30th Aug 2005 07:30
Hydro International PLC30 August 2005 EMBARGOED UNTIL 7:30 am Tuesday 30 August 2005 HYDRO INTERNATIONAL plcInterim results for the six months to 30 June 2005 CHAIRMAN'S STATEMENT Highlights •Re-listing of Hydro International plc ("Hydro") to the Alternative Investment Market ("AIM") •The acquisition of the Vexamus Group •Established HRD Technologies in Eire Performance The six months to 30 June 2005 has been an eventful period for Hydro. Followingthe re-listing of the Company to AIM in April, the acquisition of the VexamusGroup was completed on 26 May 2005. The existing operations have performed in line with both the Board's expectationand the Chairman's statement of 7 March 2005. Turnover to 30 June 2005 from theexisting operation was £5.7 million, compared to £6.4 million for thecomparative period in 2004. The transition in the regulated water industry inEngland and Wales from one capital spend cycle to the next (AMP3 to AMP4)resulted in the majority of this anticipated decrease. Profit before tax for the six months to 30 June 2005 from the existingoperations was £521,000 (30 June 2004 - £594,000). The first month's trading from the newly acquired Vexamus group is shown in theattached profit and loss statement as the "acquired" numbers and include arestructuring provision of £200,000. The acquisition of Vexamus has utilised some of Hydro's cash reserves both tocomplete the transaction and to provide working capital through therestructuring period. Closing net cash and short term deposits at 30 June 2005are £1.9 million (30 June 2004 - £2.9 million). Trading In England and Wales the regulated water industry commenced its fourth assetmanagement programme (AMP4) in April 2005. The back end loading effect of theprogramme has resulted in the anticipated reduction in turnover in Hydro UK.Whilst this market sector details its capital expenditure plans over theforthcoming five years, the focus of the existing UK business is predominantlythe stormwater market. This market is driven by regulations governing planningconsents for stormwater control, storage and treatment. Product enquiries andsales in this area continue at high levels. On 1 May 2005 we established an Irish subsidiary, HRD Technologies Ltd. Hydrohas been active in this market for a number of years through a distributorrelationship. In order to develop the Irish market further, we have taken theimportant step to commit resource through a subsidiary company. The first saleswere recognised in June and order levels continue to show promise. Over the past year resource has been added to the sales and marketing functionsof the US operation, especially in the stormwater area. The return on thisinvestment is beginning to show results, with orders for stormwater productsover 60% ahead of those for the comparative six months. Prospects in thestormwater sector are expected to continue to improve as the company introducesnew products and obtains new regulatory approvals. Activity in both thewastewater and combined sewer overflow ("CSO") sector is progressing in linewith expectations. Hydro US is both profitable and cash generative at the halfyear. The acquisition of Vexamus has significantly increased the Group's productportfolio and gives the Group a comprehensive range of wastewater treatmentproducts that provide solutions to many of the AMP4 requirements for England andWales and the Irish and Scottish markets. Although Vexamus has traditionallyundertaken fabrication and installation activities in-house the restructuring ofVexamus, which came into effect in mid-July, sees the outsourcing of fabricationand installation, in line with Hydro's business model. This move combined withother substantial cost reduction action has already produced ongoing overheadsavings in the region of 40%, which should assist both profitability and cashflow for Vexamus as we move forward. Chris Williams (Hydro UK Managing Director)is currently located full time in Vexamus, in order to oversee the changeprogramme. On the international business front, the period under review has seen thereceipt of the first order from Poland - a market identified in 2004 as havingpotential for Hydro International. Our agent (PWP) has worked hard in developingthis market and it is pleasing to see the first signs of success. Additionallywe have seen orders for stormwater and CSO products from our Korean licensee, DICorporation, and an order for grit removal equipment from Egypt. Tim Lamb, one of Hydro International's founders and former Chief Executive,unexpectedly passed away on 9th March 2005. Tim and his business partner BobSmisson formed Hydro Research & Development in 1980 to promote new approaches tosolving stormwater flooding and pollution problems using vortex basedtechnology. Tim will be fondly remembered for his entrepreneurial spirit,tireless enthusiasm and his positive attitude to life. Prospects The next six months will see the completion of the restructuring and integrationof Vexamus into the Hydro business following which it is anticipated that thebenefits of this acquisition, particularly those deriving from AMP4 expenditure,will start to come on stream. With investment in our US operation starting toshow a return, an on budget performance in the UK and progress being made inother markets we anticipate the outcome for 2005 to be in line with ourexpectations. Roger LockwoodChairman 26 August 2005 Enquiries:Keith Marshall, Director/Company Secretary, Hydro International plcTel: (01275) 878371E-mail: [email protected] Group Profit and Loss Accountfor the six months ended 30 June 2005 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) £000 (restated) (restated) Note £000 £000TurnoverExisting operations 5,703 6,361 12,450Acquisitions 777 - - 6,480 6,361 12,450 Gross profit 2,557 2,637 5,236 Administrative expensesNormal (2,083) (2,075) (4,111)Exceptional restructuring (200) - -expense Total administrative expenses (2,283) (2,075) (4,111) Operating profit/(loss)Existing operations 466 562 1,125Acquisitions (192) - - Total operating profit 274 562 1,125 Net interest receivable 57 32 87 Profit on ordinary activities 331 594 1,212before taxation Taxation (105) (192) (375) Profit on ordinary activities 226 402 837after taxation Dividend (2) (235) (206) (206) Retained (loss)/profit for (2) (9) 196 631period Earnings per ordinary share (3) 1.65p 2.92p 6.08pDiluted earnings per ordinary (3) 1.61p 2.84p 5.92pshare Hydro International plc Statement of Total Recognised Gains and Lossesfor the six months ended 30 June 2005 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Profit for the period 226 402 837 Currency translation differences on 5 (2) (10)foreign currency net investments Total recognised gains and losses 231 400 827 Reconciliation of Movements in Group Shareholders' Fundsfor the six months ended 30 June 2005 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Opening shareholders' funds (as 3,768 3,146 3,146previously stated) Prior year adjustment (see note 2) 235 206 206 Opening shareholders' funds (as 4,003 3,352 3,352restated) Total recognised gains and losses 231 400 827 Dividend (235) (206) (206) Proceeds from issue of new shares 3 27 30 Net (decrease)/increase in (1) 221 651shareholders' funds Closing shareholders' funds 4,002 3,573 4,003 Group Balance Sheet30 June 2005 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) (restated) £000 £000 £000 Fixed assetsIntangible assets 108 80 126Goodwill 1,133 - -Tangible assets 1,603 698 643 2,844 778 769Current assetsStocks and work in progress 796 124 165Debtors 5,272 2,946 2,914Investments - short term deposits 1,025 2,400 1,215Cash and short term deposits 1,233 546 1,424 8,326 6,016 5,718 Creditors: amounts falling due within (6,681) (3,214) (2,474)one year Net current assets 1,645 2,802 3,244 Total assets less current liabilities 4,489 3,580 4,013 Creditors: amounts falling due after (487) (7) (10)more than one year Net assets 4,002 3,573 4,003 Capital and reservesShare capital 691 689 690Share premium account 852 848 850Profit and loss account 2,459 2,036 2,463 Total equity shareholders' funds 4,002 3,573 4,003 Consolidated Cash Flow Statementfor the six months ended 30 June 2005 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) Note £000 £000 £000 Net cash inflow from (4) 86 1,025 1,246operating activities Return on investment and 57 27 85servicing of finance Taxation - corporation tax paid (152) (3) (512) Capital expenditure and (48) (50) (120)financial investment AcquisitionsPurchase of subsidiary (186) - -undertakingNet overdrafts acquired with (231) - -subsidiary Equity dividends paid (235) (206) (206) Cash (outflow)/inflow before (709) 793 493management of liquid resourcesand financing Management of liquid resources 191 (800) 385- Net decrease/(increase) inshort term deposits Net debt financing cash outflow (5) (16) (2) (4) Proceeds from issue of new 3 27 30shares (Decrease)/increase in cash in (531) 18 904period Notes to the Interim Announcement 1. Basis of preparation The Interim Report has been drawn up using the accounting policies as set out inthe financial statements covering the year ended 31 December 2004 subject to theadoption of FRS 21 Post balance sheet events. The financial information for thesix month period ended 30 June 2005 and 2004 has not been audited by the Group'sauditors and does not constitute accounts within the meaning of s240 of theCompanies Act 1985. The financial information for the year ended 31 December2004 is an abridged version of the Group's accounts which received anunqualified auditors' report and did not contain a statement under s237(2) or(3) of the Companies Act 1985 and have been filed with the Registrar ofCompanies. 2. Prior year adjustment The effect of adopting FRS21, and therefore recognising dividends in the periodduring which they were approved, has increased the retained profit for the sixmonths ended 30 June 2004 and the year ended 31 December 2004 by nil and £29,000respectively. The net assets at 30 June 2004 and 31 December 2004 have increasedby nil and £235,000 respectively. The retained profit for the six months to30 June 2005 would have been £235,000 higher if FRS 21 had not been adopted. Thenet assets at 30 June 2005 would be unchanged if FRS 21 had not been adopted. 3. Earnings per share Earnings per ordinary share are based on profit on ordinary activities aftertaxation, divided by a weighted average of 13,804,757 (2004 - 13,736,333) 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 14,169,842 (2004 - 14,143,728). 4. Reconciliation of the operating profit to net cash inflowfrom operating activities 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Operating profit 274 562 1,125Depreciation charges 72 60 134Amortisation charges 24 12 24Decrease in stocks 398 152 111(Increase)/decrease in debtors (333) 182 201(Decrease)/increase in creditors (349) 57 (349) Net cash inflow from operating 86 1,025 1,246activities 5. Reconciliation of net cash flow to movement in net funds 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 (Decrease)/increase in cash for the (531) 18 904periodCash (outflow)/inflow from movements (191) 800 (385)in short term depositsCash outflow from reduction in debt 16Loans acquired with subsidiary (555) 2 4 Change in net funds resulting from (1,261) 820 523cash flowsNew finance leases - - (7)Translation differences 5 (2) (10) Movement in net funds in the period (1,256) 818 506Net funds at start of period 2,623 2,117 2,117 Net funds at end of period 1,367 2,935 2,623 6. In relation to the acquisition of Vexamus continuing operations for the period to 30 June 2005 include cost of sales £612,000, gross profit £165,000, administrative expenses of £157,000 and exceptional restructuring expense of £200,000. 7. Copies of the interim results will be distributed to shareholders and made available to the general public at the Company's registered office. 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 2005 which comprises the group profit and lossaccount, the statement of total recognised gains and losses, the reconciliationof movements in group shareholders' funds, the group balance sheet, theconsolidated cash flow statement and related notes 1 to 7. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial 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 polices 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 United Kingdom auditing standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress 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 2005. Deloitte & Touche LLPChartered AccountantsBristol 26 August 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HYD.L