15th Sep 2009 07:00
NARS
Nationwide Accident Repair Services plc
("Nationwide" or "the Group")
Announces
Unaudited
Half Yearly Report
For the six months to 30 June 2009
Key Points
Creditable results against backdrop of challenging market conditions
Revenue of £90.9m (2008: £88.3m) - but significant change in sales mix
- marked drop in smaller, higher margin repair work as consumers deferred spend on lighter/cosmetic damage
Change in sales mix impacted gross margins - reduced by 2.3 percentage points to 44.3% (2008: 46.6%)
Operating profit before non-recurring items declined to £2.7m (2008: £3.8m) - with £2.1m of the reduction accounted for by gross margin movement
Profit before tax of £2.4m (2008: £3.9m)
Earnings per share of 4.0p (2008: 6.4p)
Net cash of £7.9m as at 30 June 2009 (30 June 2008: £4.6m)
Interim dividend of 1.7p per share (2008: 1.7p)
Cost base reductions have improved margins and will support second half performance
Long-term outlook remains positive
Michael Marx, Chairman of Nationwide, commented,
"The trading backdrop over the six months to 30 June 2009 was challenging and we saw a marked and rapid drop in smaller repair work, which typically offers higher margins, as consumers deferred non-essential repair spend. While this change impacted the Group's profitability, the strength of Nationwide's operations and business systems is apparent in the way in which we have managed this period and overall the Group's results are creditable.
As we move through the third quarter of the financial year, the trading backdrop is likely to remain unchanged. Currently, volumes are still variable although the actions we have taken to adjust the cost base in the first half of the year will help support our second half performance. Nationwide continues to generate strong cash flows and its net cash position at 30 June 2009 of £7.9m is significantly ahead of the same date last year."
Chairman's Statement
Introduction
The trading backdrop over the six months to 30 June 2009 was challenging and we saw a marked and rapid drop in smaller repair work, which typically offers higher margins, as consumers deferred non-essential repair spend. While this change impacted the Group's profitability, the strength of Nationwide's operations and business systems is apparent in the way in which we have managed this period and overall the Group's results are creditable.
In response to the change in trading conditions in the first half, we acted quickly to reduce the cost base of the business and, as a result, gross margins have since improved. We are continuing to monitor our gross margins and overall costs carefully.
The business continues to be underpinned by a strong balance sheet, with substantial net cash and good cash flows, and we are pleased to declare a maintained interim dividend.
Financial overview
Profit before tax was £2.4m (2008: £3.9m). Earnings per share for the period were 4.0p (2008: 6.4p). Income over the six months was broadly maintained at £90.9m (2008: £88.3m) although the sales mix varied significantly from last year, reflecting the change in consumer spending patterns. This change in the sales mix directly impacted on gross margins which reduced by 2.3 percentage points to 44.3% from 46.6% last year, representing a reduction of approximately £2.1m of profitability.
Profit has also been affected by an increase in the IAS19 pension charge which increased from £125,000 to £689,000 in the six month period due to the significant decline in the equity markets at the end of 2008. In summary the £1.5m decline in profit before tax can be broadly analysed as to the impact of 3 items; the £2.1m decline in margin, the £0.6m additional pension charge offset by the £1.2m positive margin on increased turnover.
The balance sheet remains robust with net cash at 30 June 2009 of £7.9m (2008: £4.6m).
Dividend
We are pleased to declare an interim dividend of 1.7p per share (2008: 1.7p), which will be paid on 3 November 2009 to shareholders on the register at the close of business on 9 October 2009.
Trading and Outlook
The Chief Executive's report which follows provides a more detailed review of first half trading as well as an update on the Group's growth strategy and prospects.
The past six months have been challenging for the automotive repair industry, with reductions in claims volumes and consumer spending on repair work. However, the Group has been able to manage these changes in market conditions satisfactorily. Looking ahead, I would highlight the strength of both Nationwide's financial position and its operations. We have always been careful to invest in Nationwide's management information systems and business processes. These are now industry leading and provide Nationwide with competitive advantages. They enable us to offer customers high service levels, manage work flow efficiently and to identify and respond quickly to changing levels of trade.
As we move through the third quarter of the financial year, the trading backdrop is likely to remain unchanged. Currently, volumes are still variable although the actions we have taken to adjust the cost base in the first half of the year will help support our second half performance. Nationwide continues to generate strong cash flows and its net cash position at 30 June 2009 of £7.9m is significantly ahead of the same date last year.
Longer term, as the UK's largest dedicated provider of accident repair services, we remain positive about prospects for the business.
Michael Marx
Chairman
15 September 2009
Chief Executive's Statement
I am pleased to announce a respectable result for the Group for the first half of the year notwithstanding the toughest market conditions in the automotive sector for over 30 years.
Against the background of severe economic recession, turnover increased by 3% to £90.9 million from £88.3 million. The combination of the severe winter and the economic slowdown did, however, cause a significant change in the sales mix. While the harsh winter resulted in an increase in larger repair work, we saw a reduction in smaller repairs as consumers chose to avoid or defer spending on light cosmetic damage.
This change in the sales mix adversely affected the Group's margins since larger accidents normally require a greater proportion of parts. While this increases the cost of the repair, it typically lowers the overall margin because the ratio of vehicle parts to labour increases. The reverse applies to smaller accidents, when the ratio of labour to parts typically increases. As a consequence of this change in the sales mix, our gross margins decreased by 2.3% to 44.3%, negatively impacting our profit before tax by £2.1 million and reducing operating profits (before non-recurring items) to £2.7 million from £3.8 million in the same period last year.
Although margin decline was the principal contributor to reduced profitability, a small increase in overheads also affected our results. However, our advanced management information systems identified these emerging trends promptly and rapid action has been taken. As a result, margins have improved from the first quarter to the second quarter although they are not fully restored to last year's levels. Volumes, which were ahead of our expectations in the first quarter, fell back below our expectations in the second quarter. Still below our original expectations, they now appear to be stabilising but remain unpredictable on a localised basis and we have adjusted our expenses accordingly. Our prompt action to reduce our cost base leaves us better positioned in the second half of this year.
Managing Cash and Dividends
The Group's net cash position rose in the first half to £7.9 million at 30 June 2009 compared to £4.6 million at 30 June 2008. This was partly as a result of our move last year to consolidate certain accounting functions within the Group. The initiative has now further improved our credit control and cash management procedures.
Given the cash and operational strength of the business, we are pleased to declare a maintained interim dividend of 1.7 p per share (2008: 1.7 p per share).
Strategy Update
Our stated growth strategy has been one of twin track growth, both organically and by acquisition. Although recent market conditions have created a number of acquisition opportunities, until such time as volumes and the type of accident claims fully stabilise, it is not our intention to pursue new site acquisitions, other than those which are particularly commercially or strategically attractive. The integration of newly acquired sites absorbs cash, profit and management time. We believe that it is better, in the current environment to focus on organic growth and profitability, utilising our existing network infrastructure. We continue to identify and align ourselves with potential customer needs and work hard to develop further our existing relationships.
Our Network Services division has found the market conditions challenging as claim volumes decreased and, accordingly, its contribution to results has reduced. The division is an integral part of our business and we continue to identify ways it can expand.
Our retail offering, which is still at an early stage, continues to grow even in current market conditions albeit from a small base. Annualised sales of £4.85 million represent a 46% increase on last year's annual sales of £3.31 million and we remain positive about this initiative.
We continue to invest in the development of our team at all levels. Nationwide's business model is unique, in that it combines call centres, logistics, high quality accident repair capacity and a fleet of mobile units. Maximising the efficiency of this operation requires skill sets not historically associated with the crash repair industry. Our Nationwide Academy development programmes are continually tailored to our needs as we explore the opportunities that our business offers. In recent years, we have implemented many operational efficiencies and remain convinced that there are yet more to be delivered as our skilled and committed team play a significant part in our process of continuous improvement. We would like to take this opportunity to express our sincere thanks to our colleagues across the Group. Our team has worked extremely hard to achieve our results in the first half of the year and it is much appreciated.
Outlook
The rapid impact of the economic recession on the Group stress tested both the robustness of the business model and the resolve of management. We believe that both have proved resilient. The current market remains challenging but our reduced cost base and improved margin will help support the trading performance in the second half of this year and we remain cautiously positive for the remainder of the financial year. Looking further ahead, we believe that the combination of Nationwide's strong balance sheet and cash flows, and its comprehensive service offering positions the Group well for on-going growth.
Michael Wilmshurst
Chief Executive
15 September 2009
|
Unaudited Statement of Comprehensive Income For the six months ended 30 June 2009 |
Unaudited |
Unaudited |
Audited |
|
|
6 months |
6 months |
12 months |
||
|
to 30 Jun |
to 30 Jun |
to 31 Dec |
||
|
2009 |
2008 |
2008 |
||
|
Notes |
£'000 |
£'000 |
£'000 |
|
|
Revenue |
2 |
90,940 |
88,342 |
179,337 |
|
Cost of sales |
(50,671) |
(47,156) |
(95,857) |
|
|
Gross profit |
40,269 |
41,186 |
83,480 |
|
|
Distribution costs |
(22,735) |
(22,242) |
(46,933) |
|
|
Administrative costs |
(14,731) |
(15,036) |
(28,822) |
|
|
Share option charge |
(120) |
(120) |
(240) |
|
|
Operating profit before non-recurring items |
2,683 |
3,788 |
7,485 |
|
|
Non-recurring items |
7 |
(118) |
- |
(750) |
|
Operating profit |
2,565 |
3,788 |
6,735 |
|
|
Finance income |
8 |
- |
142 |
325 |
|
Finance costs |
8 |
(157) |
(36) |
(8) |
|
Profit before tax |
2,408 |
3,894 |
7,052 |
|
|
Income tax expense |
9 |
(693) |
(1,101) |
(2,030) |
|
Profit for the period |
1,715 |
2,793 |
5,022 |
|
|
Other comprehensive income |
- |
- |
- |
|
|
Total comprehensive income for the period |
1,715 |
2,793 |
5,022 |
|
|
Attributable to: |
||||
|
Equity holders of the parent |
1,715 |
2,793 |
5,022 |
|
|
Earnings per Share |
||||
|
Basic |
10 |
4.0p |
6.4p |
11.6p |
|
Diluted |
10 |
4.0p |
6.3p |
11.5p |
All activities of the Group are classed as continuing.
|
Unaudited Consolidated Statement of Financial Position As at 30 June 2009 |
Unaudited |
Unaudited |
Audited |
|
|
30 Jun |
30 Jun |
31 Dec |
||
|
2009 |
2008 |
2008 |
||
|
Notes |
£'000 |
£'000 |
£'000 |
|
|
Assets |
||||
|
Nonߛcurrent assets |
||||
|
Property, plant and equipment |
3 |
9,714 |
8,897 |
9,811 |
|
Goodwill |
4 |
7,768 |
7,595 |
7,752 |
|
Pension and other employee assets |
5 |
8,210 |
6,422 |
7,619 |
|
25,692 |
22,914 |
25,182 |
||
|
Current assets |
||||
|
Inventories |
2,086 |
2,608 |
2,678 |
|
|
Trade and other receivables |
25,527 |
30,042 |
29,500 |
|
|
Cash and cash equivalents |
7,879 |
4,592 |
5,395 |
|
|
35,492 |
37,242 |
37,573 |
||
|
Total assets |
61,184 |
60,156 |
62,755 |
|
|
Liabilities |
||||
|
Nonߛcurrent liabilities |
||||
|
Long-term provisions |
42 |
50 |
86 |
|
|
Deferred tax liabilities |
1,788 |
1,506 |
1,678 |
|
|
1,830 |
1,556 |
1,764 |
||
|
Current Liabilities |
||||
|
Short-term provisions |
8 |
5 |
4 |
|
|
Trade and other payables |
31,733 |
32,929 |
33,728 |
|
|
Current tax payable |
512 |
590 |
568 |
|
|
32,253 |
33,524 |
34,300 |
||
|
Total liabilities |
34,083 |
35,080 |
36,064 |
|
|
Net assets |
27,101 |
25,076 |
26,691 |
|
|
Equity |
||||
|
Equity attributable to the shareholders of the parent |
||||
|
Share capital |
6 |
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 |
9,380 |
7,355 |
8,970 |
|
|
Total equity |
27,101 |
25,076 |
26,691 |
|
|
Unaudited Consolidated Statement of Changes in Equity For the six months ended 30 June 2009 |
Capital |
Share |
||||
|
Share |
redemption |
premium |
Reval |
Retained |
||
|
Capital |
reserve |
account |
reserve |
earnings |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance at 1 January 2008 |
5,578 |
1,031 |
11,104 |
8 |
7,426 |
25,147 |
|
Share buyback |
(178) |
178 |
- |
- |
(1,688) |
(1,688) |
|
Share option charge |
- |
- |
- |
- |
120 |
120 |
|
Dividend paid |
- |
- |
- |
- |
(1,296) |
(1,296) |
|
Transactions with owners |
(178) |
178 |
- |
- |
(2,864) |
(2,864) |
|
Profit for the six month period |
- |
- |
- |
- |
2,793 |
2,793 |
|
Other comprehensive income |
- |
- |
- |
- |
- |
- |
|
Total comprehensive income for the period |
- |
- |
- |
- |
2,793 |
2,793 |
|
Balance at 30 June 2008 |
5,400 |
1,209 |
11,104 |
8 |
7,355 |
25,076 |
|
Share option charge |
- |
- |
- |
- |
120 |
120 |
|
Dividend paid |
- |
- |
- |
- |
(734) |
(734) |
|
Transactions with owners |
- |
- |
- |
- |
(614) |
(614) |
|
Profit for the six month period |
- |
- |
- |
- |
2,229 |
2,229 |
|
Other comprehensive income |
- |
- |
- |
- |
- |
- |
|
Total comprehensive income for the period |
- |
- |
- |
- |
2,229 |
2,229 |
|
Balance at 31 December 2008 |
5,400 |
1,209 |
11,104 |
8 |
8,970 |
26,691 |
|
Share option charge |
- |
- |
- |
- |
120 |
120 |
|
Dividend paid (note 11) |
- |
- |
- |
- |
(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 |
|
Unaudited Consolidated Cash Flow Statement For the six months ended 30 June 2009 |
Unaudited |
Unaudited |
Audited |
|
6 months |
6 months |
12 months |
|
|
to 30 Jun |
to 30 Jun |
to 31 Dec |
|
|
2009 |
2008 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Profit for the period |
1,715 |
2,793 |
5,022 |
|
Adjustments to arrive at operating cash flow |
|||
|
Net finance costs |
- |
36 |
8 |
|
Depreciation |
1,231 |
1,151 |
2,303 |
|
(Profit)/Loss on sale of property, plant and equipment |
- |
(3) |
35 |
|
Taxation recognised in profit or loss |
693 |
1,101 |
2,030 |
|
Changes in inventories |
592 |
(17) |
(87) |
|
Changes in trade and other receivables |
3,973 |
(3,497) |
(2,955) |
|
Changes in trade and other payables |
(2,008) |
5,549 |
6,369 |
|
Movement in pension fund asset - IAS 19 |
689 |
125 |
209 |
|
Share option scheme charge |
120 |
120 |
240 |
|
Outflow from pension obligations |
(1,280) |
(1,274) |
(2,555) |
|
Outflow from provisions |
(40) |
(84) |
(49) |
|
Net cash flow from operating activities |
5,685 |
6,000 |
10,570 |
|
Tax paid |
(642) |
(1,038) |
(1,817) |
|
Investing activities |
5,043 |
4,962 |
8,753 |
|
Additions to property, plant and equipment |
(1,134) |
(1,513) |
(2,788) |
|
Proceeds from the disposal of property, plant and equipment |
- |
3 |
273 |
|
Acquisition of businesses - cost |
- |
(992) |
(2,269) |
|
(1,134) |
(2,502) |
(4,784) |
|
|
Financing activities |
|||
|
Dividend paid |
(1,425) |
(1,296) |
(2,030) |
|
Interest paid |
- |
(36) |
(8) |
|
Purchase of own shares |
- |
(1,688) |
(1,688) |
|
(1,425) |
(3,020) |
(3,726) |
|
|
Net increase/(decrease) in cash and cash equivalents |
2,484 |
(560) |
243 |
|
Cash and cash equivalents at beginning of period |
5,395 |
5,152 |
5,152 |
|
Cash and cash equivalents at end of period |
7,879 |
4,592 |
5,395 |
Notes to the Unaudited Interim Statement
For the six months ended 30 June 2009
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 2008, except as noted below.
These unaudited interim statements for the period ended 30 June 2009 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 2008, which have been prepared in accordance with IFRS.
The adoption of IAS 1 (Revised 2007) has not affected the financial position or profits of the Group, but gives rise to additional disclosures. IAS 1 (Revised 2007) introduces a "Statement of comprehensive income" The Group has chosen to prepare a single statement of comprehensive income which incorporates the income statement and statement of other comprehensive income. The adoption of IFRS 8 has changed the segments that are disclosed in the interim financial statements. Under IFRS 8, the accounting policy for identifying segments is now based on the internal management reporting information that is regularly reviewed at Board level. Consequently, the results for the period of Network Services (Nationwide) and Mobile Solutions have been separately identified.
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 2008 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.
The following new standards, amendments to existing standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but are not currently relevant to the Group: IFRIC 13, IFRIC 15, IFRIC16 and IAS 39 (Amendment).
2. Segment analysis
The Group operates three main business segments, Nationwide Crash Repair Centres (NCRC), Network Services and Mobile Solutions (which incorporates 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 Mobile Solutions 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 Solutions |
Total |
|
|
6 months to 30 June 2009 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue from external customers |
80,795 |
9,533 |
612 |
90,940 |
|
Inter-segment revenues |
- |
10,264 |
1,150 |
11,414 |
|
Profit before tax |
2,108 |
121 |
179 |
2,408 |
|
Total Assets |
49,631 |
10,248 |
1,305 |
61,184 |
|
6 months to 30 June 2008 |
||||
|
Revenue from external customers |
79,393 |
8,573 |
376 |
88,342 |
|
Inter-segment revenues |
- |
8,244 |
1,081 |
9,325 |
|
Profit before tax |
3,511 |
140 |
243 |
3,894 |
|
Total Assets |
47,848 |
11,527 |
781 |
60,156 |
|
12 months to 31 December 2008 |
||||
|
Revenue from external customers |
158,734 |
19,537 |
1,066 |
179,337 |
|
Inter-segment revenues |
- |
20,346 |
1 ,936 |
22,282 |
|
Profit/(loss) before tax |
6,857 |
(132) |
327 |
7,052 |
|
Total Assets |
47,582 |
13,288 |
1,885 |
62,755 |
3. Additions and disposals of property, plant and equipment
|
Plant, Equipment |
||||
|
6 months to 30 June 2009 |
Land |
Buildings |
and Computers |
Total |
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
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 |
|
6 months to 30 June 2008 |
||||
|
Carrying amount at 1 January 2008 |
248 |
3,148 |
4,704 |
8,100 |
|
Acquisitions |
- |
564 |
435 |
999 |
|
Additions |
- |
128 |
821 |
949 |
|
Depreciation |
- |
(148) |
(1,003) |
(1,151) |
|
Carrying amount at 30 June 2008 |
248 |
3,692 |
4,957 |
8,897 |
|
Year to 31 December 2008 |
||||
|
Carrying amount at 1 January 2008 |
248 |
3,148 |
4,704 |
8,100 |
|
Acquisitions |
- |
564 |
970 |
1,534 |
|
Additions |
- |
308 |
2,480 |
2,788 |
|
Disposals |
- |
- |
(308) |
(308) |
|
Depreciation |
- |
(304) |
(1,999) |
(2,303) |
|
Carrying amount at 31 December 2008 |
248 |
3,716 |
5,847 |
9,811 |
4. Goodwill
During the period, an adjustment of £16,000 was made to increase the goodwill of the Perth acquisition by £11,000 and the Redruth acquisition by £5,000. This related to further costs of acquisition which were known but not quantifiable at that date.
5. Pension and other employee assets/obligations
The Group operates a defined benefit scheme and a defined contribution pension scheme in the UK which offers both pensions in retirement and death benefits to members. Since 1 January 2002 the defined benefit scheme has been closed to new members. The assets of the schemes are administered by trustees independent of the Group. The Company made contributions of £1,280,000 (2008: £1,274,000) to the defined benefit scheme during the six month period to 30 June 2009 and £2,555,000 in the year to 31 December 2008. 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 2005 and was updated to 30 June 2009 by a qualified independent actuary.
|
30 Jun 2009 |
30 Jun 2008 |
31 Dec 2008 |
||
|
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 |
2.70 |
3.75 |
2.70 |
|
|
Discount rate |
6.6 |
6.8 |
6.5 |
|
|
Inflation assumption |
3.20 |
3.75 |
2.70 |
|
|
Assumed life expectancies on retirement at age 65 for members with accrued pensions under £15,000 pa are: |
||||
|
30 Jun 2009 |
30 Jun 2008 |
31 Dec 2008 |
||
|
Retiring today: |
Males |
19.0 |
19.0 |
19.0 |
|
Females |
22.1 |
22.0 |
22.0 |
|
|
Retiring in 20 years time: |
Males |
20.2 |
20.2 |
20.2 |
|
Females |
23.2 |
23.1 |
23.1 |
|
|
Assumed life expectancies on retirement at age 65 for members with accrued pensions over £15,000 pa are: |
||||
|
30 Jun 2009 |
30 Jun 2008 |
31 Dec 2008 |
||
|
Retiring today: |
Males |
22.3 |
22.2 |
22.2 |
|
Females |
25.2 |
25.1 |
25.1 |
|
|
Retiring in 20 years time: |
Males |
23.4 |
23.3 |
23.3 |
|
Females |
26.2 |
26.2 |
26.2 |
|
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.
|
30 Jun 2009 |
30 Jun 2008 |
31 Dec 2008 |
||||
|
% |
£'000 |
% |
£'000 |
% |
£'000 |
|
|
Equities |
10.2% |
26,222 |
10.3% |
33,028 |
9.6% |
26,575 |
|
Bonds |
5.5% |
11,413 |
5.8% |
9,352 |
5.2% |
9,668 |
|
Property |
10.2% |
3,880 |
10.3% |
5,559 |
9.6% |
4,378 |
|
Other |
4.5% |
2,263 |
4.8% |
2,579 |
4.2% |
3,047 |
|
Total market value of assets |
43,778 |
50,518 |
43,668 |
|||
|
Present value of defined obligations (funded plans) |
(62,259) |
(61,946) |
(60,131) |
|||
|
Present value of unfunded obligations |
18,481 |
11,428 |
16,463 |
|||
|
Unrecognised actuarial losses |
(26,691) |
(17,850) |
(24,082) |
|||
|
Net asset in balance sheet |
8,210 |
6,422 |
7,619 |
|||
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 |
|
|
2009 |
2008 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Benefit obligation at beginning of period |
60,131 |
65,040 |
65,040 |
|
Interest cost |
1,938 |
1,971 |
3,911 |
|
Actuarial gain / (loss) |
1,163 |
(4,222) |
(6,983) |
|
Benefits paid |
(973) |
(843) |
(1,837) |
|
Balance at end of period |
62,259 |
61,946 |
60,131 |
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 |
|
|
2009 |
2008 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Fair value of scheme assets at beginning of period |
43,668 |
54,733 |
54,733 |
|
Expected return on scheme assets |
1,781 |
2,113 |
4,236 |
|
Actuarial loss |
(1,978) |
(6,759) |
(16,019) |
|
Contributions by employers |
1,280 |
1,274 |
2,555 |
|
Benefits paid |
(973) |
(843) |
(1,837) |
|
Assets at end of period |
43,778 |
50,518 |
43,668 |
The amounts recognised in the income statement are:
|
6 months |
6 months |
12 months |
|
|
to 30 Jun |
to 30 Jun |
to 31 Dec |
|
|
2009 |
2008 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Interest on obligation |
1,938 |
1,971 |
3,911 |
|
Expected return on assets |
(1,781) |
(2,113) |
(4,236) |
|
Actuarial loss recognised in period |
532 |
267 |
534 |
|
689 |
125 |
209 |
|
|
Charged/(credited) to: |
|||
|
Administrative costs |
532 |
267 |
534 |
|
Finance income |
- |
(142) |
(325) |
|
Finance costs |
157 |
- |
- |
|
689 |
125 |
209 |
History of scheme assets, obligations and experience adjustments
|
30 Jun 2009 |
31 Dec 2008 |
31 Dec 2007 |
31 Dec 2006 |
31 Dec 2005 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Present value of defined benefit obligations |
(62,259) |
(60,131) |
(65,040) |
(70,928) |
(65,552) |
|
Fair value of scheme assets |
43,778 |
43,668 |
54,733 |
50,360 |
44,519 |
|
Deficit in scheme |
(18,481) |
(16,463) |
(10,307) |
(20,568) |
(21,033) |
|
Experience adjustments arising on scheme liabilities |
1,163 |
(6,983) |
(8,042) |
3,351 |
323 |
|
Experience item as a % of scheme liabilities |
2% |
(12%) |
(12%) |
5% |
0% |
|
Experience adjustments arising on scheme assets |
(1,978) |
(16,019) |
(207) |
972 |
3,113 |
|
Experience item as a % of scheme assets |
(5%) |
(37%) |
0% |
2% |
7% |
6. Equity
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||||
|
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, £120,000 of employee compensation expense has been included in the consolidated income statement for the six month period to 30 June 2009 and £240,000 in the year to 31 December 2008. 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.
7. Non-recurring items
|
6 months |
6 months |
12 months |
|
|
to 30 Jun |
to 30 Jun |
to 31 Dec |
|
|
2009 |
2008 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Bad debt provision for debtor in administration |
- |
- |
(750) |
|
Amounts recovered against above 2008 bad debt |
171 |
- |
- |
|
Redundancy Costs |
(289) |
- |
- |
|
(118) |
- |
(750) |
8. Finance income and finance costs
|
6 months |
6 months |
12 months |
|
|
to 30 Jun |
to 30 Jun |
to 31 Dec |
|
|
2009 |
2008 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Finance income |
|||
|
Pension costs (note 5): |
|||
|
- interest on obligation |
- |
(1,971) |
(3,911) |
|
- expected return on assets |
- |
2,113 |
4,236 |
|
- |
142 |
325 |
|
|
Finance costs |
|||
|
Interest payable on bank balances |
- |
36 |
8 |
|
Pension costs (note 5): |
|||
|
- interest on obligation |
1,938 |
- |
- |
|
- expected return on assets |
(1,781) |
- |
- |
|
157 |
36 |
8 |
9. Income tax expense
|
6 months |
6 months |
12 months |
|
|
to 30 Jun |
to 30 Jun |
to 31 Dec |
|
|
2009 |
2008 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Current tax: |
|||
|
United Kingdom corporation tax at 28% |
583 |
775 |
1,418 |
|
Adjustments in respect of prior years |
- |
(178) |
(64) |
|
583 |
597 |
1,354 |
|
|
Deferred tax: |
|||
|
On share options |
(34) |
(34) |
(67) |
|
Movement relating to pension asset (IAS 19) |
166 |
322 |
657 |
|
Timing differences origination and reversal |
(22) |
216 |
86 |
|
110 |
504 |
676 |
|
|
Income tax expense |
693 |
1,101 |
2,030 |
10. 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 £1,715,000 for the six month period (2008: £2,793,000) (12 months to 31 December 2008: £5,022,000).
The weighted average number of outstanding shares used for the basic earnings per share amounted to 43,197,220 (2008: 43,331,561) (12 months to 31 December 2008: 43,264,023).
Diluted earnings per share
The diluted earnings per share has been calculated using the net profit attributable to the shareholders of the Company of £1,715,000 (2008: £2,793,000) (12 months to 31 December 2008: £5,022,000).
The weighted average number of outstanding shares used for the diluted earnings per share amounted to 43,197,220 (2008: 44,381,802) (12 months to 31 December 2008: 43,672,070) and assumes the exercise of all the share options detailed in note 6 since the date they were granted and the average market price of £0.95. Due to the share options being anti-dilutive, the diluted earnings per share is the same as the basic earnings per share.
11. Dividends
In June 2009, the Company paid a dividend of £1,425,000 to its equity shareholders. This comprised a final dividend in respect of 2008 of 3.30p per share. The directors declare an interim dividend of 1.7p per share (2008:1.7p), which will be paid on 3 November 2009 to shareholders on the register at the close of business on 9 October 2009.
Related Shares:
NARS.L