our customers are always aware of how buildings under ourmanagement are performing. PEOPLE Always following the principles of our Investor in People status, we continue toencourage and support individuals and teams in their career development and thelast financial year has seen a great deal of progress on the drive tocontinually improve our employee development programmes. All levels of employeeshave benefited from both improvements to existing initiatives and some excitingnew programmes launched this year. Our recognition by the Sunday Times in their survey, Top Companies To Work For,is a ratification of our continued commitment to be the best employer in the FMindustry. CURRENT TRADING AND PROSPECTS The group operates as a sub-contractor providing engineering services to theBBC. During the year the BBC initiated a procurement exercise covering ourservices plus all their other facilities management activities. As is often thecase on such contracts, there is a likelihood that we will remain at the BBCworking for their preferred partner. I am pleased with the year's results and we go into the new financial year withconfidence. Our contracted order book stands at £482 million and since the yearend we have won new contracts with My Travel and Iron Mountain in the UK andDouglas Developments Corporation in the USA. As customers seek to simplify their FM structure, we remain positioned to takeadvantage of the opportunities that will arise. We intend to improve ourposition further through the acquisition of businesses that complement ourexisting activities and move us forward in this exciting and growing market. Colin TennentChief Executive Officer FINANCIAL REVIEW The Group's financial performance in the year has again been strong. Increasingturnover, with tight control of overheads, resulted in the 4th successive yearof substantial profit growth. TURNOVER Total turnover in the year was £118.6 million, an increase of 16% (2004: £101.8million). This increased level includes a solid contribution from all parts ofthe Group with significant growth in both Continental Europe and USA. PROFITABILITY Profit before tax and the costs of flotation increased by 27% to £4.5 million(2004: £3.5 million). The costs of the flotation as disclosed in the admission document were £1.0million. These expenses reduced the Group's profit before tax to £3.5 million. TAXATION The Group's effective rate of tax for the year was 35% (2004: 42%). The taxassessed for the year is higher than the standard rate of corporation tax in theUK (30%). KPMG have been appointed during the year as tax advisors. EARNINGS PER SHARE Basic adjusted earnings per share were 15.6 pence (2004: 11.2 pence), anincrease of 39% in the year. DIVIDEND The Board has recommended a final dividend of 6.5 pence per share which, subjectto approval at the Annual General Meeting, will be paid on 23 January 2006 toall shareholders on the register at the close of business on 30 December 2005.This dividend is covered 2.4 times by adjusted earnings. The dividend in total is £1.3 million (2004: £1.6 million). CAPITAL EXPENDITURE Capital expenditure in the year amounted to £0.7 million (2004: £0.6 million).This reflects our commitment to ensure that the Group's workforce is fullyequipped with the best technology, allowing us to continue to provide highlevels of service to our clients. BALANCE SHEET Net assets decreased to £2.5 million (2004: £3.2 million). No funds were raisedin the flotation. Net current liabilities were £1.8 million (2004: £0.9million). CASH AND CASH MANAGEMENT Cash reserves at the year end were £6.3 million (2004: £5.5 million). Thisreflected a net cash inflow for the year of £0.7 million after accounting forthe £1.2 million pre-float dividend together with the costs of the flotation(£1.0 million) and the funding (£1.9 million) of an Employee Benefit Trust topurchase shares to support the Group's share option scheme. The business, therefore, remains highly cash generative and the Board's policyis to continue to finance organic growth from its operations. It is our intention to review the Group's banking arrangements during 2006 toensure that the Group is operating at best practice levels. FINANCING Bank overdraft facilities are maintained across the group to give flexibility ifrequired. The Group has been in a net cash position throughout the year. PENSIONS The Group operates a defined contribution pension scheme whose assets are heldseparately from those of the Group in an independently administered fund. The Group also operates or participates in five defined benefit schemes and 5%of employees are members of these schemes. The pension cost charge, representingcontributions payable by the Group, amounted to £1,548,000 (2004: £1,367,000).Contributions totalling £100,000 (2004: £147,000) were payable to the funds atthe year end and are included in creditors. RISK MANAGEMENT The Group Finance function is a robust and integrated operation that has overallcontrol of Group activities. From an operational standpoint we have strictinternal control and risk management. This, together with strong financialcontrols across the group as well as full and transparent reporting, enables usto maintain a strong and predictable business performance. During the year westrengthened our Internal Audit function which continuously audits and reviewsthe Group exposure to commercial and financial risk. Appropriately, the InternalAudit function reports directly to the Audit Committee. David SimonsChief Financial Officer CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 July 2005 2005 2004 Pre- exceptional Exceptional Total Note £000 £000 £000 £000 TURNOVER -CONTINUING OPERATIONS 1 118,555 - 118,555 101,821Cost of sales (86,466) - (86,466) (72,080) ---------- ---------- -------- --------- GROSS PROFIT 32,089 - 32,089 29,741Administrative expenses (27,652) (1,011) (28,663) (26,228) ---------- ---------- -------- ---------OPERATING PROFIT -CONTINUING OPERATIONS 4,437 (1,011) 3,426 3,513 ========== ==========Other interest receivable 105 85Interest payableand similar charges (75) (80) -------- ---------PROFIT ON ORDINARYACTIVITIES BEFORE TAXATION 2 3,456 3,518Taxation (1,441) (1,466) -------- --------- PROFIT ON ORDINARYACTIVITIES AFTER TAXATION 2,015 2,052Equity minority interests 1 - -------- ---------PROFIT FOR THEFINANCIAL YEAR 2,016 2,052Dividends paid andproposed on equity shares 3 (1,259) (1,550) -------- ---------RETAINED PROFIT FOR THE YEAR 757 502 ======== ========EARNINGS PER ORDINARY SHARE 4- Basic 10.2p 10.3p ========= ========= - Basic adjusted 15.6p 11.2p ========= ========= - Diluted 9.9p 10.3p ========= ========= CONSOLIDATED BALANCE SHEETAt 31 July 2005 Note 2005 2004 £000 £000 £000 £000FIXED ASSETSIntangible assets 457 522Tangible assets 4,269 4,021Investments 43 43 -------- ------- 4,769 4,586CURRENT ASSETSStocks 4,275 3,130Debtors 18,107 16,046Cash at bank and in hand 6,314 5,497 -------- ------- 28,696 24,673 CREDITORS: Amounts falling due within one year 5 (30,507) (25,526) -------- -------NET CURRENT LIABILITIES (1,811) (853) -------- ------- TOTAL ASSETS LESS CURRENT LIABILITIES 2,958 3,733 CREDITORS: Amounts falling due inmore than one year 6 (65) (26) PROVISIONS FOR LIABILITIES AND CHARGES (366) (494) -------- -------NET ASSETS 2,527 3,213 ======== ======= CAPITAL AND RESERVESCalled up share capital 200 50Share premium account 2 2Capital redemption reserve 682 832Revaluation reserve 1,211 811Investment in own shares (1,470) -Profit and loss account 1,893 1,518 -------- ------- EQUITY SHAREHOLDERS' FUNDS 2,518 3,213Equity minority interests 9 - -------- ------- TOTAL CAPITAL EMPLOYED 2,527 3,213 ======== ======= CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 July 2005 Note 2005 2004 £000 £000 £000 £000 CASH FLOW FROM OPERATING ACTIVITIES 7 6,098 4,104 RETURNS ON INVESTMENTS ANDSERVICING OF FINANCEInterest received 104 85Interest paid (42) (64)Interest element of finance lease rental payments (33) (16) ------- -------NET CASH INFLOW FOR RETURNS ONINVESTMENTS AND SERVICING OF FINANCE 29 5 TAXATION (1,686) (1,273) CAPITAL EXPENDITUREPurchase of intangible fixed assets (113) (21)Purchase of tangible fixed assets (548) (450)Sale of tangible fixed assets 61 152 ------- ------- NET CASH OUTFLOW FOR CAPITAL EXPENDITURE (600) (319) EQUITY DIVIDENDS PAID (1,200) (350) ------- ------- CASH INFLOW BEFORE FINANCING 2,641 2,167 FINANCINGInvestment in own shares (1,850) -Capital element of finance lease rental payments (101) (349)Exercising of share options 30 - ------- ------- NET CASH OUTFLOW FROM FINANCING (1,921) (349) ------- ------- INCREASE IN CASH IN THE YEAR 8 720 1,818 ======= ======= 1 SEGMENTAL REPORT The group's turnover, profit before taxation and net assets were all derivedfrom its principal activities. The group operates in the following geographical markets: Net assets Turnover Profit before taxation 2005 2004 2005 2004 2005 2004 £000 £000 £000 £000 £000 £000 Pre-exceptionalUK & Ireland 4,731 4,756 99,760 86,286 3,460 3,012Continental Europe 273 114 12,492 10,353 727 630United States of America (1,466) (1,657) 6,303 5,182 280 (124) ------- ------- ------- ------- ------- ------- 3,538 3,213 118,555 101,821 4,467 3,518ExceptionalFlotation costs -worldwide (1,011) - - - (1,011) - ------- ------- ------- ------- ------- ------- 2,527 3,213 118,555 101,821 3,456 3,518 ======= ======= ======= ======= ======= ======= 2 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2005 2004 £000 £000 Profit on ordinary activities before taxation is stated after charging/(crediting): Depreciation and amounts written off tangible fixed assets: Charge for the year Owned assets 660 476 Leased assets 30 226 Amortisation of computer licences 214 175 Amortisation of goodwill arising on consolidation 15 15 Profit on disposal of fixed assets - (100) Operating lease rentals: Plant and machinery 1,935 2,327 Auditors' remuneration: Audit services Group 93 96 Other services Group 356 118 Exceptional items: Flotation costs 1,011 - ======== ======== Amounts payable to Baker Tilly and their associates in respect of both audit andnon-audit services: 2005 2004 £000 £000Audit services- Statutory audit 93 96 Tax services- Advisory services 43 23 Other services- Other costs 70 95- Flotation costs 243 - -------- -------- 449 214 ======== ======== 3 DIVIDENDS 2005 2004 £000 £000 Ordinary:Interim paid - 350Final proposed 1,259 1,200 ------- -------- 1,259 1,550 ======= ======== 4 EARNINGS PER ORDINARY SHARE The calculations of earnings per share are based on the following profits andnumber of shares: Basic Basic Basic adjusted Diluted Basic adjusted Diluted 2005 2005 2005 2004 2004 2004 £000 £000 £000 £000 £000 £000 Profit forthe financialyear 2,016 2,016 2,016 2,052 2,052 2,052Flotationcosts (netof tax) - 837 - - - -Amortisationofintangible fixed assets - 229 - - 190 - ------ ------- ------- ------- ------- -------Adjustedprofit forfinancial year 2,016 3,082 2,016 2,052 2,242 2,052 ====== ======= ======= ======= ======= ======= Weighted average number of shares 2005 2004 Number of shares Number of shares For basic earnings per share 19,727,559 20,000,000Exercise of share options 629,249 - ---------- ---------- For diluted earnings per share 20,356,808 20,000,000 ========== ========== 5 CREDITORS: Amounts falling due within one year 2005 2004 £000 £000 Obligations under finance leases 42 99 Trade creditors 17,043 12,585 Corporation tax 1,261 1,586 Other taxation and social security costs 2,480 2,486 Other creditors 3,870 3,001 Accruals and deferred income 4,552 4,569 Proposed dividend 1,259 1,200 --------- ---------- 30,507 25,526 ========= ========== 6 CREDITORS: Amounts falling due in more than one year 2005 2004 £000 £000 Obligations under finance leases 65 26 ========= ========= OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASECONTRACTS: 2005 2004 £000 £000Amounts payable:Within one year 42 99Within two to five years 65 26 --------- ---------- 107 125 ========= ========== 7 RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES 2005 2004 £000 £000 Operating profit 3,426 3,513 Depreciation 690 702 Amortisation 229 190 Profit on disposal of fixed assets - (100) Increase in stocks (1,126) (623) Increase in debtors (1,989) (2,191) Increase in creditors 4,998 2,211 (Decrease)/increase in provisions (130) 402 -------- --------- CASH FLOW FROM OPERATING ACTIVITES 6,098 4,104 ======== ========= The operating profit is stated after charging £1,011,000 (2004: £nil) offlotation costs. 8 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS £000 Increase in cash in the year 720 Cash inflow from decrease in debt and lease financing 101 -------- 821 Other non cash changes (83) Translation difference 97 -------- MOVEMENT IN NET FUNDS IN THE YEAR 835 NET FUNDS AT 31 JULY 2004 5,372 -------- NET FUNDS AT 31 JULY 2005 6,207 ======== 9 ANNUAL REPORT AND FINANCIAL STATEMENTS The Annual Report and Financial Statements will be posted to shareholdersshortly. Copies of the Annual Report and of this announcement will be availableat the Company's registered office: GSH House, Forge Lane, Stoke on Trent ST15PZ. 10 ANNUAL GENERAL MEETING The Annual General Meeting of the Company will be held at GSH House, Forge Lane,Stoke on Trent ST1 5PZ on Thursday 19 January 2006 at 2.30 p.m. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
GSH.L