27th Feb 2008 07:02
Ricardo PLC27 February 2008 27th February 2008 Ricardo plc Interim results for the six months ended 31 December 2007 Corporate Statement Ricardo plc is a market leading engineering, management and automotiveconsultancy, employing over 1700 people worldwide. The company has centres inthe UK, USA, Germany, Czech Republic, India, Japan and China and a global clientlist including the world's major automotive OEMs, Tier 1 suppliers to OEMs,energy companies and governments. Highlights • Revenue up 14% to £95.2m (H1 2006: £83.8m) • Profit before tax up 22% to £5.6m (H1 2006: £4.6m) • Order book up 26% to £98m (H1 2006: £78m) • Net debt reduced to £8.2m (H1 2006: £18.7m) • Interim dividend increased by 6.9% to 3.1p (H1 2006: 2.9p) • Results underpinned by good performance in the UK business with strong order intake from its Asian customers, successful restructuring in the US, further development in Germany and growth in Ricardo Strategic Consulting • A good start to the second half with good order intake from the key major markets of Europe, US and Asia Commenting on the results, Dave Shemmans, Chief Executive said: "We are pleased with the Group's performance in the first half, with profitbefore tax up 22%. The strategy to expand the technical, sector and geographicalspread of Ricardo's business is gathering real momentum and delivering tangibleresults in terms of revenue, profit, order book and increased client base. OurCO2 reducing technologies and engineering expertise continue to be in strongdemand. Trading in the second half has started well and order prospects continue tobuild across the business. We are confident that the full year for 2007/8 willbe a year of continued progress." Further enquiries: Ricardo plcDave Shemmans, Chief Executive Tel: 01273 455611Paula Bell, Group Finance DirectorWebsite: www.ricardo.com Gavin Anderson & Company Tel: 020 7554 1400Fergus WylieMichael Turner Interim Management Report SUMMARY OF RESULTS The first half performance has delivered both business and profit growth withrevenue up 14% to £95.2m, profit before tax up 22% to £5.6m and operating marginimproving to 6.4% from 6.1% in the same period last year. The order book closedat £98m compared to £78m twelve months ago and to £92m in June 2007. Technical Consulting Growth in the Technical Consulting business has been underpinned by the increasein orders won from Asia, mostly delivered by our UK division and theimplementation of a restructuring programme in the US. Following the appointmentof a new President for the US business in 2007, we have reduced the basebusiness cost and reinvigorated business development activities. We have alsocontinued to increase margins for our engineering expertise and improve theefficiency of delivery across the Group. Overall the Technical Consultingbusiness has demonstrated continued growth, both in terms of revenue andoperating profit compared to the first half last year. Strategic Consulting Strategic Consulting performed to plan in the first half and has successfullycontinued to build a strong pipeline of work. This has led to increased revenuecompared to the first half last year as the client base develops globally. Continued focus on cash management resulted in net debt (cash, cash equivalentsand bank loans) of £8.2m compared to £18.7m in the same period last year. Inparticular, we have benefitted from advance payments from clients, increasingthe trade and other payables within working capital. The net pension deficit at £17.4m compared to £22.7m in December 2006 and £16.7min June 2007. A cash contribution plan to substantially reduce the deficit overa nine-year period commenced in 2005/6. In 2008 we are reviewing the investmentand funding strategy of the defined benefit pension scheme as part of thetriennial valuation. Basic earnings per share for the first half increased to 9.3p (from 8.9p in thesame period last year). In the last financial year we enjoyed significantbenefit from retrospective R&D tax credits in both the UK and the USA, whichboosted the full year earnings per share and which we do not expect to repeatthis financial year. We are declaring an interim dividend of 3.1p, an increase of 6.9% on the prioryear interim dividend of 2.9p. Our dividend policy is to maintain a 2x to 2.5xcover ratio. The dividend will be paid on 18 April 2008 to all shareholders onthe register at close of business on 25 March 2008. We are required to report on any seasonality or cyclicality affecting half year,compared to full year performance. The second half of the financial year isnormally subject to less annual leave, both at clients and amongst the Ricardoteam, and is therefore normally more profitable. This financial year is expectedto show a similar pattern. We are required to report on the principal risks and uncertainties for theremaining six months of the financial year. Delivery of increased profits in thesecond half depends principally on customers holding to their plans, theconversion of a good pipeline of prospects into orders, and the effectivedelivery of all our business to our customers. STRATEGY UPDATE The strategy of broadening the technical and strategic offering, together withan expansion in client, sector and geographical base continues. Our focus onsolving global, industry and environmental issues through investment in anddeployment of cost effective environmentally responsible transport solutions isdelivering results for clients, Ricardo and society in general. Our CO2 reducingtechnologies and deep engineering expertise continue to be in strong demandworld-wide, penetrating beyond our traditional automotive clients. The technical drivers in our industry continue to be those of fuel economyimprovement, emissions reduction and automotive safety enhancement. The mostsignificant industry business issues remain OEM profit generation in competitivemarkets, often disrupted by new entrants, and the exploitation of emergingmarket development. These are driven by legislation, increasing in profile andtime critical. We continue to invest to develop technology and expertise toprovide solutions to these global drivers. In terms of new market development, we were pleased to open our office in Indiain response to demand from the expanding Indian automotive industry. We alsocontinued our focus on the Russian market, and as a result we were awarded newcontracts and additional opportunities. It is clear that these markets willincrease in importance on the automotive stage both domestically andinternationally. The order book is increasing across the business, with growing order intake andopportunities from new and traditional clients. The business is running with ahigher heart beat, with improved utilisation levels and a more aggressivebusiness development focus. TECHNICAL CONSULTING UK The UK business had a good first half with increased order book, order intake,revenue and operating profit compared to the same period in the prior year. Thenew orders reflect our continued focus on Asian markets, with Japan deliveringparticularly strong growth, together with an increased level of business fromEuropean clients, including pass through work from our busy German business andprogrammes from other parts of mainland Europe including Russia. Recent project wins have provided a good technical spread and we are activelyrecruiting in the areas of transmissions, engines and electronics to service thedemand. Our test beds continue to be well utilised. The engines business has continued to be underpinned by diesel projects in boththe commercial vehicle and passenger car sectors. Emissions legislation,competitive pressure on fuel economy and growth of demand for diesels in the USmarket continue to be major drivers. Our diesel expertise is being deployed onprogrammes for European, American, Chinese, Indian and Japanese clients. Howeverwe have also seen a good increase in the level of gasoline engine businesscovering sectors from small city cars to high profile super cars for Europeanand Asian clients. The transmissions and driveline business continues to benefit from investment inR&D, specifically in the areas of electronic dual clutch technology, electronicautomated manual transmission and torque vectoring, all of which are generatingnew programmes with our global client base. New programmes are being won fromAsian customers, which are enhancing our penetration of this growing market. Thehigh performance transmissions business has had a strong period with solid orderintake, particularly from F1 teams as well as GT programmes in Europe and Japan.Once again Ford were successful in winning the World Rally Car Championship withthe support of Ricardo driveline systems. The vehicle business has been re-energised and increased its efforts in themilitary sector through the establishment of a defence systems and technologiesbusiness where the high value automotive technologies are being offered to thedefence sector. Sector contacts are increasing as are the opportunities we arebidding for and winning, including a number of hybrid and clean technologyprogrammes. The vehicle business has also secured good levels of order intakefrom commercial vehicle manufacturers in Asia for powertrain integration andchassis engineering. The electronics business continued its strong performance, with activity focusedin the areas of hybrids, on-board diagnostics, systems integration and emissionscontrol. We continue to recruit in this strategic area to support ourdevelopments within the clean technology, safety and intelligent vehicle relatedareas of automotive engineering. In the period we signed an agreement with theglobal electronics manufacturer Delta Electronics Inc, whereby we can offer theindustry a new Tier 1 route while protecting intellectual property. Our role isto design the electronic modules to automotive standard, which Delta ElectronicsInc will then manufacture from their global base. Our Prague engineering facility continues to develop and expand with a team ofapproximately 130 and growing towards a target of 160. The high quality easternEuropean centre covers disciplines including software, design, simulation,analysis and electronic design, supporting global customer programmes coveringtransmissions, engines and hybrids for passenger car and commercial vehiclesectors. Increasingly the Prague centre is being used for other office businessservices as well. USA Following the change of leadership in May 2007, the US business has undertaken arestructuring programme to improve its performance. After full absorption of therestructuring costs it has demonstrated an increase in operating profit in thefirst half and is running with more momentum and good levels of utilisation.Order intake in the period was strong with commercially better terms obtainedfrom a more diverse customer base. With a strong pipeline of opportunities and amore commercial focus, the business is well positioned to exploit the increasingfocus on, and governmental backing for, CO2 reduction and new technology. Thisperformance will enable additional investment into locally generated technology,which will continue the positive trend of value added engineering and brandenhancement. Key programmes include US diesel engine developments, gasoline engine upgradesfor US and Asian clients, hybrid powertrains including plug-in hybriddemonstrators, safety and intelligent-vehicle related electronics and totalvehicle fuel economy programmes. Clients range from US to Asia and frompassenger car OEMs, oil companies and Tier 1s to US Government and military. Aninteresting addition to our US business is that of the energy sector where weare supporting developments in the wind farm arena. Our software product business stream, managed by the US division, continued toperform strongly and had a solid first half. Business was generated byincreasing our global marketing and introducing new products, which improve therobustness of powertrain design whilst also reducing time to market. Germany The German automotive industry is also driven by the challenges of meetingexhaust legislation. This has created a large demand for engineering anddevelopment support within Germany, with engineers being in short supply. Ourstrategy and actions to invest in high quality, locally based, native languagespeaking staff with the necessary engineering talent, tools and facilities isresulting in an increase in brand awareness, client base, order book andprospects. Our client base now includes the major automotive passenger car OEMs in Germany,together with Tier 1s and premium players in other sectors such as motorcycle,off highway, marine and power generation. In the period we completed a number ofprogrammes and have received repeat business from customers who are amongst themost demanding in the world, both technically and for quality. We are working inpartnership with these clients and are increasingly being seen as part of theirstrategic solution to meet their product development needs. We and our customers are in competition for the best engineers, and recruitment,while successful, has not allowed us to keep up with the increasing demand,thereby limiting our growth potential. We are building links with universitiesfor the long term, looking at acquisition solutions and continue to passbusiness to other divisions. However the real focus is on seeking out andattracting the best of talent wherever we can to serve the needs of today. Theincreasing client profile and brand strength in Germany, the portfolio ofleading edge programmes and the new leadership are all helping us to achievethis aim and we are now finding that we can compete for talent with the verybest of the premium automotive companies in Germany. Our niche high performance exhaust business has become a USP with the increasingfocus on aftertreatment solutions for passenger car and commercial vehicles. Thebusiness has performed better than planned with good demand for prototypesystems and the continued delivery of a low volume production programme for apremium automotive manufacturer. We are in the process of bringing on stream lowcost suppliers to improve the performance of the business. STRATEGIC CONSULTING The strategic consulting business has returned to high levels of utilisation andis actively recruiting to support further demand. It has secured a strongposition on a number of large programmes, which for the client are strategic innature and last for more than a year. The client base is well spreadgeographically and by name, with the order book increasing to strong levels witha good level of risk mitigation. In the first half we have improved therobustness of the business in terms of recruitment, systems, businessdevelopment and retention of core staff. The business is building inherentstrength and a reputation in the market as a core player which delivers. Thisnaturally helps with recruitment of both new clients and talent, much of whichcomes from other leading consulting companies with people who can see thebenefit of deep content management consulting. A number of the core programmesare being delivered are in conjunction with technical consulting. Business continues to be secured around new technology forecasting andimplementation, process improvements, organisational performance enhancements,due diligence and corporate strategy, warranty improvement and cost down. ASA Ricardo's orders from Asia are primarily executed in the UK, and thereforereflected in the results of the UK part of Technical Consulting. The followingparagraphs give further explanation by key country within Asia of where thebusiness has come from and the drivers in those territories. Japan In the period we have received record levels of order intake from Japaneseclients with a balance of repeat business and new client turnkey outsourceprogrammes. The Japanese automotive industry has continued to increase instrength world-wide with stronger market positions, product portfolios andengineering demands. The industry is adopting an outsource model for the firsttime and is therefore selecting partners carefully. We are delighted to bereceiving repeat business from such high quality clients as we deliver ourexisting commitments. 2006/7 was a record year for Ricardo in Japan, in terms ofengineering order intake, with 2007/8 doubling that pace in the first half froma broader portfolio of customers and product sectors covering almost all of ourofferings. We continue to develop and deepen relationships with major JapaneseOEMs, and Japan is bringing strong opportunities into the pipeline from thepassenger car, commercial vehicle, marine and motorcycle sectors. China Ricardo's Chinese operation had a natural change of leadership in the period.Our global head of transmissions took up the post and is leading the Chineseoperation through its transition to an engineering and business developmentoperation. The Chinese automotive market has also turned its attention to thenext challenge - transmissions. The development of the engineering operation in China continues with successfulrecruitment, training and deployment of local engineers. Utilisation isincreasing, serving both domestic clients as well as international clients. Thecurrent facilities are being outgrown and a move into an engineering facility isplanned in the second half of the current year, which will better support ourgrowth aspirations over the coming years. Client activity, relationships andengagement remain high with opportunities and programmes in the area of hybrids,gasoline engines, transmissions and electronics for the passenger car andcommercial vehicle sectors. India The Indian automotive industry continues to grow, with the leading companiesdeveloping both their domestic product portfolios whilst also focusing onexport. To compete on the world stage, Indian companies are seeking outcompanies with technology, quality and engineering processes who can assist withtheir strategic development. To develop closer relationships with these emergingworld players and to access the Indian market, Ricardo opened an office in Delhiin the period and has continued to develop the pipeline of opportunities. India is keen to demonstrate environmentally responsible industrial growth andis taking the emissions legislation seriously. It was with great honour that ourlaunch event was attended by Nobel Laureate Dr Rajendra K Pachauri, who is theChairman of the United Nations Intergovernmental Panel on Climate Change, andother leaders from the Indian automotive industry. South Korea The South Korean office was busy in the period with leads developed and securedin the passenger car, commercial vehicle and military sectors. The work securedfrom South Korea is delivered mainly from the UK. The leading South Koreanclient is also very active itself in the US with a US based development centre,with core decisions normally being referred back to their South Korean headoffice. RESEARCH Ricardo continues to research new technologies and innovative solutions toaddress its dominant technology drivers of energy security, the reduction ofcarbon dioxide emissions and automotive safety enhancement. Our major technologyactivities include a collaborative programme to deliver a commercially viablediesel engine that can meet the most severe emission legislation in the UnitedStates market, a unique premium gasoline engine that delivers dramaticimprovement through downsizing but with the torque of a diesel engine enabledthrough seamless switching between 2 and 4 stroke operation, low cost and lowenergy actuation systems for automatic transmissions and a new approach toengine control using a complete model of the engine to predict parametersettings, substantially reducing the time required for calibration. We alsocontinue to research advanced telematics systems that enhance vehicle fueleconomy and safety through information-enabled control. In the last six months, all of these programmes have made remarkable progress.Our diesel vehicle is now very close to the engine out emission requirements forthe US market. Our gasoline concept has achieved seamless switching between 2stroke and 4 stroke operation. Our new actuation system has been demonstrated atthe key transmissions conference in Europe. We have successfully demonstratedreal time operation of our model-based engine control system. We are now alsoactive in a range of advanced safety and telematics programmes including theintegration of our highly successful torque vectoring vehicle with asteer-by-wire system. PEOPLE The strength of the Group recruitment over the past nine months is beingdemonstrated in the increased commercial acumen, results and talent managementrigour within Ricardo. In the period we have welcomed as Group HR Director SarahMurphy from Microsoft, we have appointed Dave Pickett to the newly created GroupProcurement Director position and we have appointed Dr Peter Heuser to theManaging Director position in Germany. The divisions have continued tostrengthen their management teams with recruitment of notable and industryrespected non-executive appointments in Germany and the US. OUTLOOK We are pleased with the Group's performance in the first half, with profitbefore tax up 22%. The strategy to expand the technical, sector and geographicalspread of Ricardo's business is gathering real momentum and delivering tangibleresults in terms of revenue, profit, order book and increased client base. OurCO2 reducing technologies and engineering expertise continue to be in strongdemand. Trading in the second half has started well and order prospects continue tobuild across the business. We are confident that the full year for 2007/8 willbe a year of continued progress. Dave ShemmansChief Executive27 February 2008 Notes: (a) Related-party transactions are disclosed in Note 9. (b) Forward-looking statements: Certain statements in this interim management report are forward-looking. Although these forward-looking statements are made in good faith based on the information available to the directors at the time of their approval of the report, we can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Consolidated Income Statementfor the six months ended 31 December 2007 (unaudited) Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 Notes £m £m £m---------------------------------------------------------------------------------Revenue 4 95.2 83.8 171.5Cost of sales (63.9) (57.6) (114.0)---------------------------------------------------------------------------------Gross profit 31.3 26.2 57.5Administration expenses (25.2) (21.1) (44.3)---------------------------------------------------------------------------------Operating profit 4 6.1 5.1 13.2Finance income 0.8 0.9 2.0Finance costs (1.3) (1.4) (3.0)---------------------------------------------------------------------------------Profit before taxation 5.6 4.6 12.2Taxation 6 (0.9) (0.1) 2.9---------------------------------------------------------------------------------Profit for the period 4.7 4.5 15.1---------------------------------------------------------------------------------Profit attributable to minorityinterest - - 0.1Profit attributable to equityshareholders 4.7 4.5 15.0---------------------------------------------------------------------------------Earnings per share 7Basic 9.3p 8.9p 29.6pDiluted 9.2p 8.9p 29.5p--------------------------------------------------------------------------------- Consolidated Statement of Recognised Income and Expensefor the six months ended 31 December 2007 (unaudited) Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 £m £m £m Currency translation differences on netinvestment in foreign operations 2.1 (1.0) (1.5) Fair value gain/(loss) on net investment hedge (1.1) 0.4 0.4 - Cash flow hedges: (0.3) - -- net fair value losses 0.1 - -- recycled and reported in net profitActuarial gains/(losses) on the definedbenefit pension scheme (2.1) (0.4) 4.2Tax on items recognised directly in equity 0.9 - (1.7)---------------------------------------------------------------------------------Net income and expense recogniseddirectly in equity (0.4) (1.0) 1.4Profit for the period 4.7 4.5 15.1---------------------------------------------------------------------------------Total recognised income and expense forthe period 4.3 3.5 16.5--------------------------------------------------------------------------------- Attributable to minority interest - - 0.1 Attributable to equity shareholders 4.3 3.5 16.4--------------------------------------------------------------------------------- Consolidated Balance Sheetas at 31 December 2007 (unaudited) 31 December 31 December 30 June 2007 2006 2007 £m £m £m---------------------------------------------------------------------------------AssetsNon current assetsGoodwill 16.8 15.6 15.6Other intangible assets 2.0 1.7 1.9Property, plant and equipment 45.8 44.0 44.5Deferred tax assets 10.4 9.3 9.9--------------------------------------------------------------------------------- 75.0 70.6 71.9---------------------------------------------------------------------------------Current assetsInventories 9.5 8.3 7.5Trade and other receivables 63.8 53.6 55.6Current tax assets 0.9 0.3 0.5Deferred tax assets 1.8 0.6 1.7Cash and cash equivalents 16.2 18.0 15.4Assets classified as held for sale - 6.7 ---------------------------------------------------------------------------------- 92.2 87.5 80.7---------------------------------------------------------------------------------Total assets 167.2 158.1 152.6--------------------------------------------------------------------------------- LiabilitiesCurrent liabilitiesBank loans and overdrafts (12.1) (25.1) (9.1)Trade and other payables (55.4) (33.8) (43.9)Current tax liabilities (1.9) (2.2) (2.1)Deferred tax liabilities (0.4) (0.6) (0.4)Provisions (0.6) (0.4) (0.5)---------------------------------------------------------------------------------Liabilities directly associated withassets classified as held for sale - (6.7) ---------------------------------------------------------------------------------- (70.4) (68.8) (56.0)---------------------------------------------------------------------------------Net current assets 21.8 18.7 24.7---------------------------------------------------------------------------------Non current liabilitiesBank loans (12.3) (11.6) (13.5)Retirement benefit obligations (17.4) (22.7) (16.7)Deferred tax liabilities (4.8) (4.6) (4.7)--------------------------------------------------------------------------------- (34.5) (38.9) (34.9)---------------------------------------------------------------------------------Total liabilities (104.9) (107.7) (90.9)---------------------------------------------------------------------------------Net assets 62.3 50.4 61.7--------------------------------------------------------------------------------- Shareholders' equityShare capital 12.7 12.7 12.7Share premium 13.5 13.3 13.3Other reserves 0.6 - (0.5)Retained earnings 35.1 23.8 35.7---------------------------------------------------------------------------------Total shareholders' equity 61.9 49.8 61.2Minority interest in equity 0.4 0.6 0.5---------------------------------------------------------------------------------Total equity 62.3 50.4 61.7--------------------------------------------------------------------------------- Consolidated Cash Flow Statementfor the six months ended 31 December 2007 (unaudited) Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 £m £m £m---------------------------------------------------------------------------------Cash flows from operating activitiesCash generated/(used) by operations (note 8) 11.0 (4.4) 15.6Interest received 0.8 0.9 2.0Interest paid (1.3) (1.4) (3.0)Tax paid (1.0) (0.8) (1.6)---------------------------------------------------------------------------------Net cash generated/(used) by operatingactivities 9.5 (5.7) 13.0---------------------------------------------------------------------------------Cash flows from investing activitiesPurchases of intangible assets (0.5) (0.4) (1.0)Purchases of property, plant andequipment (4.3) (3.7) (8.5)---------------------------------------------------------------------------------Net cash used by investing activities (4.8) (4.1) (9.5)---------------------------------------------------------------------------------Cash flows from financing activitiesNet proceeds from issue of new sharecapital 0.2 - -Net proceeds from issue of new bankloan 0.8 9.0 3.9Repayment of borrowings (2.1) (2.8) (2.1)Dividends paid to shareholders (3.6) (3.4) (4.9)Dividends paid to minority interests (0.1) - (0.1)---------------------------------------------------------------------------------Net cash (used)/generated by financingactivities (4.8) 2.8 (3.2)---------------------------------------------------------------------------------Effect of exchange rate changes (0.4) (0.1) (0.3)---------------------------------------------------------------------------------Net decrease in cash and cashequivalents (0.5) (7.1) -Cash and cash equivalents at beginningof period 12.7 12.7 12.7---------------------------------------------------------------------------------Cash and cash equivalents at end of period 12.2 5.6 12.7--------------------------------------------------------------------------------- Notes to the Interim Financial Statementsfor the six months ended 31 December 2007 (unaudited) 1. General information Ricardo plc is a limited liability company incorporated in the UK with a primarylisting on the London Stock Exchange. The company's registered office is at theRicardo Shoreham Technical Centre, Shoreham-by-Sea, West Sussex, BN43 5FG, andits registered number is 222915. This interim report was approved for issue on 27 February 2008. This interim report does not comprise statutory accounts within the meaning ofSection 240 of the Companies Act 1985. The figures for the year to 30 June 2007have been extracted from the 2007 Annual Report and Accounts, which was approvedby the Board of directors on 17 September 2007 and delivered to the Registrar ofCompanies. The report of the auditors on those accounts was unqualified, did notcontain an emphasis of matter paragraph and did not contain any statement underSection 237 of the Companies Act 1985. 2. Basis of preparation This interim report for the six months ended 31 December 2007 has been preparedin accordance with the Disclosure and Transparency Rules of the FinancialServices Authority and IAS 34, 'Interim Financial Reporting' as adopted by theEuropean Union. This interim report should be read in conjunction with theAnnual Report and Accounts for the year ended 30 June 2007, which has beenprepared in accordance with IFRSs as adopted by the European Union. 3. Accounting policies The accounting policies adopted are consistent with those of the financialstatements for the year ended 30 June 2007, as described in those financialstatements. The following new standards, amendments to standards or interpretations aremandatory for the first time for the financial year ending 30 June 2008. •IFRIC 10, 'Interim Financial Reporting and Impairment', effective for annualperiods beginning on or after 1 November 2006. This interpretation has not hadany impact on the timing or recognition of impairment losses. •IFRIC 11, 'IFRS 2 - Group and Treasury Share Transactions', effective forannual periods beginning on or after 1 March 2007. This interpretation is notexpected to be relevant for the group. •IFRS 7, 'Financial Instruments: Disclosures', effective for annual periodsbeginning on or after 1 January 2007; 'Amendments to IAS 1 Presentation ofFinancial Statements Capital Disclosures', effective for annual periodsbeginning on or after 1 January 2007; and IFRS 4, 'Insurance contracts', revisedimplementation guidance, effective when an entity adopts IFRS 7: as this interimreport contains only condensed financial statements, and as there are nomaterial financial instrument related transactions in the period, full IFRS 7disclosures are not required at this stage. Disclosures required for compliancewith these standards will be given in the annual financial statements. 4. Segmental reporting (a) by business segment, with revenue reflecting sales to external customers Revenue Operating profit-------------------------------------------------------------------------------------------------- Six months Six months Year Six months Six months Year ended ended ended ended ended ended 31 December 31 December 30 June 31 December 31 December 30 June 2007 2006 2007 2007 2006 2007 £m £m £m £m £m £m-------------------------------------------------------------------------------------------------- Technical Consulting 88.7 80.0 163.0 5.5 4.6 11.9StrategicConsulting 6.5 3.8 8.5 0.6 0.5 1.3-------------------------------------------------------------------------------------------------- 95.2 83.8 171.5 6.1 5.1 13.2-------------------------------------------------------------------------------------------------- (b) reflecting the revenue and profit generated by the staff in the business units (non-GAAP measure) Revenue Operating profit-------------------------------------------------------------------------------------------------- Six months Six months Year Six months Six months Year ended ended ended ended ended ended 31 December 31 December 30 June 31 December 31 December 30 June 2007 2006 2007 2007 2006 2007 £m £m £m £m £m £m--------------------------------------------------------------------------------------------------Technical ConsultingUK 54.3 49.3 102.0 4.4 3.7 9.8North America 20.5 18.1 37.4 0.7 0.5 1.2Germany 15.3 12.8 24.2 0.4 0.4 0.9-------------------------------------------------------------------------------------------------- 90.1 80.2 163.6 5.5 4.6 11.9Strategic Consulting 5.1 3.6 7.9 0.6 0.5 1.3-------------------------------------------------------------------------------------------------- 95.2 83.8 171.5 6.1 5.1 13.2-------------------------------------------------------------------------------------------------- For this non-GAAP measure, the part of the work invoiced to third parties byStrategic Consulting that is sub-contracted to Technical Consulting is includedwithin Technical Consulting revenue. 5. Ordinary dividends Six months Six months Six months Six months ended ended ended ended 31 December 31 December 31 December 31 December 2007 2006 2007 2006 pence/share pence/share £m £m------------------------------------------------------------------------------Amounts distributed inthe period 7.1p 6.7p 3.6 3.4Proposed interimdividend 3.1p 2.9p 1.6 1.5------------------------------------------------------------------------------ 6. Taxation Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 £m £m £m--------------------------------------------------------------------------------UK 0.1 (0.5) 3.9Overseas 0.8 0.6 (1.0)---------------------------------------------------------------------------------Tax charge/(credit) on profit 0.9 0.1 (2.9)-------------------------------------------------------------------------------- 7. Earnings per share Basic earnings per share is calculated by dividing the profit attributable toequity shareholders of £4.7m (31 December 2006: £4.5m; 30 June 2007: £15.0m) bythe weighted average number of shares in issue of 50,766,297 (31 December 2006:50,694,167; 30 June 2007: 50,694,534), after deducting the shares held by theLong Term Incentive Plan ("LTIP") Trustee. For diluted earnings per share, theweighted average number of shares in issue is adjusted for the effects ofdilutive options and LTIP awards, and is accordingly 51,023,688 (31 December2006: 50,795,901; 30 June 2007: 50,833,331). 8. Cash generated by operations Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 £m £m £m--------------------------------------------------------------------------------Continuing operations Profit from operations 6.1 5.1 13.2Adjustments for: Share-based payments (0.2) 0.1 0.2 Depreciation and amortisation 4.3 4.4 8.8--------------------------------------------------------------------------------Operating cash flows before movements inworking capital 10.2 9.6 22.2Increase in inventory (1.7) (1.4) (0.5)Increase in trade and other receivables (7.1) (6.9) (9.3)Increase/(decrease) in payables 10.9 (4.3) 5.9Increase/(decrease) in provisions 0.1 (0.1) -Pension payments in excess of pensioncosts (1.4) (1.3) (2.7)---------------------------------------------------------------------------------Cash generated/(used) by operations 11.0 (4.4) 15.6-------------------------------------------------------------------------------- 9. Related-party transactions Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 £m £m £m------------------------------------------------------------------------------Compensation for key management personnel Salaries and other short-term employee benefits 1.3 1.1 2.3Post-employment benefits 0.2 0.3 0.5Termination benefits - - 0.3Share based payments 0.2 0.2 0.4-------------------------------------------------------------------------------- 1.7 1.6 3.5-------------------------------------------------------------------------------- The key management personnel are the board of directors, the Managing Directorsof the UK, US and German businesses and the Global Product and EngineeringDirector. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ricardo