7th Sep 2006 07:03
Mavinwood PLC07 September 2006 Mavinwood Plc ("Mavinwood" or "the Company") Interim results for the six months ended 30th June 2006 and acquisition of Mono Services Limited - Continued development organically and by acquisition to a business capitalised at £60m - Acquisition of Wansdyke for £11m on 10th February - Acquisition of Independent Inspections for £10m on 18th July - Acquisition of Mono today for £6m - Focus on two divisions well placed for further growth Financial highlights 2006 2005 Turnover £16.3m £0.5m Earnings before interest, tax, goodwill amortisationand share option charge (EBITA) £2.4m £(0.1m) Profit before tax £0.7m £(0.1m) Basic earnings per share 0.06p (0.36p) Profit before tax, goodwill amortisation and share option charge £1.9m £(0.1m) Adjusted basic earnings per share 0.39p (0.18p) Kevin Mahoney, Chief Executive, commented:"I am delighted with the progress Mavinwood has made in the first half of theyear. We have acquired Wansdyke and since 30 June, acquired IndependentInspections and now Mono. The acquisition of Wansdyke made us a significantplayer in the document handling market. The acquisitions of IndependentInspections and Mono build our presence, alongside ANSA, in the emergencyservices sector with a focus on insured repair solutions. Mono is an excellentfit with our existing emergency services businesses and I am particularlypleased that senior management will be staying with the company. All our operating companies are performing well and are benefiting from goodcontinuity of management. We plan to integrate the acquired businesses and addcomplementary operations in the future, pursuant to our strategy of building amarket-leading UK support services group." Enquiries:Mavinwood plcKevin Mahoney, Chief Executive 020 7661 9650Mike Vincent, Finance Director 020 7661 9651 Threadneedle PRJohn Coles 020 7936 9604 BackgroundMavinwood 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 developspecialist support services businesses which have the potential for growth,either organically or in combination with other complementary businesses. Thefocus is on the emergency services (especially where there is an insured repair)and document handling sectors. Chief Executive's review Review of operationsThe first six months of 2006 saw the further growth of the Mavinwood Group. Weare developing the two divisions of emergency services and document handling.Our existing businesses, ANSA and Restore, performed well and we acquiredWansdyke, another document handling business on 10 February 2006. On 18 July weacquired Independent Inspections for £10m funded by a Placing of £12m which hasgiven us the capacity to make further acquisitions for cash. We are very pleasedto announce today the completion of the acquisition of Mono for £6m which willextend our product offering in the emergency services sector. Emergency servicesANSA grew its profits further in the first half of 2006 driven by costreductions and business process re-engineering. Sales were £12,633,000 and EBITAwas £1,750,000 giving a return on sales of 13.9%. Investment in sales andmarketing is being made in the second half of the year together with continuedemphasis on cost saving projects.The training arm of ANSA suffered some loss of personnel and sales dropped from£754,000 in the second half of 2005 to £713,000 in the first half of 2006.Action has been taken to recruit training staff and sales are returning to their2005 levels. Independent Inspections was established in 1989 and offers a validation/restoration service or facilitates a replacement service of damaged floorings orcarpets and upholstery to the insurance industry in all the major postcodes ofthe UK. In the year ended 31 December 2005 the business generated sales of£6,486,000 and EBITA (normalised for non-recurring costs) of £927,000. Thebusiness, which was acquired after 30 June, is performing to expectations.Revenue enhancement and cost saving opportunities are already in hand. Mono offers a domestic repair service to insurance companies, loss adjusters andhousing associations. In the year ended 31 December 2005, the business generatedsales of £11,224,000 and a loss before tax of £55,000 (normalised EBITA was aprofit of £671,000). Net assets at 31 December 2005 were £878,000. It iscurrently a regional business based in the North West and is capable of beingrolled out across the UK, supplemented by other acquisitions as appropriate. ANSA, Independent Inspections and Mono provide the Group with a trio of highquality businesses serving principally the insurance sector. The businesses willbe working closely together to provide their customers with the range ofservices at the high levels of service they are seeking. Document handlingRestore generated sales of £2,021,000 and EBITA of £555,000 in the first half of2006 compared to sales of £511,000 and EBITA of £121,000 in the seven weeksended 30 June 2005. Return on sales has progressed from 23.7% to 27.5%,principally due to increased volumes. Wansdyke made its maiden contribution of £1,633,000 in sales and £517,000 inEBITA for the five months ended 30 June 2006. The return on sales was 31.7%.There is still significant unutilised capacity in the freehold undergroundstorage sites at Wansdyke. A project to integrate the operational systems and finance infrastructure ofboth businesses is well underway. Approximately £27,000 of integration costshave been taken in Wansdyke in the first half with further costs to come in thesecond half. The project should yield cost savings starting in late 2006 butmostly benefiting 2007. Central costsThe central costs of Mavinwood totalled £439,000 (2005: £195,000). The increaseis principally due to the directors no longer receiving discounted salaries andwaiving benefits. A financial controller was appointed bringing the Head Officecomplement to three. In the first half of 2005, Mavinwood was a cash shelllooking to make its first acquisition whereas in 2006 the Group is fullyoperational with five businesses. AcquisitionsWe acquired Wansdyke Security Limited on 10 February for £11m in cash. Theacquisition enhances our product offering in document handling and extends ourgeographic coverage to the West of England, the Midlands and Wales. On 25 May, the contingent consideration due on the acquisition of Restore wassettled at £2,150,000, half in cash and half in new Mavinwood shares. Thepayment of this amount brought the total consideration for Restore to £8.3m. On 18 July we acquired Independent Inspections Holdings Limited for an initialconsideration of £10m. The consideration was satisfied by £9m in cash and £1m inshares. 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 was usedto reduce debt in the short term. The vendor, who is staying with the business,can earn contingent consideration of up to £4m linked to the future performanceof the business. £2m would be payable in March 2008 assuming EBITA of £1.7m isdelivered in 2007 and a further £2m would be payable in cash in March 2009 onthe basis that EBITA of £2m is delivered in 2008. The maximum totalconsideration is £14m. Today we completed the acquisition of Mono Services Limited for an initialconsideration of £6m, plus £0.4m of net debt, utilising some of the debtcapacity generated by the Placing. Costs of the acquisition were £0.4m. The £6mof initial consideration comprises cash of £5.7m and £0.3m in Mavinwood plcordinary shares, priced at 15p. Application for admission of these two millionshares to trading on AIM has been made and dealings are expected to commence on13 September. Contingent consideration of up to £1m could also be payable, in two amounts,over the next two years. The contingent consideration is £2 for every £1 bywhich EBITA for the year ending 31 August 2007 exceeds £0.9m together with afurther sum of £2 for every £1 by which EBITA for the year ending 31 August 2008exceeds the actual EBITA for the year to 31 August 2007. The maximum contingentconsideration of £1m is payable if the EBITA reaches £1.4m in the year to 31August 2008. ResultsThe results comprise three elements in the first half of 2006; •EBITA of ANSA and Restore for six months •EBITA of Wansdyke for five months to 30 June •Central costs for six months TurnoverSales from existing operations (ANSA and Restore) were £14,654,000 (2005:£511,000). The 2005 comparative was purely Restore's turnover for the sevenweeks ended 30 June 2005. The acquisition of Wansdyke contributed £1,633,000giving Group turnover of £16,287,000 (2005: £511,000). Earnings before interest, tax, goodwill amortisation and share option charge(EBITA)EBITA from existing operations (ANSA and Restore less central costs) was£1,866,000 (2005: loss of £74,000). The 2005 comparative comprised £121,000 fromRestore less central costs of £195,000. The acquisition of Wansdyke contributed£517,000 giving Group EBITA of £2,383,000 (2005: loss £74,000). InterestNet interest payable was £525,000 (2005: income £11,000) as we borrowed to partfund the acquisitions of Restore and ANSA in 2005 and fully fund the acquisitionof Wansdyke in February 2006. Interest cover in the half year compared to EBITAwas 4.5x. AmortisationGoodwill amortisation in the half year was £869,000 (2005: £59,000). The 2006amortisation relates to the total goodwill arising on the acquisitions of ANSA,Restore and Wansdyke whereas the 2005 charge only related to the goodwillarising on the acquisition of Restore. All goodwill is being amortised over 20years. Share optionsWe have included a fair value calculation in the half year of the Group'sshare-based payment awards, totalling £316,000 (2005: nil). The valuations havebeen performed by a third party consultancy in accordance with the FinancialReporting Standard, FRS 20. TaxationThe taxation charge on the profit on ordinary activities (excluding goodwillamortisation) of 30% (2005: nil) has been based upon the estimated effective taxrate for calendar 2006. There is no tax relief on the amortisation of goodwill. Earnings per share (EPS)Basic EPS was 0.063p (2005: loss 0.36p). Adjusted basic EPS before goodwillamortisation and share option charge was 0.39p.Assuming the exercise of all options and awards under our Long Term IncentivePlan plus the conversion of the convertible A shares at an average price perordinary share in the first half of 2006 of 13.63p, the fully diluted EPS beforegoodwill amortisation and share option charge (net of tax) would becomeapproximately 0.35p. This represents dilution of approximately 10% compared tothe basic adjusted EPS. DividendMavinwood intends to continue to re-invest profits in the business and the Boardis not declaring an interim dividend. Cash flowThe net cash inflow from operating activities after capital expenditure was£1,931,000 (2005: outflow £200,000) for the half year ended 30 June 2006. Thedifference between this operating cash inflow and EBITA of £2,383,000 was due toa working capital outflow of £535,000 less the excess of depreciation of£416,000 over capital expenditure of £346,000. Significant items of capitalexpenditure included the further fitting-out of sections of Wansdyke'sunderground storage areas and archive racking at Restore. The total outflow on the purchase of subsidiaries was £12,493,000. This amountincluded £10,968,000 plus costs of £445,000 for Wansdyke and £1,075,000 as thecash element of the contingent consideration for Restore. Net debtAt 30 June 2006, net debt of the Group amounted to £15,383,000 (less deferredfinancing costs of £243,000). After the Placing to acquire IndependentInspections and now the acquisition of Mono for £6m, proforma net debt stands atapproximately £20m. The Board believes this level of net debt gives the Groupcapacity to consider and make further acquisitions for cash.Our bank facilities with Allied Irish Banks, p.l.c. were expanded in order toacquire Mono. In addition, the maturity of the facilities has been extended frommostly three years to February 2009 out to five years to September 2011. BoardThere were no changes to the Board in the half year. AdvisersEffective from today we have appointed Collins Stewart as our nominated advisorand broker. OutlookThe Group ended the half year with three established businesses and a marketcapitalisation of approximately £60m. The emergency service and documenthandling industries continue to grow strongly in 2006 and the Group is tradingin line with expectations. We have already added Independent Inspections andMono to emergency services and we intend to add further businesses to both ourdivisions in due course. 7 September 2006 Kevin MahoneyChief Executive Unaudited consolidated profit and loss accountfor the six months ended 30 June 2006 Six Six months months Year to 30 to 30 ended June June 31-Dec 2006 2005 2005 £'000 £'000 £'000 as restated -------- -------- ---------Turnover:- Continuing operations 14,654 511 15,264- Acquisitions 1,633 - -------------------------- -------- -------- ---------Group turnover 16,287 511 15,264Cost of sales (10,432) (225) (10,640)------------------------- -------- -------- ---------Gross profit 5,855 286 4,624Administrative expenses (4,657) (419) (3,861)------------------------- -------- -------- ---------EBITA 2,383 (74) 1,708Earnings before interest, tax, goodwillamortisation and share option charge (EBITA)Share option charge (316) - (85)Goodwill amortisation (869) (59) (860)------------------------- -------- -------- ---------Operating profit/(loss):- Continuing operations 766 (133) 763- Acquisitions 432 - -------------------------- -------- -------- ---------Group operating profit 1,198 (133) 763Net interest (payable)/receivable (525) 11 (213)------------------------- -------- -------- ---------Profit/(loss) on ordinary activitiesbefore tax 673 (122) 550Taxation (462) - (427)------------------------- -------- -------- ---------Profit/(loss) on ordinary activitiesafter tax 211 (122) 123Dividends - - -------------------------- -------- -------- ---------Retained profit/(loss) for the period 211 (122) 123------------------------- -------- -------- ---------Earnings/(loss) per share (pence per share)Basic 0.06p (0.36)p 0.07pFully diluted 0.06p (0.36)p 0.06p------------------------- -------- -------- --------- Unaudited consolidated balance sheetas at 30 June 2006 30-Jun 30-Jun 31-Dec 2006 2005 2005 £'000 £'000 £'000 as restated -------- -------- ---------Fixed assetsIntangible assets 33,696 32,676 31,224Tangible assets 10,429 2,105 1,996------------------------- -------- -------- --------- 44,125 34,781 33,220------------------------- -------- -------- ---------Current assetsStocks and work in progress 170 177 250Debtors 6,894 5,979 5,509Cash at bank 1,695 1,261 837------------------------- -------- -------- --------- 8,759 7,417 6,596Creditors - amounts falling duewithin one year (10,133) (10,727) (9,166)------------------------- -------- -------- ---------Net current (liabilities) (1,374) (3,310) (2,570)------------------------- -------- -------- ---------Total assets less current liabilities 42,751 31,471 30,650Creditors - amounts falling dueafter more than one year (13,942) (4,654) (3,564)Provision for liabilities and charges (238) (193) (117)------------------------- -------- -------- ---------Net assets 28,571 26,624 26,969------------------------- -------- -------- --------- Capital and reservesCalled up share capital 393 383 383Share premium account 27,524 26,444 26,459Share option reserve 401 - 85Profit and loss account 253 (203) 42------------------------- -------- -------- ---------Total equity shareholders' funds 28,571 26,624 26,969------------------------- -------- -------- --------- Unaudited consolidated cash flow statementfor the six months ended 30 June 2006 Six Six months months Year to 30 to 30 ended June June 31-Dec 2006 2005 2005 £'000 £'000 £'000------------------------- -------- -------- ---------Net cash inflow/(outflow) fromoperating activities 2,264 (172) 1,209Returns on investment and servicing offinanceNet interest paid (465) 11 (133)Interest element of finance leasepayments (8) - (13)------------------------- -------- -------- --------- 1,791 (161) 1,063------------------------- -------- -------- ---------Taxation - - (213)------------------------- -------- -------- ---------Capital expenditure and financialinvestmentPurchase of tangible fixed assets (346) (28) (182)Sale of tangible fixed assets 13 - -------------------------- -------- -------- --------- (333) (28) (182)------------------------- -------- -------- ---------AcquisitionsPurchase of subsidiaries and costs (12,493) (21,942) (22,079)Cash acquired with subsidiaries 1,251 1,166 1,150------------------------- -------- -------- ---------Net cash outflows before financing (9,784) (20,965) (20,261)------------------------- -------- -------- ---------FinancingPrincipal repayment due under financeleases (84) - (203)Net proceeds from issue of shares - 22,982 22,982Bank loan advances 12,000 - 5,140Deferred financing costs (136) - (202)Bank loan repayments (257) (2,725) (1,000)Repayment of indebtedness acquired (881) - (7,588)------------------------- -------- -------- --------- 10,642 20,257 19,129------------------------- -------- -------- ---------Increase/(decrease) in cash 858 (708) (1,132)------------------------- -------- -------- --------- Notes to the consolidated interim report for the six months ended 30 June 2006 1.a) Basis of preparation This report was approved by the directors on 7th, September 2006. The interim financial statements have been prepared using accounting policiesand practices consistent with those adopted in the accounts for the year ended31 December 2005 with the exception of the application of FRS 20 (see below) andare also consistent with those which will be adopted in the 2006 Annual Reportand Accounts. The interim financial statements are un-audited. The financial information contained in this Report does not constitute statutoryaccounts as defined by Section 240 of the Companies Act 1985. The figures for the year ended 31 December 2005 have been extracted from thestatutory accounts which have been filed with the Registrar of Companies buthave been restated for the impact of FRS20. The auditors' report for 2005accounts was unqualified and did not contain a statement under section 237(2) or(3) of the Companies Act 1985. 1.b) Adoption of new accounting policies The adoption of FRS 20 - share based payments, which is effective for accountingperiods ending on or after 1 January 2006, requires a prior period adjustment tobe made, including the deferred tax implication of this adjustment. This hascreated a share option reserve at 30 June 2006 of £401,000 and a correspondingdeferred tax asset of £120,000 and reduced the retained profits by £281,000; ofthis amount, £60,000 is attributable to the year ended 31 December 2005. 2 Segmental informationAll turnover is derived from the UK. Segmental analysis Six Six months months Year to 30 to 30 ended June June 31-Dec 2006 2005 2005 £'000 £'000 £'000 as restated------------------------- -------- -------- --------- The turnover for the period was derived fromthe group's principal activities as follows:Document handling 3,654 511 2,291Emergency services 12,633 - 12,973------------------------- -------- -------- --------- 16,287 511 15,264------------------------- -------- -------- --------- The profit before tax is derived from thegroup's principal activities as follows:Document handling 1,072 121 614Emergency services 1,750 - 1,589Central costs (439) (195) (495)Share option charge (316) - (85)Goodwill amortisation (869) (59) (860)Net interest (payable)/receivable (525) 11 (213)------------------------- -------- -------- --------- 673 (122) 550------------------------- -------- -------- --------- 3 Notes to the cash flow statement Six Six Year months months ended to 30 to 30 31-Dec June June 2006 2005 2005 £'000 £'000 £'000 as restated------------------------- -------- -------- --------- Operating profit/(loss) 1,198 (133) 763Depreciation 416 24 305Share option charge 316 - 85Goodwill amortisation 869 59 860------------------------- -------- -------- --------- 2,799 (50) 2,013Decrease/(increase) in stocks & WIP 94 3 195(Increase) in debtors (833) (114) (64)Increase/(decrease) in creditors 204 (11) (935)------------------------- -------- -------- ---------Net cash inflow/(outflow)from operating activities 2,264 (172) 1,209------------------------- -------- -------- --------- 4 Earnings/(loss) per ordinary shareBasic earnings/(loss) per share has been calculated on the profit/(loss) aftertaxation for the period/year and the weighted average number of ordinary sharesin issue during the period/year. Adjusted earnings/(loss) per share which is before goodwill amortisation and thestock option charge has been presented in addition to the basic earnings/(loss)per share as defined by FRS 22 since, in the opinion of the directors, thisprovides shareholders with a more appropriate representation of the earningsderived from the group's present businesses. Six months Six months Year ended to 30 June to 30 June 31-Dec 2006 2005 2005 £'000 £'000 £'000 as restated--------------------------- ---------- --------- ---------Profit /(loss) aftertaxation on ordinaryactivities 211 (122) 123 ========== ======== ======== No. of No. of No. of shares shares sharesWeighted average equity inissue 334,570,268 34,199,448 184,579,044--------------------------- ---------- --------- --------- Basic earnings/(loss) perordinary share 0.06p (0.36)p 0.07pGoodwill amortisation 0.26p 0.18p 0.46pShare option charge (net oftax) 0.07p - 0.03p--------------------------- ---------- --------- ---------Adjusted earnings/(loss)per ordinary share 0.39p (0.18)p 0.56p--------------------------- ---------- --------- ---------(before the goodwill amortisation and theshare option charge) --------- --------- -------------------------------------- The diluted earnings per share is 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. It is also adjusted for the conversionof the A shares into ordinary shares at a price of 13.63p; being the averageprice per ordinary share in the half year ended 30 June 2006 (year ended 31December 2005 average price 10.05p). No. of No. of No. of shares shares sharesWeighted average equity in issue 372,029,322 34,199,448 195,666,915--------------------------- --------- --------- ------------------------------------- ---------- --------- ----------Fully diluted earnings/(loss)per ordinary share 0.06p (0.36)p 0.06pGoodwill amortisation 0.23p 0.18p 0.44pShare option charge (net oftax) 0.06p - 0.03p--------------------------- ---------- --------- ----------Adjusted fully dilutedearnings/(loss) per ordinaryshare 0.35p (0.18)p 0.53p--------------------------- ---------- --------- ----------(before the goodwill amortisation and theshare option charge --------- --------- --------------------------------------- 5 Analysis of changes in At Six Acquisitions Non-cash At 30net debt months 01-Jan Cash- (Excluding movement June 2006 flow cash) 2006 2006 £'000 £'000 £'000 £'000 £'000 --------------------- -------- -------- ---------- --------- -------Cash at bank and in hand: Increase/(decrease) incash during the year 837 858 - - 1,695Bank loans & notes duewithin one year (1,500) (619) (881) - (3,000)Bank loans & notes dueafter one year (3,657) (10,243) - - (13,900)Finance leases due withinone year (175) 83 (86) - (178)--------------------- -------- -------- ---------- --------- ------- (4,495) (9,921) (967) - (15,383)Deferred financing costs 160 136 - (53) 243--------------------- -------- -------- ---------- --------- ------- (4,335) (9,785) (967) (53) (15,140)--------------------- -------- -------- ---------- --------- ------- 6 Intangible fixed assets Six months Six months Year ended to 30 June to 30 June 31-Dec 2006 2005 2005 £'000 £'000 £'000 -------- -------- ---------1 January 31,224 - -Additions - Restore - 8,784 8,268Additions - ANSA - 23,951 23,816Reduction in Restore contingentconsideration (443) - -Additions - Wansdyke 3,784 - -------------------------- -------- -------- --------- 34,565 32,735 32,084Less amortisation (869) (59) (860)------------------------- -------- -------- ---------Period end 33,696 32,676 31,224------------------------- -------- -------- ---------Goodwill on acquisition is being amortised over 20 years. 7 Acquisition Book value at Fair value Fair value at acquisition adjustment acquisition £'000 £'000 £'000------------------------- --------- --------- ---------WansdykeFixed assets 3,217 5,283 8,500Working capital (507) (507)Taxation (647) (647)Cash 1,250 1,250Loans (881) (881)Finance leases (86) (86)------------------------- --------- --------- ---------Net assets acquired 2,346 5,283 7,629------------------------- --------- ---------Goodwill capitalised 3,784 ---------Consideration 11,413------------------------- --------- --------- --------- Satisfied by:Cash to vendors 10,968Related costs of acquisition 445------------------------- --------- --------- --------- 11,413------------------------- --------- --------- --------- In preparation for IFRS3, to be adopted in the financial statements for the yearending 31 December 2007, the fixed assets were valued by an independent firm ofChartered Surveyors at £8.5m and the intangible assets were valued by anindependent specialist. The increase in value to £8.5m is reflected as a fairvalue adjustment. 8 Reconciliation of movement in Six months Six months Year endedShareholders' funds to 30 June to 30 June 31-Dec 2006 2005 2005 £'000 £'000 £'000 as restated------------------------- -------- -------- ---------Profit/(loss) for the financial period 211 (122) 123Share option reserve 316 - 85Issue of shares during the period 1,075 25,795 25,795Issue costs - (962) (962)Recovery of prior year flotation costs - - 15------------------------- -------- -------- ---------Net additions to shareholders' funds 1,602 24,711 25,056Opening shareholders' funds 26,969 1,913 1,913------------------------- -------- -------- ---------Closing shareholders' funds 28,571 26,624 26,969------------------------- -------- -------- --------- ENDS This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Restore