13th Dec 2007 07:01
Spice PLC13 December 2007 13 December 2007 Spice plc Interim results - period ended 28 October 2007 Spice plc ("Spice" or "the Group"), the provider of Total Utility SupportServices, is pleased to announce its interim results for the period ended 28October 2007. Financial highlights - Profit before tax of £8.3 million (2006 restated: £5.8 million) - 44% increase - Profit before tax and amortisation of £9.9 million (2006 restated: £6.1 million) - 62% increase - EBITA* of £12.0 million (2006 restated: £7.1 million) - 68% increase - 100% of operating profit converted into operating cash - £10.3 million (2006: £5.3 million) - 30% like for like organic growth from existing operations - Diluted earnings per share of 10.7 pence (2006 restated: 8.8 pence) - 22% increase - Adjusted diluted earnings per share of 13.6 pence (2006 restated: 9.5 pence) - 43% increase - Interim dividend of 1.5 pence per share (2006: 1.0 pence) - 50% increase * EBITA comprises profit on ordinary activities before interest, tax andamortisation of intangible fixed assets 2006 comparative numbers have been restated, where appropriate, to reflect theadoption of International Financial Reporting Standards (IFRS) Operational highlights May 2007 H20 renews Yorkshire Water contract May 2007 Team Simoco selected to provide replacement PMR to Western Power Distribution July 2007 H20 renews United Utilities contract December 2007 Billing Services agrees two year contract with Corona Energy Simon Rigby, Chief Executive Officer commented: "We have delivered a very strong performance in the first half of the financialyear with a 68% increase in EBITA, 30% of which is pure organic growth. Weexpect industry drivers, within our core utilities market, to remain strong. Weare keenly focused on organic growth, converting our profits into cash anddelivering shareholder value from our acquisition of RAS and believe that Spiceremains well placed to continue to grow organically (including by cross sellingacross operating divisions) whilst at the same time continuing to pursuecomplementary acquisition opportunities within our existing operations. We areconfident that we have the right people and structure to make the most of thesegrowth opportunities over the coming months." - Ends - Enquiries: Spice plc - Tel: 0113 201 2120Simon Rigby, Chief Executive OfficerOliver Lightowlers, Group Finance Director Financial Dynamics - Tel: 020 7831 3113Billy CleggCaroline Stewart KBC Peel Hunt (Nominated Adviser and Broker) - Tel: 020 7418 8900Julian Blunt Business and financial review Spice now provides Total Utility Support Services across seven businesses.Looking at each in turn: Billing Services Our Billing Services business was created in October 2007 through theacquisition of Revenue Assurance Services (RAS) which focused on threeactivities being billing consultancy, debt resolution and meter point services.The acquisition of RAS is particularly significant for Spice since billingconsultancy enhances our capability to work on the supply side, therebycompleting the portfolio of skills that enables us to move closer to becoming afull end to end utility outsourcer. The acquired RAS business has contributed£0.3 million to the Group result for the two week period since acquisition andtrading since October has been in line with our expectations. Billing consultancy is the largest of the three acquired activities and thisbusiness has formed our Billing Services business. Post acquisition, debtresolution and meter point services are being integrated into our Water Servicesbusiness. This is explained further within the report on Water Services. The approximate value of annual billings in UK energy markets is some £21billion per annum with the electricity market estimated to be around three timesthe size of the gas market. The industrial and commercial element of this marketis some £11 billion, generated by over 2.5 million industrial and commercialcustomers. The sheer scale and complexity of the energy markets, coupled withthe effects of deregulation and acquisition activity have created a highlycomplex billing and management environment for our utility clients. The systemsand processes of utility companies are capable of working to a high level ofefficiency and delivering around 98% accuracy over the billing process.However, material imbalances and errors do arise throughout the entiremanagement, billing and metering process. Billing Services helps the in-houseclient teams of utilities to identify and correct the errors and imbalances thatarise in the energy billing supply chain and also to generate the appropriatecash recovery. This service is provided to utilities on a fully contingent feebasis. The projects undertaken vary widely from identifying over charges and underbilling to root cause analysis, market data review, ad-hoc projects designed toaudit the efficiency of the client's system and upon request, audit andconsultancy on behalf of the industry's regulatory bodies. The entire operational management team of RAS has joined Spice and we have beenable to work with the management team during the change of control process whichhas allowed us to "hit the floor running". The integration of the RAS businessis progressing smoothly and as planned. Progress is already being made to crosssell Billing Services into Spice's existing clients in the gas and electricitysector and we have been able to engage with clients that have historicallyeluded RAS including Corona Energy, with whom we have recently agreed a two yearcontract. We also see international growth opportunities in the electricity and gasmarkets. The UK is the most deregulated energy market in the world and as mostother major countries move towards deregulation then Billing Services is ideallyplaced to be first to market in those territories. This can be achieved withoutthe need for substantial overseas investment as the fee earning work will bedelivered through our operations at Borehamwood. In the longer term, we alsobelieve that there are opportunities to develop services that address the errorsand imbalances arising within the Water and Telecoms markets. Energy Services Inenco, which provides energy management and environmental consultancy services,continues to deliver strong results recording EBITA of £1.5 million (2006: £0.6million) for the period ended 28 October 2007. This significant increase (afterallowing for the part period in 2006) has been achieved through organic growthincluding the conversion of cross selling opportunities from our otherdivisions. Higher margin procurement services continue to be the dominantcontributor to Inenco's result which is built upon solid long term customerrelationships and increased product penetration. Energy prices continue to bevolatile and the recent upward price movements act as a stark reminder thatenergy procurement is a specialist field and energy and related issues remainhigh on the boardroom agenda. Recently, Inenco became authorised by theFinancial Services Authority. This authorisation differentiates Inenco from itscompetitors, which will help us to win new customers by providing increasedconfidence in our services whilst also allowing us to develop new services toassist clients in the management of the risks associated with energyprocurement. Within the past six months, we have increased our European customer base. Anincreasing number of customers are seeking solutions that extend beyond the UKinto Mainland Europe. Whilst our European expansion is cautious, as we seek todevelop our capabilities in this area, we now have a basis to gain realexperience in other European countries including Holland, Spain, Germany andothers. The recent energy review and associated White Paper re-affirms the UKgovernment's desire to achieve a low carbon economy with a number of proposalsput forward which will maintain and increase the demand for our energy andenvironmental services. In particular the Carbon Reduction Commitment to beintroduced in 2010 will expose up to 5,000 companies to the impact of theircarbon emissions. We are seeing signs of "early adopters" responding to themessage and engaging Inenco to assist with their action plans. An example is theinstallation of smart meter technology which is supported by the provision ofongoing management reporting, to turn the massive increase in data into usefulinformation that can be easily understood and acted upon. Clarificationsurrounding renewable obligation certificates is expected to give impetus todistributed forms of renewable generation and we consider that we are in anexcellent position to support our customers' desire to be "green". Subsequent to the end of the financial period, we completed the acquisition ofSaturn Energy (Saturn) which is a commercial energy broker focused on the smalland medium enterprise ("SME") sector. Saturn acts as agent for SMEs to procuregas and electricity from suppliers under medium and long term contracts. Thisacquisition fits well with Inenco and enables us to extend the range of ourenergy brokerage services into the SME sector, which has historically been veryfragmented, and we believe that Saturn's services will be enhanced by itsability to utilise the wider resources of Inenco. Facilities Services Facilities Services, which provides facilities management solutions, reportedEBITA of £2.1 million (2006: £1.9 million) for the period. Our Servicelinebusiness has seen strong levels of client activity and demand through theperiod. This has included Debenhams taking our full integrated service acrossits entire retail estate and other contract wins including Smith News and CancerResearch UK. The number and range of tasks handled by Serviceline continues togrow to meet client demands and we continue to focus upon innovation aroundservice delivery for our customers. Circle Britannia has benefited from the growth in Serviceline and theirassociated influence on the selection of supply chain partners that, wherepossible, result in the appointment of Circle Britannia to undertake thedelivery of maintenance services. Maintenance contracts have been agreed withTravelodge and Wolseley during the period and we are hopeful that theserelationships can be grown over coming months. As the geographic coverage of ourGas Services business has improved, we have also begun to offer commercial gasmaintenance services and have seen good order levels from existing clients aswell as strong enquiry levels from new clients. The integration of Atlanta, theacquisition of which was completed in March 2007, is ongoing and our focuscontinues to be on reducing delivery through Atlanta's sub-contractor network infavour of self delivery by Circle Britannia. In the latter part of the financial period, Circle Britannia finalised thetransition from a direct service contract with Norwich Union to an indirectservice contract via Asprea, who have been appointed to deliver repairs todomestic insurance policy holders on behalf of Norwich Union. Whilst Asprea'smedium to long term forecasts show strong work volumes being maintained, weexpect that these new supply arrangements will take some time to bed down duringthe second half of the financial year. Gas Services Our Gas Services division, which provides gas maintenance, installation andrepair, meter operations and emergency response services, was created just over12 months ago and has contributed EBITA of £1.8 million to the result for theperiod. The acquisitions of Homerton and GMT strengthen our geographic footprintin the South of England and extend our operational capability across SouthYorkshire and the North Midlands. Subsequent to the end of the period, we havealso completed the acquisition of Gas Call which extends our footprint intoScotland. We remain committed to our strategy of achieving national coverage inthe UK market, using established regional businesses and brands, and to use thisnetwork to expand our presence in national gas meter operations and thecommercial gas maintenance sector via our Facilities Services business. In September 2007, we also acquired MET, which provides training services tolearners in the plumbing, gas and heating sectors. This acquisition will provideSpice with a ready supply of "best in class" gas, plumbing and heating engineerswhilst offering a sustainable and growing entry into the training market. The underlying drivers within the gas sector remain strong as we benefit fromincreasing regulations and the requirement for gas safety compliance amongsthousing associations, local authorities and private landlords. Apollo and ParGashave been better able to translate these opportunities into contracts as part ofa larger group through enhanced systems and management infrastructure. We havesecured new term contracts with customers including Wirral Housing Partnership,Hornby Homes, Stockport Council and Bowlees Park Housing Association. We nowhave access to over 440 CORGI registered engineers and maintain in excess of145,000 properties. Over the next 12 months, we expect to be able to increaseboth the number of CORGI engineers in the Group and also the number ofproperties maintained. Electricity Services During the first half of the year, Electricity Services, which providesspecialist utility engineering services to the electricity sector and toindustry, increased EBITA by 41% to £4.2 million (2006: £3.0 million). Thisgrowth is underpinned by our Service Island structure, which allows us todeliver a comprehensive "cradle to grave" service, and also through last year'smajor long term contract wins within the EDF Energy footprint. All of our EDFEnergy contracts have been mobilised successfully with particularly strongperformance to date from Freedom Power Lines which has benefited from a doublingof volumes. Freedom Asset Care has also performed strongly benefiting fromenhanced contractual terms. During the period, our Freedom Consultancy Service Island completed theacquisition of KMN which provides specialist professional civil and structuralengineering design and management services. The acquisition reinforces Freedom'sstrength in these areas but also creates a number of cross selling opportunitiesfor other Service Islands as well as the wider Spice business. The integrationof Optimal, which was acquired towards the end of the last financial year, hasnow been successfully completed. In September 2007, Freedom was selected by AT&T to provide records and datamanagement services in the USA. The contract is for an initial period of twoyears with an estimated turnover value per annum of £5 million. Freedom isworking alongside client staff from AT&T in AT&T's offices across four US states(Mississippi, Florida, Tennessee and North Carolina), as part of an integratedproject delivery team. Whilst the existing utilities market in the US iscurrently structured differently to the UK, we believe that in the longer term,the trend towards deregulation and outsourcing will accelerate in the same wayas occurred in the UK market. The AT&T contract creates a platform for long termgrowth in the US market through allowing the Group to begin to develop itscapabilities in the US ahead of expected deregulation and outsourcing trends.Whilst the AT&T contract creates a significant long term opportunity for us, ourfocus remains on the UK market which we still see as continuing to generatesignificant opportunities for the Freedom business. Telecoms Services Our Telecoms infrastructure support services business, which designs, installs,supports, maintains and operates infrastructure assets around the world,reported a 20% increase in EBITA to £2.1 million in the first half of the year(2006: £1.8 million). The order book for the business remains in line with ourexpectations and positions us well for the full year. AirRadio continues to win additional new business with British Airways as itprepares for the opening of Heathrow Terminal 5 in March 2008. This has includedan expansion of the data terminal project (D74) which should help to underpinour full year performance. Additionally, new networks have been opened up atboth Cardiff and City of London airports and we expect to add at least one otherUK airport during the remainder of this financial year. In order to cope withthe ever growing demands for radio capacity at Heathrow, AirRadio have deployedXfin multi-site technology which has created 20% extra capacity from the samequantity of radio channels. Hutchison Team Telecom continues to win new first line maintenance supportcontracts from companies such as Med Cable, M Link and EU Networks and duringthe period we have renewed and extended our existing pan European contracts withInteroute for a further three years. We have seen slower than anticipateddeployment of our Huawei BT21CN contract due to a number of issues outside ofour control. We are hopeful that momentum can be recovered in the second half asstart up issues are resolved. The business continues to roll out a number of IPfixed line networks for several of our other manufacturing partners, across boththe UK and Europe. Subsequent to the end of the financial period, we completedthe acquisition of Redbridge Management Services (RMS) which strengthens ourTelecoms Services division and means that our operational capability is nowextended to provide comprehensive, UK wide, first line maintenance serviceswhich compliments our existing UK and European footprint in Hutchison TeamTelecom. The addition of around 58 qualified telecommunications engineerssignificantly enhances our capabilities. Team Simoco continues to see strong growth in all areas and in particular forsales of Xfin technology. We recently gained another industry innovation awardfor our Xfin Mutli-site Softswitch, the second of its type in the last twoyears. New orders have been secured for networks in Panama, China and Africa aswell as the UK. During the first half of the year, we have been focused on theWestern Power Distribution network roll out programme, which, at over 100discrete sites, is the largest system of its type to be deployed in the UK inthe last five years. This project will continue through the majority of thisfinancial year, providing a significant expected benefit in the results for theyear, and we remain on track for completion as planned. Additionally we wereable to successfully renew significant maintenance contracts with the UK MODwhich will now run until 2010 underpinning our stated aim of increasingmaintenance revenues across the business going forward. Water Services Our Water Services business, which provides national clean and dirty waterservices and meter operations, has made a successful start to the financial yearcontributing EBITA of £3.2 million (2006: £2.8 million) an increase of 12%. During the period, H20 renewed both of its meter installation contracts withYorkshire Water and United Utilities for three years with an option to extendfor two years. We are now working under both of these new contracts. WithinYorkshire Water, we are working alongside client staff at Yorkshire Water's Headoffice. The scope of our work has also been extended to include repair andmaintenance of Yorkshire Water's asset infrastructure. Within United Utilities,we are now the sole provider of meter installation services across the whole ofUnited Utilities' network and will shortly be rolling out our bespoke worksmanagement system to replace United Utilities' existing systems so as to providea fully mobile working solution. Elsewhere we have renewed our meter reading contract with Scottish Water as wellas continuing to deliver our commercial meter installation contract. Therecontinues to be significant environmental pressures on water conservation andleakage and our water efficiency and leakage management service continues to bein demand from both utility and commercial clients. We have won a two yearframework contract with Thames Water to survey, provide and install pressureequipment in tall buildings and also a contract to provide water efficiencyservices. The current drivers for outsourcing by the utilities, together withthe focus on water conservation and maintenance of assets, positions us well forcontinued growth in the future. Our Metro Rod and Meter U businesses continue to perform in line withexpectations. Metro Rod has secured a number of new clients in the periodincluding Nationwide, Budgens and Elyo. We have recently begun to develop ourfranchise brand in Northern Ireland and are looking to extend this into TheRepublic of Ireland. Following the acquisition of RAS, two of the acquired businesses (debtresolution and meter point services) are being operationally managed andintegrated into our Meter U business. This broadens and extends our fieldservice offering, whilst adding a skilled office based operation. Approximately230 field agents provide nationwide coverage on utility-based debt collectionincluding pre-disconnection visits, warrant applications, token meterinstallations and warrant visits. This work is controlled by a team ofapproximately 40 people based in Warrington. Debt resolution services arecontrolled from Borehamwood and Solihull. This team undertakes complex debtresolution services for utility clients including both live and final debt. Cross selling Cross selling continues to form an important part of our future growth strategy,particularly following the acquisition of RAS, where an important part of ourstrategy is to take the Billing Services offering into the electricity sector.We have also begun to leverage the enhanced geographic coverage of our GasServices business in the development of our commercial gas maintenance services. The successes that we have enjoyed over the past twelve months are being turnedinto earnings as is demonstrated by the strong like for like organic growth thathas been achieved in this period compared to last. We continue to believe thatSpice enjoys an exceptionally strong platform from which to convert crossselling opportunities into earnings. Cross selling remains a priority for themanagement team. Head office Head office costs are mainly comprised of salaries, including the Group's IT andHR functions, and also professional costs. Costs have increased over the periodas a result of our continued investment in IT infrastructure and resource. Thisinvestment has been made to support the migration to a common accountingplatform for four of our businesses (Electricity, Facilities, Water and BillingServices). Connected to this, we have also invested in the further developmentof our in-house work management system (job track). The "next generation" of jobtrack is expected to be live, initially within our Electricity business, by theend of the year. Acquisitions Five acquisitions have been made during the period, which are summarised below: Initial net Maximum additional consideration contingent consideration £'m £'m Homerton 1.5 2.5 Contingent consideration based on acquired working capital and performance to April 2008 KMN 0.8 0.1 Contingent consideration based on net assets in completion accounts GMT and MET 6.5 14.1 Contingent consideration based on acquired working capital and performance during 2008, 2009 and 2010 RAS 101.2 - 110.0 16.7 Initial net consideration in respect of these acquisitions totals £110.0million. This includes the issue of 6.5 million new shares to shareholders ofRAS. The Group expects to incur exceptional costs of up to £0.3 million in thesecond half of the financial year connected to the reorganisation andintegration of RAS. At the start of the financial year, the Group had a provision totaling £5.2million in relation to deferred contingent cash consideration payable onacquisitions made in previous years. This provision relates principally to theacquisitions of Air Radio, Hutchison and Kemac. During the period, a total of£2.6 million contingent consideration has been paid mainly in relation toHutchison and Kemac. After taking account of earn out obligations made in theperiod ended October 2007, a provision of £16.8 million for deferred contingentcash consideration has been carried forward. It is expected that this provisionwill be utilised over the three year period ending April 2010, depending on theperformance of acquired businesses. In November 2007, the Group completed the acquisition of RMS for initial netcash consideration of £3.1 million. In December 2007, the Group completed theacquisition of Saturn for initial net cash consideration of £3.5 million andalso Gas Call for initial net cash consideration of £2.25 million. Group Board The Group announced in July 2007 that Sir Rodney Walker intended to stand downas Chairman within twelve months. We have started the search for a new Chairmanand believe that it is important to take our time, in order to identify andappoint the best candidate as Chairman. Separately the Group announced today that Carl Chambers will leave the Grouparound the middle of next year. It is intended in due course, that PeterBurridge, who is currently Managing Director of our Telecoms business will beappointed as Group Corporate Finance Director. This position will cease to be asa Main Board Director of Spice although Peter will continue to be a member ofthe Group's Operating Board. Peter has extensive acquisitions and corporatefinance experience and has worked for the Group for nearly six years. MikeNorfield, who has been Managing Director of Team Simoco for three years, willbecome Managing Director of our Telecoms business. The Group also announced today that Andy Catchpole has been appointed to theMain Board of Spice as Group Strategy and Development Director. Andy willcombine this role with his existing role as Managing Director of our Electricitybusiness. Prior to joining Spice in 2005, Andy held senior positions with 24/7,TXU Europe, Hanson and Eastern Electricity. Andy has made a huge contribution tothe development of our Electricity Services business and we believe that Andycan help the wider Group achieve its ambitions to replicate our success inElectricity within our other markets. Financial review The Group has made a strong start to the new financial period. Organic growthand cash conversion continue to be main features of the Spice business. We haverecorded 30% like for like organic EBITA growth in the business and haveconverted 100% of operating profits into operating cashflow. Turnover During 2007, turnover increased by 40% to £143.4 million (2006: £102.6 million),of which acquisitions contributed £2.5 million. Profit on ordinary activities before interest, tax and amortisation ofintangible fixed assets (EBITA) EBITA increased by 68% to £12.0 million (2006 restated: £7.1 million). The tablebelow identifies the driving factors behind this growth including separatelyidentifying the part year effect of acquisitions made during 2006: 2007 2006 £'m £'m as restatedEBITAExisting operations 10.4 8.02007 acquisitions 0.7 -Part year effect of 2006 acquisitions 1.9 -IFRS 2 Share based payment charge (1.0) (0.9) 12.0 7.1 The table shows that EBITA from existing operations, excluding the effect ofIFRS 2, was £10.4 million (2006 restated: £8.0 million), representing organicgrowth of 30% for the period. Separately, acquisitions made during 2007contributed £0.7 million to EBITA. Spice made various acquisitions during 2006, which contributed to EBITA for partof that year but which have contributed to EBITA for the whole of the periodended October 2007. For example, Inenco was acquired on 16 June 2006. Itsresults for the period between 16 June 2007 and October 2007 are shown withinexisting operations, as are the comparative numbers for the period fromacquisition to October 2006. The results of Inenco for the period from 1 May2007 to 16 June 2007 are shown within the part year effect of 2006 acquisitions.Other 2006 acquisitions, part of whose performance contributes to this line, areBreval, Apollo, Pargas, Atlanta and Optimal. EBITA operating margins for the Group improved to 8.4% (2006 restated: 6.9%).Underlying operating margins, excluding the effect of IFRS 2, were 9.0% (2006restated: 7.8%). Finance expenses Finance expenses for the period were £2.1 million (2006 restated: £1.0 million).The higher finance expense arises due to interest payable on bank debt used tofund the various acquisitions made. In addition, following the adoption of IAS 37, the Group has incurred a non-cashinterest charge on its outstanding liability for contingent consideration. Thisnon-cash charge is excluded from the calculation for the purposes of determiningcompliance with the Group's banking covenants. The Group's banking covenants are based around earnings before interest, tax,depreciation, amortisation and share based payments (Adjusted EBITDA). AdjustedEBITDA interest cover for the period was 7 times (2006 restated: 11 times) whichcompares against a covenant of 3 times. Profit on ordinary activities before tax and amortisation of intangible fixedassets (PBTA) PBTA increased by 62% to £9.9 million (2006 restated: £6.1 million). Profit on ordinary activities before tax Profit on ordinary activities before tax increased by 44% to £8.3 million (2006restated: £5.8 million). The Group's amortisation charge has increased from £0.4million to £1.6 million during the period which is attributable to theamortisation of separately identifiable intangible fixed assets arising onacquisitions made in 2007 and 2006. Tax The Group's effective rate of tax for the period was 27.5% (2006 restated:23.2%). Under IFRS, the benefit of tax relief on the exercise of share optionsis recognised entirely on the Group's balance sheet rather than the incomestatement, although the Group continues to receive the cash benefit of this taxrelief under IFRS in the same way that it did under UK GAAP. The Group'seffective rate of tax continues to be lower than the standard rate of taxprincipally as the result of the recognition and utilisation of prior year taxlosses. Earnings per share Diluted earnings per share at 10.7 pence (2006 restated: 8.8 pence) increased by22% and adjusted diluted earnings per share (before amortisation of intangiblefixed assets) at 13.6 pence (2006 restated: 9.5 pence) increased by 43%. In prior years, the Group's ESOP has had adequate shares to satisfy all optionsvested and also options granted but not yet vested. As highlighted in 2006, thisis no longer the case and new shares will either be issued or bought on themarket to make up this difference. This has been taken account of in thecalculation of diluted earnings per share. Dividend The Board is pleased to have recommended an interim dividend of 1.5 pence (2006:1.0 pence) per share payable on 12 February 2008 to shareholders on the registerat 25 January 2008. Cash flow Net cash inflows from operations increased by £5.0 million to £10.3 million(2006 restated: £5.3 million). The Group converted 100% of operating profit intooperating cash flow (2006 restated: 79%). During the first half of the financial year, net working capital utilisedincreased by £4.4 million (2006 restated: £4.0 million). This utilisationprincipally arises due to investment in inventories in the period of which thelargest movement is connected with ongoing contracts within our Telecomsbusiness. Balance sheet Net assets have increased to £119.4 million (2006 restated: £47.3 million),reflecting retained profits, cash generated from the exercise of employee shareoptions, the share placing undertaken in March 2007 and in relation to theacquisition of RAS and the adoption of IFRS. Net debt is £113.9 million (2006: £31.6 million). The increase is mainlyattributable to consideration paid in respect of acquisitions and also paymentsmade to settle contingent cash consideration connected with acquisitions. TheGroup's net debt number excludes certain costs of acquisition connected to RASwhich totaled approximately £1.6 million and which have been settled in thesecond half of the financial year. In addition, approximately £5.0 million wasowed to HMRC in connection with tax liabilities arising from the exercise ofshare options by option holders of RAS. Again these monies have been paid overto HMRC, subsequent to the end of the financial period. International Financial Reporting Standards (IFRS) The Group has adopted IFRS during the period with an effective date oftransition of 1 May 2006 and these results are the first to be presented underIFRS. The tables below reconcile the principal changes to comparative numbersfor EBITA, retained profit and net assets for the period ended October 2006 andthe year ended April 2007. The adoption of IFRS does not materially affect the Group's turnover, EBITA orprofits before tax and amortisation for either the year ended April 2007 orperiod ended October 2006. IFRS has no effect on the Group's strategy, cashflows or net debt position. The Group's detailed IFRS transition statement is set out on its website atwww.spiceplc.com. Period ended Period ended Year ended 28 October 29 October 29 April 2007 2006 2007 £'m £'m £'mEBITA under UK GAAP 7.2 16.3Holiday pay IAS 19 (0.1) (0.1)EBITA under IFRS 12.0 7.1 16.2 Period ended Period ended Year ended 28 October 29 October 29 April 2007 2006 2007 £'m £'m £'mRetained profit under UK GAAP 3.3 7.5Non cash interest charge IAS 37 (0.1) (0.3)Amortisation of intangible fixed assets IAS 38 & IFRS 3 1.3 2.8Holiday pay IAS 19 (0.1) (0.1)Deferred tax on share options IAS 12 - (0.9)Retained profit under IFRS 6.0 4.4 9.0 28 October 29 October 29 April 2007 2006 2007 £'m £'m £'mNet assets under UK GAAP 43.6 67.3Non cash interest charge IAS 37 (0.1) (0.3)Amortisation of intangible fixed assets IAS 38 & IFRS 3 1.4 2.8Holiday pay IAS 19 (0.4) (0.4)Deferred tax on share options IAS 12 2.8 5.8Net assets under IFRS 119.4 47.3 75.2 Move to the Official List In July 2007, Spice announced its intention to move its quotation from AIM tothe Official List over the 18 month period from July 2007. Over the course ofthe six months since that announcement, the Group has begun the various workprocesses connected with this move and expects to move to the Official Listduring 2008 (subject to market conditions). Outlook We are pleased with both the operating and financial performance for the firsthalf of the financial year. We expect the industry drivers, within our coreutilities market, to remain strong. We are keenly focused on strong organicgrowth and converting our profits in to cash and delivering shareholder valuefrom our acquisition of RAS and believe that Spice remains well placed tocontinue to grow organically (including by cross selling across operatingdivisions) whilst at the same time continuing to pursue complementaryacquisition opportunities within our existing operations. We are confident thatwe have the right people and structure to make the most of these growthopportunities over the coming months. WS RigbyChief Executive Officer13 December 2007 Consolidated income statement for the six months ended 28 October 2007 Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Note £'000 £'000 £'000 as restated as restatedRevenue 5 143,437 102,633 228,560Operating expenses (133,090) (95,888) (213,589) EBITA 5 11,977 7,109 16,196Amortisation of intangible fixed assets (1,630) (364) (1,225) Operating profit 10,347 6,745 14,971Finance expenses (2,051) (995) (2,727) Profit before tax and amortisation of 9,926 6,114 13,469intangible fixed assetsAmortisation of intangible fixed assets (1,630) (364) (1,225) Profit on ordinary activities before tax 5 8,296 5,750 12,244Tax on profit on ordinary activities 2 (2,282) (1,333) (3,247)Profit for the period attributable to 6,014 4,417 8,997equity shareholdersEarnings per share (pence per share)Basic 4 12.0 9.8 19.7Diluted 4 10.7 8.8 18.1 Consolidated balance sheet at 28 October 2007 Unaudited Unaudited Unaudited 28 October 29 October 29 April 2007 2006 2007 Note £'000 £'000 £'000 as restated as restatedAssetsNon-current assetsPurchased goodwill 179,353 57,156 72,159Intangible fixed assets 59,474 5,739 11,566Property, plant and equipment 17,919 13,865 17,406Investment in associates 212 212 212Trade and other receivables 336 339 335Deferred tax assets - 1,405 3,480 257,294 78,716 105,158Current assetsInventories 11,740 6,649 6,688Trade receivables and other receivables 62,227 43,229 55,323Non current assets held for resale - 595 589 73,967 50,473 62,600LiabilitiesCurrent liabilitiesTrade and other payables (63,065) (48,054) (48,184)Current tax payable (6,524) (4,677) (4,889)Financial liabilities (162) (3,327) (5,023) (69,751) (56,058) (58,096)Non-current liabilitiesFinancial liabilities (113,783) (17,576) (29,238)Deferred tax laibilities (11,464) - -Provisions for other liabilities and charges (16,820) (8,280) (5,220) (142,067) (25,856) (34,458) Net assets 119,443 47,275 75,204Shareholders equityCalled up share capital 6,001 4,947 5,347Share premium account 84,398 27,462 46,523Other reserves 100 100 100Retained earnings 28,944 14,766 23,234Equity shareholders' funds 6 119,443 47,275 75,204 Consolidated cashflow statement for the six months ended 28 October 2007 Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Note £'000 £'000 £'000Operating activitiesNet cash generated from operations 7a) 10,317 5,335 16,335Interest paid (1,932) (874) (2,489)Tax paid (1,702) (1,235) (3,318)Net cash generated from operating activities 6,683 3,226 10,528 Investing activitiesPurchase of property, plant and equipment (1,960) (1,536) (6,030)Proceeds from sale of property, plant and 737 149 269equipmentPurchase of intangible fixed assets (12) (86) (246)Acquisition of subsidiary undertakings (74,720) (12,511) (46,112)(Debt)/cash acquired with subsidiary (10,749) 3,860 6,076undertakingsInterest receivable 38 27 45Net cash used in investing activities (86,666) (10,097) (45,998) Financing activitiesDividends paid (1,482) (854) (1,306)Repayment of obligations under finance leases (121) (52) (170)Sale of investments - own shares 325 438 1,087Purchase of investments - own shares (1,368) - (1,305)Proceeds from issue of ordinary shares - - 19,461Repayment of borrowings (37,676) (634) (73,601)Proceeds from borrowings 122,238 5,962 89,368Net cash generated from financing activities 81,916 4,860 33,534 Net increase/(decrease) in cash and cash 7c) 1,933 (2,011) (1,936)equivalentsCash and cash equivalents at 30 April 2007 (1,950) (14) (14)Cash and cash equivalents at 28 October 2007 (17) (2,025) (1,950) Notes to the Interim Report for the six months ended 28 October 2007 1 Basis of accounting The interim financial statements have been prepared under the historical costconvention and in accordance with the accounting policies used in the Group'sInternational Financial Reporting Standards (IFRS) transition statement. Thecomparative numbers for the year ended April 2007 and for the period endedOctober 2006 have been restated to reflect the adoption of IFRS whereappropriate. Details of how the Group's financial results and financial positionare impacted by the adoption of IFRS are set out in detail in the Group's IFRStransition statement which was issued on 15 October 2007 and is available on theGroup's website at www.spiceplc.com. The accounting policies used in the in the interim financial statements areconsistent with those that it is intended will be used in the annual financialstatements for the year ending April 2008. Further IFRS standards orinterpretations may be issued that could apply to the Group's financialstatements for the year ending April 2008. If any such amendments, new standardsor interpretations are issued then these may require the financial informationprovided in this report to be changed. The Group will continue to review itsaccounting policies in the light of emerging industry consensus on the practicalapplication of IFRS. The interim financial statements for the six months ended 28 October 2007 andfor the six months ended 29 October 2006 contained within the interim report donot constitute statutory financial statements within the meaning of Section 240of the Companies Act 1985 and are unaudited. The comparative figures for theyear ended 29 April 2007 have been extracted from the financial statements for2007 (except for adjustments made for the adoption of IFRS described above).Those financial statements for the year ended 29 April 2007 were prepared underUK GAAP and received an unqualified auditors' report and have been delivered tothe Registrar of Companies. 2 Taxation The taxation charge on the profit on ordinary activities has been based upon theestimated effective tax rate of 27.5% (2006 restated: 23.2%) for the currentyear. 3 Dividends Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 £'000 £'000 £'000Amounts recognised as a distribution fromshareholders' funds during the periodFinal dividend paid of 3.0 pence per share for the 1,482 854 854year ended 29 April 2007 (2006: 1.9 pence)Interim dividend paid of 1.0 pence per share for the - - 452year ended 29 April 2007 (2006: 0.7 pence) 1,482 854 1,306Proposed interim dividend of 1.5 pence for the period 840 452 452ended 28 October 2007 (2006: 1.0 pence) The interim dividend for the period ended 28 October 2007 will be accounted for,following payment of that dividend, in the second half of the financial year. Itis proposed that the interim dividend amounting to £840,000 (2006: £452,000)will be paid on 12 February 2008 to those shareholders on the register at 25January 2008. 4 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of shares in issue duringeach period. The weighted average number of shares, after adjusting for sharesheld by the ESOP, in issue during the period used in the calculation of basicearnings per share was as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 '000 '000 '000Weighted average number of shares for basic earnings 50,304 44,871 45,566per share Diluted earnings per share is the basic earnings per share adjusted for theeffect of the conversion into fully paid shares of the weighted average numberof share options outstanding during the year. The weighted average number ofshares in issue during the period used in the calculation of diluted earningsper share was as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 '000 '000 '000Weighted average number of shares for diluted earnings 56,159 50,202 49,799per share Adjusted earnings per share has been calculated so as to exclude the effect ofthe amortisation of all intangible fixed assets. Adjusted earnings per share hasbeen presented in order that the effects on reported earnings of theamortisation of intangible fixed assets can be fully appreciated. Adjustedearnings used in the calculation of basic and diluted earnings per sharereconciles to basic earnings as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 £'000 £'000 £'000 as restated as restatedBasic earnings 6,014 4,417 8,997Amortisation of intangible fixed assets 1,630 364 1,225Adjusted earnings 7,644 4,781 10,222 Earnings per share (pence per share)Basic 12.0 9.8 19.7Diluted 10.7 8.8 18.1 Adjusted earnings per share (pence per share)Basic 15.2 10.6 22.4Diluted 13.6 9.5 20.6 5 Segmental analysis The turnover for the period was derived from the Group's principal activitiesand is attributable to the following markets: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 £'000 £'000 £'000By destinationUK 140,608 100,776 224,661Continental Europe 1,749 1,501 3,165Rest of the World 1,080 356 734 143,437 102,633 228,560 Turnover for the period is derived from the Group's principal activities asfollows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 £'000 £'000 £'000Billing 917 - -Energy 7,356 5,057 12,161Facilities 24,821 18,824 43,499Gas 14,927 - 10,491Electricity 50,319 43,088 89,839Telecoms 10,789 8,524 18,357Water 34,300 27,135 54,192Head office 8 5 21 143,437 102,633 228,560 Profit before tax is derived from the Group's principal activities as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 £'000 £'000 £'000 as restated as restatedBilling 317 - -Energy 1,525 621 1,711Facilities 2,161 1,943 4,028Gas 1,825 - 992Electricity 4,214 2,990 6,761Telecoms 2,115 1,757 3,541Water 3,155 2,805 5,221Head office (3,335) (3,007) (6,058)EBITA 11,977 7,109 16,196Amortisation of intangible fixed assets (1,630) (364) (1,225)Finance costs (2,051) (995) (2,727)Profit before tax 8,296 5,750 12,244 The Group's IFRS 2 charge has been recorded within Head office for the purposesof this segmental analysis. 6 Statement of changes in equity shareholders' funds Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 £'000 £'000 £'000 as restated as restatedTotal recognised income attributable to 6,014 4,417 8,997equity shareholdersDividends paid in the period (1,482) (854) (1,306)IFRS 2 Share based payments charge 1,002 900 2,000Increase in IFRS Deferred tax asset 787 1,149 4,063S23 tax relief on the exercise of share 472 - 982optionsNet proceeds from sale of own shares 285 438 1,087Payments to acquire own shares (1,368) - (1,305)Issue of shares 38,529 - 20,000Costs of share issue - - (539)Net addition to equity shareholders' funds 44,239 6,050 33,979Opening equity shareholders' funds 75,204 41,225 41,225Closing equity shareholders' funds 119,443 47,275 75,204 Opening shareholders' funds at 1 May 2007 have been restated from £39,846,000 to£41,225,000 to reflect the adoption of IFRS. 7 Notes to the cash flow statement 7a) Cash generated from operations Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 £'000 £'000 £'000 as restated as restatedOperating profit 10,347 6,745 14,971Depreciation of tangible fixed assets 1,732 1,312 2,994Amortisation of intangible fixed assets 1,630 364 1,225IFRS 2 Share based payments charge 1,002 900 2,000Loss on sale of fixed assets 35 - 11(Increase)/decrease in inventories (4,960) (1,112) 70Increase in receivables (2,144) (8,793) (15,943)Increase in payables 2,675 5,919 11,007Net cash generated from operations 10,317 5,335 16,335 7b) Analysis of net debt At At 29 April Cash Non cash 28 October 2007 flows movements 2007 £'000 £'000 £'000 £'000Bank overdraft (1,950) 1,933 - (17)Increase in cash during the period (1,950) 1,933 - (17)Bank loans due within one year (2,824) 2,824 - -Bank loans due after one year (29,200) (84,562) - (113,762)Finance leases due within one year (249) 121 (17) (145)Finance leases due after one year (38) - 17 (21)Net debt (34,261) (79,684) - (113,945) 7c) Reconciliation of net cash inflow to movement in net debt Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 £'000 £'000 £'000Increase/(decrease) in cash in the period 1,933 (2,011) (1,936)Dividends paid (1,482) (854) (1,306)Net proceeds received from share issue - - 19,461Sale of investments - own shares 325 438 1,087Payments to acquire own shares (1,368) - (1,305)Loan notes redeemed 2,824 - 10,649Cash inflow from financing (81,916) (4,860) (33,534)Change in net debt resulting from cash (79,684) (7,287) (6,884)flowsLoan notes issued - (10,704) (13,473)New and acquired finance leases - (39) (327)Net debt at 30 April 2007 (34,261) (13,577) (13,577)Net debt at 28 October 2007 (113,945) (31,607) (34,261) 8 Availability of interim report The interim report will be sent to all shareholders on 4 January 2008. Copiesmay be obtained from the Company Secretary at Wellfield House, Victoria Road,Morley, Leeds, LS27 7PA or on Spice's website at www.spiceplc.com Corporate information Directors Sir Rodney Myerscough WalkerNon-Executive Chairman William Simon RigbyChief Executive Officer Carl James ChambersCorporate Development Director Oliver James LightowlersGroup Finance Director John Mitchell TaylorNon-Executive Deputy Chairman Michael St. John ShallowNon-Executive Director Tim HuddartNon-Executive Director Company secretary Lee Johnstone Company number 3250709 Registered officeWellfield HouseVictoria RoadMorleyLeeds LS27 7PATel: 0113 201 2120Fax: 0113 201 2121www.spiceplc.com Independent auditorsPricewaterhouseCoopers LLPBenson House33 Wellington StreetLeeds LS1 4JP SolicitorsEversheds LLPBridgewater PlaceWater LaneLeeds LS11 5DR BankersHSBC Bank plcYorkshire Corporate Bank Centre4th FloorCity Point29 King StreetLeeds LS1 2HL Barclays Bank plcPO Box 1902nd Floor1 Park RowLeeds LS1 5WU KBC Bank NV111 Old Broad StreetLondon EC2N 1BR Lloyds TSB Bank plc31-32 Park RowLeeds LS1 5JD Nominated adviserand stockbroker KBC Peel Hunt Limited111 Old Broad StreetLondon EC2N 1PH Registrar Equiniti LimitedAspect HouseSpencer RoadLancing BN99 6DA This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Spire Healthcare