27th Sep 2006 17:33
Volvere PLC27 September 2006 27 September 2006 VOLVERE PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2006 Volvere plc ("Volvere" or "the Company", or "the Group"), the turnaroundinvestment company, announces its unaudited interim results for the six monthsended 30 June 2006. Highlights: • Recommended all-share offer for NMT Group PLC ("NMT") announced on 14 September 2006 • Irrevocable undertakings received to accept the offer in respect of approximately 20.2% of NMT's issued ordinary share capital. This, combined with Volvere's existing shareholding in NMT, represents in aggregate approximately 50.1% of NMT's issued ordinary share capital • Cash acquisition cost of both Vectra Group and Sira Test and Certification now recovered in full • Turnover from the Group's businesses £6.6m (1 July 2005: £5.1m; 31 December 2005: £10.6m) • Pre-tax profit £0.06m (1 July 2005: £0.03m; 31 December 2005: loss £0.06m) • Consolidated net assets of £4.15m (1 July 2005: £3.87m; 31 December 2005: £4.09m) • Basic and diluted earnings per share 1.66p and 1.55p (1 July 2005: 0.88p and 0.83p; 31 December 2005: basic and diluted loss per share 1.64p) • Sira Test & Certification, acquired in September 2005, performing well. Vectra's performance satisfactory. Sira Environmental, acquired in March 2006, performing in line with expectations. • No dividend proposed Chairman, Lord Kalms, said: "Our recommended all-share offer for NMT Group PLCis a key step towards ensuring that our strategy is expanded in terms of thescale of the opportunities that we are able to complete, both in number andsize." For further information, please contact:Volvere plc +44 (0) 20 7979 7596Jonathan Lander, Chief Executive Officer Weber Shandwick Square Mile +44 (0) 20 7067 0700Terry Garrett About Volvere Volvere was admitted to trading on AIM in December 2002 to invest in, oracquire, quoted companies where the market capitalisation does not reflect thevalue of the assets or in any company that is in distress but offers thepossibility of a turnaround. Volvere employs approximately 150 people in 14offices in the UK, Holland and the Middle East. Its executive directors are theexecutives of the venture capital and advisory firm Dawnay Day Lander Ltd. Itsnon-executive directors are Lord Kalms of Edgware, Neil Ashley and DavidBuchler. Website: www.volvere.co.uk VOLVERE PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2006 CHIEF EXECUTIVE'S STATEMENT Introduction I am pleased to present the interim statement for the six months ending 30 June2006. Since Volvere was admitted to AIM in December 2002, the Group has implementedits combined strategies of both investment in turnaround candidates andinvesting in or acquiring quoted companies where the market capitalisation wasless than the value of the companies' net assets. Acquiring turnaround candidates means that the path to profitability can bechallenging. We assess the success or failure of our turnaround investmentsprincipally by how much of or how quickly we can recover the cash spent onacquiring them. I am pleased to report that we now own both Vectra GroupLimited ("Vectra") and Sira Test and Certification Limited ("STC") for no cashoutlay. Moreover, in the case of STC this was achieved within 12 months of theacquisition date. This is an important milestone for the Group and testament toour turnaround skills. I am also pleased to report that on 14 September 2006, we announced arecommended, all share, offer for the shares in NMT Group PLC ("NMT") that theCompany does not currently own. At the date of this announcement we have received irrevocable undertakings fromcertain NMT shareholders, which together with our own holding will take us overthe minimum 50% threshold for the offer to go unconditional. The offer for NMT is the natural step in the implementation of our activistinvestment strategy. As you will recall, Volvere was successful in removingNMT's then board in September 2005 by calling an EGM. At the Annual GeneralMeeting of NMT on 11 September 2006, a resolution was passed, inter alia,adopting an investing strategy that is similar in many respects to that ofVolvere. Your board believes that the acquisition by Volvere of NMT represents anopportunity to reduce costs by combining two listed entities followingessentially similar strategies. The board also believes that together thecompanies will benefit from an increase in the size and range of targetinvestments due to the increased amount of cash available for investment as wellas the risk diversification inherent in a larger portfolio. Operating performance Safety and risk consulting - Vectra Upon its acquisition in 2003, Volvere implemented a turnaround strategy atVectra. This has resulted in an improvement in its operating performance andworking capital management. As a result we recouped the purchase price ofVectra of £2 million within approximately three yearsand we now own Vectra at nocash cost to the Group. Our Transportation business performed well during the period and we continue tosee the benefits of having integrated our security solutions and propertypractices into this business. The Oil & Gas market has been strong, once again driven by the high oil price.We have continued to see significant repeat workflows from our major clients,particularly the Shell group. The Nuclear consulting business has continued to suffer from somewhatunpredictable workflows arising from the structural changes that have taken, andcontinue to take, place in the supply chain for that market. However, we remainoptimistic about the long-term future for this business and indications are thatits performance will improve in the second half of the year. The nucleardecommissioning market has, for the small-scale projects that are Vectra'sspeciality, been particularly tough with the result that we have now ceased ouroperations in this area. The markets in which Vectra operates were generally buoyant during the period.As a result we have experienced the inevitable recruitment pressures that arisewhen there is a shortage of talented people. However, as a well-regardedcompany in its sectors, we believe Vectra is in a good position to attractquality employees in the future. The retention and recruitment of staff remainsour primary focus. Certification services - Sira Test and Certification and Sira Environmental Sira Test and Certification Limited ("STC") STC was a new company set up to acquire certain business and assets from theSira Group. The transaction was completed on 29 September 2005. STC provides certification services covering the safety of products that areused within potentially explosive environments (such as chemical plants, minesand other hazardous areas) and provides training for personnel that work inthese environments. During the period STC delivered a strong operating performance, contributing£250,000 to the Group before goodwill (£30,000) and intra-Group managementcharges from Vectra (£49,000). As part of a planned growth strategy we opened asecond office during the period, in Bakewell, United Kingdom. We believe thisbusiness is capable of further growth over the medium term and are veryencouraged by its performance to date. STC drew down £600,000 pursuant to an acquisition finance facility from itsbankers during the period and this, combined with the positive operating cashflow arising from STC since acquisition, has enabled us to recover all of thecash element of the purchase price. Sira Environmental Limited ("SEL") We announced the acquisition of SEL on 29 March 2006 for a nominalconsideration. SEL provides monitoring and conformity assessment solutions to the water qualityand emissions monitoring markets. It operates the Monitoring CertificationScheme (MCERTS) for the Environment Agency, a national standard for monitoringemissions to air, land and water. In addition, the business provides gastesting and accelerometer calibration services in laboratories accredited by theUnited Kingdom Accreditation Service. We consider this business to be a growtharea because of the increasing requirements of environmental legislation. As part of the SEL acquisition, we acquired a security solutions business. Inthe period under review this business formed part of the SEL business and itsresults are included within those for Certification services. However, witheffect from 1 August 2006, we have transferred the business into a new companycalled Sira Defence & Security Limited ("SDS"), which we believe will enhanceits profile. SDS develops, and advises in relation to, security solutions and surveillanceproducts for government agencies, the Police service and the Home Office. Theprincipal product being developed, called Meerkat, is a software and hardwaresolution that takes electronic images in multiple formats, and then digitizesand catalogues them. Although this product is under development, prototypeversions have been sold to, and are being evaluated by certain clients. SDSexpects to launch the product in the fourth quarter of 2006 and expects todeliver other products to clients in the second half of 2006. During the 3 months from acquisition to 30 June 2006 the SEL business (includingthat of SDS) reported an operating loss of £50,000. We expect this performanceto improve in the second half of 2006. We are pleased with the operating performance of our acquisitions, andparticularly with Sira Test and Certification. Further commentary on theperformance of each of the Group's trading businesses is set out in theFinancial Review below. Holding in NMT Group PLC During the period we increased our holding in NMT Group PLC ("NMT") for a cashconsideration of £190,000. This resulted in our holding in NMT increasing to29.9% of its issued ordinary share capital. As noted above, we announced on 14 September 2006 a recommended, all share,offer for the shares in NMT that the Company does not currently own. We havereceived irrevocable undertakings from certain other NMT shareholders which,together with our existing holding of 29.9%, means that the offer will, whenmade, be capable of going unconditional as to acceptances. Future Strategy We continue to seek activist or turnaround investment opportunities as well asacquisitions that are complementary to our existing businesses. Outlook We have now demonstrated the strength of our turnaround capability and also ofour activist skills. The acquisition of NMT will enable our strategy to beimplemented with increased scale and pace for the benefit of both Volvere's andNMT's shareholders. Jonathan Lander Chief Executive Officer 27 September 2006 FINANCIAL REVIEW Turnover Turnover for the six months to 30 June 2006 was £6.6m (1 July 2005: £5.1m).This arose from the Group's three trading businesses and from the generation ofmanagement fees arising from services provided to NMT. The segmental analysisof external turnover by activity is set out in the table below: Segmental Note 1 January to 30 1 January to 1 Year ended 31activity June 2006 July 2005 December 2005 Unaudited Unaudited Audited £000 £000 £000 Managementservices 1 160 - 70Safety andriskconsulting 2 5,064 5,130 9,898Certificationservices 3 1,359 - 658 Total turnover 6,583 5,130 10,626 Note 1: Represents the fees for the provision of management services by Volvereplc to NMT Group PLC. The amount in respect of the year ended 31 December 2005relates to the period from 14 September - 31 December 2005. Note 2: Safety and risk consulting services are provided by Vectra GroupLimited. Note 3: Certification services are provided by the Group's subsidiaries, SiraTest and Certification Limited ("STC") and Sira Environmental Limited ("SEL"). STC was acquired on 29 September 2005 and its turnover is included in the yearended 31 December 2005 from that date. SEL was acquired on 29 March 2006 andits turnover is included from that date. Operating Profit and Profit after tax The Group's profit after tax for the six months was £0.06m (1 July 2005:£0.03m). During the period Vectra has provided the central services functionsfor the Sira companies and carried the costs associated with that. However,given the Group's growth we established, on 1 July 2006, a separate subsidiarycompany, Volvere Central Services Limited, to undertake the financial, IT andhuman resources management activities of the Group. We believe this will enablea more accurate reflection of the cost structure attributable to the Group'soperations. The segmental analysis of Group operating profit, before Group managementcharges and goodwill, is set out in the table below: Group operating profit Note 1 January to 1 January to 1 Year ended 31 30 June 2006 July 2005 December 2005 Unaudited Unaudited Audited £000 £000 £000 Managementservices 1 (89) (132) (202)Safety andriskconsulting 2 13 92 (48)Certificationservices 2 151 - 83 Totaloperatingprofit 75 (40) (167) Note 1: These are the costs of the Group's head office function net ofexternally generated turnover in respect of services provided by the Group. Note 2: Stated after an inter-segment recharge relating to the provision ofadministration and other services from Safety and risk consulting toCertification services of £49,000 (1 January - 1 July 2005: Nil; year ended 31December 2005: £24,000). For the whole of the period (and consistent with the treatment in the full yearaccounts for 2005) the Group has accounted for its investment in NMT as anassociate because of the size of its shareholding. In the period to 1 July2005, the smaller size of the Group's shareholding meant that it was treated asan investment. This has given rise in 2006 (as it did in the full year 2005results) to a share of the associate's loss being incorporated in the Group'sprofit and loss account along with negative goodwill arising on consolidation. Balance sheet and Cash flow At the end of the period the Group's consolidated net assets were £4.15m (1 July2005: £3.87m) of which cash represented £1.60m (1 July 2005: £2.67m). Duringthe period the Group increased its stake in NMT for a cash consideration of£0.19m. On 30 June 2006 the Group's subsidiary STC drew down a 5-year term loanof £600,000. This loan has been used to partly repay intra-Group debt withVolvere in order to supplement existing cash resources and finance the Group'sinvestment activities. During the period the net operating cash inflow was £0.22m compared to a netoperating cash outflow of £0.19m for the same period in 2005. The improvementwas a result principally of the improved financial performance in 2006 comparedto the same period in 2005 and improved working capital management. On 16 August 2006 the Group closed the Contract for Difference ("CFD") throughwhich some of its investment in NMT Group PLC had been held and the Grouprepurchased the shares which were the subject of the CFD. The Group's treatmentin respect of this CFD had been to show the funds received from the CFD providerupon the original transfer of the holding to the CFD provider, net of the fundsprovided by the Group as security under the terms of the CFD, as an increase indebt. As at 30 June 2006 the net CFD debt outstanding amounted to £0.42m. Uponclosure of the CFD, the Group's cash resources have been reduced by this amountand the debt reduced accordingly. Nick Lander Chief Financial & Operating Officer 27 September 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT Existing Total 1 January to Acquisitions 1 January to Year ended 31 30 June 2006 30 June 2006 December 2005 1 January to 30 1 January to June 2006 1 July 2005 Unaudited Unaudited Unaudited Unaudited Audited Note £000 £000 £000 £000 £000 TURNOVER 2 6,443 141 6,584 5,130 10,626 Cost of sales (3,225) (45) (3,270) (2,818) (5,791 GROSS PROFIT 3,218 96 3,314 2,312 4,835 Administrative expenses:- before goodwill (3,093) (146) (3,239) (2,352) (5,002)- realisation of negative 12 - 12 12 24goodwill- amortisation of positive (30) - (30) - (16)goodwill Total administrative expenses (3,111) (146) (3,257) (2,340) (4,994) OPERATING PROFIT/(LOSS) 107 (50) 57 (28) (159) Share of operating loss in (65) - (89)associateNegative goodwill arising inrespect of associate 37 - 135Finance income - interestreceivable/(payable)- group (4) 50 59- share of associate 38 21Cost of fundamentalreorganisation - share ofassociate - - (30)Profit on sale of tangiblefixed asset investments - 10 - PROFIT/(LOSS) ON ORDINARYACTIVITIES BEFORE TAX 63 32 (63)Tax on loss on ordinary - - 3activities PROFIT/(LOSS) ON ORDINARYACTIVITIES AFTER TAX BEINGPROFIT/(LOSS) FOR PERIODTRANSFERRED TO/(FROM) RESERVES 63 32 (60) Earnings/(Loss) per share Basic 5 1.66p 0.88p (1.64p)Diluted 5 1.55p 0.83p (1.64p) All results are derived from continuing operations. There are no recognised gains or losses other than the result for the currentand preceding financial periods. Accordingly, no statement of total recognisedgains and losses is given. CONSOLIDATED BALANCE SHEET 30 June 1 July 31 December 2005 2006 2005 Note Unaudited Unaudited Audited £000 £000 £000 FIXED ASSETS Intangible fixed assets - positivegoodwill 3 1,167 - 1,285Intangible fixed assets - negativegoodwill 3 (107) (78) (66)Tangible fixed assets 248 139 218Investments 1,735 385 1,535 3,043 446 2,972 CURRENT ASSETS Stocks 44 - -Debtors 4 4,452 3,028 3,663Cash at bank and in hand 1,600 2,667 1,144 6,096 5,695 4,807CREDITORS: amounts falling duewithin one year (4,505) (2,269) (3,688) NET CURRENT ASSETS 1,591 3,426 1,119 CREDITORS: amounts falling due aftermore than one year (480) - - TOTAL ASSETS LESS LIABILITIES 4,154 3,872 4,091 CAPITAL AND RESERVESCalled up share capital 50 50 50Share premium account 361 50 361Profit and loss account 3,743 3,772 3,680 EQUITY SHAREHOLDERS' FUNDS 5 4,154 3,872 4,091 CONSOLIDATED CASH FLOW STATEMENT 1 January 1 January Year ended 31 December 2005 to 30 June 2006 to 1 July Note 2005 Unaudited Unaudited Audited £000 £000 £000 Net cash inflow/(outflow) fromoperating activities 6 221 (190) (21) Returns on investment andservicing of finance 7 (4) 50 59 Capital expenditure and financialinvestment 7 (70) (196) (18) Acquisitions and disposals 7 (134) - (2,457) Cash inflow/(outflow) beforemanagement of liquid resourcesand financing 13 (336) (2,437) Financing 443 - 578 Increase/(decrease) in cash inthe period 8 456 (336) (1,859) NOTES TO THE INTERIM STATEMENT 1. The financial information contained in this interim report does notconstitute statutory accounts within the meaning of s240 of the Companies Act1985, and has not been audited or reviewed. The interim statement has beenprepared on the basis of accounting policies expected to be applied consistentlyfor the foreseeable future, of which the principal ones are explained below.The interim accounts were approved by the directors on 27 September 2006. 2. Turnover Turnover is recognised on a basis appropriate to the income source. Turnoverearned on time and materials contracts is recognised as costs are incurred.Income from fixed price contracts is recognised in proportion to the stage ofcompletion of the relevant contract. Segmental information is set out in the Financial Review. 3. Intangible asset - goodwill Goodwill, representing the excess of the fair value of the consideration givenover the fair value of the separable net assets acquired, is capitalised as anintangible asset and is amortised over a period of 20 years, being thedirectors' assessment of its likely future life. Provision is made for anyimpairment. Negative goodwill, representing the excess of the fair value of the separablenet assets acquired over the fair value of the consideration given, iscapitalised as an intangible asset and credited to the profit and loss accountover the periods in which the assets acquired are consumed or realised as cash. 4. Debtors Debtors includes amounts recoverable under contracts of £1,090,000 (1 July 2005:£1,031,000 and 31 December 2005: £1,253,000). 5. Reconciliation of movement in shareholders' funds 1 January 1 January Year ended 31 December 2005 to 30 June 2006 to 1 July 2005 Unaudited Unaudited Audited £000 £000 £000 Opening shareholders' funds 4,091 3,840 3,840 Issue of share capital - - 300Refund of expenses associated withthe issue of share capital - - 11Profit/(loss) for the period 63 32 (60) Closing shareholders' funds 4,154 3,872 4,091 6. Reconciliation of operating profit/(loss) to operating cashflows 1 January 1 January Year ended 31 December 2005 to 30 June 2006 to 1 July Group 2005 Unaudited Unaudited Audited £000 £000 £000 Operating profit/(loss) 57 (28) (159)Depreciation 49 27 66Amortisation of positive goodwill 30 - 16Realisation of negative goodwill (12) (12) (24)Increase in stocks (44) - -Increase in debtors (616) (238) (366)Increase in creditors 757 61 457 Net cash inflow/(outflow) fromoperating activities 221 (190) (21) 7. Analysis of cash flows 1 January 1 January Year ended 31 December 2005 to 30 June 2006 to 1 July Group 2005 Unaudited Unaudited Audited £000 £000 £000Returns on investment andservicing of financeInterest received - 50 59Interest payable (4) - - Net cash inflow/(outflow) fromreturns on investments andservicing of finance (4) 50 59 Capital expenditure and financialinvestmentPurchase of tangible fixed assets (70) (14) (97)Sale of tangible fixed assets - - 3Purchase of equity investment - (227) -Sale of equity investment - 45 76 Net cash outflow from capitalexpenditure and financialinvestment (70) (196) (18) Acquisitions and disposalsAcquisition of business (31) - (1,090)Net cash acquired on acquisitionof business - - 1Reduction in consideration ofprevious acquisition 87 - -Investment in associatedundertaking (190) - (1,368) Net cash outflow fromacquisitions and disposals (134) - (2,457) Financing Increase in short term borrowings 600 - 874Repayment of short termborrowings (157) - (296) Net cash inflow from financing 443 - 578 8. Analysis and reconciliation of net funds Analysis of net funds 1 January Cash flow 30 June Group 2006 2006 Unaudited Unaudited Unaudited £000 £000 £000Cash in hand at bank 1,144 456 1,600 Other loans - within one year (578) 37 (541) Other loans - due after more than - (480) (480)one year Net funds at end of period 566 13 579 Reconciliation of net funds 30 June 1 July 31 December 2006 2005 2005 Unaudited Unaudited Audited £000 £000 £000Increase/(decrease) in cash in 456 (336) (1,859)the period Cash flow movement in debt (443) - (578)financing Change in net funds resulting 13 (336) (2,437)from cash flows Net funds at start of period 566 3,003 3,003 Net funds at end of period 579 2,667 566 9. Earnings per share The basic and diluted earnings per share are based on the profit on ordinaryactivities after taxation of the company attributable to ordinary shareholdersof £63,000 and on 3,786,588 shares and 4,061,698 shares respectively, being theweighted average numbers of ordinary shares in the period. At the end of theperiod 3,786,588 (1 July 2005: 3,638,440; 31 December 2005: 3,786,588) ordinaryshares were in issue. In addition, 99,470 convertible shares (1 July 2005:99,470; 31 December 2005: 99,470) were in issue and options for 268,553 ordinaryshares (1 July 2005: 277,483; 31 December 2005: 278,260). 10. Dividend The Board is not recommending payment of an interim dividend for the periodended 30 June 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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