29th Feb 2008 07:01
Helphire Group PLC29 February 2008 Date 29th February 2008 Contacts Mark B Jackson Tel: 01225 321 134 David E Lindsay 01225 321 134 Helphire Group plc Chris Steele Tel: 07979 604 687 Tarquin Edwards 07879 458 364 Adventis Financial PR HELPHIRE GROUP PLC Interim Results for the six months ended 31 December 2007 Chief Executive's Statement for the six months ending 31 December 2007 Highlights Helphire is pleased to announce: • Hire cases increased by 41%, turnover increased by 45% • Dividend increased by 25% to 6.5p • Operating profit increased by 16% to £23.5m • Profit before tax increased by 7% to £19.4m • Eight new insurer contracts signed in the period • Increased banking facilities at the same cost of borrowing to finance strong growth. A third bank has joined the banking syndicate • Weighted average age of claims has fallen by 9% in the period • Accelerated claims settlement process continues to develop • Exceptional current year growth provides an excellent platform for the future; focus on profitability and cash flow • Fleet ownership model continues to deliver reductions in fleet holding costs • Legal Services development accelerates I have pleasure in presenting the Chief Executive's Statement for the six monthsended 31 December 2007. Overview The UK non-fault accident management market is maturing and all participants inthe provision of services to accident victims are now utilising some or all ofthe services of accident management companies. This includes insurancecompanies, insurance brokers, resellers of insurance such as banks, legalexpense insurance companies, solicitors, car manufacturers and car dealerships/repair shops. This has resulted in rapid growth in business in the first half ofthis financial year with an increase of 41% in the number of cases handled toover 92,000 and a concomitant increase in turnover of 45% to £184m. We are alsoseeing an increasing number of insurers using us for other replacement vehicleproducts. While this is typically lower margin business we expect increasingprofitability due to reduced fleet holding costs and contribution to fixedoverheads. This period has also seen the Group commence eight new insurer contracts and wenow have relationships with many of the UK's leading motor insurers as customersand all as counterparties. Helphire's ever closer relationship with insurersputs us in a stronger position in the longer term as our market matures and itis already facilitating steps which will bring financial benefits to bothHelphire and the insurer. In this period, the weighted average age of a claimhas fallen by 9% compared to 8% in the whole of the last financial year. Underthe ABI GTA, to which we and the insurers subscribe, there is a financialincentive for insurers to settle claims promptly but achieving more rapidsettlement requires close cooperation between ourselves and insurers.Discussions regarding accelerated settlement are now underway with insurersrepresenting 70% of the market. A step change in settlement profile howeverleads to a short term impact on gross and net margins as 'late paymentpenalties' collected under the terms of the ABI GTA decrease. This iscompensated for by the reduction in the costs of financing and handling claimswhich more rapid claims settlement brings but this will not be seen until nextfinancial year. The overwhelming driver of cash flow in our business is growth. In the firstsix months of the year, our rapid growth meant that we were adding new casesfaster than existing cases were being settled so the value of our debtorsnaturally increased commensurately. Helphire's rapid growth masks theunderlying improvement in such measures as debtor days. It is very important tomaintain our rapid increase in market penetration as we believe that organicgrowth will slow over the course of the next two to three years as ever-more ofthe available cases are the subject of a credit hire. As the market continues to develop and the new claims settlement processes takefull effect, we expect to see a recovery in net margin and improved cashgeneration combined with the opportunity to take advantage of the cost reductionand efficiency gains from initiatives such as Project Expedite, the businessprocess re-engineering project which reaches full implementation next year. The change of the Group's year-end to 30 June has reduced seasonality ofbusiness volumes due to winter weather. However, the second half of thefinancial year still includes the busiest months. Helphire continually appraises the relative merits of owning or contract hiringvehicles. Over the last two years we have moved from a position of owning aroundtwenty per cent of a fleet of 10,000 vehicles to over eighty per cent of a fleetof 20,000. The cost saving of owning the vehicles is considerable. The residualrisk associated with the second hand disposal of the vehicles is effectivelyidentical whether they are owned or hired as contract hire rates move to reflectresidual values. The average holding period for the fleet is 12 months.However, this is constantly under review and may rise slightly if commercialbenefits can be secured. Our banking syndicate is happy to fund this expansionand we recently negotiated increased facilities with an enlarged syndicate. Thisnew facility is at the same cost of borrowing as our existing facility. Operational Performance Accident Management UK (Automotive, Albany, Helphire) Strong growth in core credit hire and repair business has been achieved bothfrom new and existing clients. A number of new insurer clients startedreferring cases in the period and many long-standing customers are nowincreasing the penetration of the service and referring more cases as thebenefits both in terms of service, cost saving and income generation becomeclearer. 92,833 hires were started in the period (2006: 65,714), an increase of 41% and35,479 repairs (2006: 23,893), an increase of 48%. A total of 17,216 personalinjury cases were accepted (2006 14,355), an increase of 20% helped in part bybusiness combinations in the period. Over 97% of hires were fulfilled using the Group's own fleet. The Group fleet isnow operated out of 31 depots around the United Kingdom with 6 further depotscurrently being sourced. In November 2007, Cabaid was acquired. Cabaid is a provider of replacementvehicles to the taxi market, offering a full range of licensed vehicles and alsospecialising in the customisation of replacement vehicles for the specific needsof the relevant local authorities. This acquisition significantly strengthensthe Group's presence in this particular niche of the accident management market.The business is performing in line with expectations. Legal Services In August 2007, a financial agreement with CS2 Lawyers Limited based inChesterfield was announced, alongside the acquisition of the CS2 Group of LegalServices companies. This marked a significant step forward in the development ofthe Legal Services Division of the Group, which we regard as an excitingopportunity over the next few years. We are already seeing strong growth in ourPI business and expect to see further growth in other Legal Service offerings. Accident Management Overseas A Spanish accident management operation has now commenced trading. Based inMadrid it is now processing approximately 30 hires per month. The target for theyear to 30 June 2008 is a modest one, the intention being to test the viabilityof the service in terms of profitability and acceptance by the insuranceindustry before committing significant investment. The results to date arepromising. Further market research is being carried out in France and Germany with theintention of exploring these markets in due course. Claims Settlements Traditionally, the accident management industry has handled each case as anindividual claim against a third-party insurer. This process is time consuming,prolonging claims settlement and slowing cash collection. The insurer incurs claims handling costs, has to reserve cash against thepotential value of each claim and incurs 'late payment penalties' of up to 30%.The accident management company also incurs claims handling costs and cashcollection is slow which increases borrowing requirements and financing costs. The strength of our insurer relationships is allowing Helphire to explorevarious methods of more rapid 'bulk' settlement involving single invoices forgroups of cases which are paid to an agreed formula and settled by the insurerwithin a much reduced period. As the average claims settlement time falls, thelevel of 'late payment penalties' also declines. In the short-term, more rapidclaims settlement therefore reduces net income per case but in the medium term,claims handling and borrowing costs will be reduced. One such settlement has recently been entered into which will have the effect ofaccelerating payment of an insurer's entire debt to the Group totalling £25m. Financial Results and Position Revenue increased by 45% to £183.9m (2006: £126.5m). Gross profit increased by27% to £67.0m (2006: £52.8m). Operating profit increased by 16% to £23.5m (2006:£20.3m) Profit before taxation increased by 7% to £19.4m (2006: £18.1m).Excluding the impact of amortisation and impairment of intangible assets, shareoption charges and aborted acquisition costs, adjusted profit before taxincreased by 6% to £21.8m (2006: £20.6m). We have historically referred to debtor days, calculated by dividing total Groupdebtors at the balance sheet date by the previous twelve months' turnover andmultiplying by 365. This ratio is inflated in a rapidly growing business suchas ours when the period end debtor balance is far higher than the average forthe period. This makes it a poor indicator of cash flow performance of thebusiness. At 31 December 2007 this ratio was 248 (31 December 2006: 213). Itshould also be noted that accrued income (i.e. hires and repairs which have beencompleted but not yet billed) is included in the turnover and debtor figures inthe simple calculation of debtor days. Stripping out this element, debtor dayswould be 201. We have experienced a reduction in the weighted average age ofdebt by 9% in the six month period (year ended 30 June 2007: 8% in 12 months). Diluted earnings per share increased by 13% to 9.88p (2006: 8.74p). Dilutedearnings per share adjusted for amortisation of intangible assets, share-basedpayment charges and non-recurring items increased by 9% to 11.10p (2006: 10.23p) Excluding fleet finance, indebtedness of the Group rose to £122.0m comprising£54.7m of working capital borrowings, £61.1m of acquisition finance and £6.2m ofproperty related mortgages. Fleet finance was £29.9m, bringing totalindebtedness (excluding fleet finance lease liabilities of £201.7m) to £151.9m.A new banking facility was agreed at the end of February, which introduced athird bank to the syndicate. This facility includes £85m of working capital,£30m of acquisition finance, £65m of fleet finance and £40m of term loan. Thetotal bank facility is therefore increased by £40m from £180m to £220m at thesame borrowing cost as the previous facility. The Group's net assets at 31 December 2007 were £135.0m (2006: £132.0m). Theincrease in net assets is explained fully in the condensed consolidatedstatement of changes in equity. The purchase of Helphire shares by an employeebenefit trust, for the purpose of satisfying share-based payment awards, hasreduced net assets by £5.5m, as the cost of the shares is required to beaccounted for directly in reserves. Infrastructure The Group now operates out of a total of 195,000 square feet of office spacebased in Bath, Bristol, Northwich, Chesterfield and Peterlee. A further 85,000square feet of space now has been sourced which will fulfil space-planningrequirements for 2008-9. At 31 December 2007 a total of 3,100 people wereemployed by the Group (2006: 1,925) of these 310 were based in Peterlee, 125 inNorthwich, 260 in Chesterfield, 845 in the branch network distributed around theUnited Kingdom, 80 in Surrey, and the remaining 1,480 in Bath and Bristol. The business process re-engineering programme Project Expedite has made progressin the period. Hire cases were first processed in August 2007 and the nexttarget is a pro rata claims handling capacity of 36,000 cases per annum bySeptember 2008. Business case financial benefits will begin to be experienced inthe next financial year. The new system offers significant efficiencies in termsof the speed and cost of claims processing. Principal risks and uncertainties The principal risks and uncertainties facing the Group have not changedsignificantly from those described in the Annual Report and Accounts for theyear ended 30 June 2007 and we anticipate these will also be relevant for thesecond half of the financial year. Liquidity risk is being addressed by thesteps taken to reduce the average case settlement period discussed earlier inthis Statement and the new banking facilities outlined above. Risks relating tothe fleet are managed by continuous review of optimum holding periods asdiscussed earlier Interest rate risk is addressed by the use of hedging. TheGroup entered into an interest swap arrangement in January 2008 which isdesigned to reduce the Group's exposure to adverse interest rate movements. Dividends Last year, a total dividend of 11.0p was paid for the whole year. At the end ofthe first six months of that financial period, the interim divided payment was5.2p. The progressive dividend policy will continue. I am therefore pleased toannounce that the Board is recommending an interim dividend of 6.5p, which willbe paid on 1 May 2008 to shareholders on the register at 28 March 2008. Responsibility statement The directors are responsible for the preparation of the condensed consolidatedfinancial statements and interim management report comprising this set ofInterim Results for the six months ended 31 December 2007, each of whomaccordingly confirms that to the best of his knowledge: • The condensed consolidated financial statements have been prepared in accordance with IAS34; • The interim management report includes a fair review of the information required by the Financial Statements Disclosure and Transparency Rules ("DTR") 4.2.7R (indication of important events during the first six months and their impact on the financial statements and description of principal risks and uncertainties for the remaining six months of the year); and • The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). The directors of Helphire Group plc are listed in the Annual Report and Accountsfor the year ended 30 June 2007. Mark Jackson Chief Executive Condensed consolidated income statement for the six months ended 31 December 2007 Notes Unaudited Unaudited 6 months ended 6 months ended 31 December 31 December 2007 2006 £'000 £'000Revenue______________________________________________________________________________________________________________ Existing operations 178,501 126,514 Business combinations 13 5,419 -______________________________________________________________________________________________________________ 183,920 126,514 Cost of sales (116,912) (73,745)______________________________________________________________________________________________________________ Gross profit 67,008 52,769 Administrative expenses: Abortive acquisition costs - (766) Amortisation of intangible assets (1,058) (1,148) Impairment of intangible assets - (406) Share-based payment charge (1,317) (164) Other (43,365) (31,723)______________________________________________________________________________________________________________ (45,740) (34,207) Other operating income 2,233 1,743______________________________________________________________________________________________________________ Operating profit analysed between Existing operations 22,065 20,305 Business combinations 13 1,436 -______________________________________________________________________________________________________________ Total operating profit 23,501 20,305 Finance costs (4,111) (2,238)______________________________________________________________________________________________________________ Profit on ordinary activities before taxation 19,390 18,067 Tax on profit on ordinary activities 4 (5,521) (5,784)______________________________________________________________________________________________________________ Profit for the period 13,869 12,283______________________________________________________________________________________________________________ Earnings per share Basic 5 10.03 9.01 Diluted 5 9.88 8.74______________________________________________________________________________________________________________ Adjusted earnings per share Basic 5 11.27 10.55 Diluted 5 11.10 10.23 ______________________________________________________________________________________________________________ Condensed consolidated balance sheet as at 31 December 2007 Notes Unaudited Audited 31 December 30 June 2007 2007 £'000 £'000____________________________________________________________________________________________________ Assets Non-current assets: Goodwill 73,877 67,052 Intangible assets 7 9,263 7,502 Property, plant and equipment (including vehicles) 8 213,426 144,109 Investments 300 300 Deferred tax asset 2,232 2,054 Other receivables - 2,023____________________________________________________________________________________________________ 299,098 223,040____________________________________________________________________________________________________ Current assets: Trade and other receivables 249,950 191,494 Tax receivable - 432 Cash and cash equivalents 9,793 4,895____________________________________________________________________________________________________ 259,743 196,821____________________________________________________________________________________________________ Total assets 558,841 419,861____________________________________________________________________________________________________ Liabilities: Current liabilities: Trade and other payables (54,411) (52,865) Tax liabilities (7,705) - Obligations under finance leases 10 (152,722) (126,237) Short term borrowing and overdrafts 9 (92,315) (47,221)____________________________________________________________________________________________________ (307,153) (226,323)____________________________________________________________________________________________________ Net current liabilities (47,410) (29,502) Non-current liabilities: Long-term borrowings and overdrafts 9 (59,272) (33,498) Deferred tax liability (8,519) (7,394) Obligations under finance leases 10 (48,943) (20,606)____________________________________________________________________________________________________ (116,734) (61,498)____________________________________________________________________________________________________ Total liabilities (423,887) (287,821)____________________________________________________________________________________________________ Net assets 134,954 132,040____________________________________________________________________________________________________ Equity Share capital 11 6,945 6,910 Share premium account 11 70,039 68,664 ESOP reserve (5,524) - Equity reserve 7,347 6,206 Retained earnings 56,147 50,260____________________________________________________________________________________________________ Total equity 134,954 132,040____________________________________________________________________________________________________ Condensed consolidated statement of changes in equity for the six months ended31 December 2007 Share Share premium ESOP Equity Retained capital account reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000_______________________________________________________________________________________________________________ Six months ended 31 December 2007 Balance at 1 July 2007 6,910 68,664 - 6,206 50,260 132,040 Profit for the period - - - - 13,869 13,869 Issue of new ordinary shares 35 1,375 - - - 1,410 Share based incentive plans - - - 1,317 - 1,317 Current tax - share based - - - 46 - 46incentive plan Deferred tax - share based - - - (222) - (222)incentive plan Dividend - - - - (7,982) (7,982) Helphire Group plc shares - - (5,524) - - (5,524)acquired by ESOP_______________________________________________________________________________________________________________ Balance at 31 December 2007 6,945 70,039 (5,524) 7,347 56,147 134,954_______________________________________________________________________________________________________________ Condensed consolidated cash flow statement for the six months ended 31 December 2007 Unaudited Unaudited 6 months ended 6 months ended 31 December 31 December 2007 2006 £'000 £'000 £'000 £'000___________________________________________________________________________________________________________ Cash flows from operating activities: Operating profit 23,501 20,305 Depreciation, amortisation and impairment 19,897 10,464charges Gains on sale of tangible fixed assets (397) (300) Shared based payment charge 1,317 164 Increase in debtors (47,112) (30,353) Increase in creditors 224 3,584___________________________________________________________________________________________________________ Cash (used in) / generated from operations (2,570) 3,864 Bank and loan interest paid (3,732) (2,009) Interest element of finance lease rentals (379) (229)___________________________________________________________________________________________________________ (4,111) (2,238) Taxation received / (paid) 610 (1,716)___________________________________________________________________________________________________________ Net cash flow from operating activities (6,071) (90) Cash flows from investing activities: Purchase of property, plant and equipment (18,821) - Purchase of other intangible assets (673) (2,088) Proceeds from sale of property and 39,981 12,219equipment Helphire Group plc shares acquired by ESOP (5,524) - Business combinations (13,072) - Deferred consideration on acquisition (1,893) -___________________________________________________________________________________________________________ Net cash flow from investing activities (2) 10,131___________________________________________________________________________________________________________ Cash flows from financing activities: Net proceeds from issue of ordinary share 1,410 1,270capital Net proceeds from issue of new loans 59,053 13,661 Repayment of borrowings (500) (20,899) Finance lease principal repayments (53,324) (12,739) Dividends paid to shareholders (7,982) (9,535)___________________________________________________________________________________________________________ Net cash flow from financing activities (1,343) (28,242)___________________________________________________________________________________________________________ Net decrease in cash and cash equivalents (7,416) (18,201) Cash and cash equivalents at beginning of (37,510) (14,423)period___________________________________________________________________________________________________________ Cash and cash equivalents at end of period (44,926) (32,624)___________________________________________________________________________________________________________ Cash and cash equivalents comprise: Cash at bank and in hand 7,852 5,900 Cash held in restricted deposit 1,941 426 Bank overdraft (54,719) (38,950)___________________________________________________________________________________________________________ (44,926) (32,624)___________________________________________________________________________________________________________ Note to the condensed consolidated cash flow statement for the 6 months ended 31December 2007 Audited Other Unaudited 1 July Cash non-cash 31 December 2007 flow changes 2007 £'000 £'000 £'000 £'000_______________________________________________________________________________________________________________ Analysis and reconciliation of net debt Net cash and cash equivalents (37,510) (7,416) - (44,926)_______________________________________________________________________________________________________________ Debt due within one year (4,816) (32,780) - (37,596) Debt due after more than one year (33,498) (25,774) - (59,272) Finance leases (146,843) 53,324 (108,146) (201,665) _______________________________________________________________________________________________________________ (185,157) (5,230) (108,146) (298,533)_______________________________________________________________________________________________________________ Net debt (222,667) (12,646) (108,146) (343,459)_______________________________________________________________________________________________________________ Audited Other Unaudited 1 July Cash non-cash 31 December 2006 flow changes 2006 £'000 £'000 £'000 £'000Analysis and reconciliation of net debt: Net cash and cash equivalents (14,423) (18,201) - (32,624)_______________________________________________________________________________________________________________ Debt due within one year (25,785) 24,492 - (1,293) Debt due after more than one year (15,487) (17,254) (6,198) (38,939) Finance leases (46,985) 12,739 (65,302) (99,548)_______________________________________________________________________________________________________________ (88,257) 19,977 (71,500) (139,780)_______________________________________________________________________________________________________________ Net debt (102,680) 1,776 (71,500) (172,404)_______________________________________________________________________________________________________________ Notes to the condensed consolidated financial statements for the 6 months ended31 December 2007 1 BASIS OF PREPARATION The condensed consolidated financial statements have been prepared usingaccounting policies consistent with International Financial Reporting Standardsand in accordance with International Accounting Standard ("IAS") 34, "InterimFinancial Reporting". The information for the year ended 30 June 2007 does not constitute statutoryaccounts as defined in Section 240 of the Companies Act 1985. A copy of thestatutory accounts for that year has been delivered to the Registrar ofCompanies. The auditors' report on these accounts was not qualified and did notcontain statements under Section 237(2) or (3) of the Companies Act 1985. 2 SIGNIFICANT ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared under thehistorical cost convention. The same accounting policies, presentation andmethods of computation have been applied in these condensed consolidatedfinancial statements as were applied in the Group's financial statements for theyear ended 30 June 2007. In the current financial year the Group has adopted IFRS7, "Financialinstruments: Disclosures". However, as IFRS7 is a disclosure standard only, itsadoption has not impacted on the condensed consolidated financial statements forthe period ended 31 December 2007. 3 SEGMENTAL INFORMATION The condensed consolidated financial statements are in respect of the Group'ssole business segment of non-fault accident services, conducted principally inthe United Kingdom. The trading activity of Helphire Spain SL during the periodwas immaterial. 4 INCOME TAX CHARGE Interim period income tax is accrued based on the estimated average annualeffective income tax rate of 28% (2006: 32%) 5 EARNINGS PER SHARE The calculation of basic and diluted earnings per share is based on thefollowing data: Unaudited Unaudited 6 months ended 6 months ended 31 December 31 December 2007 2006Earnings £'000 £'000______________________________________________________________________________________________________________ Earnings for the purposes of basic and diluted earnings per share, 13,869 12,283being net profit attributable to equity holders Number of shares Number Number Weighted average number of ordinary shares for the purposes of 138,262,631 136,251,504basic earnings per share Effect of dilutive potential ordinary shares - share options andother share plans 2,044,703 4,219,856______________________________________________________________________________________________________________ Weighted average number of ordinary shares for the purposes ofdiluted earnings per share 140,307,334 140,471,360______________________________________________________________________________________________________________ 5 EARNINGS PER SHARE (CONTINUED) The calculation of basic and diluted adjusted earnings per share is based on thenumber of shares as for the unadjusted earnings per share set out above and theprofit adjusted by the following expenses: Unaudited Unaudited 6 months ended 6 months ended 31 December 31 December 2007 2006 £'000 £'000______________________________________________________________________________________________________________ Abortive acquisition costs - 766 Amortisation of intangible assets 1,058 1,148 Impairment of intangible assets - 406 Share-based payment charge 1,317 164______________________________________________________________________________________________________________ Adjustments to profit before tax 2,375 2,484 Tax credits attributable to the above expenses (665) (394)______________________________________________________________________________________________________________ 1,710 2,090______________________________________________________________________________________________________________ 6 DIVIDENDS Unaudited Unaudited 6 months ended 6 month ended 31 December 31 December 2007 2006 £'000 £'000______________________________________________________________________________________________________________ Final dividend for the year ended 30 June 2007 of 5.8 per ordinaryshare 7,982 - Final dividend for the 15 month period ended 30 June 2006of 4.0p per ordinary share - 5,456______________________________________________________________________________________________________________ 7,982 5,456______________________________________________________________________________________________________________ An interim dividend of 6.5p for the year ending 30 June 2008 was proposed at 31December 2007 but it is not recorded in the condensed consolidated financialstatements as it has not been approved. An interim dividend of 5.2p for the yearending 30 June 2007 was proposed 31 December 2006 but was not recorded as aliability as it had not been approved. 7 INTANGIBLE ASSETS During the period the Group spent approximately £0.7m on software development.The remaining increase in intangible assets relates to customer relationshipacquired in business combinations during the period (see note 13). 8 PROPERTY, PLANT AND EQUIPMENT (INCLUDING VEHICLES) During the period the Group spent approximately £126.3m on additions beingprincipally vehicles. £107.5m of this was funded by finance leases. It alsodisposed of plant and equipment (predominantly vehicles) with a carrying amountof £39.6m for disposal proceeds of £40.0m. The remaining increase in property,plant and equipment relates to assets acquired in business combinations duringthe period (see note 13) and depreciation and amounts written off of £18.9m. 9 BORROWINGS During the period the group increased its bank overdraft by £15.8m. The Groupalso received proceeds of £59.1m from the advance of new loan funding and madeloan repayments of £0.5m. Funding arrangements in place at 31 December 2007 comprised a £150m facilityincluding Term Loans and a banking facility at a cost of 0.95% to 1.40% aboveLIBOR dependent on specific financial ratios. The facility included a Term Loanfacility of £40m, a Revolving Facility A of £50m and a Revolving Facility B of£10m. The £40m Term Loan facility is repayable at a rate of £6.3m per year, witha final bullet payment of £11.9m due in 2011. The facility also included anadditional £50m Term Loan facility which has yet to be utilised. There was alsoa fleet funding facility of £29.9m. 10 OBLIGATIONS UNDER FINANCE LEASES During the period the Group entered into new finance leases with a principalvalue of £107.5m and made principal repayments of existing finance leases of£53.3m. In addition, finance lease obligations of £0.6m were assumed in businesscombinations (see note 13). 11 SHARE CAPITAL AND SHARE PREMIUM ACCOUNT Share capital and share premium account increased during the period by £1.4m.This related principally to the issue of shares under the terms of shareincentive plans. 12 CONTINGENT ASSETS AND LIABILITIES Details of contingent assets and liabilities relating to warranty claims arisingfrom the acquisitions of Albany and Swift in 2004 and 2005 respectively weredisclosed in note 27 of the group's Annual Report for the year ended 30 June2007. Claims on behalf of the Group are being pursued but remain at an earlystage such that it is not possible to assess their success, or otherwise, withsufficient certainty. In respect of liabilities the directors have estimated thelikely impact of these matters and recognised an associated liability in thecondensed consolidated balance sheet. 13 BUSINESS COMBINATIONS On 6 August 2007 the Group acquired the entire issued share capital of E-ClaimLimited, Medirep Marketing Limited, QSIT Limited, Fleet Legal Limited andLawyer.com Limited (together "the Companies"). Also on that date the Groupentered into long term financial arrangements with CS2 Lawyers Limited ("CS2LL"), which included a loan of £5.1m used by CS2LL to purchase the trade, assetsand liabilities of CS2 Lawyers partnership. The Group has no shareholding inCS2LL. CS2LL provide uninsured loss recovery services. The Companies provideinsurance mediation services, medico-legal reports and fleet assistance. TheGroup has also exchanged contracts on the purchase of freehold property occupiedby CS2LL and the Companies for consideration of £4.2m, due to complete in March2008. On 19 November 2007, the Group acquired 100% of the issued ordinary sharecapital of Cabaid Limited and NFL Cover Limited (together "the Cabaid group").Cabaid is engaged in the provision of replacement hire vehicles to the hire andreward sector. Although the Group has no shareholding in CS2LL, the nature of its financialarrangements are such that, in accordance with the requirements of IAS 27, 'Consolidated and Separate Financial Statements', CS2LL and the Companies havebeen consolidated into the Group from 6 August 2007. The Cabaid group has beenconsolidated from 19 November 2007. 13 BUSINESS COMBINATIONS (CONTINUED) The book value and provisional fair value of the net assets consolidated and thegoodwill arising are as follows: CS2 Lawyers Limited and the Companies Carrying amount Fair value Fair value before adjustments combination £'000 £'000 £'000_______________________________________________________________________________________________________ Net assets consolidated: Intangible assets - 1,323 1,323 Property, plant and equipment (including vehicles) 719 (20) 699 Trade and other receivables 3,745 3,331 7,076 Cash and cash equivalents 766 - 766 Trade and other payables (1,527) (100) (1,627) Tax liabilities (304) (1,253) (1,557) Deferred tax liability - (379) (379)_______________________________________________________________________________________________________ 3,399 2,902 6,301_______________________________________________________________________________________________________ Goodwill arising Consideration - cash 10,880_______________________________________________________________________________________________________ 4,579_______________________________________________________________________________________________________ Net cash outflow arising Cash and cash equivalents consolidated 766 Cash consideration paid (10,880)_______________________________________________________________________________________________________ (10,114)_______________________________________________________________________________________________________ The fair value adjustments related principally to the recognition of intangibleassets on combination in accordance with IAS38, the restatement of the revenuerecognition policy for legal fees to an accruals basis in line with Group policyand IAS18, "Revenue", and recognition of deferred tax liabilities in relation tothese items as required by IAS12, "Income Taxes". The policy adopted for legalfee revenue is to recognise such revenue at the fair value of the amountreceivable for services provided in the period net of VAT and inclusive ofaccrued income at the period-end. The intangible assets recognised relate tocustomer relationships and IT development costs and are being amortised over 3to 5 years. The goodwill arising is attributable to future operating synergies, qualityoperating processes and staff and management expertise. CS2LL and the Companies together contributed revenues of £4.5m and operatingprofit of £1.3m during the period. If the business combination had beencompleted on 1 July 2007, the total Group revenue would have been £184.7m andthe profit for the period would have been £13.9m. 13 BUSINESS COMBINATIONS (CONTINUED) The book value and provisional fair value of the net assets consolidated andthe goodwill arising are as follows: The Cabaid Group Carrying amount Fair value Fair value before adjustments combination £'000 £'000 £'000_______________________________________________________________________________________________________ Net assets acquired: Intangible assets - 792 792 Property, plant and equipment (including vehicles) 722 - 722 Trade and other receivables 927 1,318 2,245 Cash and cash equivalents 1,084 - 1,084 Trade and other payables (872) (55) (927) Tax liabilities (32) (602) (634) Obligations under finance leases (617) - (617) Deferred tax liability - (237) (237)_______________________________________________________________________________________________________ 1,212 1,216 2,428_______________________________________________________________________________________________________ Goodwill arising on acquisition Consideration - cash 4,042 Deferred contingent consideration 632_______________________________________________________________________________________________________ 2,246_______________________________________________________________________________________________________ Net cash outflow arising on acquisition Cash and cash equivalents acquired 1,084 Cash consideration paid (4,042)_______________________________________________________________________________________________________ (2,958)_______________________________________________________________________________________________________ The fair value adjustments relate principally to the recognition of intangibleassets on acquisition in accordance with IAS38, "Intangible Assets", therestatement of the revenue recognition basis for credit hire to an accrualsbasis to be consistent with the Group's existing policy and IAS18, "Revenues",and recognition of the related deferred tax liabilities in accordance withIAS12, "Income Taxes". An increase in the current tax liability was alsorequired in order to reflect the estimated liability at acquisition. Theintangible assets recognised related to customer relationships and are beingamortised over 3 years. The terms of the acquisition of Cabaid provided for additional deferredcontingent consideration to become payable in the event that agreed revenues aregenerated from specified sources. The total amount potentially payable by theGroup under this arrangement is £1.2m and at this point the Directors' estimateof the likely amount that will be payable in November 2008 is £632,000. Aprovision has been made for this liability. The goodwill arising is attributable to future fleet synergies and postacquisition cost reductions. Cabaid contributed revenues of £0.9m and operating profit of £0.1m during theperiod. If the business combination had been completed on 1 July 2007, the total Grouprevenue would have been £188.9m, and the profit for the period would have been£14.5m. 14 POST BALANCE SHEET EVENTS Revised banking facilities were agreed in February 2008, which introduced athird bank to the syndicate. This facility includes £85m of working capital,£30m acquisition finance, £65m of fleet finance and a £40m of other funding. Theterms are similar to the previous facilities. 15 APPROVAL OF INTERIM FINANCIAL STATEMENTS The interim financial statements were approved by the board of directors on 28February 2008. INDEPENDENT REVIEW REPORT TO HELPHIRE GROUP PLC We have been engaged by the company to review the condensed consolidatedfinancial statements in the interim report for the six months ended 31 December2007 which comprises the condensed consolidated income statement, the condensedconsolidated balance sheet, the condensed consolidated statement of changes inequity, the condensed consolidated cash flow statement and related notes 1 to15. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed consolidated financialstatements. This report is made solely to the company in accordance with Internal Standardon Review Engagements 2410 issued by the Auditing Practices Board. Our work hasbeen undertaken so that we might state to the company those matters we arerequired 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 interim report is the responsibility of, and has been approved by, thedirectors. The directors are responsible for preparing the interim 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 areprepared in accordance with IFRS as adopted by the European Union. The condensedconsolidated financial statements included in this interim report has beenprepared in accordance with International Accounting Standard 34, "InterimFinancial Reporting", as adopted by the European Union. OUR RESPONSIBILITY Our responsibility is to express to the company a conclusion on the condensedconsolidated financial statements in the interim financial report based on ourreview. 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, wedo not express and audit opinion. CONCLUSION Based on our review, nothing has come to our attention that causes us to believethat the condensed consolidated financial statements in the interim report forthe six months ended 31 December 2007 are 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 and Touche LLPChartered Accountants and Registered Auditor 28 February 2008,Bristol, United Kingdom This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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