20th Aug 2007 14:37
International Nuclear Solutions PLC20 August 2007 International Nuclear Solutions plcInterim Results for the six months ended 30 June 2007 International Nuclear Solutions plc (INS), a company supplying engineeringsupport services to the nuclear industry for over 25 years, announces a 25%increase in turnover with operating profits before exceptional items at asimilar level to the comparable period in 2006. Financial Highlights 6 months ended 6 months ended 12 months ended 30/6/07 30/6/06 31/12/06 £'000 £'000 £'000 Turnover 15,675 12,577 31,745 Operating Profit* 1,027 1,008 2,501 Profit before taxation 812 179 1,708 Basic Earnings per share 0.78p 0.06p 1.68p Adjusted Earnings per share* 1.22p 1.40p 3.01p Net Cash Inflow 352 458 2,370 Net cash and cash equivalents 3,086 822 2,734 * Before exceptional items relating to costs of the demerger from RoboticTechnology Systems PLC (RTS) and admission to AIM in 2006, and beforeexceptional items relating to the offer for INS by Babcock International GroupPLC (Babcock) in 2007. KEY POINTS Turnover in the period increased by 25% from £12.6m to £15.7m. Offer from Babcock provides an excellent return for shareholders. Changing market place bringing uncertainty for INS in a market with increasingpenetration from larger corporations. Retention and recruitment remains difficult and there are significant labourcost pressures. Reconstitution of the Board with the appointment to the Board of two Babcockrepresentatives and the move of the current executive directors to a full timemanagement committee role. Chris Brown, Chairman of INS, said today: "INS has successfully completed its first year of trading as a listed companyfollowing the demerger from RTS. The offer from Babcock so soon after demergerwas unexpected but the Directors believe that it provides an excellent return toshareholders. In the light of the rapidly changing UK market place shareholderscan crystallize their investment while the company gains a stronger positionfrom which to address these new challenges." 20 August 2007 Enquiries International Nuclear Solutions plc Tel: 0161 777 2043Chris Brown, Chairman Collins Stewart Europe Limited Tel: 020 7523 8350Chris Wells, Mark Connelly, Stewart Wallace College Hill Tel: 020 7457 2020Matthew Smallwood, Matthew Gregorowski International Nuclear Solutions plcInterim results for the six months ended 30 June 2007 Chairman's Statement Overview International Nuclear Solutions plc ("INS") successfully completed its firstyear of trading as a listed company following the demerger from RoboticTechnology Systems PLC ("RTS") on 31st May 2006. In the six months to 30 June 2007, turnover was £15.7m (2006: £12.6m), which isbroadly in line with our expectations. The order book at the end of June was£6.4m (2006: £11.4m) which is behind forecast and reflects contracts beingplaced at a slower rate than anticipated, particularly at our major operatingsite at Sellafield. Nearly 40% of revenues came from Tier 2 prime contractors or consortia where INSwas either a subcontractor or a teaming member but not the lead organisation.This is further evidence of the changing nature of the nuclear sector - fewerbut larger contracts and framework agreements - which we have forecastpreviously. The net cash inflow over the period was £0.4m (2006: £0.5m) and the closing cashbalance stood at £3.1m as compared to £0.8m at the half year in 2006. Operating profit before exceptional charges over the first 6 months remained ata similar level at £1m (2006: £1m). Escalating labour costs are the primarycause of the lower profit margin achieved. Labour costs have been running aheadof national average earnings as a result of a shortage of skilled personnel andan increasing demand from industry in general. The basic earnings per share after exceptional costs was 0.78p (2006: 0.06p).The adjusted basic earnings per share before exceptional costs is 1.22p (2006:1.40p). An exceptional charge of £0.28m relates to the costs arising in the period fromthe offer by Babcock International Group PLC (Babcock). The total cost of thisin the full year is anticipated to be in excess of £0.5m. On 2 August 2007 Babcock announced that it had acquired or had received validacceptances for 58.5% of the existing share capital of INS. The fact thatBabcock now owns more than 50% of the shares means that INS will now beconsidered as a subsidiary of Babcock while remaining a separately listedcompany. INS will be publishing its first annual financial statements prepared inaccordance with International Financial Reporting Standards (IFRS) as adopted bythe European Union (EU) for the year ended 31 December 2007. In accordance withthe AIM Rules for Companies, INS's interim report for the six months ended 30June 2007 has been prepared on the basis of the accounting policies which willbe applied in those financial statements. Operational Review Whilst revenues in the first six months of the year were at the highest levelever recorded, the order book was significantly lower than anticipated. This wasa result of a slowdown in tendering and contract placement for projects both atSellafield and the Magnox sites. Even where contracts have been placed with INS, either directly or as part of aconsortium, projects have been slow to mobilise or have received only partialfunding as part of a phased funding approach. INS, as part of the ACCORD Alliance (a consortium of AMEC, INS and DGPInternational - now part of the Scott Wilson Group), has been successful inwinning the next stage of design for the B41 Silo project at Sellafield, one ofthe highest hazard rated facilities on the Sellafield site. INS has also been successful in winning our first framework agreement forengineering services for The United Kingdom Atomic Energy Authority (UKAEA) atDounreay, the second largest site in the Nuclear Decommissioning Authority (NDA)portfolio. An order has been received for the continued evaluation of the INS Encapsulationprocess - a technology that has been developed by INS for the encapsulation ofnuclear waste materials for which it has applied for a patent. INS is one ofonly three companies selected to continue to the next stage of evaluation. The UK's nuclear support services market is going through a period ofconsolidation and re-structuring as demonstrated by the recent sale of Nukem andthe acquisition of BNFL's Magnox Reactor sites management company by largeoverseas conglomerates. There will be further consolidation following thedecision by the UK Government to sell the nuclear decommissioning division ofthe UKAEA, which employs over 2,000 people. The Directors of INS believe thatthe larger nuclear-focused companies and consortia will become more dominant inthe industry and that INS, as a smaller independent organisation, will becomemore reliant on these larger organisations as they increase their penetrationinto the UK nuclear sector. Retention and recruitment remains difficult and there are significant labourcost pressures reflecting the capacity constraints arising from a buoyant marketplace for skilled engineering personnel and the competition for this labour bythe larger multi-national corporations. We will continue to concentrate on staff retention and recruitment, which is oneof the biggest challenges currently facing the business. INS was a finalist in the North West Business Awards for Innovation and has alsowon two RoSPA (Royal Society for the Prevention of Accidents) awards, one beinga prestigious sector award. The Executive Directors (Tony Moore, Steve McGowan and Geoff Mellor) will stepdown from the Board with effect from today to full time roles as part of amanagement committee, under the supervision of a non-executive Board, to allowthem to concentrate on the day to day operation of the business. I, along withmy fellow independent Non Executive Director, John Ridings will remain on theBoard. We have invited Archie Bethel (54) and Kevin Thomas (53), both seniorBabcock executives, with extensive experience of the nuclear business to jointhe Board as Non Executive Directors. The new directors' appointment will takeeffect from today. A list of the new Directors' current and past directorshipsis attached at the end of this announcement. Other than as disclosed in thelist, there are no disclosures to be made under Schedule Two, para G of the AIMRules for Companies. Outlook Whilst order intake has been slow in the first half of the year, quotationactivity has increased significantly at the start of the second half of the yearreflecting increased activity on a number of significant projects. The delay insome major projects is likely to affect overall revenues for 2007. However, weremain optimistic about the outlook for 2008 particularly since the level ofannual spend at the Aldermaston Weapons Establishment (AWE) is expected toincrease over the next few years and there are a significant number ofopportunities there that are of interest to INS. Chris Brown, Chairman20 August 2007 Consolidated Income Statement for the six months ended 30 June 2007 (IFRS) 6 months 6 months 12 months ended ended ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) Continuing operations Notes £'000 £'000 £'000Revenue 15,675 12,577 31,745 Cost of sales (12,771) (10,165) (26,006)Gross profit 2,904 2,412 5,739 Distribution costs (157) (168) (364)Administrative expenses (1,995) (2,072) (3,706) Operating profit before exceptional charges 1,027 1,008 2,501 Exceptional administrative expenses included inadministrative expenses above 4 (275) (836) (832) Operating profit 752 172 1,669 Finance income 60 8 41Finance costs - (1) (2) 60 7 39 Profit before taxation 812 179 1,708 Taxation 5 (327) (140) (663) Profit for the year attributable to equityshareholders 485 39 1,045 Earnings per share deriving from both total andcontinuing operations Basic 6 0.78p 0.06p 1.68p Diluted 6 0.77p 0.06p 1.67p * Comparative information for the six months ended 30 June 2006 and the yearended 31 December 2006 was previously reported under UK GAAP and has beenrestated under IFRS as adopted by the EU. The reconciliations from UK GAAP toIFRS for each period are shown in note 8. Consolidated Statement of Changes in Shareholders' Equity for the six monthsended 30 June 2007 (IFRS) 6 months ended 6 months ended 12 months ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) Note £'000 £'000 £'000 At 1 January 1,527 2,420 2,420Profit for the financial period 485 39 1,045Equity shares issued - 623 623Preference shares issued - 50 50Preference shares redeemed - (50) (50)Reserve arising on demerger - 23,064 23,064Reverse acquisition reserve - (23,687) (23,687)Dividend paid - (1,964) (1,964)Movement on other reserves relating to share options 23 2 26At end of period 9 2,035 497 1,527 Group Balance Sheet at 30 June 2007 (IFRS) 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) £'000 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 993 908 1,038Other intangible assets 197 170 193 1,190 1,078 1,231 Current assetsTrade and other receivables 4,077 3,898 5,238Amounts due from customers for contract work 1,734 3,488 2,117Cash and cash equivalents 3,086 822 2,734 8,897 8,208 10,089 LiabilitiesCurrent liabilitiesTrade and other payables (6,065) (5,804) (7,970)Amounts due to customers for contract work (1,668) (2,851) (1,376)Current tax liabilities (319) (134) (447) (8,052) (8,789) (9,793) Net current assets/(liabilities) 845 (581) 296 Net assets 2,035 497 1,527 Equity shareholders' fundsCalled up share capital 623 623 623Merger reserve 23,064 23,064 23,064Capital redemption reserve 50 50 50Reverse acquisition reserve (23,687) (23,687) (23,687)Other reserves 49 2 26Retained earnings 1,936 445 1,451Total equity attributable to equity holders of theparent 2,035 497 1,527 Group Cash Flow Statement for the six months ended 30 June 2007 (IFRS) 6 months 6 months 12 months ended ended ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) Note £'000 £'000 £'000 Net cash inflow from operating activities 7 849 3,508 5,908 Cash flows from investing activitiesPurchase of property, plant and equipment (54) (903) (1,161)Purchase of intangible assets (41) (190) (244)Interest received 60 8 41Net cash used in investing activities (35) (1,085) (1,364) Cash flows from financing activitiesInterest paid - (1) (2)Taxation paid (462) - (208)Dividend paid - (1,964) (1,964)Net cash used in financing activities (462) (1,965) (2,174) Net increase in cash and cash equivalents in theperiod 352 458 2,370 Opening cash and cash equivalents 2,734 364 364 Closing cash and cash equivalents 3,086 822 2,734 Notes to the Financial Information General information and basis of preparation The consolidated interim financial statements have been prepared in accordancewith the AIM Rules for Companies and on a basis consistent with the accountingpolicies set out in note 2, which will be applied when the Group prepares itsfirst set of annual financial statements in accordance with IFRS as adopted bythe EU for the financial year ending 31 December 2007. These are the Group's first interim financial statements prepared under IFRS asadopted by the EU, with the exception of IAS 34 (Interim Financial Reporting),which is not mandatory for UK groups, and therefore IFRS 1 "First-time Adoptionof International Financial Reporting Standards" has been applied. Thedisclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS asadopted by the EU are given in note 8. The interim financial statements are unaudited and do not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. Thefinancial information for the year ended 31 December 2006 has been derived fromthe published statutory accounts as restated by the IFRS adjustments set out innote 8. A copy of the full accounts for that period, on which the auditorsissued an unqualified report that did not contain statements under Section 237(2) or (3) of the Companies Act 1985, has been delivered to the Registrar ofCompanies. The preparation of financial statements in conformity with IFRS as adopted bythe EU requires the use of certain critical accounting estimates. It alsorequires management to exercise its judgment in the process of applying theGroup's accounting policies. The areas involving a higher degree of judgment orcomplexity, or areas where assumptions and estimates are significant to theconsolidated financial statements, are disclosed in Note 3. Accounting policies The financial statements have been prepared under the historical cost conventionand are in accordance with the Companies Act 1985 and applicable accountingstandards. The accounting policies adopted during the period have been reviewed as part ofthe conversion to IFRS and are largely consistent with those adopted previouslyunder UK GAAP. As these are the first set of accounts prepared under IFRS asadopted by the EU, the accounting policies are set out in full below: First time adoption of IFRS The year ended 31 December 2007 will be the Group's first financial statementsprepared in accordance with IFRS. Accordingly, IFRS 1 "First time adoption ofInternational Financial Reporting Standards" has been applied in the interimconsolidated financial statements. The Group's transition date to IFRS is 1January 2006, and the Group prepared its opening balance sheet at that date inaccordance with IFRS effective at 30 June 2007. Comparative information for the six months ended 30 June 2006 and the year ended31 December 2006 was previously reported under UK GAAP and has been restatedunder IFRS as adopted by the EU. The reconciliations from UK GAAP to IFRS foreach period are shown in note 8. In addition, there is a reconciliation ofequity at the transition date for the Group, being 1 January 2006. The Group has not taken advantage of any of the exemptions to IFRS 1. Basis of consolidation In preparing the consolidated financial statements, INS Innovation Limited hasbeen deemed to be the acquirer and the Company, the legal parent, has beendeemed to be the acquiree. Under IFRS 3 "Business Combinations", the acquisitionof INS Innovation Limited by the Company has been accounted for as a reverseacquisition and the consolidated IFRS financial information of the Company istherefore a continuation of the financial information of INS Innovation Limited. The effect of this transaction is that the net assets of INS Innovation Limitedat the date of the transaction are presented at book value and those of thelegal parent are shown at fair value. However, two large and opposing reservesare created which are shown gross on the face of the balance sheet. The net ofthese two reserves is the difference between the share capital of the legalparent (INS plc) and the substantive parent (INS Innovation Ltd). Subsidiaries are all entities over which the Group has the power to govern thefinancial and operating policies generally accompanying a shareholding of morethan one half of the voting rights. Subsidiaries are fully consolidated from thedate on which control is transferred to the Group. Inter-company transactions, balances and unrealised gains on transactionsbetween Group companies are eliminated. Unrealised losses are also eliminatedsubject to impairment in relation to the asset transferred. Accounting policiesof subsidiaries have been changed where necessary to ensure consistency with thepolicies adopted by the Group. Employee share option schemes The Group operates an equity-settled share-based compensation plan. The fairvalue of the employee services received in exchange for the grant of shareoptions is measured by reference to the fair value of the share options at thedate of grant, and is recognised in the income statement on a straight linebasis over the vesting period, based on the Company's estimate of shares thatwill eventually vest. The associated credit is recognised in other reserves.Fair value is determined by reference to the Binomial option pricing model inrespect of the EMI scheme and the Black Scholes option pricing model in respectof the SAYE scheme. If dividends are paid on the underlying shares during the period between vestingdate and the end of the option's life an early exercise is more likely. In thesecircumstances the Binomial model is the most appropriate option pricing model toestimate the fair value of the options. This is because the Binomial model cancompare the benefit of option exercise with its time value at each step of theoption's life where exercise is possible. SAYE options have term to expiration equal to the vesting period and an optionof an early exercise is not applicable. Therefore, the Black-Scholes model isthe most appropriate and accurate method to evaluate these options. At each balance sheet date, the Company revises its estimate of the number ofoptions that are expected to become exercisable. When share options are exercised, the proceeds received, net of any transactioncosts, are credited to share capital (nominal value) and share premium. Investment in subsidiary undertakings The investment in INS Innovation Ltd in the Company balance sheet is recorded atthe cost, which is based on the fair value of shares issued. This is calculatedby multiplying the share price on flotation by the number of shares issued atacquisition. In these consolidated interim accounts, the investment is cancelled out againstthe shares issued on acquisition, which gives rise to the creation of thereverse acquisition reserve in the consolidated balance sheet. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciationand any impairment losses. Cost comprises the purchase price together with anydirectly attributable costs. Depreciation commences when an asset is available for use. Depreciation isprovided to write-off the depreciable amount of assets to their residual valueson a straight line basis, over their expected useful economic lives. Where thereis evidence of impairment, assets are written down to their recoverable amounts.Depreciation is calculated at the following annual rates: Leasehold buildings - Over length of the leaseFixtures, fittings and equipment - 20%Plant and machinery - 20% Residual values are assessed each year and where material are restated to theircurrent values. Intangible assets Purchased computer software is carried at cost less accumulated amortisation,plus any impairment losses. Amortisation is calculated on a straight line basisover 5 years. Impairment of tangible and intangible assets At each balance sheet date, the Group assesses whether there is any indicationthat its assets have been impaired. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent ofthe impairment, if any. The recoverable amount of an asset is the higher of its fair value less costs tosell and its value in use. The value in use is the present value of the futurecash flows expected to be derived from an asset. If the recoverable amount of an asset is less than its carrying amount, thecarrying amount of the asset is reduced to its recoverable amount. Thatreduction is recognised as an impairment loss and is recognised immediately inthe income statement. If an impairment loss subsequently reverses, the carrying amount of the asset isincreased to the revised estimate of its recoverable amount. A reversal of animpairment loss is recognised in the income statement. Revenue Revenue is derived from the design and installation of equipment and systems andthe provision of design services. Such services are provided under one of fourcontract types: Reimbursable contracts are generally for services under which initial designideas and concepts are produced. Under these contracts, INS is reimbursed infull for work done with an agreed percentage uplift. Costs incurred andassociated revenue is recognised as incurred. Target price contracts. Target total costs and profit percentage uplift areagreed with the customer at the start of the contract. Any cost savings oroverruns are shared 50% with the customer up to an agreed maximum payablecontract price. Costs are recognised as incurred, along with revenue equallingcosts incurred and a percentage profit uplift based on total expected profits. Incentivised contracts. Costs are recharged to the customer as incurred, plus avariable percentage profit uplift. The amount of uplift varies in accordancewith an agreed formula based on the performance of INS against an agreed set ofKPI's. Performance against KPI's is reviewed on a monthly basis. Costs arerecognised as incurred and revenue is calculated in accordance with the resultsof the monthly reviews. Fixed price contracts are entered into when a detailed specification of thefinal design is known. Costs are recognised as incurred, along with revenueequalling costs incurred and a percentage profit uplift based on total expectedprofits. In the case of all types of contract, any anticipated losses are providedimmediately in full. Long-term contracts Amounts recoverable on each long term contract are stated at cost plusattributable profits, less provision for any known or anticipated losses andpayments on account, and are included in trade and other receivables. Paymentson account in excess of amounts recoverable on each long term contract areincluded in payables. Pre-contract costs Where pre-contract costs can be separately identified and measured reliably andit is probable that the contract will be obtained, they are included as part ofthe contract costs and taken to cost of sales as incurred. Where it is not possible to identify or measure them reliably, or where theprobability of obtaining the contract is uncertain, pre-contract costs arerecognised as expenses as incurred and charged to the income statement. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on the taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears, and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets to the extent that it is probable that taxable profitwill be available against which the deductible temporary difference can beutilised, except for goodwill and differences arising through businesscombinations. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled, or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Leases Leases are classified as finance leases wherever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. Assets held under finance leases are recognised as assets in the balance sheetat their fair values or, if lower, at the present value of the minimum leasepayments, both determined at the inception of the lease. The correspondingobligation is recorded as finance lease obligations and presented withinpayables. Lease payments are apportioned between finance charges and areduction of the lease obligation. The finance charge is allocated to eachperiod during the lease term so as to produce a constant periodic rate ofinterest on the remaining balance of the liability. Rentals due under operating leases are charged to the income statement on astraight line basis over the term of the lease. Pension costs Contributions to defined contribution pension schemes are charged to the incomestatement in the year in which they become payable. Research and development Expenditure on research is recognised as an expense when incurred. Developmentcosts are capitalised only when it is probable that future economic benefit willresult from the project and the following criteria are met: The technical feasibility of the product has been ascertained; Adequate technical, financial and other resources are available to complete andsell or use the intangible asset; The Group can demonstrate how the intangible asset will generate future economicbenefits and the ability to use or sell the intangible asset can bedemonstrated; It is the intention of management to complete the intangible asset and use it orsell it; and The development costs can be measured reliably. Currency exposure These consolidated interim financial statements are presented in poundssterling, which represents the functional currency of the Group Monetary assets and liabilities denominated in foreign currencies are translatedto Sterling at the rates of exchange at the balance sheet date. Transactions inforeign currencies are recorded at the rate ruling at the date of thetransaction. All differences are recognised in the income statement. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Trade and other receivables Trade and other receivables do not carry any interest and are stated at theirfair values reduced by appropriate allowances of estimated irrecoverableamounts. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits on call with banks andbank overdrafts. Bank overdrafts are disclosed as current borrowings on thebalance sheet. Trade and other payables Trade and other payables are not interest bearing and are stated at theirsettlement amount. Financial risk management Price risk The Company has no significant exposure to securities price risk, as it holds nolisted equity investments. Credit risk The Group's principal financial assets are bank balances, cash, and tradereceivables, which represent the Group's maximum exposure to credit risk inrelation to financial assets. The Group's credit risk is primarily attributable to its trade receivables.Credit risk is managed by monitoring the aggregate amount and duration ofexposure to any one customer depending upon their credit rating. The amountspresented in the balance sheet are net of allowances for doubtful debts,estimated by the Group's management based on prior experience and theirassessment of the current economic environment. The credit risk on liquid funds is limited because the counterparties are bankswith high credit-ratings assigned by international credit-rating agencies. TheGroup has no significant concentration of credit risk, with exposure spread overa large number of counterparties and customers. Financial risk management (continued) Cash flow interest rate risk Interest bearing assets comprise cash and bank deposits, all of which earninterest at a fixed rate. The interest rate on the bank overdraft is at marketrate and the Group's policy is to keep the overdraft within defined limits suchthat the risk that could arise from a significant change in interest rates wouldnot have a material impact on cash flows. The Group's policy is to maintainother borrowings at fixed rates to fix the amount of future interest cash flows.The directors monitor the overall level of borrowings and interest costs tolimit any adverse effects on financial performance of the Group. Undrawn bank facilities The Group has an undrawn committed floating rate bank borrowing facility of£4million. The facility is for the purpose of providing flexibility in themanagement of liquidity and is subject to annual review and confirmation. Key estimates and judgements The key area of accounting requiring the exercise of judgment by the Group isrecognition of revenue and profit for target price, incentivised and fixed pricecontracts as detailed in the revenue accounting policy on page 12. Allcontracts are the subject of monthly management review. Exceptional items The profit before taxation is stated after charging the following exceptionalitems: 6 months ended 6 months ended 12 months ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) £'000 £'000 £'000Costs in connection with demerger from RTS and admission toAIM - 836 832Costs in connection with the offer for INS by Babcock. 275 - - 275 836 832 The above items have been highlighted as operating exceptional costs on thebasis that they are considered as one-off items that do not relate to theunderlying performance of the Group. Taxation The taxation charge for the period ended 30 June 2007 is significantly higherthan the standard rate of UK corporation tax due to the tax treatment of certaincosts in respect of the offer for the Company by Babcock. The taxation charge for the period ended 30 June 2006 is significantly higherthan the standard rate of UK corporation tax due to the demerger from RTS andthe tax treatment of certain costs in respect of the subsequent flotation of theCompany. Earnings per Share Earnings per ordinary share has been calculated using the weighted averagenumber of shares in issue during the relevant period. The calculation of basicearnings per share for the six months ended 30 June 2007 is based upon a profitafter tax of £485,000 (30 June 2006: £39,000; 31 December 2006: £1,045,000). Theweighted average number of shares used in the calculation of basic earnings pershare for the current and comparative periods is 62,335,374. 6 months ended 6 months ended 12 months ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) Pence Pence Pence Basic earnings per share 0.78 0.06 1.68Diluted earnings per share (see below) 0.77 0.06 1.67Adjusted basic earnings per share (see below) 1.22 1.40 3.01 The weighted average number of shares used in the dilution calculation is asshown below. 6 months ended 6 months ended 12 months ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) Number Number Number Weighted average number of ordinary shares for the purposesof basic earnings per share 62,335,374 62,335,374 62,335,374Effect of dilutive potential ordinary shares in respect ofshare options 474,343 49,701 94,766Weighted average number of ordinary shares for the purposesof diluted earnings per share 62,809,717 62,385,075 62,430,140 Earnings per share before the exceptional items has been calculated using theadjusted profit after tax as follows: 6 months ended 6 months ended 12 months ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) £'000 £'000 £'000 Profit after taxation 485 39 1,045Exceptional item in administrative expenses (note 4) 275 836 832Adjusted profit after tax 760 875 1,877 Reconciliation of Profit before Taxation to Net Cash Inflow from OperatingActivities 6 months 6 months 12 months ended ended ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited*) (Unaudited*) £'000 £'000 £'000 Profit before taxation 812 179 1,708Adjustments for:Depreciation 137 81 240Finance income (60) (8) (41)Finance expense - 1 2Share option charge 23 2 26Changes in working capital:Decrease in trade and other receivables 1,551 3,493 3,213(Decrease)/increase in payables (1,614) (240) 760Net cash inflow from operating activities 849 3,508 5,908 Reconciliation of equity and profit under UK GAAP to IFRS International Nuclear Solutions plc reported under UK GAAP in its previouslypublished financial statements for the year ended 31 December 2006 and interimreport for the six months ended 30 June 2006. The analysis below shows areconciliation of equity and profit as reported under UK GAAP as at 31 December2006 and 30 June 2006 to the revised equity and profit under IFRS. In addition,there is a reconciliation of equity under UK GAAP to IFRS at the transition datefor the Group, being 1 January 2006. Reconciliation of consolidated profit for the year ended 31 December 2006 (a) IAS 19 Employee UK GAAP benefits IFRS £'000 £'000 £'000Revenue 31,745 - 31,745Cost of sales (26,007) 1 (26,006)Gross profit 5,738 1 5,739Distribution costs (364) - (364)Administration expenses (2,871) (3) (2,874)Exceptional administrative expenses (832) - (832)Operating profit 1,671 (2) 1,669Finance income 41 - 41Finance costs (2) - (2)Profit before taxation 1,710 (2) 1,708Taxation (663) - (663)Profit attributable to equity shareholders 1,047 (2) 1,045 Reconciliation of consolidated profit for the six months ended 30 June 2006 (a) IAS 19 Employee UK GAAP benefits IFRS £'000 £'000 £'000Revenue 12,577 - 12,577Cost of sales (10,126) (39) (10,165)Gross profit 2,451 (39) 2,412Distribution costs (163) (5) (168)Administration expenses (1,217) (19) (1,236)Exceptional administrative expenses (836) - (836)Operating profit 235 (63) 172Finance income 8 - 8Finance costs (1) - (1)Profit before taxation 242 (63) 179Taxation (159) 19 (140)Profit attributable to equity shareholders 83 (44) 39 The consolidated profit for the period ended 30 June 2006 and the consolidatedequity shareholders' funds at 1 January 2006 disclosed in the unaudited 2006interim results have been increased/reduced by £50,000 respectively. Theadjustments were reflected in the audited financial statements for the yearended 31 December 2006. Reconciliation of consolidated equity at 31 December 2006 (a) (b) (c) IAS 19 IAS 38 IFRS 3 Employee Intangible Business UK GAAP benefits assets combinations IFRS £'000 £'000 £'000 £'000 £'000Non-current assetsProperty, plant and equipment 1,231 - (193) - 1,038Other intangible assets - - 193 - 193 1,231 - - - 1,231Current assetsTrade and other receivables 5,238 - - - 5,238Amounts due from customers for 2,117 - - - 2,117contract workCash and cash equivalents 2,734 - - - 2,734 10,089 - - - 10,089Current liabilitiesTrade and other payables (7,952) (18) - - (7,970)Amounts due to customers for (1,376) - - - (1,376)contract workCurrent tax liabilities (452) 5 - - (447) (9,780) (13) - - (9,793) Net current assets 309 (13) - - 296 Net assets 1,540 (13) - - 1,527 Shareholders' equityCalled up share capital 623 - - - 623Merger reserve (623) - - 23,687 23,064Capital redemption reserve 50 - - - 50Reverse acquisition reserve - - - (23,687) (23,687)Other reserves 26 - - - 26Retained earnings 1,464 (13) - - 1,451 1,540 (13) - - 1,527 Reconciliation of consolidated equity at 30 June 2006 (a) (b) (c) IAS 19 IAS 38 IFRS 3 Employee Intangible Business UK GAAP benefits assets combinations IFRS £'000 £'000 £'000 £'000 £'000Non-current assetsProperty, plant and equipment 1,078 - (170) - 908Other intangible assets - - 170 - 170 1,078 - - - 1,078Current assetsTrade and other receivables 3,898 - - - 3,898Amounts due from customers for 3,488 - - - 3,488contract workCash and cash equivalents 822 - - - 822 8,208 - - - 8,208Current liabilitiesTrade and other payables (5,725) (79) - - (5,804)Amounts due to customers for (2,851) - - - (2,851)contract workCurrent tax liabilities (158) 24 - - (134) (8,734) (55) - - (8,789) Net current liabilities (526) (55) - - (581) Net assets 552 (55) - - 497 Shareholders' equityCalled up share capital 623 - - - 623Merger reserve (623) - - 23,687 23,064Capital redemption reserve 50 - - - 50Reverse acquisition reserve - - - (23,687) (23,687)Other reserves 2 - - - 2Retained earnings 500 (55) - - 445 552 (55) - - 497 Reconciliation of consolidated equity at 1 January 2006 (date of transition toIFRS) (a) IAS 19 UK GAAP Employee benefits IFRS £'000 £'000 £'000Non-current assetsProperty, plant and equipment 66 - 66Other intangible assets - - - 66 - 66Current assetsTrade and other receivables 8,304 - 8,304Amounts due from customers for contract work 2,568 - 2,568Cash and cash equivalents 364 - 364 11,236 - 11,236Current liabilitiesTrade and other payables (8,408) (16) (8,424)Amounts due to customers for contract work (163) - (163)Current tax liabilities (300) 5 (295) (8,871) (11) (8,882) Net current assets 2,365 (11) 2,354 Net assets 2,431 (11) 2,420 Shareholders' equityRetained earnings 2,431 (11) 2,420 2,431 (11) 2,420 Explanation of reconciling items between UK GAAP and IFRS The standards and interpretations giving rise to the changes to the previouslyreported profit and equity of the Group are: (a) IAS 19 Employee benefits Under IAS 19, any unused paid holiday entitlement that has accumulated at thebalance sheet date must be charged to the income statement in the year to whichit relates. (b) IAS 38 Intangible assets Under UK GAAP, all capitalised computer software was included within tangiblefixed assets. IAS 38 requires software that is not an integral part of an itemof computer hardware to be classified within intangible assets. (c) IFRS 3 Business combinations Under UK GAAP, the demerger of INS Innovation Ltd from Robotic TechnologySystems plc was accounted for by merger accounting in accordance with FRS 6 "Acquisitions and mergers". IFRS 3 requires that the acquirer be identified asthe party that gains control of the other party. Therefore under IFRS, thetransaction is accounted for as a reverse acquisition. Cash flows Income taxes and dividends which were presented as separate categories of cashflows under UK GAAP have been included in financing cash flows under IFRS.There are no other significant adjustments to the cash flows presented underIFRS. Equity Analysis of Changes in Consolidated Shareholders' Equity for the six monthsended 30 June 2007 Capital Reverse Profit and Share redemption Merger acquisition Other loss capital reserve reserve reserve reserve account Total £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 January 2007 623 50 23,064 (23,687) 26 1,451 1,527Profit for the period - - - - - 485 485Share based paymentscredit - - - - 23 - 23At 30 June 2007 623 50 23,064 (23,687) 49 1,936 2,035 Analysis of Changes in Consolidated Shareholders' Equity for the year ended 31December 2006 Capital Reverse Profit and Share redemption Merger acquisition Other loss capital reserve reserve reserve reserve account Total £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 January 2006 - - - - - 2,420 2,420Profit for the - - - - - 1,045 1,045periodDividend paid - - - - - (1,964) (1,964)Equity shares issued 623 - - - - - 623Preference shares 50 - - - - - 50issuedPreference shares (50) 50 - - - (50) (50)redeemedReserve arising on - - 23,064 - - - 23,064demergerReverse acquisition - - - (23,687) - - (23,687)reserveShare based payments - - - - 26 - 26creditAt 30 June 2006 623 50 23,064 (23,687) 26 1,451 1,527 Analysis of Changes in Consolidated Shareholders' Equity for the six monthsended 30 June 2006 Capital Reverse Profit and Share redemption Merger acquisition Other loss capital reserve reserve reserve reserve account Total £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 January 2006 - - - - - 2,420 2,420Profit for the - - - - - 39 39periodDividend paid - - - - - (1,964) (1,964)Equity shares issued 623 - - - - - 623Preference sharesissued 50 - - - - - 50Preference sharesredeemed (50) 50 - - - (50) (50)Reserve arising ondemerger - - 23,064 - - - 23,064Reverse acquisitionreserve - - - (23,687) - - (23,687)Share based paymentscredit - - - - 2 - 2At 30 June 2006 623 50 23,064 (23,687) 2 445 497 Current and Past Directorshipsof Archibald anderson Bethel and Kevin richard Thomas Archibald anderson Bethel Current DirectorshipsAlstec Airports LimitedAlstec Automation LimitedAlstec Defence LimitedAlstec Group LimitedAlstec LimitedAlstec Power Systems LimitedAppledore Shipbuilders (2004) LimitedArmstrong Technology Associates LimitedBabcock Design & Technology LimitedBSN Environmental Services LimitedDefence Supply Chain Solutions LimitedDevonport Management LimitedDevonport Royal Dockyard LimitedFMA Services LimitedFN Consultancy LimitedFNC Group LimitedFNC LimitedFrazer-Nash Consultancy Group LimitedFrazer-Nash Consultancy LimitedLocam LimitedLSC Group Holdings LimitedLSC Group LimitedMarine Engineering & Fabrications (Holdings) LimitedMarine Engineering & Fabrications LimitedRosyth Royal Dockyard Limited Past Directorships Caledonian Compressors LimitedClayton Walker LimitedMB Aerospace LimitedMB Faber LimitedMB Inspection LimitedMB Material Handling Systems LimitedMB Plastics LimitedMBMHS 3 LimitedMerelake Plastics LimitedMotherwell Bridge Engineering LimitedMotherwell Bridge Fabricators LimitedMotherwell Bridge Holdings Limited(i)Motherwell Bridge Thermal LimitedNousenomore 20 LimitedNowoutofdate 2 LimitedPrecision Machining (Edinburgh) LimitedResin Glass Products LimitedRoberts Brothers Engineering LimitedSort 4 LimitedTorch Technical Services Limited KEVIN RICHARD THOMAS Current DirectorshipsAlstec Airports LimitedAlstec Automation LimitedAlstec Defence LimitedAlstec Group LimitedAlstec LimitedAlstec Power Systems LimitedBabcock Support Services LimitedFMA Services LimitedX-CMR Consultants LimitedDebut Services (South West) Limited Past Directorships Air Power International LimitedBabcock Dyncorp LimitedDebut Services (South West) LimitedDebut Services LimitedMouchelparkman Babcock Education LtdDebut Services LimitedOmnisure Property Management LimitedSGI (Holdings) LimitedThe Conservation Practice Architects & Specialist Consultants Ltd Neither of the newly appointed Non Executive Directors will have a shareholdingin the Company on appointment. -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
INS.L