14th Mar 2007 07:03
Mavinwood PLC14 March 2007 Mavinwood plc Preliminary results for the 12 months ended 31 December 2006 Financial highlights: 2006 2005 £'000 £'000Turnover 42,453 15,264Profit before taxation 1,589 528Underlying adjusted profit before tax * 4,958 1,495Basic earnings per share 0.10p 0.05pAdjusted fully diluted earnings per share* 0.80p 0.53p +51% Acquisitions completed during the year: Wansdyke for £11m on 10 February Independent Inspections for an initial consideration of a net £10m on 18 July Mono for an initial consideration of £6m on 7 September *before goodwill amortisation, share based payments charge and notional intereston contingent consideration Kevin Mahoney, Chief Executive of Mavinwood said: "These are very good results as we continue to build strong positions in bothour targeted markets, emergency repair and document handling. The threeacquisitions we made during the year are performing well and as with all ouracquisitions are benefiting from continuity of senior management. We anticipatefurther benefits as we continue to integrate the businesses. Our net debt is£17.6m which gives us significant scope to make further acquisitions in cash.When we floated on AIM in 2004 our strategy was to build a market leading UKsupport services business in our chosen sectors. These results confirm that weare delivering on this strategy" Mavinwood plc Kevin Mahoney 020 7661 9650Mike Vincent 020 7661 9651 Threadneedle CommunicationsJohn Coles 020 7936 9604 BACKGROUND Mavinwood was launched 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. CHIEF EXECUTIVES REVIEW RESULTS Turnover in 2006 was £42,453,000 (2005:£15,264,000) and the profit before taxwas £1,589,000 (2005: £528,000). The profit before goodwill amortisation, sharebased payments charge and notional interest on contingent consideration was£4,958,000, (see Profit before taxation section below) (2005: £1,495,000). Thebasic earnings per ordinary share were 0.10p, (2005: 0.05p). However, the measure we focus on as a Board is the fully diluted earnings pershare before goodwill amortisation, share based payments charge and notionalinterest on contingent consideration. At this level, the earnings per share for2006 were 0.80p compared to 0.53p in 2005. This is an impressive growth of some51%. At 31 December 2006, net debt of the Group amounted to £17,649,000 (2005:£4,335,000). The Mavinwood Group comprises two divisions, Emergency Repair and DocumentHandling. EMERGENCY REPAIR 2006 2005 £'000 £'000Sales ANSA * 25,884 12,973 Independent Inspections/Mono ** 8,631 - -------- -------- Total 34,515 12,973 ======== ======== EBITA*** ANSA * 3,843 1,589 Independent Inspections/Mono ** 944 - -------- -------- Total 4,787 1,589 ======== ======== * ANSA 6 months in 2005** Independent Inspections 5 1/2 months and Mono 4 months in 2006*** Excluding share based payments charges The significant increase in sales and profit in this division is principally dueto the fact that ANSA was only included for six months in 2005 compared to afull twelve months in 2006 and that the 2006 figures include IndependentInspections for five and a half months and Mono for four months. This division includes three businesses which serve principally the insuredrepair sector. Approximately 90% of sales in 2006 were to the leading insurancecompanies and we also service a range of housing associations and commercialcompanies. All three businesses share a common business process which is: •Take the emergency call from the customer via the 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 in building fabric surveys andrepairs, often due to water damage. ANSA and Independent Inspections are national businesses and Mono is currently aregional 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 keyperformance indicators 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 which have begunin late 2006. A range of integration projects are underway including: •Assessing and optimising IT platforms •Purchasing initiatives •Extending Mono's reach across the country •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 ANSA's volume of instructions grew satisfactorily comparing 2006 with calendar2005. The business tends to produce higher volumes in the second half of theyear. From October we were also awarded 100% of volumes from one leading insurerinstead of 50% and this arrangement will run for three years. Operating profit at ANSA has increased due to volume growth, cost reductions andproductivity gains. Customers have benefited from strong performance in claimsvalidation, service delivery and cost control. ANSA has extended its drainage services to a wider range of customers in thecommercial sector. This initiative has had minimal impact in 2006 but goodvolumes of new work are coming through in 2007 to supplement business flowingfrom the renewal of a contract with a major high street retailer for 3 years. ANSA also owns a small business offering Health and Safety training. Revenuesfrom ANSA Training dipped in 2006 as a number of trainers left the business.INDEPENDENT INSPECTIONS Independent Inspections' initial contribution was hampered by delays in bringingon new business from insurers and a weak volume of instructions in the last fewweeks of the year. Whereas volumes through the year were running above 2005levels, in December volumes dropped below those of December 2005. This was anindustry wide issue and not peculiar to Independent Inspections. A series of profit improvement opportunities are being implemented inIndependent Inspections in the second quarter. MONO Mono has progressed strongly under our ownership. Volumes are well up over thecomparable four months in 2005 and the business is looking to widen thepostcodes it covers outwards from the Manchester, Liverpool and Leeds area. The number of full time employees has increased from 337 at 7 September to 373at 31 December 2006 and has increased further since the year end. DOCUMENT HANDLING 2006 2005 £'000 £'000Sales Restore * 4,162 2,291 Wansdyke ** 3,776 - -------- -------- Total 7,938 2,291 ======== ======== EBITA*** Restore * 1,160 614 Wansdyke ** 1,258 - -------- -------- Total 2,418 614 ======== ======== * Restore 7 months in 2005** Wansdyke 11 months in 2006*** Excluding share based payments charges The document handling division serves a wide range of customers, including lawfirms, corporates of varying sizes, financial services companies, councils andhealth trusts. Our customers are mostly based in London and the South across toBristol and South Wales. The majority of sales are the storage and retrieval ofarchive boxes but also individual files and other material such as magneticmedia and film. Scanning of documents on a selective basis is also offered to clients. Shreddingof documents at the end of their useful lives is currently outsourced, althoughthis would form a logical product extension. The key non-financial performance indicators are: •% accuracy in retrieving items •% of items retrieved in accordance with terms of service, such as same day or next day delivery We are well advanced with our integration plans for Restore and Wansdyke.Approximately £96,000 of integration costs have been charged against Wansdyke'sprofits in 2006. The Restore operating system of bar coding is being applied atWansdyke and the back office functions are increasingly being integrated. Totalemployees at Wansdyke have dropped from 75 at February 2006 to 63 at 31 December2006 by natural wastage as systems have become more automated. 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. 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 volume growth in Restore and Wansdyke compared to the comparable periodin 2005 was 7%. We still have significant amounts of undeveloped space at our undergroundstorage facilities near Bath which we will be looking to fit out over the nextcouple of years CENTRAL COSTS Central costs have increased from £495,000 to £969,000. The Group has been fullyoperational throughout 2006 whereas in 2005 the Company was a cash shell for thefirst five months of that year. INTEREST Net interest payable amounted to £1,436,000 as we borrowed to fund theacquisitions of Wansdyke and Mono. Included within the net interest charge is£158,000 representing the notional interest on contingent consideration due onthe acquisitions of Independent Inspections and Mono. The discount rate appliedin this calculation was 7.9% PROFIT BEFORE TAXATION The profit before tax for the year ended 31 December 2006 was £1,589,000 (2005:£528,000). 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 Group's business. Theitems adjusted for in arriving at that underlying level are as follows: 2006 2005 £'000 £'000Profit before tax 1,589 528Amortisation of goodwill 2,172 860Share based payments charge 1,039 107Notional interest on contingent consideration 158 - ---------- ----------Adjusted profit before tax 4,958 1,495 ========== ========== Neither the amortisation of goodwill nor the notional interest on the contingentconsideration attracts any tax relief. The share based payments charge onlyattracts a potential benefit through deferred tax. TAXATION Due to the distortions caused by the non-deductibility of goodwill and thenotional interest on the contingent consideration, the reported tax charge is75.2% (2005:80.9%). However, the underlying tax rate during 2006 was 30.4%, as apercentage of adjusted profit before taxation. (2005: 30.2%).EARNINGS PER SHARE (EPS) Basic EPS is 0.10p, which compares with 0.05p in 2005. Basic EPS adjusted asabove was 0.89p (2005: 0.56p). Assuming the exercise of all options and awardsunder the LTIP plus the conversion of the convertible A shares at an averageprice in 2006 of 13.93p (2005: 10.05p), the fully diluted adjusted EPS becomes0.80p (2005:0.53p) an increase of 51%. SHARE ISSUES New equity was issued on three occasions in 2006. • 9.8m shares were allotted on 31 May at 11.0p to the vendors of Restore in settlement of contingent consideration due. This amount of £1,075,000 represented half the contingent consideration with the remainder settled in cash. • 100m new shares were placed on 17 July with existing and new shareholders at 12.0p per share. The proceeds of £12m were used to fund the cash element of the acquisition of Independent Inspections of £9m. The remainder or over-raise of approximately £1.8m after costs was used to reduce debt in the short term. A further 7.8m shares were allotted to the vendor of Independent Inspections with a value of £1m. • 2m shares were allotted at 15p per share on 7 September as part consideration for the acquisition of Mono. ACQUISITIONS Details of all the Group's acquisitions are set out in note 5 to thisannouncement. The total initial investment in these acquisitions was £30.4million with estimated contingent consideration payable in cash of £5.0 million,subject to meeting profit improvement objectives. The maximum amount ofcontingent consideration payable is £5 million. During the year the Company paid£2,150,000 in contingent consideration relating to the 2005 acquisition ofRestore. Approximately £0.5 million may be paid as contingent consideration in2007. The Group will continue to pursue acquisition targets that support itsproduct and service development. BALANCE SHEET Net assets increased to £42,075,000 in the year reflecting the share issues topart fund the acquisitions plus the profit in the year of £394,000. Goodwill onthe five acquisitions, at 31 December 2006 was £52,418,000 (2005: £31,224,000).Tangible fixed assets totalled £11,084,000 (2005: £1,996,000) principallycomprising the freehold underground storage facilities at Wansdyke, but alsocomputer systems, storage racking and vehicles. Operating working capital (excluding cash) amounted to a net £2,566,000 at 31December 2006. Net debt at the year end totalled £17,649,000 after deferredfinancing costs of £310,000. In order to part fund our acquisitions, we operatea number of facilities led by Allied Irish Banks, plc (AIB) which currently runthrough to September 2011. At 31 December 2006, the Group had unutilisedcommitted bank facilities totalling £3,300,000 in addition to cash of £1,850,000. CASH FLOW The net cash inflow from operating activities after capital expenditure was£3,564,000, (2005: £1,027,000). This inflow is after taking account of anoutflow of £2,369,000 in the year on working capital. This outflow is partiallydue to an outflow of VAT at Independent Inspections and Mono totalling £937,000.The VAT related to the sales of their respective office buildings just prior toacquisition. Gross capital expenditure totalled £1,168,000, (2005: £182,000). Significantexpenditures comprised the fitting out of empty space in the underground storageareas at Wansdyke and installing new racking at both Restore and Wansdyke. AtANSA, we acquired the trade and assets of a small sub-contractor The DrainTechnicians, for £143,000. In November 2006 we sold and leased back the vehiclefleet at Independent Inspections. This transaction realised £0.7 million in cashand will also result in operating savings on the fleet going forward, CHANGES IN UK ACCOUNTING STANDARDS With effect from 1 January 2006, the Group adopted FRS 20, Share Based Payments.FRS 20 seeks to reflect the cost of share based remuneration, including shareoption schemes, in the profit and loss account. The effect of FRS 20 has beenreflected both in 2006 and in a restatement of 2005. OUTLOOK The Group ended the year with two well established divisions and a currentmarket capitalisation in excess of £80 million. Integration benefits are comingthrough in the two divisions as well as good underlying organic growth. Theemergency repair and document handling industries continue to grow strongly in2007 and all our businesses are trading in line with expectations. We still planto add further complementary businesses to these operations on a selective basisand given the cash generative qualities of the business, there is significantscope to acquire further businesses for cash. Kevin MahoneyChief Executive Officer 14 March 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2006 Continuing Acquisitions Year ended 31 Year ended 31 Operations December December Notes 2006 2005 £'000 £'000 £'000 £'000 as restated TURNOVER 2 30,046 12,407 42,453 15,264 Cost of sales (19,788) (6,412) (26,200) (10,640) -------- --------- --------- --------- Gross profit 10,258 5,995 16,253 4,624 Administrativeexpenses (8,826) (4,402) (13,228) (3,883)---------------- ------ -------- --------- --------- ---------EBITA andshare basedpaymentscharge 4,034 2,202 6,236 1,708 Goodwillamortisation (1,590) (582) (2,172) (860) Share basedpaymentscharge (1,012) (27) (1,039) (107)---------------- ------ -------- --------- --------- --------- OPERATINGPROFIT 1,432 1,593 3,025 741 -------- --------- Interestpayable (1,518) (268)Interestreceivable 82 55 --------- ---------PROFIT ONORDINARYACTIVITIESBEFORETAXATION 1,589 528Taxation 3 (1,195) (427) --------- ---------PROFIT ONORDINARYACTIVITIESAFTER TAXATION 394 101 ========= =========Earnings pershare (pence pershare)Basic 4 0.10 p 0.05 pFully diluted 4 0.09 p 0.05 p ========= ========= STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSESFor the year ended 31 December 2006 2006 2005 £'000 £'000 as restatedProfit for the financial year 394 101 =========Prior year adjustmentsShare based payments charge (86) ---------Total recognised gains and losses since last financialstatements 308 ========= 2004 and 2005 results have been restated for the adoption of FRS 20 "Share basedpayments" during 2006. CONSOLIDATED BALANCE SHEETAs at 31 December 2006 Notes 2006 2005 £'000 £'000 as restatedFIXED ASSETSIntangible assets 5 52,418 31,224Tangible assets 11,084 1,996 -------- -------- 63,502 33,220 -------- --------CURRENT ASSETSStocks and work in progress 311 250Debtors 13,369 5,509Cash at bank 1,850 837 -------- -------- 15,530 6,596 CREDITORS: Amounts falling due within one year (16,792) (6,593) -------- -------- NET CURRENT (LIABILITIES)/ASSETS (1,262) 3 -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 62,240 33,223 -------- -------- CREDITORS - amounts falling due after more thanone (15,790) (3,564)yearPROVISIONS FOR LIABILITIES AND CHARGES (4,375) (2,716) -------- --------NET ASSETS 42,075 26,943 ======== ======== CAPITAL AND RESERVESCalled up share capital 8 503 383Share premium account 40,060 26,459Share based payments reserve 1,102 85Profit and loss account 410 16 -------- --------EQUITY SHAREHOLDERS' FUNDS 9 42,075 26,943 ======== ======== CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2006 Continuing Year ended Year ended Operations Acquisitions 31 December 31 December Notes 2006 2006 2006 2005 £'000 £'000 £'000 £'000 NET CASH INFLOWFROM OPERATINGACTIVITIES a 4,448 284 4,732 1,209 -------- --------- --------- --------- RETURNS ONINVESTMENTS ANDSERVICING OFFINANCENet interest paid (948) 20 (928) (133)Interest elementoffinance lease (19) (8) (27) (13)payments -------- --------- --------- --------- 3,481 296 3,777 1,063 -------- --------- --------- --------- TAX PAID (494) (490) (984) (213) -------- --------- --------- --------- CAPITALEXPENDITURE ANDFINANCIALINVESTMENTPurchase oftangible fixedassets (627) (541) (1,168) (182)Sale of tangiblefixed assets 66 776 842 - -------- --------- --------- --------- (561) 235 (326) (182) -------- --------- --------- --------- ACQUISITIONSPurchase ofsubsidiaries andcosts 5 (29,114) - (29,114) (22,079)Payment ofcontingentconsideration (1,075) - (1,075) -Cash acquired withsubsidiaries - 4,682 4,682 1,150 -------- --------- --------- ---------NET CASH OUTFLOWSBEFORE FINANCING (27,763) 4,723 (23,040) (20,261) -------- --------- --------- --------- FINANCINGPrincipalrepaymentdue under finance (118) (569) (687) (203)leasesNet proceeds fromissue of shares 11,346 - 11,346 22,982Bank loan advances 18,043 - 18,043 5,140Deferred financingcosts - (268) (268) (202)Bank loanrepayments (3,500) - (3,500) (1,000)Repayment ofindebtednessacquired - (881) (881) (7,588) -------- --------- --------- --------- 25,771 (1,718) 24,053 19,129 -------- --------- --------- --------- INCREASE/(DECREASE) (1,992) 3,005 1,013 (1,132)IN CASH ======== ========= ========= ========= a CASH FLOWS Continuing Acquisitions Year to 31 Year to 31 Operations December December 2006 2006 2006 2005 £'000 £'000 £'000 £'000 As restatedReconciliation of operatingprofit to net cash inflowfrom operating activitiesOperatingprofit 1,432 1,593 3,025 741Depreciation 575 344 919 305(Gain)/loss ondisposal oftangibleassets 39 (93) (54) -Amortisationof goodwill 1,590 582 2,172 860Share basedpayments 1,012 27 1,039 107 -------- --------- -------- -------- 4,648 2,453 7,101 2,013Decrease/(increase) instocks andwork inprogress 102 (43) 59 195(Increase) indebtors (944) (1,626) (2,570) (64)(Decrease)/increase increditors 642 (500) 142 (935) -------- --------- -------- --------Net cashinflow fromoperatingactivities 4,448 284 4,732 1,209 ======== ========= ======== ======== NOTES TO THE PRELIMINARY ANNOUNCEMENT 1 BASIS OF ACCOUNTING The consolidated financial information for the year ended 31 December 2006 hasbeen prepared on a basis consistent with the previous year and in accordancewith applicable UK accounting standards. The preliminary announcement does notconstitute the Group's statutory financial statements within the meaning of s240of the Companies Act 1985. The preliminary announcement contains information extracted from the audited financial statements of the Group for the year ended 31 December 2006 and the year ended 31 December 2005. The statutory accounts for the year ended 31 December 2006 will be sent to shareholders shortly. The auditors have reportedon these financial statements. Their report was unqualified and did not containa statement under s.237 (2) or (3) of the Companies Act 1985. The Group's 2005 accounts, which contain an unqualified audit report, have been filed with the Registrar of Companies. 2 SEGMENTAL ANALYSIS Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 as restatedThe turnover for the year was derived from theGroup's principal activities as follows: Emergency Repair 34,515 12,973Document Handling 7,938 2,291 ----------- -----------TURNOVER 42,453 15,264 =========== =========== The Group's profit before tax is derived from itsprincipal activities as follows:Emergency Repair 4,787 1,589Document Handling 2,418 614Central costs (969) (495) ----------- -----------EBITA and share based payments charge 6,236 1,708 Goodwill amortisation (2,172) (860)Share based payments charge (1,039) (107)Notional interest on contingentconsideration (158) -Other interest payable (1,360) (268)Interest receivable 82 55 ----------- -----------PROFIT BEFORE TAX 1,589 528 =========== =========== The Group's net assets are employed in itsprincipal activities as follows: Emergency Repair 44,303 24,964Document Handling 19,988 8,815Central (184) 99Contingent consideration (4,383) (2,600) ----------- ----------- 59,724 31,278Net debt (17,649) (4,335) ----------- -----------NET ASSETS 42,075 26,943 =========== =========== All trading of the Group is undertaken within the United Kingdom and the Companyhas no foreign operations. 3 TAXATION Year ended 31 Year ended 31 December 2006 December 2005 £'000 £'000Current tax:UK corporation taxon profits for theyear 1,571 476Adjustments inrespect ofprevious periods (11) - ---------- ----------Total current tax 1,560 476 ---------- ---------- Deferred tax: Deferred tax (365) (49) ---------- ----------Total deferred tax (365) (49) ---------- ----------Total tax charge 1,195 427 ========== ========== Year ended 31 Year ended 31 December 2006 December 2005 £'000 £'000Factors affecting tax charge for yearProfit on ordinaryactivities beforetax 1,589 528 ---------- ---------- Profit on ordinaryactivitiesmultiplied by therate ofcorporation tax of30% 477 158Effects of:Goodwill onconsolidation 652 258Expenses notdeductible for taxpurposes 43 25Notional intereston contingentconsideration 47 -Timing differences- Share basedpayments charge 312 25Capital allowancesin excess ofdepreciation 63 (3)Chargeable gains 12 -Net utilisation oflosses - (3)Benefit of smallcompanies rate 3 (15)Adjustments inrespect ofprevious years (11) -Other timingdifferences (38) 31 ---------- ----------Current tax chargefor year 1,560 476 ========== ========== After deducting deferred tax of £365,000 and adding back taxation of £312,000 onthe share based payments charge of £1,039,000 the tax charge on the adjustedprofit before tax of £4,958,000 becomes £1,507,000 or 30.4% 4 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 goodwill amortisation, share basedpayments charge and notional interest on contingent consideration have beenpresented in addition to the basic earnings per share since, in the opinion ofthe directors, this provides shareholders with a more appropriate representationof the underlying earnings derived from the Group's businesses. Year ended Year ended 31 December 31 December 2006 2005 No. of shares No. of sharesWeighted average number of shares inissue 388,920,578 184,579,044 ========== ========== £'000 £'000Profit after taxation on ordinaryactivities 394 101 === ===AdjustmentsAmortisation of goodwill 2,172 860Share based payments charge (net of tax) 727 82Notional interest on contingentconsideration 158 - ---------- ----------Adjusted earnings 3,451 1,043 ========== ========== Basic earnings per ordinary share 0.10p 0.05p ========== ========== Adjusted basic earnings per ordinaryshare (before goodwill amortisation,share based payments charge and notionalinterest on contingent consideration) 0.89 p 0.56 p ========== ========== No. of shares No. of sharesWeighted average number of shares inissue 388,920,578 184,579,044 Convertible 'A' Shares, Share Optionsand awards under the LTIP 44,082,349 11,087,871 ---------- ----------Weighted average fully diluted number ofshares in issue 433,002,927 195,666,915 ========== ========== Fully diluted earnings per ordinaryshare 0.09 p 0.05p ========== ========== Adjusted fully diluted earnings perordinary share (before goodwillamortisation, share based paymentscharge and notional interest oncontingent consideration) 0.80 p 0.53 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 13.93p, being theaverage price per ordinary share in the year ended 31 December 2006 (2005:10.05p). 5 INTANGIBLE ASSETS Goodwill £'000Cost1 January 2006 32,084 Contingent consideration adjustment - Restore (450)Adjustment - Restore 20Adjustment - ANSA 90Addition - Wansdyke 3,656Addition - Independent 13,665Addition - Drain Technicians 121Addition - Mono 6,264 ----------31 December 2006 55,450 ---------- Amortisation1 January 2006 (860)Amortisation charge for the year (2,172) ----------31 December 2006 (3,032) ----------Net book value at 31 December 2006 52,418 ========== Net book value at 31 December 2005 31,224 ========== The directors consider each acquisition separately for the purpose ofdetermining the amortisation period of any goodwill that arises. The goodwillarising from the three acquisitions in 2006 is being amortised over 20 years. The amount of contingent consideration expected to be payable in respect of theacquisition of Restore was reduced by £0.5 million between 31 December 2005 andMay 2006 due to profit levels attained. Certain leasehold improvements at ANSAwere revalued downwards by £0.1 million during 2006. WANSDYKE On 10 February, Mavinwood acquired Wansdyke Security Limited, a documenthandling business for £11m in cash. Book value at Fair value Fair value at acquisition adjustment acquisition £'000 £'000 £'000 Fixed assets 3,217 5,412 8,629Workingcapital (514) - (514)Taxation (634) - (634)Cash 1,250 - 1,250Loans (881) - (881)Finance leases (86) - (86) --------- --------- ---------Net assetsacquired 2,352 5,412 7,764 --------- ---------Goodwillcapitalised 3,656 ---------Consideration 11,420 =========Satisfied by:Cash tovendors 10,968Related costsof acquisition 452 --------- 11,420 ========= 5 INTANGIBLE ASSETS cont... The only fair value adjustment is to net assets in relation to the freehold andlong leasehold storage facilities at Wansdyke which were valued upon acquisitionby an external firm of Chartered Surveyors. INDEPENDENT INSPECTIONS On 18 July, Mavinwood acquired Independent Inspections Holdings Limited for aninitial consideration of £11.9m. Net funds of £2.9m were left in the balancesheet on completion. The consideration was satisfied by £10.9m in cash and £1min shares. The cash element was funded by a Placing of £12m at 12p per share.The ''over raise'' in the Placing after costs was approximately £1.8m which wasused to reduce debt in the short term. The vendor, who is staying with thebusiness, can earn contingent consideration of up to £4m linked to the futureperformance of the business. £2m would be payable in March 2008 assuming EBITAof £1.7m is delivered in 2007 and a further £2m would be payable in cash inMarch 2009 on the basis that EBITA of £2m is delivered in 2008. The maximumtotal consideration is £15.9m. Book value at Fair value Fair value at acquisition adjustment acquisition £'000 £'000 £'000 Fixed assets 814 - 814Workingcapital (1,310) - (1,310)Taxation (177) - (177)Cash 3,412 - 3,412Finance leases (520) - (520) --------- --------- ---------Net assetsacquired 2,219 - 2,219 --------- ---------Goodwillcapitalised 13,665 ---------Consideration 15,884 =========Satisfied by:Cash to vendor 10,924Related costsof acquisition 607Discountedcontingentconsideration(gross £4million) 3,353Issue ofMavinwoodshares tovendor 1,000 --------- 15,884 ========= 5 INTANGIBLE ASSETS cont... MONO On 7 September, Mavinwood completed the acquisition of Mono Services Limited foran initial consideration of £6m, utilising some of the debt capacity generatedby the Placing. Costs of the acquisition were £0.3m. The £6m of initialconsideration comprises cash of £5.7m and £0.3m in ordinary shares, priced at15p. Contingent consideration of up to another £1m could also be payable, in twoamounts, over the next two years. This payment is linked to the levels of EBITAattained by Mono in each of the two years ending 31 August 2007 and 2008. Book value at Fair value Fair value at acquisition adjustment acquisition £'000 £'000 £'000 Fixed assets 184 - 184Workingcapital 1,121 - 1,121Taxation (360) - (360)Cash 20 - 20Finance leases (15) - (15) --------- --------- ---------Net assetsacquired 950 - 950 --------- ---------Goodwillcapitalised 6,264 ---------Consideration 7,214 =========Satisfied by:Cash tovendors 5,700Related costsof acquisition 342Discountedcontingentconsideration(gross £1million) 872Issue ofMavinwoodshares tovendors 300 --------- 7,214 ========= On 31 August 2006, ANSA Utilities Limited acquired the trade and assets of TheDrain Technicians (UK) Limited. The cash consideration, including £22,000 forthe fixed assets, was £132,000. The total consideration paid for group acquisitions during the year was £34.6million, which was satisfied as follows: Wansdyke Independent Drain Mono Total Inspections Technicians £'000 £'000 £'000 £'000 £'000 Cash tovendors 10,968 10,924 110 5,700 27,702Related costsof acquisition 452 607 11 342 1,412Discountedcontingentconsiderationnot yet due(gross £5million) - 3,353 - 872 4,225Issue ofshares tovendors - 1,000 - 300 1,300 -------- -------- -------- -------- ------- 11,420 15,884 121 7,214 34,639 ======== ======== ======== ======== ======= 6 ANALYSIS OF CHANGE IN NET DEBT At 1 January Cashflow Acquisitions Non-cash At 31 December 2006 (Excluding Movement 2006 Cash) £'000 £'000 £'000 £'000 £'000Cash at bankand in hand: 837 1,013 - - 1,850 Bank loans ¬es duewithin oneyear (1,500) (1,219) (881) - (3,600)Bank loans ¬es dueafter one year (3,657) (12,443) - - (16,100)Finance leasesdue within oneyear (175) 687 (621) - (109)Deferredfinancingcosts 160 268 - (118) 310 ------ ------- -------- -------- ------- (4,335) (11,694) (1,502) (118) (17,649) ====== ======= ======== ======== ======= The non-cash movement relates to the amortisation of the deferred financingcosts. 7 RECONCILIATION OF NET CASH INFLOW TO MOVEMENT IN NET DEBT Year ended 31 Year ended 31 December 2006 December 2005 £'000 £'000 Increase/(decrease) in cash in theyear 1,013 (1,132)Cash inflow fromfinancing (12,707) 3,843 ---------- ----------Change in net debtresulting fromcash flows (11,694) 2,711Debt acquired withsubsidiaryundertaking (881) (7,588)Acquired financeleases (621) (378)Non-cash loannotes - (1,007)Other non cashchanges (118) (42)Net (debt)/cash at1 January (4,335) 1,969 ---------- ----------Net debt at 31December (17,649) (4,335) ========== ========== 8 SHARE CAPITAL 2006 2005 £'000 £'000Authorised:9,950,000,000 ordinary shares of 0.1p each 9,950 9,95050,000,000 convertible A shares of 0.1p each 50 50 --------- --------- 10,000 10,000 ========= ========= Allotted, issued and fully paid:452,512,406 (2005: 332,896,474) ordinary shares of 0.1p each 453 33350,000,000 (2005: 50,000,000) convertible A shares of 0.1peach 50 50 --------- --------- 503 383 ========= ========= The issued share capital has been increased in 2006 as follows: Date Number of Issue price shares 1 January 2006 332,896,474 31 May 2006 9,772,795 11.00p17 July 2006 100,000,000 12.00p17 July 2006 7,843,137 12.75p7 September 2006 2,000,000 15.00p -----------Total shares issued in 2006 119,615,932 ----------- 31 December 2006 452,512,406 =========== 9 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS Group Group 2006 2005 £'000 £'000Profit/(loss) for the financial year 394 101Issue of shares during the financial year 14,375 25,795Issue costs (654) (962)Share based payments reserve 1,017 85Recovery of prior year flotation costs - 15 -------- --------Net addition to shareholders' funds 15,132 25,034Opening shareholders' funds 26,943 1,909 -------- --------Closing shareholders' funds 42,075 26,943 ======== ======== END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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