13th Aug 2008 07:00
HALF-YEAR RESULTS INTERSERVE DELIVERS STRONG PROFIT GROWTH
Interserve, the services, maintenance and building group, announces its half-year results for the six months ended 30 June 2008.
H1 2008 H1 2007 Revenue ‚£913.6m ‚£861.1m +6.1% Headline profit 1 ‚£36.5m ‚£30.0m +21.7% Profit before tax ‚£33.7m ‚£28.2m +19.5% Headline earnings per share 2 19.3p 16.1p +19.9% Basic earnings per share 17.7p 15.0p +18.0% Cash generated by operations ‚£19.5m ‚£34.2m -43.0% Interim dividend 5.3p 5.0p +6.0% Future workload 3 ‚£6.1bn ‚£5.9bn +3.4%Highlights: * Strong progress in the year * Long-term client relationships provide resilience and high forward visibility * 30 per cent of Group profits from fast-growing Middle East market * Record future workload
Chief Executive Adrian Ringrose commented,
"The half year was a period of significant success and development for Interserve. We delivered strong profit growth and have skills and market positioning that provide an excellent platform as we broaden our services and move into new markets.
"With our strong position in the buoyant Middle East and the continued opportunities for growth in our core UK sectors, we are confident that Interserve is well placed to maintain its progress."
1 Headline profit comprises profit before taxation of ‚£33.7m (H1 2007: ‚£28.2m)adjusted for the impact of (‚£2.5m) amortisation of intangible assets (H1 2007:(‚£2.4m)); (‚£0.3m) amortisation of intangible assets (associates) (H1 2007: ‚£nil); ‚£nil exceptional items (H1 2007: ‚£0.6m).
2 Headline earnings per share are based on Headline profit as defined in note 1 above (see also note 5 to the unaudited condensed financial statements)
3 Future workload excludes work won by our Middle East associate companies.
For further information please contact:
Adrian Ringrose, Chief Executive / Tim Jones, Group Finance Director 0118 932 0123
Elizabeth Morley / Tom Roberts, Maitland 020 7379 5151
Interim management reportChairman's statementInterserve continued its strong growth in the first half of the year. Headlineearnings per share were 19.3p (H1 2007: 16.1p), a rise of 19.9 per cent. Futureworkload at 30 June 2008 had risen to a record ‚£6.1 billion (31 December 2007:‚£5.7 billion).
The Group continues to grow its international footprint and is developing further opportunities in fast-growing emerging markets. Our positioning in the Middle East, where we are engaged in construction, equipment hire and, on a smaller scale, FM service provision, enables us to take advantage of the ongoing buoyant conditions in that region, supporting healthy contributions from our operations in the UK.
Dividend
Given this performance and the positive outlook for the second half of the year, the Board has approved an interim dividend of 5.3p (H1 2007: 5.0p) which will be paid on 27 October 2008 to shareholders on the register at close of business on 26 September 2008.
Board
As noted in the 2007 annual report we appointed two new directors to the Boardin January 2008. Both were internal appointments involving the managingdirectors of two of Interserve's divisions: Bruce Melizan, responsible for theFacilities Management division, and Steven Dance, responsible for EquipmentServices. These appointments reflect our objective of maintaining a strongBoard with a complementary mix of executive and non-executive experience.
Prospects
Our principal markets offer good prospects for continued growth, and we believethat our business model of concentrating on long-term client relationships is akey strength, given the resilience and visibility of future workload it brings.We have been working in the Middle East for over 25 years and the activedevelopment of our operations there has positioned us to take full advantage ofa market which is expected to remain strong for the foreseeable future. Theregion currently accounts for 30 per cent of the Group's profits and this islikely to increase. We also have a presence in many other internationalmarkets, which provides additional growth opportunities as well as diversifyingour sources of revenue and profits. Overall, our operations outside the UK nowaccount for around 45 per cent of the Group's profits.In the UK our outsourcing operations are based on increasing the efficiency andquality of a broad range of services for our clients. Customers, both in thepublic and private sectors, see outsourcing as a means of reducing cost andimproving service delivery - features which become even more valuable when themacroeconomic outlook is less certain. In addition, our operations areunderpinned by a series of long-term contracts where we provide core servicesto public-sector clients, much of it in areas where spending is either heavilycommitted or effectively non-discretionary.Interserve's construction activities in the UK are focused primarily on sectorssuch as health, education, the custodial market and private-sector frameworkagreements. The assets we create for clients in these areas are usuallyfundamental to their future plans and we anticipate that the demand in thesesectors will remain strong.We are well positioned in markets which offer good prospects for growth. Ourfuture workload reflects this strength and, at 30 June, stood at ‚£6.1 billion(31 December 2007: ‚£5.7 billion). The Board remains confident that the Group'sexposure to buoyant international markets, together with our strong and growingposition in UK social infrastructure and outsourcing, will underpin continuedprogress.Lord BlackwellChairman13 August 2008Business reviewKey Performance Indicators H1 2008 H1 2007 Change Revenue ‚£913.6m ‚£861.1m +6.1% Headline earnings per share 19.3p 16.1p +19.9% Cash conversion 4 70.1% 146.2% -76.1% pts Future workload 5 ‚£6.1bn ‚£5.9bn +3.4% Annualised staff turnover 6 9.0% 10.0% -1.0% pts
Annualised all-employee accident 455 421 +8.1% incidence rate per 100,000 workforce
4 Cash conversion is calculated as the percentage of cash generated by operationsof ‚£19.5m (H1 2007: ‚£34.2m) divided by the sum of: operating profit of ‚£25.3m(H1 2007: ‚£21.6m); plus amortisation of intangible assets of ‚£2.5m (H1 2007: ‚£2.4m); less profit on disposal of property and investments of ‚£nil (H1 2007: ‚£0.6m).5 Future workload comprises contracted work plus work that has been settled andon which final terms are being agreed (principally PFI projects at preferredbidder stage).
6 Staff turnover measures the proportion of managerial, technical and office-based staff leaving voluntarily over the course of the period. The figures for January-June have been doubled to give an annual equivalent.
The half year was a period of significant success and development forInterserve. Each of our three principal regions, the UK, Middle East andAustralasia, contributed to our strong growth, with headline profit rising 22per cent to ‚£36.5 million (H1 2007: ‚£30.0 million) on revenue of ‚£913.6 million(H1 2007: ‚£861.1 million).Net debt at 30 June was ‚£115.4 million (31 December 2007: ‚£101.6 million),representing cash conversion of 70.1 per cent (H1 2007: 146.2 per cent). Cashflow in the period was impacted by the timing of advance payments received inthe prior year and by growth in activity over the period.
Segmental review
Interserve's five market-facing divisions provide services throughout the lifecycle of the buildings or other environments with which our clients areconcerned. Increasingly we operate across our divisional structure in seamlessteams to bring customers the benefits of a fully integrated approach.Our divisions are supported by a Group Services function which provides a rangeof central services and encompasses our PFI bidding activity. Group Servicescosts in the half year were ‚£8.4 million (H1 2007: ‚£ 7.9 million).Facilities Management is one of the industry's leading providers of facilitiesservices. The division manages and delivers the services necessary to thesmooth running of some of the UK's most important buildings, includingcorporate head offices, government properties, schools, airports, shoppingcentres and industrial facilities. The division performed well, generating acontribution to Total Operating Profit of ‚£14.0 million (H1 2007: ‚£12.7million) on revenue of ‚£393.8 million (H1 2007: ‚£378.0 million).The division is organised into six sectoral business units in order to buildleading market positions, focus resources and facilitate the sharing of bestpractice.
Among the new contracts we won during the period were:
* Home Office: a five-year contract worth over ‚£100 million to provide a range of property-based services in 575 buildings in the south-west, north-west and north-east of England, Wales and Scotland.
* BAE Systems: a fifth successive contract, lasting three years, to provide
protective coatings services as part of the ‚£6 billion Type 45 Destroyers
programme.
* National Power Authority of Sierra Leone: supply, installation, repair and
construction of the country's Western Area transmission and distribution
network.
* Toyota: provision of a range of industrial cleaning services in Toyota's
engine plant in Deeside, North Wales. The two-year contract covers the
factory, offices and amenity areas with an option to extend for a further
year.
* Boots: extension and augmentation of previous cleaning contract. We are now
responsible for over 1,000 stores, the head office, two distribution
centres and all airport stores in a contract worth more than ‚£40 million
over three years.
* Her Majesty's Courts Service: renewal and doubling of Interserve's remit to
provide a variety of cleaning services within all crown courts, combined
court centres, county courts, magistrates courts and tribunal buildings
within Metropolitan London. The contract is for four years.
Our long-term relationship with Slough Borough Council took a significant stepforward when we helped People 1st (Slough), the arm's-length managementorganisation which manages homes on behalf of the council, to win its covetedtwo-star rating from the Audit Commission. The partnership between the council,Interserve and People 1st (Slough) provides building maintenance and repairservices to around 6,500 council homes, 1,000 leasehold homes and more than 70council-owned buildings such as offices and libraries. The two-star ratingmeans that People 1st (Slough) is now able to embark on an accelerated ‚£45million investment programme to bring the council's stock up to the DecentHomes standard.Specialist Services offers facilities services such as security, mechanical andelectrical (M&E) design, installation and maintenance and technical services(such as heating, ventilation and air conditioning, lift maintenance andasbestos surveying and remediation). These are usually delivered in discretepackages but are also often included as part of a "bundled" offering to clientsof the Facilities Management or Project Services divisions.This year we have also launched a new service advising clients on strategies toreduce the environmental impact of their operations. Not only are clientstaking their impact on the environment more seriously, they are also facing thechallenges of the rising cost of energy. These two trends provide us withsignificant opportunities.The division's contribution to Total Operating Profit was ‚£2.0 million (H12007: ‚£2.7 million) on revenue of ‚£88.5 million (H1 2007: ‚£88.8 million). Thereduction in profit was due to some slowing in client spending in the M&Einstallation sector and a tightening of margins in manned guarding. However, wehave secured a number of contracts associated with public-sector projects andour Technical Services business delivered an improved performance following thechanges we made last year.In January we acquired R & D Security for a cash consideration of ‚£0.3 millionon completion with an earn-out over three years up to a maximum of ‚£0.7million. R & D supplies, installs and maintains CCTV, intruder alarms,technical surveillance and access control. These are areas which command highermargins than traditional manned guarding, enhancing the range of securitycapabilities we bring to market.
Among the contracts won during the six months were:
* British Airways Maintenance: re-award and extension of our contract at the
purpose-built British Airways aircraft maintenance facilities in Cardiff
and Glasgow. The ‚£10 million contract is for five years and, in addition to
traditional M&E services, incorporates building fabric maintenance, maintenance of docking and aircraft support systems, ground equipment, cleaning services, landscaping and waste management.
* London Borough of Lambeth: a four-year, ‚£12 million contract for a full
range of maintenance services for all 12 corporate council office buildings
within the Borough and provision of reactive repairs to an additional 68
council buildings including libraries and primary schools. Interserve already provides lift maintenance across the council's domestic housing portfolio.
* National Exhibition Centre: further replacement of ventilation plant and
associated system modifications following successful completion of similar
works previously. * Barclays Capital: concierge / manned guarding at the investment banking group's London offices over a three-year period.
Specialist Services increasingly forms a key part of our support to clients through other divisions. Notable examples include security for the Home Office, specialised window cleaning for the Metropolitan Police and several M&E installation projects both in the NHS ProCure21 framework agreement and the Leeds Building Schools for the Future (BSF) programme.
Project Services is a leading construction business focusing on long-termrelationships with clients. First half trading was strong in the UK andexcellent in the Middle East, producing a contribution to Total OperatingProfit of ‚£15.2 million (H1 2007: ‚£10.9 million). ‚£7.2 million of this camefrom the UK (H1 2007: ‚£6.4 million) on revenue of ‚£406.6 million (H1 2007: ‚£362.0 million) and ‚£8.0 million came from our Middle East associates (H1 2007:‚£4.5 million).
In the UK we performed particularly strongly in the health, education and custodial sectors in the period. Contract wins in these and other sectors included:
* Designed for Life: Building for Wales framework programme: the ‚£45 million
Children's Hospital for Wales is one of several contracts secured this
year, the latest in a series of wins since the programme's launch two years
ago. These now total over ‚£250 million and have work streams running through to 2014. * Further projects under the NHS ProCure21 framework in England including Poole Hospital maternity and neonatal department, United Lincolnshire
Hospitals, Truro Dental School and the Langdon Hospital redevelopment in
Dawlish.
* Torquay Community College: a ‚£23 million rebuild of the college as a
"Pathfinder" project in the BSF programme. These projects aim to transform
teaching and learning through well-designed buildings which provide
inspirational environments for students, teachers and the local community.
* Home Office framework agreement: a four-year fit-out and refurbishment
agreement anticipated to be worth approximately ‚£50 million. It includes
estates throughout the UK belonging to the Home Office, Ministry of
Justice, Border and Immigration Agency, National Police Improvement Agency
and National Probation Service.
* National Offender Management Service: ‚£25 million of further work under the
prison new-build and refurbishment framework agreements. * Thames Water: our consortium has won the contract to build the Thames Gateway Water Treatment Plant, the first in London to use the latest
desalination technology to abstract brackish water from the tidal Thames
and deliver fresh water to one of Thames Water's reservoirs. The value of
the work to Interserve will be in the region of ‚£50 million.
In the Middle East our associate companies benefit not only from being able toprovide services into the oil and gas markets and downstream industries, butalso in the drive by economies in the region to diversify their revenue streamsinto other sectors such as retail, tourism, leisure and commerce. Our marketreach and capabilities across the full range of sectors have led not only to anexcellent first-half performance but also to rising levels of forward workloadand future opportunities.Most of our customers work with us on a repetitive, long-term basis and we arebeginning to benefit from the increasing adoption of collaborative working andframework arrangements in the region. Contract wins included:
* Al Furjan: phase 1 of the ‚£140 million infrastructure development for this
family-oriented residential community in Dubai.
* Dubailand Roads Phase I: we have been awarded the first phase of the access
roads to the northern section of the development following our work on the
access roads for the adjacent Tiger Woods Golf Club.
* Camel Race Track for Dubai Engineer's Office: construction of a 5km camel
race track consisting of a specially graded sand running surface, guide
rails and an asphalted inner track for support vehicles. This follows our
Camel Racing City contract last year.
* Ahmed Hassan Bilal Tower: a 22-storey tower comprising 179 luxury
apartments on Qatar's Pearl Island project. Construction is over a 21-month
period. * Six further electricity substations for Areva in Qatar over a 14-month period. Also in the Middle East, Madina, the engineering and training group in which weacquired a 49 per cent beneficial interest in 2007, has won a major contract toprovide training in leadership, supervision, health, safety and the environmentfor the Shell Pearl Gas-to-Liquids project.Equipment Services is a global leader in the supply of specialised equipment(formwork and falsework) used in creating major concrete structures. Itperformed strongly, posting a record first-half contribution to Total OperatingProfit of ‚£13.7 million, 37 per cent higher than in the equivalent period in2007 (‚£10.0 million). Revenue was ‚£79.2 million (H1 2007: ‚£60.6 million).Both revenue and profit in the Middle East rose by over 50 per cent as theregion traded very strongly. Prestigious contracts included Concourse 3 atDubai airport, a 12-month contract due to finish early next year worth inexcess of ‚£7 million, where a range of equipment is being used to create thecolumns, walls and roofing slabs in this substantially-below-ground area, withceiling heights of up to 11m. Another ongoing contract, completing in mid-2009and of a similar scale, is the Saddiyat Island Bridge in Abu Dhabi.Our operation in South Africa, started last year, is performing in line withour expectations. We have branches in Durban and Pretoria and have just openedanother in Cape Town. Among its successes is the Gautrain Rapid Rail Linkproject joining Johannesburg and Pretoria in Gauteng province. Our equipment isbeing used, over approximately two years, to create concrete walls and supportviaducts during construction.We made further pleasing progress in Europe. Our operation in Spain continuedto benefit from the investments we made previously. Among its successes is theBasagoiti Viaduct in the Basque region, an ongoing project, involving the hireof 1,800 tonnes of a variety of equipment in the construction of a 390m-long,box-shaped viaduct. Domestic UK performance has also been strong, both in hireand sales. Projects included the use of our industry-leading Alshor Plus rangeof shoring in the creation of a spiral ramp in Liverpool's Paradise Streetregeneration area. Although we are experiencing signs of weakness in theEuropean commercial building sector, the infrastructure sector continues toprovide attractive opportunities, particularly in the UK through the Olympicsand several major transport projects.Australasia produced a much-improved result due largely to the changes we havemade to deliver services to the growing mining market. One example is theNewman Hub project in Pilbara for Macmahon Contractors, where a range of ourshoring equipment is being used in a 10-month contract to construct thefoundations for a new iron ore crushing and screening plant. Other recentcontracts with the same client include the Boddington Gold Mine expansion andthe Mitchell Freeway extension in Perth.PFI Investments contributed ‚£1.5 million (H1 2007: ‚£0.8 million) to operatingprofit. At 30 June we had 28 signed PFI contracts (30 June 2007: 26) and threemore at preferred bidder stage (30 June 2007: four). Our total investmentcommitment on the signed contracts was ‚£64.5 million (30 June 2007: ‚£58.7million), of which ‚£43.9 million (30 June 2007: ‚£36.2 million) had already beenmade.We reached financial close on one of the three preferred bidder projectssubsequent to the period end. The Corsham contract with the DefenceCommunication Services Agency will create a communication centre of excellenceat Corsham in Wiltshire. Interserve's consortium will be responsible forworking with Defence Estates to create and manage a working and livingenvironment, to which all essential MoD personnel and business partners willco-locate, capable of supporting an estimated 2,000 people. We shall beinvolved alongside our construction partner as the new flagship offices andsingle-living accommodations are built, and shall then provide a range of FMservices throughout the 25-year operational phase.We have also announced today a further PFI contract within the Leeds BSFstrategic partnership which began in 2006 and will run until 2015. The New LeafLeisure project will involve the construction of two new leisure centres for ‚£27 million and their operation over 25 years, generating an FM revenue of ‚£17million. The Local Education Partnership (LEP), comprising Interserve'sconsortium (E4L), Leeds City Council and Partnerships for Schools, is the firstLEP in the country to have undertaken a non-educational PFI project.It was also the first LEP to let a second PFI schools scheme, which we signedduring the period. This covers the creation and operation of the West Leeds andWortley School, which will be worth approximately ‚£50 million to Interserve inconstruction and FM revenue. The first of four schools being created under thefirst scheme has already opened, two more are due for the autumn term this yearand the remaining one is planned to open at the same time in 2009.The 512-bed Pembury Hospital and mental health project in Tunbridge Wells isnow under construction following financial close on the contract in March. Thiswill be the first acute hospital in the country to be provided with 100 percent single rooms. We shall invest ‚£5.5 million of equity and subordinated debtin the project and shall deliver FM services worth ‚£67 million, including M&Emaintenance, estates management, grounds maintenance, utilities management andthe provision and operation of a helpdesk, in the new buildings over a periodof 30 years following their opening, anticipated for 2011.The Armada project is a major PFI undertaking for the Warship Support Agency onbehalf of the Naval Base Commander, Devonport. Signed four years ago andinvolving the creation, operation and maintenance of the MoD's new SingleLiving Accommodation facilities at the Fleet Accommodation Centre in Devonport,the facility reached its fully operational phase on schedule during the halfyear. We have been delivering FM services since construction began and shallcontinue to do so for a further 21 years.
Health and Safety
Health and safety remain of paramount importance to Interserve. We have undertaken a sustained drive to reduce accidents over a number of years and one of our Group goals is to be accident-free.
The all-labour injury incidence rate (i.e. including subcontractors) is one ofour Key Performance Indicators. The annualised RIDDOR-reportable accident andincident rate for the first six months of 2008 was 455 accidents per 100,000workforce, which compares to 421 for the equivalent period in 2007. While it isdisappointing that the rate has increased over the year, we have maintained asignificant improvement relative to the 2006 figure (744). We havesignificantly increased our dedicated occupational-health resource and are nowdelivering health surveillance in-house in the UK. In addition we areinvestigating new ways of engaging our employees in accident-reductionmeasures.
Sustainability
Interserve is uniquely placed to make a difference in terms of sustainability,both in respect of its own operations and those of its clients. We see this asbeing a driver for change in our own behaviour and as a source of future growthas we advise on and deliver change for our clients' built environments.We launched Interserve's RENEWABLES programme on World Environment Day, 5 June2008 - the word is formed as an acronym from letters representing 10sustainable priorities. It is a Sustainable Development Guide which we areoffering to clients as part of an advisory service and operates as a frameworkfor managing environmental, social and economic responsibilities.
We have also continued our participation in the Westminster Sustainable Business Forum, the not-for-profit organisation which seeks to provide effective dialogue between business and the government on important sustainability issues. Its final report on sustainable procurement, to which we have made a significant contribution, has now been launched in parliament.
Strategy and outlook
Interserve's business is built around long-term relationships with our clients in the provision of essential services and infrastructure. This has many advantages including a better understanding of each others' needs and capabilities, a more flexible approach in day-to-day operations, a continuous-improvement culture and greater forward visibility.
We have developed the Group to be able to offer services throughout the assetlife cycle, and within our chosen sectors we aim to offer an unrivalled breadthand depth of service. This means that we can assist our clients at any pointfrom the inception of a project - even when it is just an idea - through itsconstruction to operation, maintenance and replacement. The assets may bebuildings, infrastructure or parts of the environment; the concept is that wecan provide the services that our clients need at whatever stage they needthem.In the UK, we are increasingly becoming involved with clients at the earlieststage of project development and have expanded our consulting team to includeexperts in estates strategy, programme management and project controls. Thisapproach enables us to provide expert advice at the earliest stages of aproject, shaping and delivering strategies for clients seeking optimum outcomesfor their capital investments and operational support requirements.Our involvement in the whole-life delivery of services to the built environmentgives us a unique insight into how their design, construction anduse-in-occupancy impacts on future sustainability. We are seeking to leveragethat knowledge and experience both to advise on and to implement changestrategies for our clients, often with the primary aim of improving theircarbon footprint (see `Sustainability' above).With the majority of our business based on long-term relationships andproviding services in prioritised sectors, we have experienced little overalleffect from the current movements in the economic environment. We haverelatively limited exposure to the sub-sectors of the commercial buildingmarket in which we anticipate some further softening of demand, and we remainconfident that any impact will be significantly outweighed by our exposure togrowth markets in UK outsourcing and social infrastructure and to burgeoninginternational opportunities.
UK
Demand in the majority of our UK markets remains strong. The public-sectorpipeline looks healthy for large, multi-service outsourcing opportunities andthere are good prospects for organic growth in many of our contracts. While adegree of pressure is likely to remain in some parts of the market in the shortterm, visibility of our future business through long-term relationships remainsa key differentiator and our focus on prioritised spending sectors continues togenerate many future opportunities.Spending on education is set to continue. The Comprehensive Spending Review(October 2007) indicates that spending on the sector in England will rise onaverage by 2.8 per cent a year in real terms between 2007/08 and 2010/11.Schools capital investment is budgeted to increase to ‚£8.2 billion, withfunding for the building or refurbishment of a further 275 primary schools ontop of the 400 schools covered by previous plans, and with the Building Schoolsfor the Future programme being responsible for similar developments in 1,000secondary schools.We are continuing to see opportunities in the health sector through theProCure21 framework agreement and Designed for Life: Building for Wales, and inScotland we are currently bidding the four-year Scottish health frameworkConstruction Integrated Supply Chain NHS Scotland. In the custodial sector,where we have a very strong track record and unique construction expertise, weare pursuing several major opportunities under both PFI and public-sectorprocurement. The National Offender Management Service's capacity programme aimsto create approximately 10,000 additional prison places, with 4,000 coming frombuilding additional capacity in existing facilities and the remainder likely tobe from the construction of new prisons.Elsewhere there are a number of new local authority framework agreements, wherecounty and district councils and other public bodies are joining forces toextend the benefits of collaborative working and partnering. With our strongregional network and familiarity with these methods of procurement we arewell-placed to win a share of this work.
Middle East
Our markets in the Middle East are very strong and the indications are thatthey will remain so for the foreseeable future, with forecast real GDP growthto 2012 averaging at around 6.5 per cent in the UAE, 5 per cent in Oman and 7.5per cent in Qatar (source: Business Monitor International). Having made ourfirst step into the Middle Eastern FM services market through Madina, we areincreasingly attracted by the medium-term prospect of leveraging ouroutsourcing skills in the region.
Dubai remains buoyant with a steady stream of new work opportunities and long-term contracts available at good margins. We are also moving to take advantage of the burgeoning market in Abu Dhabi both in our Project and Equipment Service divisions.
Oman is experiencing a period of sustained growth with increased projectopportunities in all sectors. The hotel, residential, leisure and commercialsectors are particularly active alongside the continued investment inindustrial and infrastructure projects. As just one example, in Duqm in thesouth of the country, major developments over the next 10 years are expected toinclude an airport, an independent water and power production facility, a newport, dry dock, industrial zone and refinery, the development of a new town, aresort beach hotel and other ancillary facilities such as schools andhospitals. Together these will cost in the region of $5 billion.Qatar is equally promising. The economy continues to thrive on the highpetrochemical prices. The budget for the current fiscal year sets records interms of incomes and surpluses which are sure to feed through to theconstruction industry. Some 800 high-rise buildings are predicted to beconstructed over the next 10 years and mixed use developments such as Losail,Barwa Village and Al Waab are scheduled to commence in the next 12 months.Government investment is also being made in Energy City with the first buildingcurrently out to tender.
With our strong position in the buoyant Middle East and the continued opportunities for growth in our core UK markets, we are confident that Interserve is well placed to maintain its progress.
Principal risks and uncertainties
The principal risks and uncertainties which could have a material impact uponthe Group's performance over the remaining six months of the 2008 financialyear, together with the mitigation strategies adopted, and which could causethe actual results to differ materially from those expected, have not changedsignificantly from those set out on pages 26 and 27 of the Business Reviewincluded in the Group's 2007 annual report and financial statements. Theserisks and uncertainties may be summarised as: * Market change * Major contracts * Key people * Health & safety * Financial risks; and * Damage to reputation. Responsibility statement
The directors confirm to the best of their knowledge:
a. the condensed set of financial statements has been prepared in accordance
with IAS 34; and
b. the interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency
Rules of the Financial Services Authority.
By order of the BoardAdrian Ringrose Tim Jones
Chief Executive Group Finance Director
13 August 2008.
INDEPENDENT REVIEW REPORT
We have been engaged by the Company to review the condensed set of financialstatements in the half-year report for the six months ended 30 June 2008 whichcomprises the condensed income statement, the condensed balance sheet, thecondensed statement of recognised income and expense, the condensed cash flowstatement and related notes 1 to 12. We have read the other informationcontained in the half-year report and considered whether it contains anyapparent misstatements or material inconsistencies with the information in thecondensed set of financial statements.This report is made solely to the Company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the Company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company, for our review work, for thisreport, or for the conclusions we have formed.
Directors' responsibilities
The half-year report is the responsibility of, and has been approved by, thedirectors. The directors are responsible for preparing the half-year report inaccordance with the Disclosure and Transparency Rules of the United Kingdom'sFinancial Services Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-year report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-year report based on our review.
Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the half-year reportfor the six months ended 30 June 2008 is not prepared, in all materialrespects, in accordance with International Accounting Standard 34 as adopted bythe European Union and the Disclosure and Transparency Rules of the UnitedKingdom's Financial Services Authority.Deloitte & Touche LLPChartered Accountants and Registered Auditor13 August 2008London, UK
Unaudited condensed consolidated income statement
For the six months ended 30 June 2008
Six months ended 30 June 2008 Six months ended 30 June 2007 Year ended 31 December 2007 Before Exceptional Total Before Exceptional Total Before Exceptional Total exceptional items and exceptional items and exceptional items and items and amortisation items and amortisation items and amortisation amortisation of amortisation of amortisation of of intangible of intangible of intangible intangible assets intangible assets intangible assets assets assets assets ‚£million ‚£million ‚£million ‚£million ‚£million ‚£million ‚£million ‚£million ‚£million Continuing operations Revenue 913.6 - 913.6 861.1 - 861.1 1,738.0 - 1,738.0 Cost of sales (809.4) - (809.4) (771.9) - (771.9) (1,544.4) - (1,544.4) Gross profit 104.2 - 104.2 89.2 - 89.2 193.6 - 193.6 Other - - - - - - 0.1 - 0.1operating Income Administration (76.4) - (76.4) (65.8) - (65.8) (138.9) - (138.9)expenses Amortisation - (2.5) (2.5) - (2.4) (2.4) - (4.8) (4.8)of acquired intangible assets Total (76.4) (2.5) (78.9) (65.8) (2.4) (68.2) (138.9) (4.8) (143.7)administration expenses Profit on - - - - 0.6 0.6 - 1.0 1.0disposal of property and investments Operating 27.8 (2.5) 25.3 23.4 (1.8) 21.6 54.8 (3.8) 51.0profit Share of result of associates and joint ventures Share of 10.2 - 10.2 5.8 - 5.8 18.5 - 18.5results Amortisation - (0.3) (0.3) - - - - (0.3) (0.3)of acquired intangible assets Total share of 10.2 (0.3) 9.9 5.8 - 5.8 18.5 (0.3) 18.2result of associates and joint ventures Total 38.0 (2.8) 35.2 29.2 (1.8) 27.4 73.3 (4.1) 69.2operating profit Investment 19.2 - 19.2 19.5 - 19.5 38.1 - 38.1revenue Finance costs (20.7) - (20.7) (18.7) - (18.7) (38.0) - (38.0) Profit before 36.5 (2.8) 33.7 30.0 (1.8) 28.2 73.4 (4.1) 69.3tax Tax (charge)/ (10.8) 0.8 (10.0) (9.1) 0.5 (8.6) (21.0) 1.1 (19.9)credit (note 4) Profit for the 25.7 (2.0) 23.7 20.9 (1.3) 19.6 52.4 (3.0) 49.4period Attributable to: Equity holders 24.1 (2.0) 22.1 19.9 (1.3) 18.6 49.6 (3.0) 46.6of the parent Minority 1.6 - 1.6 1.0 - 1.0 2.8 - 2.8interest 25.7 (2.0) 23.7 20.9 (1.3) 19.6 52.4 (3.0) 49.4 Earnings per p p pshare (note 6) Basic 17.7 15.0 37.5 Diluted 17.4 14.8 36.9
Dividend per share: 2008 proposed and 5.3 5.0 16.22007 paid (note 7) Unaudited condensed consolidated statement of recognised income and expense
For the six months ended 30 June 2008
Six Six Year ended months months 31 ended 30 ended 30 December June 2008 June 2007 2007 ‚£million ‚£million ‚£million Exchange differences on translation of foreign 2.7 - 3.4operations
Gains on revaluation of available-for-sale 0.3 0.3
-
financial assets (excluding joint ventures) Gains/(losses) on cash flow hedges (joint 3.6 21.6 (2.0)ventures) (Losses)/gains on available-for-sale financial (30.9) (32.4) 25.8assets (joint ventures) Actuarial (losses)/gains on defined benefit (32.6) 45.0 15.7pension schemes
Deferred tax on items taken directly to equity 16.7 (11.6) (13.8)
Net (loss)/income recognised directly in equity (40.2) 22.9 29.1 Profit for the period 23.7 19.6 49.4
Total recognised (loss)/income (16.5) 42.5
78.5 Attributable to: Equity holders of the parent (18.1) 41.5 75.7 Minority interest 1.6 1.0 2.8 (16.5) 42.5 78.5
Unaudited condensed consolidated balance sheet
At 30 June 2008 30 June 30 June 31 December 2007 2008 2007 ‚£million ‚£million ‚£million Non-current assets Goodwill 228.8 228.4 228.4 Other intangible assets 33.4 37.2 34.8 Property, plant and equipment 124.4 107.7 117.6 Interests in joint ventures 68.7 53.9 82.1
Interests in associated undertakings 40.5 30.4
39.3 Investments 0.1 0.1 0.1 Deferred tax asset 13.0 - 5.1 508.9 457.7 507.4 Current assets Inventories 21.0 14.7 15.6 Trade and other receivables 420.1 363.9 370.7 Cash and deposits 52.2 39.7 69.4 493.3 418.3 455.7 Total assets 1,002.2 876.0 963.1 Current liabilities Bank overdrafts and loans (21.2) (2.4) (4.9) Unsecured loan notes - (1.0) (1.0) Trade and other payables (523.4) (479.2) (478.3) Short-term provisions (8.7) (7.9) (5.8) (553.3) (490.5) (490.0) Net current liabilities (60.0) (72.2) (34.3) Non-current liabilities Bank loans (145.0) (136.8) (163.0) Trade and other payables (15.8) (11.1) (17.8) Long-term provisions (24.2) (24.9) (26.0) Retirement benefit obligation (110.5) (60.2) (83.1) (295.5) (233.0) (289.9) Total liabilities (848.8) (723.5) (779.9) Net assets 153.4 152.5 183.2 Equity Share capital 12.5 12.5 12.5 Share premium account 112.7 110.9 111.9 Capital redemption reserve 0.1 0.1 0.1 Merger reserve 49.0 49.0 49.0
Hedging and translation reserves 22.0 11.3
38.7 Investment in own shares (0.5) (0.5) (0.5) Retained earnings (44.2) (31.9) (30.1) Equity attributable to equity holders of 151.6 151.4 181.6the parent Minority interest 1.8 1.1 1.6 Total equity 153.4 152.5 183.2
Unaudited condensed consolidated cash flow statement
For the six months ended 30 June 2008
Six Six Year ended months months ended ended 30 June 30 June 31 December 2007 2008 2007 ‚£million ‚£million ‚£million Operating activities Total operating profit 35.2 27.4 69.2 Adjustments for:
Amortisation of acquired intangible assets 2.5 2.4
4.8
excluding associates amortisation Depreciation of property, plant and 10.8 9.5
21.5equipment Profit on disposal of property and - (0.6) (1.0)investments Pension payments in excess of the income (5.2) (5.0) (9.9)statement charge Total share of result of associates and joint (9.9) (5.8) (18.2)ventures
Equity settled share based payments 1.3 0.7
2.0
Gain on disposal of property, plant and (4.5) (5.4) (8.0)equipment
Operating cash flows before movements in 30.2 23.2
60.4working capital
(Increase)/decrease in inventories (5.0) 0.7
0.1 Increase in receivables (50.2) (53.7) (65.7) Increase in payables 44.5 64.0 70.2 Cash generated by operations 19.5 34.2 65.0 Taxes (paid)/received (8.1) 2.7 (4.5)
Net cash from operating activities 11.4 36.9
60.5 Investing activities Interest received 2.9 3.8 6.5 Increase in investment in associates - (9.1)
(9.1)
Dividends received from associates and joint 7.7 6.5 8.4ventures Proceeds on disposal of property, plant and 10.2 10.5 21.5equipment Purchases of property, plant and (21.7) (17.1) (43.8)equipment
Purchase of subsidiary undertaking (0.3) -
-
Investment in joint ventures - PFI (5.0) - (2.8)investments
Repayment of sub debt - PFI joint 0.2 0.1
-ventures Net cash used in investing activities (6.0) (5.3) (19.3) Financing activities Interest paid (4.4) (4.2) (9.1) Dividends paid to equity shareholders (14.0) (13.1)
(19.3)
Dividends paid to minority shareholders (1.3) (1.3) (2.6) Issue of shares 0.8 1.8 2.7
(Decrease)/increase in bank borrowings (18.0) (4.2)
22.8
Movement in obligations under finance (0.7) (0.3)
0.5leases Redemption of loan notes (1.0) (0.4) (0.4) Net cash used in financing activities (38.6) (21.7)
(5.4)
Net (decrease)/increase in cash and cash (33.2) 9.9
35.8equivalents
Cash and cash equivalents at beginning 64.5 28.4
28.4of period
Effect of foreign exchange rate changes (0.3) 0.3
0.3
Cash and cash equivalents at end of 31.0 38.6
64.5period
Cash and cash equivalents comprise
Cash and deposits 52.2 39.7 69.4 Bank overdrafts (21.2) (1.1) (4.9) 31.0 38.6 64.5
Reconciliation of net cash flow to movement in
net debt
Net (decrease)/increase in cash and cash (33.2) 9.9
35.8equivalents Decrease/(increase) in bank borrowings 18.0 4.2
(22.8)
Repayments of obligations under finance 0.7 0.3
0.8leases Increase in finance leases - (0.8) (1.3) Redemption of loan notes 1.0 0.4 0.4
Change in net debt resulting from cash (13.5) 14.0
12.9flows
Effect of foreign exchange rate changes (0.3) 0.3
0.3
Movement in net debt during the period (13.8) 14.3
13.2 Net debt - opening (101.6) (114.8) (114.8) Net debt - closing (115.4) (100.5) (101.6)
Notes to the unaudited Interim Financial Statements For six months ended 30 June 2008
1. General information
Interserve Plc (the Company) is a company incorporated in the United Kingdom.The half - year results and condensed consolidated financial statements for thesix months ended 30 June 2008 (the Interim Financial Statements) comprise theCompany and its subsidiaries (together referred to as the Group) and theGroup's interest in joint ventures and associates. The information contained inthis Interim Financial Statements does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985.A copy of the statutory accounts for the year ended 31 December 2007 has beendelivered to the Registrar of Companies. The auditors' report on those accountswas unqualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985.
The Interim Financial Statements for the six months ended 30 June 2008 have been reviewed but have not been audited.
2. Accounting policies
The Interim Financial Statements have been prepared in accordance with IAS 34Interim Financial Reporting, the recognition and measurement criteria ofInternational Financial Reporting Standards (IFRSs) as adopted by the EuropeanUnion, and the disclosure requirements of the Listing Rules. The InterimFinancial Statements do not include all information required for full annualfinancial statements, and should be read in conjunction with the Annual Reportand Financial Statements for the year ended 31 December 2007.The accounting policies and methods of computation followed in the InterimFinancial Statements are consistent with those as published in the Group'sAnnual Report and Financial Statements for the year ended 31 December 2007 andwhich are available on the Company's website at www.interserve.com. In additionthese accounting policies used are consistent with those that the directorsintend to use in the Annual Report and Financial Statements for the year ending31 December 2008.
At the date of authorisation of these Interim Financial Statements the following standards and interpretations were in issue but not yet effective and therefore have not been applied in these Interim Financial Statements:
IFRS 8 - Operating Segments;
IFRIC 12 - Service Concession Arrangements;
IFRIC 13 - Customer Loyalty Programmes;
IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
The introduction of these standards and interpretations are not expected to materially impact the Group.
The principal risks and uncertainties facing the Group are those described onpages 26 to 27 of the Group's Annual Report and Financial Statements for theyear ended 31 December 2007. The seasonality of the group results is notexpected to differ significantly from prior years
3. Business and geographical segments
The Group is organised into five operating divisions, as set out below. These divisions are the basis on which the Group reports its primary segment information.
* Facilities Management: provision of outsourced support services to public-
and private-sector clients.
* Specialist Services: mechanical and electrical design, installation and
maintenance; asbestos surveying and remedial work; security services; and
specialist cleaning operations. * Project Services: design, construction and maintenance of buildings and infrastructure * Equipment Services: design, hire and sale of formwork, falsework and associated access equipment.
* PFI Investments: transaction structuring and management of the Group's PFI
activities. The Joint ventures - PFI Investments segmental figures
represent the Group's share of its PFI special purpose companies.
Segment information about these operating divisions is presented below.
Revenue Result Six Six Year Six months Six Year months months ended ended months ended ended ended ended 30 June 30 June 31 30 June 30 June 31 December December 2008 2007 2007 2008 2007 2007 ‚£million ‚£million ‚£million ‚£ ‚£ ‚£million million million Facilities Management 393.8 378.0 733.1 14.0 12.7 27.9 Specialist Services 88.5 88.8 190.2 2.0 2.7 6.7 Project Services 406.6 362.0 759.5 15.2 10.9 29.4 Equipment Services 79.2 60.6 132.0 13.7 10.0 23.9 Joint ventures - PFI - - - 1.5 0.8 2.1Investments Inter-segment (54.5) (28.3) (76.8) - - -elimination 913.6 861.1 1,738.0 46.4 37.1 90.0 Group Services (8.4) (7.9) (16.7)
Profit on disposal of property - 0.6
1.0and investments Amortisation of acquired (2.8) (2.4) (5.1)intangible assets 35.2 27.4 69.2 Investment revenue 19.2 19.5 38.1 Finance costs (20.7) (18.7) (38.0) Profit before tax 33.7 28.2 69.3 Tax (10.0) (8.6) (19.9) Profit after tax 23.7 19.6 49.4Net assets / (liabilities) 30 June 30 June 31 December 2008 2007 2007 ‚£million ‚£ ‚£million million Facilities Management (7.8) (2.4) (21.3) Specialist Services (7.0) (6.3) (7.9) Project Services (104.0) (101.5) (87.5) Equipment Services 123.5 105.3 112.1 Joint ventures - PFI 68.7 52.4 82.1Investments 73.4 47.5 77.5 Group Services 193.6 204.4 205.7 267.0 251.9 283.2 Net debt (115.4) (100.5) (101.6) Net assets (excluding minority 151.6 151.4 181.6interest) Geographical segmentsFacilities Management and Specialist Services are predominantly based in theUnited Kingdom. The Project Services division is located in the United Kingdomand has investments in associates in the Middle East. Equipment Services hasoperations in all of the geographic segments listed below.
The table below provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services.
Revenue by geographical market Total operating profit
Six Six Year Six Six Year months months ended months months ended ended ended ended ended 30 June 30 June 31 30 June 30 June 31 December December 2008 2007 2007 2008 2007 2007 ‚£ ‚£ ‚£million ‚£million ‚£million ‚£million million million United Kingdom 901.7 839.9 1,704.2 24.2 22.4 51.6 Rest of Europe 14.2 12.2 28.0 2.3 2.7 4.9 Middle East & Africa 29.0 17.1 39.7 14.0 8.1 25.3 Australasia 16.8 11.9 26.4 4.6 2.2 6.1 Far East 4.2 4.2 8.5 (0.4) (0.4) (2.3) Americas 2.2 4.1 8.0 0.2 1.3 2.3
Inter-segment elimination (54.5) (28.3) (76.8) - -
- 913.6 861.1 1,738.0 44.9 36.3 87.9 Joint ventures - PFI 1.5 0.8 2.1Investments Group Services (8.4) (7.9) (16.7)
Profit on disposal of property - 0.6
1.0and investments Amortisation of acquired (2.8) (2.4) (5.1)intangible assets 35.2 27.4 69.2Net assets / (liabilities) 30 June 30 June 31 December 2007 2008 2007 ‚£million ‚£million ‚£million United Kingdom (129.7) (109.4) (128.0) Rest of Europe 28.2 19.2 25.1 Middle East & Africa 64.7 40.7 54.2 Australasia 21.2 20.3 19.8 Far East 14.3 18.8 18.0 Americas 6.0 5.5 6.3 4.7 (4.9) (4.6)
Joint ventures - PFI Investments 68.7 52.4 82.1
Group Services 193.6 204.4 205.7 267.0 251.9 283.2 Net debt (115.4) (100.5) (101.6) Net assets (excluding minority 151.6 151.4 181.6interest) 4. Income tax expense 5. Six Year
Six months ended months ended 31
30 June 2008 ended 30 December June 2007 2007 ‚£ ‚£ ‚£ million million million UK 7.1 6.8 14.2 taxation Overseas 2.1 1.8 3.7 taxation Deferred 0.8 - 2.0 taxation 10.0 8.6 19.9 Effective 29.7% 30.5% 28.7% tax rate
The effective corporation tax charged represents the best estimate of the weighted average annual corporation tax rate expected for the full financial year.
In addition to the income tax charged to the income statement, the followingdeferred tax charges/(credits) have been recorded directly in equity in theperiod: Six months Six months Year ended ended 30 ended 30 31 June 2008 June 2007 December 2007 ‚£million ‚£million ‚£million Tax on actuarial (loss)/gain on pension (9.1) 13.6 5.4liability
Impact of the change in tax rate relating to - 1.2 1.2 the deferred tax on the pension liability
Tax on fair value adjustment on cash flow 1.1 6.5 (0.6)hedges
Tax on the fair value adjustments on (8.7) (9.7)
7.8
available for sale financial assets within the PFI special purpose companies
(16.7) 11.6 13.8
5. Reconciliation of movement in equity
Six months Six months Year ended 31 ended 30 ended 30 June December 2007 June 2008 2007 ‚£million ‚£million ‚£million Opening equity attributable to equity 181.6 120.5 120.5holders of the parent
Total recognised income and expense for (18.1) 41.5 75.7 the period attributable to equity
holders of the parent Equity dividend paid (14.0) (13.1) (19.3) Issue of shares 0.8 1.8 2.7 Share - based payments 1.3 0.7 2.0
Net (reduction)/addition to equity (30.0) 30.9
61.1
attributable to equity holders of the
parent Equity attributable to equity holders 151.6 151.4 181.6of the parent Minority 1.8 1.1 1.6interest 153.4 152.5 183.2 6. Earnings per share
The calculation of earnings per share is based on the following data:
Earnings Six months Six months Year ended ended 30 ended 30 31 June 2008 June 2007 December 2007 ‚£million ‚£million ‚£million Earnings for the purposes of basic 22.1 18.6
46.6
earnings per share being net profit attributable to equity holders of the
parent Profit on disposal of property and - (0.6) (1.0)investments Amortisation of acquired 2.8 2.4 5.1intangibles Tax effect of above (0.8) (0.5) (1.1)adjustments Headline 24.1 19.9 49.6earnings Earnings for the purposes of diluted 22.1 18.6 46.6earnings per share Weighted average number of Six months Six months Year ended 31shares ended 30 ended 30 December 2007 June 2008 June 2007 Number Number Number thousand thousand thousand
Weighted average number of ordinary 124,861 123,863 124,221 shares for the purposes of basic and
headline earnings per share
Effect of dilutive potential ordinary
shares: Share - based payments 2,364 1,981 2,225
Weighted average number of ordinary 127,225 125,844 126,446 shares for the purposes of diluted
earnings per share Earnings per Six months Six months Year endedshare ended 30 ended 30 31 December June 2008 June 2007 2007 pence pence pence Headline earnings per share 19.3 16.1 39.9 Basic earnings per share 17.7 15.0 37.5 Diluted earnings per share 17.4 14.8 36.9 7. Dividends Dividend Six months Six months Year per share ended 30 ended 30 ended 31 June 2008 June 2007 December 2007 pence ‚£ ‚£ ‚£million million million
Final dividend for the year ended 31 11.2 14.0 -
-December 2007 Final dividend for the year ended 31 10.6 - 13.1 13.1December 2006 Interim dividend for the year ended 5.0 - - 6.231 December 2007
Amount recognised as distribution to equity 14.0 13.1 19.3 holders in the period
The proposed interim dividend of 5.3p per share, amounting to ‚£6.6m, was approved by the directors on 12 August 2008 and has therefore not been included as a liability as at 30 June 2008.
8. Defined benefit retirement schemes
The following table sets out the key IAS 19 assumptions used to assess the present value of the defined benefit obligation.
Six months Six months ended Year ended 31 ended 30 June 30 June 2007 December 2007 2008 Retail price inflation 3.9% pa 3.1% pa 3.3% pa Discount rate 6.5% pa 5.8% pa 5.8% pa Pension increases in payment: LPI/RPI 3.7%/3.9% 3.1%/3.1% 3.2%/3.3% Fixed 5% 5.0% 5.0% 5.0% 3% or RPI if higher 3.9% 3.5% 3.6%(capped at 5%) General salary increases 4.65 - 5.40% pa 3.85 - 4.60% pa 4.05 - 4.80% pa
The amount included in the balance sheet arising from the Group's obligations in respect of the various pension schemes is as follows:
30 June 30 June 31 December 2008 2007 2007 ‚£million ‚£million ‚£million
Present value of defined benefit 557.6 532.8 563.4obligation Fair value of scheme assets (447.1) (472.6) (480.3) Liability recognised in the balance 110.5 60.2 83.1sheet
The amounts recognised in the income statement are as follows:
Six months Six months Year ended ended 30 ended 30 31 December June 2008 June 2007 2007 ‚£million ‚£million ‚£million
Employer's part of current service cost 7.3 6.3
13.8 Interest cost 16.3 14.5 28.9 Expected return on scheme (16.3) (15.7) (31.6)assets
Total expense recognised in the income 7.3 5.1
11.1
statement Actuarial gains and losses are recognised in full in the period in which theyoccur. They are recognised directly in equity and presented in the statement ofrecognised income and expense. 9. Share capital Six months Six months Year ended ended 30 ended 30 31 December June 2008 June 2007 2007 Shares Shares Shares million million million At 1 January 124.8 123.8 123.8 Exercised share - based 0.3 0.6 1.0payments At the end of the period 125.1 124.4 124.810. Acquisitions On 11 January 2008, the Group acquired 100% of the share capital of R & DHoldings Ltd, for a total consideration of ‚£1.0 million of which ‚£0.7 millionis deferred and contingent consideration. A preliminary fair value exercise hasbeen performed and ‚£1.1 million and ‚£0.4 million of intangible assets andgoodwill, respectively, has been recognised.
11. Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Key management compensation is disclosed on pages 52 to 55 in the Annual Report and Financial Statements for the year ended 31 December 2007.
During the period, Group companies entered into the following transactions with related parties who are not members of the Group:
Six months Six months Year ended ended 30 ended 30 31 December June 2008 June 2007 2007 ‚£million ‚£million ‚£million Sales of goods Joint ventures - PFI 109.0 55.5 134.6 Investments and services Associates 1.0 0.3 2.7
Purchases of Joint ventures - PFI - -
- Investments goods and Associates 0.8 - 1.2services
Amounts owed by Joint ventures - PFI 0.9 -
0.8 Investments related parties Associates 2.6 2.5 2.5
Amounts owed to Joint ventures - PFI - -
- Investments
related parties Associates 0.2 0.2
0.3
Sales and purchases of goods and services to related parties were made on normal trading terms.
The amounts outstanding per the above table are unsecured and will be settledin cash. No guarantees have been given or received on these amounts. Noprovisions have been made for doubtful debts in respect of the amounts owed
byrelated parties.12. Contingent liabilities As part of the Office of Fair Trading's ongoing review of tender activity inthe construction sector, it wrote to the Group with regard to potentialbreaches of competition law in respect of 16 tenders submitted between 2000 and2005. These tenders represent a very small proportion of the bidding activityduring this period. In April 2008, the OFT published its Statement ofObjections against 112 companies in the construction sector in England,including the Group. The Statement of Objections alleges suspected `coverpricing' by the Group on three construction industry tenders between October2000 and September 2001. The Group has taken the opportunity to makerepresentations before any final decision is made. Given the stage of the OFT'sreview it is not possible to predict whether this will have a materiallyadverse effect on the Group's financial position or results of operations.
Other contingent liabilities of the Group have not materially changed from those published in the Annual Report and Financial Statements for the year ended 31 December 2007.
vendorRelated Shares:
Interserve