30th Aug 2006 07:00
Hydro International PLC30 August 2006 Hydro International plc Interim Results for the six months to 30 June 2006 Chairman's Statement Highlights • Profit before tax increased to £602k* • Order book up 34% to £7.2m • Net cash at bank and short term deposits up 21% to £2.3m** • Earnings per share (diluted) increased to 2.98p • Vexamus Water integration and rebranding as Hydro International, Water & Wastewater Division completed • Successful launch of Up-FloTM Filter and StormBankTM • New and enhanced distribution agreements in the US (SludgeScreenTM) and with Rocla (Australia) and Hynds (New Zealand) * this amounts to an increase of 13% before, or 82% after, the inclusion of the exceptional restructuring expense of £200k incurred in 2005 ** net cash in 2005 was £1.9m being £2.2m bank balance and short term deposits less £0.3m overdraft Financial Performance We are pleased to report financial results for the first half of 2006 in linewith our expectations. Turnover grew by £4.5m and profit before tax increased to£602k, compared with £331k (after £200k of exceptional restructuring expense)for the same period in 2005. The closing order book increased by 34% and net cash at bank and short termdeposits was up 21% at £2.3m. Operating Review In England and Wales the regulated water industry completed the first full yearof its fourth asset management program (AMP4). As anticipated, the program isback end loaded and has got off to a relatively slow start though it's pleasingto report that proposal activity for Hydro's portfolio of wastewater products,enhanced with 2005's acquisition of Vexamus Water, is at encouraging levels.Hydro's Water & Wastewater Division, formerly Vexamus Water, has beensuccessfully integrated into the Group and has secured several key contracts inthe first half of 2006. The division has also entered into an exclusivedistribution agreement, for Hydro's SludgeScreenTM, with a leading supplier ofwastewater treatment equipment in the US. Demonstration units have already beenshipped from Ely to the US for testing and promotional purposes. Hydro's Clevedon based stormwater business has delivered a solid performance forthe first six months of 2006 with enquiries, orders and sales continuing atencouraging levels. The stormwater market is driven by regulations governingplanning consents for stormwater control, storage and treatment. The StormwaterDivision launched StormBankTM - a compact and cost-effective rainwaterharvesting system designed to collect and store rainwater from roofs, from bothresidential and commercial properties. The water can then be used fornon-potable water applications. Interest in the product is growing, driven bythe increasing concerns about drought conditions and the call for more efficientuse of ever more scarce water resources. HRD Technologies Ltd, our Irish subsidiary, has delivered a strong result forthe first six months of 2006. The Irish business introduced Hydro's water andwastewater products into the Irish market and has secured contracts in both theindustrial and municipal market sectors. The Stormwater Division in the US has had a good start to the year building onthe advances made in 2005. The new Up-FloTM Filter, a unique filter systemdesigned to remove fine particulates and associated pollutants from stormwaterrunoff, is generating significant interest in the market. Third partyperformance testing (ETV) is close to completion and regulatory approvals arecurrently under review in key markets. Activity in both the wastewater andcombined sewer overflow (CSO) sector is lagging behind expectations due todelays in project approvals and funding. However, proposal activity remainsbuoyant and there are indications that bid activity is likely to increasethrough the latter part of the year. At the start of the year, Hydro created an Innovation Team to oversee theGroup's marketing, information systems, product development and technicalsupport functions. Its objective is to separate the creative functions from theday-to-day operating functions of the business in order to focus on creatingstandard platforms and streamlining systems for the supporting functions of theoperating companies. The Innovation Team is working well together; one notablesuccess is the standardisation to the Inventor drawing and modelling packageacross the company. The adoption of Inventor as the standard drawing tool hasled to improvements in efficiency and improved quality of outputs. On the international business front we have successfully completed Grit King(R)projects in Qatar, Doha and Egypt and the first Storm King(R) installation inKorea. Following the enhancements to the distribution agreements with RoclaWater Quality Products in Australia and Hynds Environmental in New Zealand theGroup received its first significant orders for the First Defense(R) andUp-FloTM Filters. Outlook The outcome for the first half of the year was as anticipated. Despite some AMP4procurement lag and delays in US wastewater projects, as indicated in our AGMtrading statement, and providing there is no significant economic downturn, weanticipate delivering further growth for the year as a whole with the financialresults of the two halves expected to be proportionately similar to thoseattained (pre exceptional restructuring expense) in the previous year. Roger LockwoodChairman 29 August 2006 Enquiries: Roger Lockwood, ChairmanTel: +44 (0) 1249 652652Steve Hides, CEOTel +1 207 756 6200 Group profit and loss accountFor the six months ended 30 June 2006 6 months ended 6 months ended Year ended 30 June 2006 30 June 2005 31 December 2005 Note (Unaudited) (Unaudited) (Audited) £000 £000 £000 Turnover - 11,021 6,480 18,640 continuing activities Gross profit 3,809 2,557 6,526 Administrative expenses Continuing (3,224) (2,083) (5,095) activities Exceptional - (200) (200) restructuring expense Exceptional gain - - 79 on revaluation of building Total (3,224) (2,283) (5,216) administrative expenses Operating profit 585 274 1,310 - continuing activities Net interest 17 57 60 receivable Profit on 602 331 1,370 ordinary activities before taxation Taxation (179) (105) (400) Profit for the 423 226 970 period Earnings per (2) 3.02p 1.65p 7.02p ordinary share Diluted earnings (2) 2.98p 1.61p 6.88p per ordinary share Statement of total recognised gains and lossesFor the six months ended 30 June 2006 6 months ended 6 months ended Year ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Profit for the period 423 226 970 Unrealised surplus on revaluation - - 671of freehold land and buildings Currency translation differenceson foreign currency net (22) 5 16investments Total recognised gains and losses 401 231 1,657 Reconciliation of movements in Group shareholders' fundsFor the six months ended 30 June 2006 6 months ended 6 months ended Year ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Opening shareholders' funds 5,471 4,003 4,003 Total recognised gains and losses 401 231 1,657 Dividend (282) (235) (235) Proceeds from issue of new shares 52 3 46 Net increase/(decrease) in 171 (1) 1,468shareholders' funds Closing shareholders' funds 5,642 4,002 5,471 Note of Group historical cost profits and lossesFor the six months ended 30 June 2006 6 months ended 6 months ended Year ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Reported profit on ordinary 602 331 1,370activities before tax Difference between an historicalcost depreciation charge 16 - 32and the actual depreciation chargefor the period Historical cost profit on ordinary 618 331 1,402activities before tax Group balance sheet30 June 2006 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Fixed assets Intangible assets 95 108 90 Goodwill 1,350 1,133 1,399 Tangible assets 2,240 1,603 2,275 Current assets 3,685 2,844 3,764 Stocks and work in progress 586 796 612 Debtors 6,179 5,272 6,620 Investments - short term deposits 1,280 1,025 - Cash at bank and in hand 972 1,233 1,703 9,017 8,326 8,935 Creditors: amounts falling due (6,603) (6,681) (6,742)within one year Net current assets 2,414 1,645 2,193 Total assets less current 6,099 4,489 5,957liabilities Creditors: amounts falling due (457) (487) (486)after more than one year Net assets 5,642 4,002 5,471 Capital and reservesShare capital 706 691 696 Share premium account 932 852 890 Revaluation reserve 623 - 639 Profit and loss account 3,381 2,459 3,246 Total shareholders' funds 5,642 4,002 5,471 Consolidated cash flow statementFor the six months ended 30 June 2006 6 months 6 months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Note Net cash inflow from operating (3) 1,019 86 57activities Equity dividends paid (282) (235) (235) Return on investment andservicingof finance 17 57 65 Taxation - corporation tax paid (117) (152) (282) Capital expenditure and (109) (48) (87)financial investment AcquisitionsPurchase of subsidiary - (186) (219)undertakingNet overdrafts acquired with - (231) (229)subsidiary Cash inflow/(outflow) beforemanagementof liquid resources and 528 (709) (930)financing Management of liquid resources -Net (increase)/decrease in (1,280) 191 1,215short term deposits Net debt financing cash outflow (4) (31) (16) (68) Proceeds from issue of new 52 3 46shares (Decrease)/increase in cash in (731) (531) 263period Notes to the interim announcement 1 Basis of preparation The Interim Report was approved by the Directors on 29 August 2006. The Interim Report has been drawn up using the accounting policies as set out inthe financial statements covering the year ended 31 December 2005. The effect ofadopting FRS 20 share based payments, and therefore recognising the cost of thefair value of the share options has been reviewed and there is no implication onthe financial statements as all options were granted prior to the applicationdate noted in the standard. The financial information for the six month period ended 30 June 2006 and 2005has not been audited by the Group's auditors and does not constitute accountswithin the meaning of s240 of the Companies Act 1985. The financial informationfor the year ended 31 December 2005 is an abridged version of the Group'saccounts which received an unqualified auditors' report and did not contain astatement under s237(2) or (3) of the Companies Act 1985 and have been filedwith the Registrar of Companies. 2 Earnings per share Earnings per ordinary share are based on profit on ordinary activities aftertaxation, divided by a weighted average of 14,016,361 (2005 - 13,804,757) sharesin issue during the period. The diluted earnings per share are calculated afterthe inclusion of share options and the weighted average of ordinary shares usedin the calculation is 14,178,440 (2005 - 14,169,842). 3 Reconciliation of the operating profit to net cash inflow from operatingactivities 6 months ended 6 months Year ended ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Operating profit 585 274 1,310 Depreciation charges 120 72 219 Amortisation of intangible fixed 19 24 36assets Amortisation of goodwill 49 - 56 Gain on reversal of permanent - - (79)diminution Decrease/(increase) in stocks 26 398 (131) Decrease/(increase) in debtors 441 (333) (1,988) (Decrease)/increase in creditors (199) (349) 634 Currency translation differences (22) - - Net cash inflow from operating 1,019 86 57activities 4 Reconciliation of net cash flow to movement in net funds 6 months 6 months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 (Decrease)/increase in cash for (731) (531) 263the period Cash inflow/(outflow) from 1,280 (191) (1,215)movements in short term deposits Cash outflow from reduction in 31 16 68debt Change in net funds resulting 580 (706) (884)from cash flows New finance leases - - (12) Loans acquired with subsidiary - (555) (573) Translation differences - 5 16 Movement in net funds in the 580 (1,256) (1,453)period Net funds at start of period 1,170 2,623 2,623 Net funds at end of period 1,750 1,367 1,170 5 Copies of the interim results will be distributed to shareholders and madeavailable to the general public at the Company's registered office; Shearwater HouseClevedon Hall EstateVictoria RoadClevedon, BS21 7RD. Independent review report to Hydro International plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the group profit and lossaccount, statement of total recognised gains and losses, reconciliation ofmovements in Group shareholders' funds, note of Group historical cost profitsand losses, Group balance sheet, consolidated cash flow statement and relatednotes 1 to 5. We have read the other information contained in the interim reportand considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Deloitte & Touche LLPChartered AccountantsBristol 29 August 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HYD.L