Half Year Results

RNS Number : 0689T

Nationwide Accident Repair Srvs PLC

22 September 2010

 

 

NARS

22 September 2010

NATIONWIDE ACCIDENT REPAIR SERVICES PLC

("Nationwide", "the Company" or "the Group")

 

Unaudited Interim Results

For the six months ended 30th June 2010

 

Nationwide provides automotive crash repair and accident administration services principally to the UK insurance industry. With a national network of accident repair centres located across England, Scotland and Wales, it is the largest dedicated provider of accident repair services in the UK.

 

Key Points

 

·; Good progress in first half and three year growth plan underway

 

·; Revenue of £87.25m (2009: £90.94m) - up 9% on H2 2009

 

·; Gross profit margin increased to 48% (2009: 44%)

- reflects continuing operational efficiencies & cost base realignment completed in H2 2009

 

·; Profit before tax increased by 26% to £3.03m (2009: £2.41m)

 

·; Earnings per share increased by 28% to 5.1p (2009: 4.0p)

 

·; Net cash at 30 June 2010 at £8.15m (2009: £7.88m)

 

·; Strong operating cash generation - £3.3m

 

·; Interim dividend increased 6% to 1.8p (2009: 1.7p)

 

·; Major new insurance contract win, with Groupama, secured in April 2010

- Nationwide to manage the deployment of all Groupama's vehicle repairs

 

·; Additional repair capacity added in the North East region to fulfil demand

 

·; Board believes Nationwide is well-positioned to deliver profits ahead of current market expectations for the year

 

 

Michael Marx, Chairman, commented,

 

"Results are very encouraging, with profit before tax up by 26% to £3.03m, and cash generation remains strong. In addition, Nationwide continues to maintain a robust balance sheet, with substantial net cash and no debt. This all provides a firm platform for the Board's progressive dividend policy and, accordingly, we have raised the interim dividend, reflecting the Group's good performance. 

 

Nationwide is well-positioned to continue to execute its growth plans. We are investing in the business to take advantage of the growth opportunities we see in our core insurance market as well as in the allied fleet and retail markets. At the same time, we are considering acquisition opportunities, which complement our existing operations.

 

Given our good performance over the first half and current trading to date, we believe that results for the financial year to 31 December 2010 will be ahead of current market expectations."

 

Enquiries:

 

Nationwide Accident Repair Services plc		Michael Wilmshurst, Chief Executive David Loftus, Finance Director		T: 01993 701 720
Biddicks		Katie Tzouliadis/ Sophie Lane		T: 020 7448 1000
Arbuthnot Securities		James Steel/ Ben Wells		T: 020 7012 2000

 

 

CHAIRMAN'S STATEMENT

 

Introduction

 

I am pleased to report that results for the six months ended 30 June 2010 are very encouraging, with profit before tax up by 26% to £3.03m, as gross margins rose four percentage points and cash generation remained strong. In addition, Nationwide continues to maintain a robust balance sheet, with substantial cash and no debt. This all provides a firm platform for the Board's progressive dividend policy and accordingly we have increased the interim dividend, reflecting the Group's good performance.

 

As shareholders will be aware, the current financial year is the first year of our three year growth plan, aimed both at supporting the development of Nationwide's activities in its core motor insurance marketplace and at expanding the Group's presence in the fleet and retail markets, where our current market share is underdeveloped. We see good growth opportunities across all three sectors, each of which accounts for significant repair spend. The insurance sector is responsible for the major part of the UK repair market, at an estimated £3.7 billion a year and remains our principal focus but, with a combined spend of £1.4 billion a year, the fleet and retail markets present target growth areas for the Group.

 

A number of factors supported the more than satisfactory first half performance, including management's success in driving operational efficiencies and tightening control of the cost base, which we adjusted in the second half of 2009 to take account of the trading environment. Other notable steps forward for the business over the first six months were the winning of a major new insurance contract, with Groupama, at the end of April 2010 whilst, in mid May, we added capacity to our operations in the North East, with the acquisition of a bodyshop to support our increased workload in that region.

 

We also completed the launch of our enhanced mobile repair services in the late summer. While we have always operated a small fleet of specialist repair vehicles, we are substantially upgrading and expanding our mobile repair capability over the next three years. This will support our activities within the insurance market as well as our initiative to build the Group's fleet and retail repair work.

 

Financial Results

 

For the six months to 30 June 2010, revenues were £87.25 million, some 9% ahead of the second half of 2009 although slightly lower than the first half of last year (2009: £90.94 million). Operating profit before non-recurring items increased by 20% to £3.22 million (2009: £2.68 million). This reflected the improvement in gross margins, which rose in the first half of 2010 to 48%, from 44% in the same period last year and was principally driven by operational efficiencies. Profit before tax increased by 26% to £3.03 million (2009: £2.41 million) and earnings per share rose by 28% to 5.1p (2009: 4.0p). This is stated after the impact of non-recurring items, amounting to a net credit of £23,000 in 2010 and a net cost of £118,000 in 2009.

 

The balance sheet remains strong, with net cash at 30 June 2010 of £8.15 million (2009: £7.88 million).

 

Dividend

 

Reflecting the improvement in the Group's performance, the Board is pleased to declare an increased interim dividend of 1.8p (2009: 1.7p). This represents a rise of 6% year on year and will be paid on 5 November 2010 to shareholders on the register at the close of business on 8 October 2010.

 

Trading Overview

 

I commented in my Statement accompanying the publication of Nationwide's annual results that, in our opinion, the Group was well-positioned to move forwards despite the fact that we did not anticipate any material improvement in market conditions over the near term. This reflected management's belief that Nationwide's scale, combined with its unrivalled operating systems and infrastructure, could be leveraged for further operational efficiencies and formed a very sound platform from which to execute our growth plans.

 

Our market-leading IT systems enable us to monitor our operations and operational efficiencies closely. Over the first half we have been able to improve gross profit margins through a combination of further cost reductions and changes to the way we manage repair work. At the same time, we have retained high levels of customer service and continue to flex our core offering of Quality, Value, Speed and Service, according to customer demands.

 

Within our core insurance-funded marketplace, in April 2010, we were delighted to secure a major new, multi-year contract with Groupama. This was won after a stringent tender process, following the insurer's decision to consolidate its large supplier network and so cut costs and improve efficiencies. We will manage the deployment of all Groupama's vehicle repairs though our Network Services Division and Groupama will also use our mobile repair capability, enabling its customers to have smaller repairs completed at home or at work. This major new win made no contribution to results in the first half but will contribute to results in the second half of the year and beyond. We retain close relationships across the motor insurance industry and continue to work alongside our customers to understand and deliver their changing needs.

 

The development of our mobile repair capacity is an important element in our overall growth plans and we have been active in the first half with the preparation and launch of a re-branded and enhanced specialist repair fleet. The added flexibility which the mobile repair fleet gives us is important, especially as we address the requirements of the fleet and retail markets. The expansion of our mobile repair capacity enables us to complete light repairs faster and 'off-site', at almost any location convenient to our customers. If a repair is more substantial, our mobile engineers can identify the repair as requiring the attention of a bodyshop and so transfer the job efficiently into our network of sites.

 

This proposition of offering both a mobile and fixed site capability, linked by a common IT platform, is unique in our marketplace and should create competitive and cost advantages. While it has particular synergies with the fleet and retail markets, it applies equally to our core insurance marketplace, providing insurers with additional benefits to pass on to their customers. We are currently targeting a mobile repair fleet comprising approximately 200 vans by the end of 2013.

 

Our progress in the fleet and retail sectors over the first half has been encouraging. While we are still at a relatively early stage with our new initiatives, the response, especially within the fleet market, is promising, with sales up by 7% albeit from a modest base.

 

Outlook 

 

The Group has achieved a pleasing performance in the first half and is well-positioned to continue to execute its growth plans. We are investing in the business to take advantage of the growth opportunities we see in our core insurance market as well as in the allied fleet and retail markets. At the same time, we are considering acquisition opportunities which complement our existing operations. Our strong balance sheet, with net cash of £8.15 million, and cash generative model provides firm support both for growth and our progressive dividend policy.

 

Given our good performance over the first half and current trading to date, we believe that results for the financial year to 31 December 2010 will be ahead of current market expectations.

 

CHIEF EXECUTIVE'S STATEMENT

Introduction

 

I am pleased to report that pre-tax profits have risen by 26% to £3.03 million against the comparable period in 2009. The increase in profits reflects both the improvement in gross margins and the steps we took last year in response to the market conditions. Cash generation remained strong and the balance sheet continues to be robust.

 

The first half also marked the beginning of our three year growth plan for the Company. While we remain focused on increasing our insurance business, our growth plan also aims to broaden Nationwide's customer base and build sales with fleet operators and consumers. Alongside our organic growth, we are also actively looking at acquisition targets which will enable us to build our market share and strengthen our current network.

 

We are pleased with the start we have made with our growth initiatives, which include some new appointments to the operational management team. One element helping to support our growth plans is the expansion of our mobile repair services as part of the expansion of our overall repair services offer. We expect to increase the size of our mobile fleet over the next three years and, backed by a national network of sites, accident management call centres and integrated information systems, this should help us to maximise the opportunities across all our target markets: insurance, fleet and retail.

 

In my previous report, I highlighted our focus on continuous improvement in performance as being a key part of our culture. This is not only important in helping to drive operational efficiencies but also in ensuring that Nationwide continues to offer industry-leading service levels. The expansion of our mobile repair capability should also make a positive impact on this, in particular assisting with the speed with which we can turn around smaller repairs.

Managing Cash and Dividends

 

The Group's net cash of £8.15 million at 30 June 2010 shows a broadly maintained position on the year end (31 December 2009: £8.27 million) despite the investment expenditure over the first half associated with our growth plan, which amounted to £0.5m. Compared to the net cash position at the same point last year, there was a 3.5% improvement (30 June 2009: £7.88 million). Close credit control and cash management continue to be major strengths and our debtors ratio of 34 days in our bodyshop business is amongst the best in the industry.

 

Given the cash and operational strength of the business, we are pleased to declare an increased interim dividend of 1.8p per share (2009: 1.7p per share).

 

Progress

 

We have made in good progress in moving gross margins forward over the first half. The increase, in the second quarter, of smaller repairs, with higher labour content has contributed to this but the improvement also reflects efficient management of the repair process, which we continue to work hard on. Overall site efficiency in the first half improved by seven percentage points over the same period last year. The improvement was also supported by the adjustments we made to the cost base in the second half of 2009.

 

Our proactive approach to identifying potential overhead savings continues, as well as our tight control of costs. A key measure is the ratio of total expenses to sales, which was 42.6% for the half year within our bodyshops, compared to 43.2% for the same period last year.

 

We have also added to our repair capacity in the North East, with the acquisition of a modern bodyshop in Newcastle-upon-Tyne in May 2010. Its acquisition was in line with our policy of only adding further capacity where demand has been identified and we have since installed our IT platform and introduced our workflow processes at the site. Its addition brings Nationwide's total number of sites to 73.

 

This year sees the launch of our re-branded and enhanced mobile repair capability, which underlies our plans to develop our presence in the fleet and retail marketplaces. We formally launched our new offering, 'mobile restore' and motorglass', in the late summer and are pleased with the overall response. Currently, our mobile division consists of 52 vans (up from 32 as at 30 June 2009) and sales in the division increased by 33% to £2.4m (2009: £1.8m).

 

Insurance work

 

The insurance repair market is estimated to be worth circa £3 billion per annum and our market share is approximately 5%. Operational efficiencies in all our sites have been driven and this is borne out by the 4% increase in our gross margins. We have also changed the way we approach certain jobs and through the reduced use of replacement parts, this new approach has benefited margins and is also more environmentally friendly. This market remains our key focus, both in terms of obtaining new customers and developing existing relationships.

 

The half year also saw us successful in winning new insurance contracts. The signing of the Groupama contract at the end of April 2010 was pleasing for us. We have been named as this major insurer's preferred supplier for all accident repairs across the UK and our accident administration services division, Network Services, will manage the deployment of all Groupama's vehicle repairs. The contract is for three years and estimated as being worth approximately £8 million per annum. Previously Groupama used multiple suppliers and the decision to consolidate suppliers should result in greater efficiencies and raised service standards for Groupama. The benefit of this contract will be seen in the second half of 2010 and beyond. We continue to work closely alongside all our insurance customers, deepening our relationships and working in partnership for our mutual benefit.

 

Fleet work

 

Spend in the fleet market is estimated at £1.5 billion per annum, with £0.9 billion of repair spend paid for directly by the fleet operators, the remainder being paid for by the relevant insurance companies. Our penetration of this market is currently very small. Sales for the half year were £7.9m, which represents an increase of 7% over the same period last year. Although we are at an early stage of our growth plan, we have been successful in winning contracts with a number of sizeable new fleet operators and have significantly increased our work with existing customers.

 

Retail work

 

The retail market is estimated to be worth £0.5 billion per annum. Over recent years, our approach has been to offer consumers the opportunity to resolve any additional repairs while their vehicles are in our bodyshops after an accident. With the expansion of our mobile repair capability, our strategy is to leverage both our fixed sites and our mobile division. In the six months to 30 June 2010, our site-based retail sales have grown by 21% to £2.9m from £2.4m for the comparable period last year. Our marketing campaign, which is now being rolled out, is aimed at driving these sales forward.

Outlook

 

Half year results and trading to date place us in a good position to go beyond existing market forecasts for the current financial year. Looking further ahead, we remain confident of capitalising on growth opportunities in our core insurance market as well as in the fleet and retail markets. Operationally, Nationwide has market-leading systems and service standards and financially, the business is cash generative with a solid balance sheet. This gives us competitive advantages and therefore we continue to remain positive about growth prospects for the short and medium term. We continue to seek to supplement organic growth opportunities in our markets with acquisitions.

 

 

Unaudited Consolidated Statement of Comprehensive Income For the six months ended 30 June 2010		Unaudited	Unaudited	Audited
		6 months	6 months	12 months
		to 30 Jun	to 30 Jun	to 31 Dec
		2010	2009	2009
	Notes	£'000	£'000	£'000
Revenue	2	87,245	90,940	170,890
Cost of sales		(45,401)	(50,671)	(90,681)
Gross profit		41,844	40,269	80,209
Distribution costs		(24,172)	(22,735)	(46,647)
Administrative expenses		(14,407)	(14,731)	(27,544)
Share option charge		(48)	(120)	(169)
Operating profit before non-recurring items		3,217	2,683	5,849
Non-recurring items - Administrative costs	6	23	(118)	(307)
Operating profit		3,240	2,565	5,542
Finance income	7	2	-	5
Finance costs	7	(214)	(157)	(490)
Profit before tax		3,028	2,408	5,057
Income tax expense	8	(831)	(693)	(1,440)
Profit for the period		2,197	1,715	3,617
Other comprehensive income		-	-	-
Total comprehensive income for the period		2,197	1,715	3,617
Attributable to:
Equity holders of the parent		2,197	1,715	3,617
Earnings per Share
Basic	9	5.1p	4.0p	8.4p
Diluted	9	5.1p	4.0p	8.4p

 All activities of the Group are classed as continuing.

The accompanying notes form an integral part of these financial statements.

 

Unaudited Consolidated Statement of Financial Position As at 30 June 2010		Unaudited	Unaudited	Audited
		30 Jun	30 Jun	31 Dec
		2010	2009	2009
	Notes	£'000	£'000	£'000
Assets
Non‑current assets
Goodwill		7,768	7,768	7,768
Property, plant and equipment	3	10,491	9,714	9,962
Pension and other employee assets	4	9,101	8,210	8,649
		27,360	25,692	26,379
Current assets
Inventories		2,428	2,086	2,317
Trade and other receivables		23,031	25,527	23,460
Cash and cash equivalents		8,151	7,879	8,269
		33,610	35,492	34,046
Total assets		60,970	61,184	60,425
Liabilities
Non‑current liabilities
Long-term provisions		45	42	86
Deferred tax liabilities		2,200	1,788	2,112
		2,245	1,830	2,198
Current Liabilities
Short-term provisions		16	8	31
Trade and other payables		28,928	31,733	29,568
Current tax payable		644	512	311
		29,588	32,253	29,910
Total liabilities		31,833	34,083	32,108
Net assets		29,137	27,101	28,317
Equity
Equity attributable to the shareholders of the parent
Share capital	5	5,400	5,400	5,400
Capital redemption reserve		1,209	1,209	1,209
Share premium account		11,104	11,104	11,104
Revaluation reserve		8	8	8
Retained earnings		11,416	9,380	10,596
Total equity		29,137	27,101	28,317

 

The accompanying notes form an integral part of these financial statements.

 

Company Number 966807

 

Unaudited Consolidated Statement of Changes in Equity For the six months ended 30 June 2010		Capital	Share
	Share	redemption	premium	Reval	Retained
	Capital	reserve	account	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2009	5,400	1,209	11,104	8	8,970	26,691
Share option charge	-	-	-	-	120	120
Dividend paid	-	-	-	-	(1,425)	(1,425)
Transactions with owners	-	-	-	-	(1,305)	(1,305)
Profit for the six month period	-	-	-	-	1,715	1,715
Other comprehensive income	-	-	-	-	-	-
Total comprehensive income for the period	-	-	-	-	1,715	1,715
Balance at 30 June 2009	5,400	1,209	11,104	8	9,380	27,101
Share option charge	-	-	-	-	49	49
Dividend paid	-	-	-	-	(735)	(735)
Transactions with owners	-	-	-	-	(686)	(686)
Profit for the six month period	-	-	-	-	1,902	1,902
Other comprehensive income	-	-	-	-	-	-
Total comprehensive income for the period	-	-	-	-	1,902	1,902
Balance at 31 December 2009	5,400	1,209	11,104	8	10,596	28,317
Share option charge	-	-	-	-	48	48
Dividend paid (note 10)	-	-	-	-	(1,425)	(1,425)
Transactions with owners	-	-	-	-	(1,377)	(1,377)
Profit for the six month period	-	-	-	-	2,197	2,197
Other comprehensive income	-	-	-	-	-	-
Total comprehensive income for the period	-	-	-	-	2,197	2,197
Balance at 30 June 2010	5,400	1,209	11,104	8	11,416	29,137

 

The accompanying notes form an integral part of these financial statements.

 

Unaudited Consolidated Cash Flow Statement For the six months ended 30 June 2010	Unaudited	Unaudited	Audited
	6 months	6 months	12 months
	to 30 Jun	to 30 Jun	to 31 Dec
	2010	2009	2009
	£'000	£'000	£'000
Operating Activities
Profit for the period	2,197	1,715	3,617
Adjustments to arrive at operating cash flow
Net finance costs	(2)	-	(5)
Depreciation	1,027	1,231	1,828
Profit on sale of property, plant and equipment	-	-	(211)
Taxation recognised in profit or loss	831	693	1,440
Changes in inventories	(111)	592	361
Changes in trade and other receivables	429	3,973	6,040
Changes in provisions	-	-	60
Changes in trade and other payables	(641)	(2,008)	(4,176)
Movement in pension fund asset - IAS 19	848	689	1,553
Share option scheme charge	48	120	169
Outflow from pension obligations	(1,300)	(1,280)	(2,582)
Outflow from provisions	(56)	(40)	(33)
Net cash flow from operating activities	3,270	5,685	8,061
Tax paid	(409)	(642)	(1,263)
	2,861	5,043	6,798
Investing activities
Additions to property, plant and equipment	(1,556)	(1,134)	(2,088)
Proceeds from the disposal of property, plant and equipment	-	-	319
	(1,556)	(1,134)	(1,769)
Financing activities
Dividend paid	(1,425)	(1,425)	(2,160)
Interest received	2	-	5
	(1,423)	(1,425)	(2,155)
Net (decrease)/increase in cash and cash equivalents	(118)	2,484	2,874
Cash and cash equivalents at beginning of period	8,269	5,395	5,395
Cash and cash equivalents at end of period	8,151	7,879	8,269

The accompanying notes form an integral part of these financial statements.

 

Notes to the Unaudited Interim Statement

For the six months ended 30 June 2010

 1. Basis of preparation

The unaudited interim accounts have been prepared on the same basis and using the same accounting policies as used in the audited financial statements for the year ended 31 December 2009, except as noted below.

 

These unaudited interim statements for the period ended 30 June 2010 have been prepared in accordance with IAS 34, Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2009, which have been prepared in accordance with IFRS.

The financial information set out in these interim accounts does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The figures for the year ended 31 December 2009 have been extracted from the statutory financial statements which have been filed with the Registrar of Companies. The auditors' report on those financial statements was unmodified.

There are a number of other accounting standards that have become effective in the current period. However, there is no material impact on the financial statements for the interim period.

2. Segment analysis

 

The Group operates three main business segments, Nationwide Crash Repair Centres (NCRC), Network Services and the Mobile Division (which incorporates Motor Glass and Mobile Restore). The former is the core business and comprises a dedicated network of repair centres across England, Scotland and Wales. Network Services provides accident administration services to insurance companies and fleet operators, in the main deploying work to Nationwide Crash Repair Centres Limited, while the Mobile Division provides glass, air conditioning and auto-electronic services to the automotive industry. The income and costs of the holding company are shown within NCRC.

 

The revenues and net result generated by the three business segments are summarised as follows:

 

	NCRC	Network Services	Mobile Division	Total
6 months to 30 June 2010	£'000	£'000	£'000	£'000
Revenue from external customers	78,369	7,224	1,652	87,245
Inter-segment revenues	-	7,932	722	8,654
Total revenue	78,369	15,156	2,374	95,899
Profit/(loss) before tax	3,306	(91)	(187)	3,028
Total Assets	54,527	5,127	1,316	60,970
6 months to 30 June 2009
Revenue from external customers	80,795	9,533	612	90,940
Inter-segment revenues	-	10,264	1,150	11,414
Total revenue	80,795	19,797	1,762	102,354
Profit before tax	2,108	121	179	2,408
Total Assets	49,631	10,248	1,305	61,184
12 months to 31 December 2009
Revenue from external customers	152,809	15,855	2,226	170,890
Inter-segment revenues	-	20,095	1,299	21,394
Total revenue	152,809	35,950	3,525	192,284
Profit before tax	4,950	52	55	5,057
Total Assets	52,992	6,223	1,210	60,425

 

3. Additions and disposals of property, plant and equipment

 

			Plant, Equipment
6 months to 30 June 2010	Land	Buildings	and Computers	Total
	£'000	£'000	£'000	£'000
Carrying amount at 1 January 2010	248	3,949	5,765	9,962
Additions	-	482	1,074	1,556
Depreciation	-	(204)	(823)	(1,027)
Carrying amount at 30 June 2010	248	4,227	6,016	10,491
6 months to 30 June 2009
Carrying amount at 1 January 2009	248	3,716	5,847	9,811
Additions	-	239	895	1,134
Depreciation	-	(183)	(1,048)	(1,231)
Carrying amount at 30 June 2009	248	3,772	5,694	9,714
Year to 31 December 2009
Carrying amount at 1 January 2009	248	3,716	5,847	9,811
Additions	-	646	1,442	2,088
Disposals	-	(53)	(56)	(109)
Depreciation	-	(360)	(1,468)	(1,828)
Carrying amount at 31 December 2009	248	3,949	5,765	9,962

 

4. Pension and other employee assets/obligations

 

The Company operates a funded pension scheme in the UK. The Fund has both defined benefit and defined contribution sections. Since 1 January 2002 the Fund has been closed to new members. Active members of the Fund ceased to accrue further benefits in the defined benefit section on 31 July 2006. This disclosure is in respect of the defined benefit section of the Fund only. The Company made contributions of £1,300,000 (2009: £1,280,000) to the defined benefit scheme during the six month period to 30 June 2010 and £2,582,000 in the year to 31 December 2009. The defined benefit scheme was closed for future accruals on 31 July 2006 with active members transferred to a new defined contribution section of the scheme.

 

The Group has opted to amortise all actuarial gains and losses above the corridor (10% of the greater of assets and liabilities) over the future working lifetime of the active membership.

 

A full actuarial valuation of the defined benefit scheme was carried out as at 31 December 2009 and was updated to 30 June 2010 by a qualified independent actuary.

 

		30 Jun 2010	30 Jun 2009	31 Dec 2009
The major assumptions used by the actuary were (in nominal terms):		%	%	%
Rate of increase in salaries		n/a	n/a	n/a
Rate of increase in pensions - accrued pre 5 April 1997		3.0	3.0	3.0
Rate of increase in pensions - accrued post 5 April 1997		3.10	2.70	3.50
Discount rate		5.6	6.6	6.0
Inflation assumption		3.10	3.20	3.50
Assumed life expectancies on retirement at age 65 are:
		30 Jun 2010	30 Jun 2009	31 Dec 2009
		Current Pensioners	Accrued Pensions under £15,000 pa	Current Pensioners
Retiring today:	Males	21.1	19.0	21.0
	Females	23.7	22.1	23.6
Retiring in 20 years time:	Males	-	20.2	-
	Females	-	23.2	-

		30 Jun 2010	30 Jun 2009	31 Dec 2009
		Future Pensioners	Accrued Pensions over £15,000 pa	Future Pensioners
Retiring today:	Males	20.8	22.3	20.7
	Females	23.4	25.2	23.3
Retiring in 20 years time:	Males	22.7	23.4	22.6
	Females	25.3	26.2	25.2

The assumptions used in determining the overall expected return of the scheme have been set with reference to yields available on government bonds and appropriate risk margins. The pre and post retirement mortality assumptions use the A92 and PA92 tables respectively. The 1992 series of mortality tables were published by the Continuous Mortality Investigation Bureau and are based on mortality data from life assurance companies over the years 1991 to 1994 inclusive. The "A92" tables are based on the mortality experience of life assurance policyholders. The "PA92" tables are based on the mortality experience of pension annuity policyholders.

 

	30 Jun 2010		30 Jun 2009		31 Dec 2009
	%	£'000	%	£'000	%	£'000
Equities	8.8%	31,881	10.2%	26,222	9.2%	33,940
Bonds	4.9%	13,261	5.5%	11,413	5.2%	12,776
Property	8.8%	4,473	10.2%	3,880	9.6%	4,212
Other	3.9%	2,802	4.5%	2,263	4.2%	2,012
Total market value of assets		52,417		43,778		52,940
Present value of defined obligations (funded plans)		(77,337)		(62,259)		(73,195)
Present value of unfunded obligations		(24,920)		(18,481)		(20,255)
Unrecognised actuarial losses		34,021		26,691		28,904
Net asset in balance sheet		9,101		8,210		8,649
Actual return on assets in period		(1,085)		(197)		8,752

 

Reconciliation of opening and closing balances of the present value of the defined benefit obligations

 

	6 months	6 months	12 months
	to 30 Jun	to 30 Jun	to 31 Dec
	2010	2009	2009
	£'000	£'000	£'000
Benefit obligation at beginning of period	73,195	60,131	60,131
Interest cost	2,185	1,938	3,842
Actuarial loss	2,695	1,163	11,284
Benefits paid	(738)	(973)	(2,062)
Balance at end of period	77,337	62,259	73,195

 

Reconciliation of opening and closing balances of the fair value of plan assets

 

	6 months	6 months	12 months
	to 30 Jun	to 30 Jun	to 31 Dec
	2010	2009	2009
	£'000	£'000	£'000
Fair value of scheme assets at beginning of period	52,940	43,668	43,668
Expected return on scheme assets	1,971	1,781	3,352
Actuarial (loss)/gain	(3,056)	(1,978)	5,400
Contributions by employers	1,300	1,280	2,582
Benefits paid	(738)	(973)	(2,062)
Assets at end of period	52,417	43,778	52,940

 

The amounts recognised in the statement of comprehensive income are:

 

	6 months	6 months	12 months
	to 30 Jun	to 30 Jun	to 31 Dec
	2010	2009	2009
	£'000	£'000	£'000
Current service cost	-	-	-
Interest on obligation	2,185	1,938	3,842
Expected return on assets	(1,971)	(1,781)	(3,352)
Actuarial loss recognised in period	634	532	1,063
Curtailments and settlements	-	-	-
	848	689	1,553
Charged to:
Administrative costs	634	532	1,063
Finance costs	214	157	490
	848	689	1,553

 

History of scheme assets, obligations and experience adjustments

 

	30 Jun 2010	31 Dec 2009	31 Dec 2008	31 Dec 2007	31 Dec 2006
	£'000	£'000	£'000	£'000	£'000
Present value of defined benefit obligations	(77,337)	(73,195)	(60,131)	(65,040)	(70,928)
Fair value of scheme assets	52,417	52,940	43,668	54,733	50,360
Deficit in scheme	(24,920)	(20,255)	(16,463)	(10,307)	(20,568)
Experience adjustments arising on scheme liabilities	2,695	11,285	(6,983)	(8,042)	3,351
Experience item as a % of scheme liabilities	3%	15%	(12%)	(12%)	5%
Experience adjustments arising on scheme assets	(3,056)	5,400	(16,019)	(207)	972
Experience item as a % of scheme assets	(6%)	10%	(37%)	0%	2%

 

5. Equity

 

	30 June 2010		30 June 2009		31 December 2009
	Shares	£'000	Shares	£'000	Shares	£'000
Authorised
Ordinary shares of 12.5p each	64,000,000	8,000	64,000,000	8,000	64,000,000	8,000
Issued and fully paid
Ordinary shares of 12.5p each	43,197,220	5,400	43,197,220	5,400	43,197,220	5,400

 

Of the 20,802,780 shares authorised, but not issued, 4,262,861 are reserved for issue in respect of the share options.

 

Share options

 

		Number of	Exercise	Exercise
		shares	price	Period
M A Wilmshurst	Approved	25,751	£1.165	2009-16
	Unapproved	2,217,860	£1.11	2009-16
D J Loftus	Approved	25,751	£1.165	2009-16
	Unapproved	1,096,055	£1.11	2009-16
S D G Thompson	Approved	25,751	£1.165	2009-16
	Unapproved	871,693	£1.11	2009-16
		4,262,861

 

All the above options were issued on 4 July 2006 and no additional share options have been issued since this date. In total, £48,000 of employee compensation expense has been included in the consolidated statement of comprehensive income for the six month period to 30 June 2010 and £169,000 in the year to 31 December 2009. The corresponding credit is taken to shareholders' funds. No liabilities were recognised due to share based transactions.

 

Each Director has been granted two tranches of options. The first tranche is not subject to any vesting conditions and the second tranche is subject to achievement of a Total Shareholder Return performance condition. Under both tranches, vested options can be exercised at any time between the third and tenth anniversary of the date of the grant.

 

The following have been factored into the model:

Exercise prices of £1.11 and £1.165, expected volatility of 25%, dividend yield of 3.00%, equivalent risk free rate of return being the rate of return on zero-coupon Government bonds with a term equal to the expected life assumptions.

The Company's assumptions regarding the volatility of its shares have been based on a review of market and competitors' volatility.

 

The Group's objectives when managing capital are:

• to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for

shareholders and benefits for other stakeholders, and

• to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk

 

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

 

6. Non-recurring items

 

	6 months	6 months	12 months
	to 30 Jun	to 30 Jun	to 31 Dec
	2010	2009	2009
	£'000	£'000	£'000
Amounts recovered against 2008 bad debt	-	171	171
Profit on assets destroyed in fire	628	-	200
Site closure costs	(470)	-	(186)
Redundancy Costs	(135)	(289)	(492)
	23	(118)	(307)

 

In 2009, the Company suffered two fires at its sites in Manchester (August 09) and Norwich (September 09). The Group's insurers accepted liability for the respective claims, which cover the loss of assets and business interruption (lost profits). Included within trade and other receivables as at 30 June 2010 is an amount of £1,003k (at December 2009: £1,336k) which relates to amounts claimed under the policy. This is after taking into account interim payments from the insurers of £2,145k that were received in December 2009 (£675k) and April 2010 (£1,470k).

The Norwich site reopened in May 2010 and a further profit of £143k has been recognised in 2010 (12 months to December 2009: £200k). The combined profit of £343k has arisen as the insurance proceeds of £390k are in settlement of fixed assets with a net book value of £47k. The insurance claim has not been finally settled and this profit is still provisional.

 

The Manchester site reopened in May 2010 but the site was not fully operational until July 2010. A profit of £485k has been recognised in 2010 which comprises estimated insurance proceeds of £500k in settlement of fixed assets with a net book value of £15k. The insurance claim has not been finally settled and this profit is still provisional.

 

In July 2010, additional insurance proceeds of £425k were received relating to Norwich (£175k) and Manchester £250k).

 

The site closure costs relate to an accrual for the disposal of the Croydon property lease. The 2009 charge related to the closure of the Kidderminster site.

 

7. Finance income and finance costs

 

	6 months	6 months	12 months
	to 30 Jun	to 30 Jun	to 31 Dec
	2010	2009	2009
	£'000	£'000	£'000
Finance income
Interest receivable on bank balances	2	-	5
	2	-	5
Finance costs
Pension costs (note 4):
- interest on obligation	2,185	1,938	3,842
- expected return on assets	(1,971)	(1,781)	(3,352)
	214	157	490

 

8. Income tax expense

 

	6 months	6 months	12 months
	to 30 Jun	to 30 Jun	to 31 Dec
	2010	2009	2009
	£'000	£'000	£'000
Current tax:
United Kingdom corporation tax at 28%	743	583	1,007
Adjustments in respect of prior years	-	-	(1)
	743	583	1,006
Deferred tax:
On share options	(6)	(34)	(47)
Movement relating to pension asset (IAS 19)	36	166	288
Temporary differences origination and reversal	58	(22)	193
	88	110	434
Income tax expense	831	693	1,440

 

9. Earnings per share

 

Basic earnings per share

The basic earnings per share has been calculated using the net profit attributable to the shareholders of the Company of £2,197,000 for the six month period (2009: £1,715,000) (12 months to 31 December 2009: £3,617,000).

 

The weighted average number of outstanding shares used for the basic earnings per share amounted to 43,197,220 (2009: 43,197,220) (12 months to 31 December 2009: 43,197,220).

 

Diluted earnings per share

The diluted earnings per share has been calculated using the net profit attributable to the shareholders of the Company of £2,197,000 (2009: £1,715,000) (12 months to 31 December 2009: £3,617,000).

The weighted average number of outstanding shares used for the diluted earnings per share amounted to 43,197,220 (2009: 43,197,220) (12 months to 31 December 2009: 43,197,220) and assumes the exercise of all the share options detailed in note 5 since the date they were granted and the average market price of £0.87. Due to the share options being anti-dilutive, the diluted earnings per share is the same as the basic earnings per share.

 

10. Dividends

 

In June 2010, the Company paid a dividend of £1,425,000 to its equity shareholders. This comprised a final dividend in respect of 2009 of 3.30p per share. The directors have declared an interim dividend of 1.8p per share (2009:1.7p), which will be paid on 5 November 2010 to shareholders on the register at the close of business on 8 October 2010.

This information is provided by RNS

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