25th Aug 2005 07:01
Davis Service Group PLC25 August 2005 FOR IMMEDIATE RELEASE25 August 2005 DAVIS SERVICE GROUP Interim results announcement for the half year ended 30 June 2005 NOW A FOCUSED EUROPEAN TEXTILES GROUP SOUND OVERALL TRADING RESULT Continuing operations Revenue Up 3% to £328.1 million (2004: £318.5 million) Profit before tax Up 9% to £37.0 million (2004: £33.9 million)(before amortisation of customer lists,restructuring and property sales) Profit before tax Down 7% to £31.2 million (2004: £33.7 million) Adjusted earnings per share Up 14% to 13.1p (2004: 11.4p) Adjusted earnings per share, including Up 4% to 14.3p (2004: 13.8p)discontinued operations(1) Earnings per share 44.8p (2004: 14.9p) Interim dividend Up 5% to 5.5 pence (2004: 5.25 pence) Free cash flow Generation of £34.5 million (2004: £31.9 million) (1) Includes results of the discontinued Elliott operations (2005: turnover£52.5 million; operating profit £3.9 million; profit before tax £3.0 million) Christopher Kemball, Chairman of The Davis Service Group, commented: "We are encouraged by these results which have been achieved despite challengingmarkets. The UK business has stood up well to pricing pressure and we expect tomake further operational improvements, especially on the Continent. We areexpecting to deliver a satisfactory outcome for the year". For further information contact: Davis Service Group Financial DynamicsRoger Dye, Chief Executive Richard Mountain/Andrew LorenzKevin Quinn, Finance Director Telephone 020 7269 7291Telephone 020 7269 7291 (today, until 1pm)Telephone 020 7259 6663 (thereafter) INTERIM STATEMENT This is my first report to Shareholders as Chairman of the Board. The sixmonths ended 30 June 2005 have been one of significant change for the group withRoger Dye succeeding John Ivey as Chief Executive, Kevin Quinn appointed asFinance Director and myself as Chairman following the retirement of Neil Bensonat the end of April. I am pleased to report that the transition has proceededsmoothly and that the new executive team has settled in well. We announced the sale of the Elliott business on 25 May 2005 together with ourintention to make a return of capital to shareholders and a 5 for 6 shareconsolidation. The Extraordinary General Meeting on 15 August 2005 approved theBoard's proposals to return £151 million, which will commence on 31 August. We now have a focused European textile maintenance business with market leadingpositions in most of the countries in which we operate. While tradingconditions continue to be challenging, overall we are encouraged by the resultsin the first six months of the year. Results The group has adopted International Financial Reporting Standards ('IFRS') asfrom 1 January 2005 and these financial statements, along with the comparativesfor 2004, have been produced in accordance with these standards. As previouslyreported, there has been little net effect on the group's reported operatingprofits and net assets, excluding the reversal of goodwill amortisation, and theadoption of IFRS has not had any impact on the fundamentals of our business, ourstrategy or future cash flows. Revenue from continuing operations in the period was £328.1 million (2004:£318.5 million), an increase of 3%. Operating profit from continuing operations before property sales, restructuringitems and amortisation of customer lists (adjusted operating profit) was £42.4million compared with £40.6 million last year, an increase of 4%. With thebenefit of the reduction in net interest charge from £6.7 million in 2004 to£5.4 million and a lower effective tax rate at 29%, headline earnings per sharefor these continuing operations rose 14% from 11.4p to 13.1p. During the period we began a significant restructuring in Germany, following ourpurchase of healthcare contracts from Rentokil Initial. We have recognised acharge of £5.7 million for the costs of this restructuring in the first halfresults, including £1.2 million of non-cash asset write offs, and currentlyexpect further costs of £1.5m in the second half. Amortisation of acquiredcustomer lists less profit on property sales result in a net charge of £0.1m(2004: net charge of £0.2m). Operating profit after these items was £36.6million (2004: £40.4m) Earnings per share, including the discontinued operations of Elliott in thefirst half, its profit on sale, and the exceptional items, were 44.8p comparedwith 14.9p in 2004. The board has resolved to pay an interim dividend of 5.50 pence (2004: 5.25pence) a 5% increase, on the reduced number of shares in issue following the 5for 6 share consolidation. This dividend will be paid on 18 October 2005 toshareholders on the register at close of business on 23 September 2005. Free cash flow generated was £34.5 million (2004: £31.9 million). Netborrowings at 30 June were £68.6 million, taking into account the Elliott saleproceeds. This compared with a level of £250.5 million at 31 December 2004 butis before the £151 million return of capital to shareholders and the £22.5million cash transfer to the Davis pension fund in respect of past serviceliabilities of Elliott and HSS staff. Net debt to shareholders' funds was 14%at 30 June 2005. Taking into account the return of capital and pension fundpayment, pro forma net debt would have been £242.1 million at the same date, or70% of pro forma shareholders' funds. Textile maintenance - UK and Eire Revenue grew by 4% to £131.8 million (2004: £126.7 million) while operatingprofit (before property sales and amortisation of customer lists) was £16.4million compared with £17.3 million in 2004. In a price-driven UK market place, the business performed well, securing morevolume and achieving operating efficiencies as planned following therationalisation of plants in 2004 and continued investments. Pricing in themarket has not reflected the increase in operating costs faced by the business.In particular we have seen significant rises in our wage bill as a result ofminimum wage legislation and significant recent increases in our energy and fuelbills. As a consequence, the adjusted operating margin declined from 13.6% inthe first half of 2004 to 12.5% in 2005, with profits and margins lower in allour business sectors. Our linen rental business continued to see market share growth and with pricesholding year on year we were able to increase revenue, which we consider a goodperformance by our management team in this market. Our focus has been onmaintaining service and building customer relationships. Our operations havebenefited from the added volume together with the investment programmeimplemented in recent years. The London hotel market has been adverselyimpacted since the period end by the bombings in July and, with volume recoveryuncertain, we have taken action to minimise the impact on profitability. The healthcare division achieved good growth in revenue in a growing marketdespite the pressure on prices in re-tendered contracts. Our workwear businessfaced the most significant impact from the combination of pricing and increasingcosts and increased volumes have been difficult to achieve. In Eire, our business faced similar trading conditions to those we experiencedin the UK but management has succeeded in growing the business, albeit at lowermargins. Looking forward, we do not see any improvement this year in the general tradingclimate but expect management to deliver a satisfactory performance. Textile maintenance - Continent Revenue increased to £196.3 million (2004: £191.8 million) and operating profit(before property sales, restructuring costs and amortisation of customer lists)grew to £28.2 million from £25.2 million in 2004. The overall impact of foreignexchange on these results, compared to the equivalent period in 2004, was toincrease revenue by £5.9 million and operating profit by £0.9 million. We have seen little improvement in the economies of Continental Europe in thefirst half of 2005 and trading conditions have been similar to those experiencedin the second half of 2004. However, against this backdrop of no growth involume, we have been able to increase local currency profits by 8%. Ouradjusted operating margin has increased from 13.1% to 14.4% as a result of ourcontinued focus on efficiency, productivity and cost control. Opportunities for revenue growth were limited in most of our markets on thecontinent. However, we continued to position ourselves for future growth byinvesting in our sales force and by broadening the service offering in ourexisting markets. We have also continued to make targeted acquisitions, whichexpand our market reach, in particular in Germany where we acquired healthcarecontracts from Rentokil Initial. Consequent to this we have restructured ourGluckstadt plant, near Hamburg, with a workforce reduction of up to 160 staffand the transfer of work to plants in the east of Germany. Our workwear business in Holland continued to face a particularly challengingbusiness environment and healthcare contract re-tendering in Germany has putpressure on margins. In Scandinavia, sales to our existing business base showedno growth but new business levels were encouraging. However, sales in ourPolish business and our direct sale business in Sweden made advances atacceptable margins. We expect the business to progress in a similar way in the second half, withgrowth in revenue difficult to achieve but with improved margins relative to thesecond half of 2004. Development opportunities are being followed up in eachterritory with the objective of continuing profitable growth in the medium term. Sale of Elliott On 25 May 2005, the group announced the sale of the Elliott Group Ltd ("Elliott") to a management buy-out vehicle backed by TDR Capital for £166 million. Aprofit on the sale of the Elliott business of £65.7 million has been recorded,net of transaction expenses. The Elliott trading results have been disclosed in the consolidated profit andloss account as a discontinued operation. Revenue was £52.5 million for theperiod of ownership on which an operating profit of £3.9 million was achieved(£2.5m after interest and tax, which was 1.2p per share). In 2004, revenue was£71.7 million for the six months with operating profits of £7.9 million. Inline with trends experienced in 2004, revenue and profits in the direct salesand related service activities were depressed in the period with Elliottexperiencing a shortage of orders from the public sector. Other Financial Matters Following the sale of Elliott, the Board made a payment of £22.5 million on 22August 2005 to the Company's UK Pension Fund in respect of the past serviceliabilities of Elliott and HSS staff. This payment was provided for in our 31December 2004 balance sheet (restated for IFRS) together with all otherpreviously unrecognised pension liabilities. On 23 June 2005, the group concluded the re-financing of its banking facilitiesby signing a £420 million Revolving Credit Facility with an initial term of fiveyears with eight banks on attractive commercial terms, including a reducedmargin compared to the previous agreement. The group received a payment of $15 million (£8.4 million) against the USelement of the vendor loan notes from the sale of the HSS tool hire business.This was a modest surplus to the provisioned level of these loan notes. Since30 June 2005, the UK vendor loan notes of £12.5 million have also been redeemedin full together with accrued interest. Outlook Despite challenging market conditions, especially in the UK, we expect todeliver a satisfactory outcome for the current year. Christopher KemballChairman CONSOLIDATED INTERIM INCOME STATEMENTFor the six months ended 30th June 2005 Six months Six months Year to to 30th June 2005 to 30th June 2004 31st December 2004 Notes £000 £000 £000 Continuing operations Revenue 1 328,127 318,512 651,464Cost of sales (178,035) (173,064) (354,305) Gross profit 150,092 145,448 297,159 Other operating income 973 193 4,901Distribution costs (61,363) (57,443) (121,017)Administrative expenses (46,038) (46,829) (84,943)Other operating expenses (7,039) (957) (1,689) Operating profit 1 36,625 40,412 94,411 Analysed as:Operating profit before property sales,restructuring items and amortisation ofcustomer lists 1 42,426 40,615 90,990 Property sales 724 10 3,037Restructuring items (5,664) - 973Amortisation of customer lists (861) (213) (589) Operating profit 1 36,625 40,412 94,411 Interest payable and similar charges (8,475) (8,752) (16,999)Interest receivable 3,049 2,074 3,702 Profit before taxation 31,199 33,734 81,114Taxation 2 (8,787) (10,617) (25,364) Profit for the period from continuingoperations 22,412 23,117 55,750 Discontinued operations Profit for the period from discontinued 1 2,490 4,705 11,892operationProfit/(loss) on sale of discontinued 1 65,731 2,520 (20,275)operation Profit/(loss) for the period from 68,221 7,225 (8,383)discontinued operations Profit for the period 90,633 30,342 47,367 Profit attributable to minority (307) 206 310interestProfit attributable to equity 90,940 30,136 47,057shareholders 1 90,633 30,342 47,367 Earnings per share expressed in penceper share- Basic 3 44.82 14.92 23.26- Diluted 44.48 14.81 23.10 Earnings per share from continuingoperations- Basic 3 11.20 11.34 27.40- Diluted 11.11 11.26 27.44 CONSOLIDATED INTERIM BALANCE SHEETFor the six months ended 30th June 2005 Six months Six months Year to to 30th June 2005 to 30th June 2004 31st December 2004 Notes £000 £000 £000 AssetsProperty, plant and equipment 358,832 439,087 450,866Goodwill 280,629 280,875 294,313Intangible assets 11,203 5,104 9,557Investments 12,500 32,324 20,000Deferred tax assets 25,976 26,068 25,462 Total non-current assets 689,140 783,458 800,198 Inventories 11,170 24,097 22,319Income tax receivable 2,291 4,653 2,332Trade and other receivables 112,627 136,768 148,897Cash and cash equivalents 222,254 57,511 73,856 Current assets 348,342 223,029 247,404 Non-current assets classified as held 936 - 1,404for sale Total current assets 349,278 223,029 248,808 Liabilities Bank overdrafts 9 15,641 12,184Interest bearing loans and borrowings 9,300 50,390 46,405Income tax payable 9,161 7,663 8,795Trade and other payables 74,857 87,511 91,727Accruals and deferred income 58,635 69,618 64,391 Total current liabilities 151,962 230,823 223,502 Net current assets/(liabilities) 197,316 (7,794) 25,306 Interest bearing loans and borrowings 281,576 245,040 265,776Retirement benefit obligations 73,969 69,282 71,217Other payables 418 125 307Deferred tax liabilities 33,328 37,255 44,359 Total non current liabilities 389,291 351,702 381,659 Net assets 497,165 423,962 443,845 Equity Share capital 50,900 50,599 50,692Share premium 242,530 239,141 240,240Other reserves 367 (150) 1,061Retained earnings 202,116 132,144 150,180 Total shareholders' equity 495,913 421,734 442,173 Minority interest in equity 1,252 2,228 1,672 Total equity 497,165 423,962 443,845 Net borrowings 5 68,631 253,560 250,509 CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYFor the six months ended 30th June 2005 Attributable to equity shareholders' of the company Share Share Other Retained Minority Total capital premium reserves earnings interests equity £000 £000 £000 £000 £000 £000 At 1st January 2004 50,326 236,521 240 156,010 2,192 445,289Issue of share capital 366 3,719 - - - 4,085Purchase of shares - - - - (784) (784)Currency translation - - 821 1,738 26 2,585Dividends - - - (32,080) (72) (32,152)Actuarial losses net of deferred - - - (22,400) - (22,400)taxDeferred tax on share option - - - (145) - (145)benefitProfit for the year - - - 47,057 310 47,367 At 31st December 2004 50,692 240,240 1,061 150,180 1,672 443,845 Issue of share capital 208 2,290 - - - 2,498Currency translation - - (694) (11,599) (72) (12,365)Dividends - - - (22,819) (41) (22,860)Actuarial losses net of deferred - - - (5,073) - (5,073)taxOther - - - 487 - 487Profit for the year - - - 90,940 (307) 90,633 At 30th June 2005 50,900 242,530 367 202,116 1,252 497,165 CONSOLIDATED INTERIM CASH FLOW STATEMENTFor the six months ended 30th June 2005 Six months Six months to 30th June 2005 to 30th June 2004 Notes £000 £000Cash flows from operating activities Cash generated from operations 4 114,526 111,419Interest paid (12,403) (6,533)Income tax paid (8,652) (9,242) Net cash used in operating activities 93,471 95,644 Net flows from investing activities Acquisition of subsidiary, net of cash acquired (9,402) (4,980)Purchases of property, plant and equipment (65,936) (68,725)Proceeds from the sale of property, plant and 5,590 3,476equipmentPurchases of intangible assets (1,359) (467)Proceeds from sale of business 142,812 139,840 Issue of loan notes - (32,500) Loan repayments received from third parties 8,368 - Interest received 2,687 2,001 Net cash generated from investing activities 82,760 38,645 Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 2,498 2,894 Repayment of borrowings (383,909) (106,167)Drawdown of borrowings 393,139 -Repayment of loan notes - (48)Repayment of finance leases/hire purchase liabilities (3,280) (2,260)Dividends paid to Company's shareholders (22,819) (21,438)Dividends paid to minority interests (40) (68) Net cash used in financing activities (14,411) (127,087) Net increase in cash and bank overdrafts 161,820 7,202 Cash and bank overdrafts at beginning of period 61,672 36,078Exchange losses on cash and bank overdrafts (1,247) (1,410) Cash and bank overdrafts at end of period 222,245 41,870 Free cash flow 34,453 31,929 Analysis of free cash flow Net cash used in operating activities 93,471 95,644Purchases of property, plant and equipment (65,936) (68,725)Proceeds from the sale of property, plant and 5,590 3,476equipmentPurchases of intangible assets (1,359) (467)Interest received 2,687 2,001 Free cash flow 34,453 31,929 NOTES TO THE INTERIM RESULTSFor the six months ended 30th June 2005 1 SEGMENTAL INFORMATION (a) Primary reporting format - business segments At 30th June 2005, the Group has only one business segment being textilemaintenance within UK, Eire and the Continent. On 25th May, the Group soldElliott, its building systems division, and the segmental results relating tothis division are reported as a discontinued operation. Based on the risks and returns the directors consider that the primary reportingformat is by business segment and that the secondary reporting format is bygeographical analysis by origin and destination. The segmental results for the six months ended 30th June 2005 are as follows: Textile Textile Unallocated Group maintenance UK maintenance & Eire Continent £000 £000 £000 £000 Revenue 131,863 196,264 - 328,127 Operating profit/(loss) before 16,422 28,177 (2,173) 42,426property sales, restructuring itemsand amortisationof customer lists Profit on sale of property sales 724 - - 724Restructuring items - (5,664) - (5,664)Amortisation of customer lists (167) (694) - (861) Operating profit/(loss) 16,979 21,819 (2,173) 36,625 Net interest (5,426) Profit before taxation 31,199 Taxation (8,787) Profit from continuing operations 22,412Profit from discontinued operations 2,490 Profit on sale of discontinued 65,731operations Profit for the period 90,633 Profit attributable to minority (307)interestsProfit attributable to equity 90,940shareholders Capital expenditure 29,371 32,496 53 61,920Depreciation and amortisation 27,243 32,005 73 59,321 Revenue and operating profit for discontinued operations was £52,534,000 and£3,859,000 respectively. The capital expenditure, depreciation and amortisationwere £7,339,000 and £5,637,000. Capital expenditure comprises additions to property, plant and equipment(£58,597,000), additions to intangible assets (£1,359,000), and additionsresulting from acquisitions through business combinations (£1,964,000). 1 SEGMENTAL INFORMATION CONTINUED (a) Primary reporting format - business segments The segmental results for the six months ended 30th June 2004 are as follows: Textile Textile Unallocated Group maintenance maintenance UK & Eire Continent £000 £000 £000 £000 Revenue 126,690 191,822 - 318,512 Operating profit/(loss) before property 17,276 25,209 (1,870) 40,615sales and amortisation of customer lists Profit on sale of property sales 10 - - 10Amortisation of customer lists (62) (151) - (213) Operating profit/(loss) 17,224 25,058 (1,870) 40,412 Net interest (6,678) Profit before taxation 33,734 Taxation (10,617) Profit from continuing operations 23,117Profit from discontinued operations 4,705 Profit on sale of discontinued 2,520operations Profit for the period 30,342 Profit attributable to minority 206interestsProfit attributable to equity 30,136shareholders Capital expenditure 31,121 32,352 35 63,508Depreciation and amortisation 26,398 32,217 83 58,698 Revenue and operating profit for discontinued operations was £71,682,000 and£7,933,000 respectively. The capital expenditure, depreciation and amortisationwere £11,192,000 and £6,471,000 respectively. Capital expenditure comprises additions to property, plant and equipment(£57,533,000), additions to intangible assets (£467,000), and additionsresulting from acquisitions through business combinations (£5,508,000). 1 SEGMENTAL INFORMATION CONTINUED (a) Primary reporting format - business segments The segmental assets and liabilities at 30th June 2005 are as follows: Textile Textile Unallocated Group maintenance UK maintenance & Eire Continent £000 £000 £000 £000 Operating assets 259,468 596,564 140,683 996,715Investments - - 12,500 12,500Deferred tax assets - - 25,976 25,976Income tax assets - - 2,291 2,291Non current assets held for sale - 936 - 936 Total assets 259,468 597,500 181,450 1,038,418 Operating liabilities 51,319 80,039 2,561 133,919Borrowings - - 290,876 290,876Deferred tax liabilities - - 33,328 33,328Income tax liabilities - - 9,161 9,161Retirement benefit obligations 23,621 12,949 37,399 73,969 Total liabilities 74,940 92,988 373,325 541,253 The segmental assets and liabilities at 31st December 2004 are as follows: Textile Textile Building Unallocated Group maintenance maintenance UK & Eire Continent systems £000 £000 £000s £'000 £'000 Operating assets 254,673 623,851 125,330 (4,046) 999,808Investments - - - 20,000 20,000Deferred tax assets - - - 25,462 25,462Income tax assets - - - 2,332 2,332Non current assets held for sale 338 1,066 - - 1,404 Total assets 255,011 624,917 125,330 43,748 1,049,006 Operating liabilities 48,171 89,912 34,736 (4,210) 168,609Borrowings - - - 312,181 312,181Deferred tax liabilities - - - 44,359 44,359Income tax liabilities - - - 8,795 8,795Retirement benefit obligations 26,517 11,750 7,005 25,945 71,217 Total liabilities 74,688 101,662 41,741 387,070 605,161 Segmental assets consist primarily of property plant and equipment, intangibleassets, goodwill, inventories, receivables and operating cash. They excludedeferred taxation, income tax assets, investments and assets classified as heldfor sale. Segmental liabilities comprise operating liabilities and retirement benefitobligations, but exclude items such as taxation and corporate borrowings. 1 SEGMENTAL INFORMATION CONTINUED (b) Secondary reporting format - geographical segments The Group's operations are based in three main geographical areas. The UK isthe home country of the parent company. The main operations in the principleterritories are as follows: UK and EireScandinaviaOther Europe The sales analysis in the information below is based on the location of thecustomer which is not materially different from the location where the order isreceived and where the assets are located. Segmental assets and capitalexpenditure are allocated on the basis of location. Turnover Segmental assets Capital expenditure 6 months 6 months 6 months Year 6 months 6 months to 30th June to 30th June to 30th June to 31st to 30th June to 30th June Dec 2004 2005 2005 2004 2005 2004 £000 £000 £000 £000 £000 £000 Continuing operations UK and Eire 131,863 126,746 400,151 250,965 29,424 31,156Scandinavia 120,438 114,718 386,394 401,769 16,353 17,311Other Europe 83,539 82,967 211,106 223,148 16,143 15,041Unallocated (7,713) (5,919) 40,767 47,794 - - 328,127 318,512 1,038,418 923,676 61,920 63,508 Discontinued operations UK and Eire 52,544 71,706 - 125,330 7,339 11,192Unallocated (10) (24) - - - - 380,661 390,194 1,038,418 1,049,006 69,259 74,700 The Group's continuing operations revenue is derived primarily from provision of services. 2 TAXATION The taxation charge for the first half year of the current year is based on theestimated tax charge for the full year. 3 EARNINGS PER ORDINARY SHARE Basic earnings per ordinary share are based on the group profit for the periodand a weighted average of 202,905,717 (2004: 201,994,018) ordinary shares inissue during the year. Diluted earnings per share are based on the group profit for the year and aweighted average of ordinary shares in issue during the year calculated asfollows: 30th June 2005 30th June 2004 31st December 2004 No. of shares No. of shares No. of shares In issue 202,905,717 201,994,018 202,346,162Potential dilution arising from unexercised share 1,544,426 1,474,358 1,367,305options 204,450,143 203,468,376 203,713,467 Six months to 30th June Six months to 30th Year to 31st December 2005 June 2004 2004 Earnings Earnings Earnings per share per share per share £000 pence £000 pence £000 pence Profit attributable to equity holders of 22,719 11.20 22,911 11.34 55,440 27.40the CompanyProfit on disposal of properties (438) (0.22) (10) - (1,266) (0.63)Amortisation of customer lists 662 0.32 191 0.10 499 0.25Restructuring items 3,583 1.77 - - (998) (0.49) Adjusted earning per share 26,526 13.07 23,092 11.44 53,675 26.53 The reconciliation between the basic and adjusted figures for the total group isas follows: Six months to 30th June Six months to 30th Year to 31st December 2005 June 2004 2004 Earnings Earnings Earnings per share per share per share £000 pence £000 pence £000 pence Profit attributable to equity holders of 90,940 44.82 30,136 14.92 47,057 23.26the Company(Profit)/loss on disposal of business (65,731) (32.39) (2,520) (1.25) 20,275 10.02Profit on disposal of properties (438) (0.22) (10) - (2,265) (1.12)Amortisation of customer lists 662 0.32 191 0.10 499 0.25Restructuring items 3,583 1.77 - - (998) (0.49) Adjusted earning per share 29,016 14.30 27,797 13.77 64,568 31.92 4 CASH GENERATED FROM OPERATIONS Six months Six months to 30th June 2005 to 30th June 2004 £000 £000 Profit for the period 90,633 30,342 Adjustments for: Taxation 9,936 13,825 Amortisation of intangible fixed assets 1,325 715 Depreciation of tangible fixed assets 63,633 64,454 Profit on sale of property (724) (10) Profit on sale of plant and equipment (239) (1,051) Profit on sale of business (66,361) (3,600) Interest income (3,049) (2,101) Interest expense 9,291 9,736 Exchange losses on borrowings 33 144 Changes in working capital (excluding effect of acquisitions,disposals and exchange differences on consolidation): Inventories (1,749) 1,196 Trade and other receivables 2,531 (2,275) Trade and other payables 3,731 44 Provisions 5,535 - Cash generated from operations 114,526 111,419 In the cash flow statement, proceeds from sale of property, plant and equipment comprise: Six months Six months to 30th June 2005 to 30th June 2004 £000 £000 Net book amount 4,627 2,415Profit on sale of property, plant and equipment 963 1,061 Proceeds from sale of property, plant and equipment 5,590 3,476 5 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Six months Six months to 30th June 2005 to 30th June 2004 £000 £000 Increase in cash 161,820 7,202Cash inflow from movement in debt and financing lease financing 9,648 108,475 Changes in net debt resulting from cash flows 171,468 115,677 New finance leases (1,933) (2,018) Bank loans and lease obligations disposed with subsidiaries 1,350 559Translation difference 10,993 11,029 Movement in net debt in period 181,878 125,247 Net debt at beginning of period (250,509) (378,807) (68,631) (253,560) 6 PREPARATION OF THE INTERIM RESULTS The Group have adopted the requirements of International Financial ReportingStandards and International Accounting Standards (collectively IFRS) for thefirst time for the purpose of preparing financial statements for the periodending 30th June 2005. The Group issued an IFRS transition report 29th June 2005 that set out therestated 2004 comparatives and the 2005 opening balance sheet and also providedthe reconciliations required by IFRS. The next annual financial statements of the Group will be prepared in accordancewith accounting standards issued by the International Accounting Standards Boardand adopted by the European Union. These interim financial statements have been prepared in accordance with theaccounting policies, published on the Group's website, which have beenconsistently applied to all the years presented except for those relating to theclassification and measurement of financial instruments. The Group has made useof the exemption available under IFRS 1 to only apply IAS 32 and IAS 39 from 1stJanuary 2005. These accounting policies comply with applicable IFRS standardsand IFRIC interpretations issued and effective as the time of preparing thesestatements (July 2005). IFRS standards and IFRIC interpretations that will beapplicable at 31st December 2005, including those that will be applicable on anoptional basis, are not known with certainty at the time of preparing theseinterim financial statements. The abridged profit and loss accounts and cash flow statements for the sixmonths to 30th June 2004 and 30th June 2005 and the balance sheets as at thosedates are unaudited. The balance sheet at 31st December 2004 and the results for the year then endedhave been abridged from the Group's 2004 statutory accounts which have beenfiled with the Registrar of Companies and on which the auditors gave anunqualified report. 7 WEBSITE POLICY The directors are responsible for the maintenance and integrity of the company'swebsite. Information published on the internet is accessible in many countrieswith different legal requirements. Legislation in the United Kingdom governingthe preparation and dissemination of financial statements may differ fromlegislation in other jurisdictions. 8 PUBLISHED INTERIM STATEMENT Copies of the interim report will be posted to shareholders on 9th September2005 and will be available to members of the public from the company'sregistered office at 4 Grosvenor Place, London SW1X 7DL. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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