12th Mar 2008 07:01
Mavinwood PLC12 March 2008 Mavinwood plc ("Mavinwood" or "the Company") Preliminary Announcement Preliminary results for the year ended 31 December 2007 - Another year of good progress and strong growth - Profit before tax up 35% to £5.0m (2006: £3.7m) - Adjusted fully diluted earnings per share up 19% - Integration delivering results - Successfully completed acquisitions of Document Control Services Limited and Peter Cox Limited - Board strengthened - Clear strategy for growth Financial highlights: 2007 2006 Increase £'000 £'000 Turnover 68,153 42,453 +61%Adjusted profit before taxation1 12 7,289 5,044 +45%Profit before taxation 2 5,047 3,751 +35%Basic earnings per share 0.56p 0.66pAdjusted fully diluted earnings per share1 2 0.96p 0.81p +19% 1 before amortisation of intangible assets, share based payment charge andnotional interest on contingent consideration2 after integration costs of £0.3m on acquiring Peter Cox Limited Kevin Mahoney, Chief Executive of Mavinwood said: "These are good results with all the key numbers showing healthy increases. On alike for like basis both divisions, Emergency Repair and Document Handling,achieved double digit growth in sales and on aggregate 19% increase in operatingprofit. Since Mavinwood was launched at the end of 2004 we have made sevenprincipal acquisitions and built strong positions in our chosen markets. Weaccelerated integration plans across the Mavinwood Group in 2007, improvingsystems and reducing costs. We also increased capital expenditure in bothdivisions to help drive future organic growth. 2008 has started in line withexpectations and we are confident that the investments we made in 2007 willensure that we continue our track record of strong organic growth." Enquiries:Mavinwood plcKevin Mahoney , Chief Executive 020 7661 9650Mike Vincent, Finance Director 020 7661 9651 Threadneedle CommunicationsJohn Coles 020 7936 9604 Collins Stewart Europe LimitedAdrian Hadden 020 7523 8353 BACKGROUND Mavinwood was admitted on AIM on 5 November 2004 and is pursuing a buy and buildstrategy in the support services sector. The strategy is to acquire and developsupport services businesses which have the potential for growth, eitherorganically or in combination with other complementary businesses. The focus ison the Emergency Repair (especially where there is an insured repair) andDocument Handling sectors. PROFIT BEFORE TAX The profit before tax for the year ended 31 December 2007 was £5,047,000 (2006:£3,751,000). However, the Directors believe that an adjusted measure of profitbefore tax and earnings per share provides shareholders with a more appropriaterepresentation of the underlying earnings derived from the Mavinwood Group'sbusiness. The items adjusted for in arriving at that underlying level are asfollows: 2007 2006 £'000 £'000 Emergency Repair 7,152 4,832Document Handling 3,886 2,459Central costs (1,439) (969)Share based payments charge (1,892) (1,039)Amortisation of intangible fixed assets (288) (96) -------- --------Operating profit 7,419 5,187Net finance costs (2,372) (1,436) -------- --------Profit before tax 5,047 3,751Amortisation of intangible assets 288 96Share based payments charge 1,892 1,039Notional interest on contingent consideration 62 158 -------- --------Adjusted profit before tax 7,289 5,044 ======== ======== EMERGENCY REPAIR 2007 2006 £'000 £'000Sales ANSA, Independent Inspections and Mono Services * 51,965 34,515 Peter Cox ** 4,232 - -------- -------- Total 56,197 34,515 ======== ======== EBITA*** ANSA, Independent Inspections and Mono Services * 6,853 4,832 Peter Cox ** 299 - -------- -------- Total 7,152 4,832 ======== ======== * Independent Inspections five and a half months and Mono Services four months in 2006** Peter Cox three months in 2007*** Excluding share based payments charge The significant increase in sales and profit in this division is principally dueto the fact that Independent Inspections and Mono Services were only includedfor part of 2006 compared to a full twelve months in 2007. The 2007 figuresinclude Peter Cox for three months. This division includes three businesses which serve principally the insuredrepair sector. Approximately 80% of sales in 2007 were to leading insurancecompanies and we also service a range of housing associations and commercialcompanies. Peter Cox currently carries out little insurance work and most of itssales leads come from referrals or trade directories. All four businesses share a common business process which is: • Take the emergency call from the customer or via an insurer • Arrange a survey to validate or repudiate the claim and cost out the repair • Undertake the repair either by directly employed labour or sub contractors ANSA specialises in drainage surveys and repair, Independent Inspections inflooring surveys and restoration and Mono Services in building fabric surveysand repairs, often due to water damage. ANSA, Independent Inspections and Peter Cox are national businesses and MonoServices is a regional business in the North West. There is some customer overlap between the businesses but one of ouropportunities moving forward is to offer all our services to a wider range ofcustomers. All these businesses operate to high service standards. Examples of customersatisfaction measures that are monitored on a continuous basis are: • Response times in terms of contacting a policyholder after they report an insured event • Courtesy of staff and customer satisfaction • Average cost per claim There are integration benefits to flow between the businesses. A range ofintegration projects are underway including: • Optimising the IT platform across all the operations • Purchasing initiatives • Optimising back office functions • Reviewing marketing opportunities and widening the service offering As well as good organic growth within the division, we will continue to look forbolt on acquisitions which would further enhance our offering. Turning to the highlights within each operation: ANSA After a strong start to the year, ANSA's volume of insurance instructionsdropped overall comparing 2007 with calendar 2006. The heavy flooding over thesummer reduced the number of blockages we needed to attend. This wet weather wasthen followed by one of the driest autumns on record. This had the effect ofreducing root ingress into the drains. Without the build up of water a number ofhouseholders would not have been aware their drains were blocked. Right at theyear end, December saw a sharp drop in volumes. This pattern was a feature ofthe whole drainage industry in the second half of the year. ANSA did benefit from an improved mix of business with an increased proportionof larger jobs in 2007. During January and February 2008, volumes of instructions received from theinsurers have returned back to the levels seen during the first half of 2007. ANSA has extended its drainage services to a wider range of customers in thecommercial sector. This is still a relatively small part of the ANSA businessbut after extensive trialling in 2007 we have national coverage and are growinga number of regional and national accounts. Operating profit at ANSA has increased due to an improved mix of business, costreductions and productivity gains. Customers have benefited from strongperformance in claims validation, service delivery and cost control. FromOctober we renewed a contract with one leading insurer and this arrangement willrun for three years. In February 2007, ANSA acquired ESG Limited, a small drainage contractor for£0.2m. This acquisition has helped to increase the proportion of repair workthat is being carried out by direct labour as opposed to sub contractors. ANSA also owned a small business offering Health and Safety training. Revenue inthe first six months of 2007 was £617,000. The trade and assets of thisoperation were sold to the training management team on 29 June 2007 at net bookvalue of £556,000. INDEPENDENT INSPECTIONS After suffering through low volumes in the first quarter, a series of costreduction and profit improvement initiatives were made. The summer floods werepositive for Independent Inspections as a large number of floor coverings weredestroyed or damaged. New income streams were developed later in the year whichhave broadened the base of the business. MONO SERVICES Mono Services' sales have increased by approximately one fifth compared to 2006due to winning new business, helped by the storm damage over the 2006/7 winterand the summer floods. Some of Mono Services' business has been re-directed viaan insurer's joint venture partner that has caused some disruption to ouroperations. This resulted in transition and set up costs that reduced marginsduring the year. The acquisition of Peter Cox with its network of branches and its integrationwith Mono Services will enable us to build a national building fabric solutionfor insurers. PETER COX Peter Cox was acquired on 28 September 2007. It is a national provider of dampand water proofing, timber preservation and wall stabilisation for property inthe United Kingdom. Peter Cox has a network of 17 branches in England andScotland and employs 287 people. Its revenue is generated from yellow pages andthe commercial sector, with at present little or no insurance work. Peter Coxcontributed revenue and operating profit of £4.2 million and £0.3 million in itsfirst three months. Revenue was 6% up on the comparable period and operatingprofit significantly increased. We have commenced the integration of the back office system of Peter Cox intothe Emergency Repair division very promptly after completion of the acquisition.This was partly driven by the need to move out of the shared servicesenvironment of the vendor group. The central functions of Peter Cox have beenrelocated to the same offices as ANSA and Mono Services, in Oldham. During thelast quarter of 2007 there were double running costs of operating the twoenvironments plus investment in the IT integration. We estimate the doublerunning and integration costs incurred by Peter Cox and Mono Services were £0.3million in aggregate. EMERGENCY REPAIR SUMMARY Overall, on a true like for like basis comparing each business with thecomparable period of trading in 2006, sales advanced by 10% and operating profitby 18%. After a soft end to the year in volume terms the division has bouncedback in the first quarter of 2008. We have built a division which competes effectively as a claims fulfilmentbusiness to insurance companies. We are integrating the operations under onedivisional management team headed by Steve Watkins and beginning to eliminateduplication in function across the division. The implementation of one ITplatform across the division will improve efficiency during 2008 and especially2009. The integration of Peter Cox with Mono Services will be a key initiativefor 2008. DOCUMENT HANDLING 2007 2006 £'000 £'000Sales Restore and Wansdyke * 8,934 7,938 Document Control Services ** 3,022 - -------- -------- Total 11,956 7,938 ======== ======== EBITA*** Restore and Wansdyke * 2,808 2,459 Document Control Services ** 1,078 - -------- -------- Total 3,886 2,459 ======== ======== * Wansdyke eleven months in 2006** Document Control Services nine months in 2007*** Excluding share based payments charge RESTORE AND WANSDYKE Restore and Wansdyke serve a wide range of customers, including law firms,corporates of varying sizes, financial services companies, councils and healthtrusts. Our customers are mostly based in London and the South across to Bristoland South Wales. The majority of sales are the storage and retrieval of archiveboxes but also individual files and other material such as magnetic media andfilm. Scanning of documents on a selective basis is also offered to clients. Shreddingor pulping of documents at the end of their useful lives is currentlyoutsourced, although this would form a logical product extension. The key customer satisfaction measures are: • % accuracy in retrieving items • % of items retrieved in accordance with terms of service, such as same day or next day delivery We continue to integrate Restore and Wansdyke and the companies share the samemanagement team. Approximately £0.1m of integration costs have been chargedagainst Wansdyke's profits in 2007. The Restore operating system of bar codingis being applied at Wansdyke and the back office functions are increasinglybeing integrated. Total employees at Wansdyke have dropped from 75 at February2006 to 66 at 31 December 2007 by natural wastage as systems have become moreautomated. We operate a combination of freehold and leasehold sites at Wansdyke and Restorerespectively. Due to the absence of rental charges, the return on sales atWansdyke is higher than that at Restore. Having repositioned the business in 2006, Wansdyke's sales grew strongly in2007, by 10%. We are filling up our underground storage facilities near Bath andin the first half of 2007 acquired an adjoining underground space of 16 acresfor £0.5m. Once fitted out this space will provide medium term expansion for thebusiness through to 2013. Restore suffered from some disruption and dealt with a high volume of archivebox intake but the flow through from this new volume means it is well placed for2008. DOCUMENT CONTROL SERVICES (DCS) We acquired 100% of the share capital of Stapledon Holdings Limited, the parentcompany of DCS on 26 March 2007. DCS is a quality national operation scanningand indexing documents with high intellectual property content. The business hasa blue chip customer base including Network Rail, Highways Agency, The CrownEstate, oil and gas companies, city councils and property companies. DCS made avery strong contribution in its first nine months. DOCUMENT HANDLING SUMMARY The market for the physical storage of archives continues to grow well in excessof GDP, with especially strong growth in sectors such as professional services.Overall, on a true like for like basis comparing each business with a comparableperiod of trading in 2006, sales advanced by 11% and operating profit by 21%. The division is well placed to capitalise on its pipeline of new business whilemaximising the utilisation of its freehold space. Restore and Wansdyke areeffectively being run as one business and the appointment of Ed Marshall fromDCS as divisional Chief Executive will help to bind all three operationstogether. CENTRAL COSTS Central costs have increased from £969,000 to £1,439,000 as we now operate twomuch larger divisions compared to 2006. INTEREST Net interest payable amounted to £2,372,000 (2006: £1,436,000) as we borrowed tofund the acquisitions of Mono Services from September 2006 and DCS and Peter Coxin 2007. Included within the finance cost is £62,000 representing the notionalinterest on contingent consideration due on the acquisitions of IndependentInspections, Mono Services and DCS. The discount rate applied in thiscalculation was 7.9%. TAXATION The amortisation of intangible assets, the notional interest on the contingentconsideration and the share based payments charge do not attract any tax relief.Due to these distortions, the reported tax charge is 49% (2006: 32%). Theheadline tax rate is significantly higher in 2007 as we have assumed that theshare based payments charge will not attract a tax deduction. In addition, wehave written off the deferred tax asset of £312,000 relating to the share basedpayment charge in 2006. However, the underlying tax rate during 2007 was 30%, asa percentage of adjusted profit before taxation. (2006: 30%). EARNINGS PER SHARE (EPS) Basic EPS in 2007 is 0.56p, which compares with 0.66p in 2006. The reason forthe reduction in basic EPS is the absence of tax relief assumed on the sharebased payments charge. If we are able to assume tax relief of 30%, the basic EPSwould have been 0.76p. Basic EPS adjusted for the amortisation of intangibleassets, the share based payments charge and the notional interest on thecontingent consideration was 1.11p (2006: 0.90p). Assuming the exercise of all options and awards under the LTIP plus theconversion of the convertible A shares at an average price in 2007 of 18.4p(2006: 13.93p), the fully diluted adjusted EPS becomes 0.96p (2006: 0.81p) anincrease of 19%. DIVIDENDS The directors do not recommend a dividend for the year (2006: £nil). SHARE ISSUES New equity was issued on two occasions in 2007: • 5.4 million shares were allotted on 26 March 2007 at 18.5p per share as part of the consideration for DCS. • 4.5 million shares were allotted on 16 October 2007 at 20p per share to the vendors of Mono Services in settlement of contingent consideration due. The balance of £0.1 million was settled in cash. ACQUISITIONS External Services Group Limited (ESG), a drainage sub contractor to ANSA, wasacquired on 2 February 2007 for cash of £206,000. DCS was acquired for an initial sum of £1.3 million, including £1 million inMavinwood shares. In addition, debt of £4.8 million was repaid. Contingentconsideration of up to £2 million is also payable in cash linked to the growthin EBITA above £0.93 million for the year ending 30 June 2008. The full £2m ispayable assuming EBITA reaches £1.23 million. Peter Cox Limited was acquired for an initial sum of £6 million. Contingentconsideration of £1,050,000 was also paid on 21 February 2008 linked to theachievement of EBITA for the year ended 30 November 2007. BALANCE SHEET Net assets increased to £50,613,000 in the year reflecting the profit before taxfor the year of £5,047,000 plus the share issues to part fund the acquisition ofDCS and the contingent consideration for Mono Services. Intangible assetsrelating to the acquisitions at 31 December 2007 was £70,634,000 (2006:£58,823,000). Property, plant and equipment totalled £12,220,000 (2006: £10,826,000)principally comprising the freehold underground storage facilities at Wansdykebut also computer systems, storage racking and vehicles. Operating working capital (excluding cash) amounted to a net £7,967,000 at 31December 2007. Net debt at 31 December 2007 totalled £30,917,000 (2006:£17,649,000) after deferred financing costs of £357,000 (2006: £310,000).Interest cover in the year was 4.1 times. Due to Independent Inspections' slow start in the first half of 2007, theDirectors consider it unlikely that the business will make the hurdles totrigger earn out payments to the vendor in respect of 2007 and 2008 so theseamounts of £4m have been written back to opening intangible assets. CASH FLOW The net cash inflow from operating activities before investing and financingactivities was £1,430,000 (2006: £2,793,000). This inflow is after takingaccount of an outflow of £4.6m on working capital. We expect an outflow as thebusiness expands and would have expected this to be around £2.1 million.However, working capital increased due to a number of other factors: • £1.1 million due to the re-direction of work for a large insurer via a joint venture management company and other changes in Mono Services' business model • £0.5 million due to reducing the number of sub-contractors in ANSA and bringing more work in house The above factors are permanent changes in the size of our working capital. Inaddition, we have suffered from other slippages in our Document Handlingbusiness and in Emergency Repair as some of our larger customers took longer tosettle during 2007. A large portion of this amount of £0.9 million has beenrecouped since the year end. Capital expenditure totalled £2,683,000 (2006: £1,168,000). Two major projectsaccounted for £1 million of the expenditure. £0.5 million was spent acquiringfurther underground storage at Wansdyke and a similar amount was spent on thefirst phase of the major IT project in Emergency Repair. This project integratesthe finance and operating systems of Peter Cox and Mono and helps build the ITplatform for the entire Emergency Repair division. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) We have adopted IFRS with effect from 1 January 2006. Comparative figures forthe year ended 31 December 2006 have been presented. The principal differencesrelates to the write back of goodwill amortisation in 2006 and providing fulldeferred taxation on the property at Wansdyke and other intangibles. OUTLOOK The Mavinwood Group ended the year with two well established divisions and acurrent market capitalisation in excess of £70 million. Integration benefits arecoming through in the two divisions as well as good underlying organic growth.After a few months of lower than normal volumes at the end of 2007, particularlyin drainage, the Emergency Repair business has started 2008 well withinstructions back to their early 2007 levels. The Document Handling industrycontinues to grow strongly in 2008 and our business is well placed within theindustry. We plan to add further complementary businesses to both divisions on a selectivebasis and given the cash generative qualities of the Group, there is scope overtime to acquire further businesses for cash. Kevin MahoneyChief Executive Officer 12 March 2008 CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2007 Year ended Year ended Note 31 December 31 December 2007 2006 £'000 £'000Continuing operations REVENUE 1 68,153 42,453 Cost of sales (41,771) (26,200) ---------- -----------Gross profit 26,382 16,253 Administrative expenses (18,963) (11,066) ---------- -----------OPERATING PROFIT 7,419 5,187 Finance income 106 82Finance costs (2,478) (1,518) ---------- -----------PROFIT BEFORE TAX 5,047 3,751 Income tax expense 2 (2,463) (1,195) ---------- -----------PROFIT FOR THE YEAR 2,584 2,556 ========== =========== ATTRIBUTABLE TOEQUITY HOLDERS OF THECOMPANY 2,584 2,556 ========== =========== EARNINGS PER SHARE (PENCE) Basic 3 0.56p 0.66p ========== =========== Diluted 3 0.48p 0.59p ========== =========== CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITYFor the year ended 31 December 2007 Share capital Share premium Share based Retained Total payments earnings Equity reserve £'000 £'000 £'000 £'000 £'000 Balance at 1January 2006 383 26,459 85 16 26,943Profit for theyear - - - 2,556 2,556 ------- ------- -------- -------- --------- 383 26,459 85 2,572 29,499Issue ofshares duringthe financialyear 120 14,255 - - 14,375Issue costs - (654) - - (654)Share basedpaymentscharge - - 1,017 - 1,017 ------- ------- -------- -------- ---------Balance at 31December 2006 503 40,060 1,102 2,572 44,237 ======= ======= ======== ======== ========= Balance at 1January 2007 503 40,060 1,102 2,572 44,237Profit for theyear - - - 2,584 2,584 ------- ------- -------- -------- --------- 503 40,060 1,102 5,156 46,821Issue ofshares onacquisition ofDCS (note 4) 5 995 - - 1,000Contingentconsiderationin respect ofMono Services 4 896 - - 900Share basedpaymentscharge - - 1,892 - 1,892 ------- ------- -------- -------- ---------Balance at 31December 2007 512 41,951 2,994 5,156 50,613 ======= ======= ======== ======== ========= CONSOLIDATED BALANCE SHEETAt 31 December 2007 31 December 31 December 2007 2006 £'000 £'000ASSETSNON-CURRENT ASSETSIntangible assets 70,634 58,823Property, plant andequipment 12,220 10,826Investments 556 -Deferred tax asset 179 8 --------- ---------- 83,589 69,657 --------- ----------CURRENT ASSETSInventories 381 311Trade and other receivables 23,140 13,369Cash and cash equivalents 1,108 1,850 --------- ---------- 24,629 15,530 --------- ---------- --------- ----------TOTAL ASSETS 108,218 85,187 --------- ---------- LIABILITIESCURRENT LIABILITIESTrade and other payables (15,554) (11,114)Bank loans and overdrafts (4,337) (3,600)Other financial liabilities (45) (109)Current tax liabilities (1,229) (1,969)Provisions (3,698) (500) --------- ---------- (24,863) (17,292) --------- ---------- NET CURRENT LIABILITIES (234) (1,762) --------- ---------- NON-CURRENT LIABILITIESBank loans and overdrafts (27,643) (15,790)Deferred tax liability (5,099) (3,985)Provisions - (3,883) --------- ---------- (32,742) (23,658) --------- ---------- NET ASSETS 50,613 44,237 ========= ========== EQUITYShare capital 512 503Share premium account 41,951 40,060Share based payments reserve 2,994 1,102Retained earnings 5,156 2,572 --------- ----------ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY 50,613 44,237 ========= ========== CONSOLIDATED CASH FLOWFor the year ended 31 December 2007 Year ended Year ended Note 31 December 31 December 2007 2006 £'000 £'000CASH INFLOW FROM OPERATING ACTIVITIESContinuing operations Profit for the year 2,584 2,556 Depreciation of property, plant and equipment 843 833 Amortisation of intangible assets 288 96 Finance costs recognised in profit and loss 2,372 1,436 Income tax expense recognised in profit and loss 2,463 1,195 Share based payments charge 1,892 1,039 Gain on sale or disposal of property, plant and equipment (33) (54) Movements in working capital Change in inventories 12 59 Change in trade and other receivables (5,945) (2,570) Change in trade and other payables 1,311 142 -------- -------CASH GENERATED FROM OPERATING ACTIVITIES 5,787 4,732 Finance costs (1,681) (1,037) Investment income 106 82 Income taxes paid (2,782) (984) -------- -------NET CASH GENERATED FROM OPERATING ACTIVITIES 1,430 2,793 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on disposal of property, plant and equipment 101 845 Purchases of property, plant and equipment (2,287) (1,089) Purchases of applications software (396) (79) Acquisition of subsidiaries net of cash acquired 4 (6,988) (24,432) Contingent consideration (106) (1,075) -------- --------NET CASH FLOWS USED IN INVESTING ACTIVITIES (9,676) (25,800) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (2,000) (3,500) Repayment of indebtedness acquired (4,794) (881) New bank loans raised 14,300 18,043 Deferred financing costs (192) (268) Increase in bank overdrafts 337 - Net proceeds from issue of shares - 11,346 Finance lease principal repayments (147) (687) -------- --------NET CASH GENERATED IN FINANCING ACTIVITIES 7,504 25,833 -------- --------NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS (742) 1,013 Cash and cash equivalents at start of year 1,850 837 -------- --------CASH AND CASH EQUIVALENTS AT THE END OF YEAR 5 1,108 1,850 ======== ======== NOTES TO THE PRELIMINARY ANNOUNCEMENT Mavinwood plc and its subsidiaries specifically focus on Emergency Repair andDocument Handling. The Group operates in the UK. During the year, the Groupacquired control of External Services Group, a drainage services company,Document Control Services, a value added scanning company and Peter Cox, a dampcourse, water damage and timber treatment services company. The Company is a public limited company incorporated and domiciled in the UnitedKingdom. These financial statements were authorised for issue by the board of directorson 12 March 2008. BASIS OF PREPARATION The financial information has been prepared using the recognition andmeasurement principles of IFRS. The financial information is presented in pounds sterling, prepared on ahistorical cost basis and, unless otherwise stated, rounded to the nearestthousand. The financial information set out in this announcement is abridged anddoes not constitute statutory accounts for the year ended 31 December 2007 butis derived from those draft financial statements. The financial information isnot audited. The statutory accounts for the year ended 31 December 2007 will befinalised on the basis of the financial information presented by the directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies following the Company's annual general meeting. The financial information contained in the preliminary announcement of resultshas been prepared on the basis of the accounting policies as outlined in theinterim announcement made on 12 September 2007. This announcement also publishedthe results for the year ended 31 December 2006 as reported under InternationalFinancial Reporting Standards. The comparative financial information for the year ended 31 December 2006 wasderived from information extracted from the annual report and accounts for thatperiod, which was prepared under UK GAAP and which has been filed with the UKRegistrar of Companies. The auditors have reported on those UK GAAP accounts,their report was unqualified and did not contain statements under sections 237(2) or (3) of the Companies Act 1985. 1 SEGMENTAL ANALYSIS For management purposes, the Group is organised into two main segments,Emergency Repair and Document Handling. The business segment is the primarysegment. All trading of the Group is undertaken within the United Kingdom andthe Company has no foreign operations. The secondary segment based on geographyis solely the United Kingdom. Segment assets include goodwill, property, plantand equipment, inventory, debtors and operating cash. Central assets includeinvestments, deferred tax and head office assets. Segment liabilities compriseoperating liabilities. Central liabilities include income tax, corporateborrowings and head office liabilities. Capital expenditure comprises additionsto computer software, property, plant and equipment and includes additionsresulting from acquisitions through business combinations. Segment assets andliabilities are allocated between segments on an actual basis. Year ended Year ended 31 December 31 December 2007 2006 £'000 £'000REVENUEThe revenue was derived from the Group'sprincipal activities in the UK as follows:Emergency Repair 56,197 34,515Document Handling 11,956 7,938 --------- ---------- 68,153 42,453 ========= ========== RESULTSThe profit after tax was derived from theGroup's principal activities in the UK asfollows:Emergency Repair 7,152 4,832Document Handling 3,886 2,459Central costs (1,439) (969)Share based payments charge (1,892) (1,039)Amortisation of intangible assets (288) (96) --------- ----------Operating profit 7,419 5,187 Net finance cost (2,372) (1,436) --------- ----------Profit before tax 5,047 3,751Income tax expense (2,463) (1,195) --------- ----------Profit after tax 2,584 2,556 ========= ========== 2007 2006 £'000 £'000Segmental assets:Emergency Repair 71,433 59,326Document Handling 36,533 25,620Central 252 241 --------- ----------Total 108,218 85,187 Segmental liabilities:Emergency Repair (14,297) (13,422)Document Handling (5,004) (5,071)Central (38,304) (22,457) --------- ----------Total (57,605) (40,950) Segmental net assets:Emergency Repair 57,136 45,904Document Handling 31,529 20,549Central (38,052) (22,216) --------- ----------Total 50,613 44,237 ========= ========== Property, plant and equipment additions 2,287 1,059Amortisation of intangible assets 288 96Depreciation of property, plant and equipment 843 833 ========= ========== 2 TAXATION Year ended Year ended 31 December 31 December 2007 2006 £'000 £'000Current tax:UK corporation tax on profits for theyear 2,245 1,571Adjustments in respect of previousperiods (187) (11) ---------- ---------Total current tax 2,058 1,560 ---------- --------- Deferred tax: Current year 405 (365) ---------- ---------Total deferred tax 405 (365) ---------- ---------Total tax charge 2,463 1,195 ========== ========= The charge for the year can be reconciled to the profit per the ConsolidatedIncome Statement as follows: Year ended Year ended 31 December 31 December 2007 2006 £'000 £'000 Profit on ordinary activities before tax 5,047 1,589 ---------- --------- Profit on ordinary activities multipliedby the rate of corporation tax of 30% 1,514 1,125Effects of:Expenses not deductible for tax purposes 95 70Tax relief not recognised on share basedpayments charge 574 -Tax losses not utilised 19 2Effect of different tax rate used fordeferred tax (23) -Adjustments in respect of current incometax of previous years (187) 1Adjustments in respect of deferredincome tax of previous years 471 (3) ---------- ---------Total tax charge as reported in theConsolidated Income Statement 2,463 1,195 ========== ========= The effective tax rate is 49% due to the distortion caused by the nondeductibility of the amortisation of intangible assets, the notional interest onthe contingent consideration and the share based payments charge. Afteradjusting for these the effective rate becomes 30% (2006: 30%). 3 EARNINGS PER ORDINARY SHARE Basic earnings per share have been calculated on the profit after taxation forthe year and the weighted average number of ordinary shares in issue during theyear. Adjusted earnings per share which are before amortisation of intangible assets,share based payments charge and notional interest on contingent considerationhave been presented in addition to the basic earnings per share since, in theopinion of the directors, this provides shareholders with a more appropriaterepresentation of the underlying earnings derived from the Group's businesses. Year ended Year ended 31 December 31 December 2007 2006 No. of shares No. of sharesWeighted average number of shares inissue 457,684,786 388,920,578 ========= ========= £'000 £'000Profit after taxation on ordinaryactivities 2,584 2,556 AdjustmentsShare based payments charge 1,892 1,039Tax effect 312 (312)Amortisation of intangible assets 288 96Tax effect (36) (26)Notional interest on contingentconsideration 62 158 --------- ---------Adjusted earnings 5,102 3,511 ========= ========= Basic earnings per ordinary share 0.56p 0.66p ========= ========= Adjusted basic earnings per ordinaryshare (before goodwill amortisation,share based payments charge and notionalinterest on contingent consideration) 1.11p 0.90p ========= ========= No. of shares No. of sharesWeighted average number of shares inissue 457,684,786 388,920,578 Convertible 'A' Shares, Share Optionsand awards under the LTIP 76,521,253 44,082,349 --------- ---------Weighted average fully diluted number ofshares in issue 534,206,039 433,002,927 ========= ========= Fully diluted earnings per ordinaryshare 0.48p 0.59 p ========= ========= Adjusted fully diluted earnings perordinary share (before goodwillamortisation, share based paymentscharge and notional interest oncontingent consideration) 0.96p 0.81 p ========= ========= The diluted earnings per share are the basic earnings per share adjusted for thedilutive effect of the conversion into fully paid shares of the outstandingshare options and awards under the LTIP. They are also adjusted for theconversion of the A shares into ordinary shares at a price of 18.4p, being theaverage price per ordinary share in the year ended 31 December 2007 (2006:13.93p). 4 ACQUISITIONS On 2 February 2007, 100% of the share capital of External Services Group Limited(ESG), a drainage sub contractor to ANSA, was acquired for cash of £206,000. Book value at Fair value Fair value at acquisition adjustment acquisitionExternal Services Group Limited(ESG) £'000 £'000 £'000 Inventories 14 - 14Debtors 214 - 214Creditors (166) - (166)Taxation (12) - (12)Finance leases (27) - (27) --------- ---------- ----------Net assets acquired 23 - 23 ========= ==========Goodwill capitalised 183 ----------Consideration 206 ========== Satisfied by:Cash to vendors 206 ========== The goodwill of £0.2 million represents the value attributable to new businessand the assembled and trained workforce. On 26 March 2007, the Company acquired 100% of the share capital of StapledonHoldings Limited, the parent company of Document Control Services Limited (DCS)for an initial sum of £1.3 million which was satisfied by cash of £0.3millionand the issue of 5,405,405 ordinary shares in Mavinwood plc at an issue price of18.5p at mid market value. Contingent consideration of up to £2 million is alsopayable in cash linked to the growth in EBITA for the year ending 30 June 2008.The full £2 million is payable assuming EBITA reaches £1.23 million. Book value at Fair value Fair value at acquisition adjustment acquisitionStapledon Holdings Limited £'000 £'000 £'000 Intangible assets - 2,901 2,901Property, plant and equipment 104 - 104Debtors 916 - 916Creditors (342) - (342)Taxation (147) (812) (959)Cash 6 - 6Finance leases (56) - (56) --------- ---------- ----------Net assets acquired 481 2,089 2,570 ========= ==========Goodwill capitalised 5,588 ----------Consideration 8,158 ========== Satisfied by:Cash to vendors 291Loans repaid 4,794Share issues 1,000Discounted contingent consideration 1,777Related costs of acquisition 296 ---------- 8,158 ========== The goodwill of £5.6 million represents the value attributable to new businessand the assembled and trained workforce. The intangible asset fair valueadjustment has been made to recognise the value attributable to existingcustomer relationships, the trade name, technology and software. Deferred tax at28% has been provided on the value of the intangible assets. On 28 September 2007, the Company acquired 100% of the share capital of PeterCox Limited for an initial consideration of £6.4 million. Book value at Fair value Fair value at acquisition adjustment acquisitionPeter Cox Limited £'000 £'000 £'000 Intangible assets - 1,079 1,079Property, plant and equipment 224 - 224Inventories 68 68Debtors 3,007 - 3,007Creditors (1,560) - (1,560)Deferred taxation 559 (302) 257Cash 745 - 745Long term liabilities (656) - (656) --------- ---------- ----------Net assets acquired 2,387 777 3,164 ========= ==========Goodwill capitalised 5,232 ----------Consideration 8,396 ========== Satisfied by:Cash to vendors 6,350Deferred consideration 400Contingent consideration 1,050Related costs of acquisition 596 ---------- 8,396 ========== The deferred consideration of £0.4 million and contingent consideration of £1.0million were paid on 3 January 2008 and 21 February 2008 respectively. Thegoodwill of £5.2m represents the value attributable to the assembled and trainedworkforce. The intangible asset fair value adjustment has been made to recognisethe value attributable to existing customer relationships and the trade name.Deferred tax at 28% has been provided on the value of the intangible assets. Post acquisition profits ESG DCS Peter Cox £'000 £'000 £'000 ====== ====== ======Profit before tax since acquisition included in the ConsolidatedIncome Statement 185 1,073 299 ====== ====== ====== If the acquisitions had been completed on the first day of the financial year,Group revenues for the year would have been £81,477,000 and Group profit beforetax would have been £5,257,000. The total consideration paid for Group acquisitions during the year was £16.8million, which was satisfied as follows: ESG DCS Peter Cox Total £'000 £'000 £'000 £'000 Cash to vendors 206 291 6,350 6,847Loans repaid - 4,794 - 4,794Related costs of acquisition - 296 596 892Contingent consideration not yet due - 1,777 1,450 3,227Issue of shares to vendors - 1,000 - 1,000 ------ ------- ------ ------ 206 8,158 8,396 16,760 ====== ======= ====== ====== 5 ANALYSIS OF NET DEBT The movement in net debt is analysed as follows 2007 2006 £'000 £'000 At 1 January (17,649) (4,335)Net cash generated from operating activities 1,430 2,760Net cash flows used in investing activities (9,676) (25,833)Repayment of indebtedness acquired (4,794) (881)Net proceeds from issue of shares - 11,346Finance leases acquired (83) (621)Payment of deferred financing costs (192) (268)Other 47 183 -------- --------At 31 December (30,917) (17,649) ======== ======== Analysis of net debt Cash at bank and in hand 1,108 1,850Bank loans due within one year (4,337) (3,600)Bank loans due after one year (28,000) (16,100)Finance leases due within one year (45) (109)Deferred financing costs 357 310 -------- -------- (30,917) (17,649) ======== ======== END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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