15th Mar 2005 07:01
Interior Services Group PLC15 March 2005 ISG REPORTS GROWTH IN LONG-TERM ORDER BOOK Interior Services Group plc, ("ISG") the construction services specialist, hastoday announced its interim results for the six months to 31 December 2004. Financial Highlights 2004 2003 • Profit before tax £1.2m £3.4m • Profit before tax, goodwill and exceptionals £1.2m £3.8m • Fee income * £18.4m £21.3m • Gross value of work performed (GVWP) * £179m £239m • Turnover * £163m £192m • Earnings per share 3.07p 8.37p • Adjusted earnings per share - before goodwill and exceptional costs 3.19p 9.83p • Interim dividend maintained 2.75p 2.75p • Net cash £30.3m £33m • Order book * £574m £316m * ongoing operations David King, Chief Executive of ISG, commented, " The financial year has started in line with our expectations. Trading remainedas difficult as we anticipated with some project start up delays contributing tolower volumes. Cash remained strong at £30.3m and the interim dividend is beingmaintained. " Profitability was affected by these volume reductions and by investments forlonger term growth, especially in the Regions. Demand for New build andRefurbishment services was strong and demand for Fit out in London levelled offbut is now increasing. " ISG is now in a recovery phase with our order book up 80% at a new record highof £574m, and having passed the low point in our cycle, volumes will now startto increase. At this stage though the precise timing and full extent of thatincrease in volumes and profits is still variable." - ends -Date: 15 March 2005For further information please contact: Interior Services Group PLCDavid King, Chief Executive 020 7392 5251David Lawther, Group Financial Director 020 7392 5307Web: www.isgplc.com City ProfileSimon Courtenay 020 7448 3244 CEO Half Year Statement Profits before tax, goodwill and exceptionals for the first half to 31 December2004 were £1.2m (2003 £3.8m) on a reduced gross value of work performed of £179m(2003 £239m). This level of trading and profitability is in line with our year end statement in September 2004 and our trading update on 1 December 2004. In our year end statement we highlighted that volumes of work performed in thisfirst half would be similar to those in the previous second half. In our 1December 2004 statement we noted that some startup project delays had occurredand that volumes, and therefore profits, would be impacted in the first half. Asa result of these delays, first half volumes were down slightly at £179mcompared to the previous year's second half of £184m. Overall profitability levels were in line with our expectations given the effectof these delays and given the different mix of New build / Refurbishment and Fitout work carried out in the period. New build and Refurbishment work has onaverage an 18 month period between project start and completion whereas Fit outtypically has only a 9 month period. This impacts on our profit recognition, andas a greater proportion of the workload was in New build and Refurbishmentprojects in their early stages, profitability had been reduced. Despite the reduced turnover levels, net cash has remained strong at £30.3m(2003 £33m). As a result, the dividend is being maintained at 2.75p and will bepaid on 26 April 2005 to shareholders on the register on 29 March 2005. Strategic Developments The priorities for this last six months have been to: * Position ourselves for organic growth as a national construction services business; * Consider our options to be involved in the PFI schools market; * Improve the contribution from our overseas businesses; and * Identify possible acquisition targets. With work in London representing 85% of our UK workload, there is growthpotential for the Group in the Regions. To develop there, we are expanding ourservice offering to include New build and Refurbishment as well as Fit out.Under new leadership the regional business will operate initially in aManchester/Leeds/Birmingham triangle out of our existing offices in Manchester.We closed our office in Reading in January. With the recent improvement in occupier take up figures in London, and theexpected resultant demand for new buildings, we have been investing in ourwinning teams and maintaining key skills and people to be ready for the upswing. We have not been bidding for any PFI projects in this period. We continue toresearch ways into this market, especially for schools, but the priority will beto ensure that investment levels and risks to the business are minimised. In Europe, we have concluded the transfer of our German business into a JV withour Paris based partner. We now have a 36% interest in the Frankfurt basedbusiness, in addition to the 20% already held in the French business. In Asia we have been working closely with our partner to expand that businessand return it to profitability on the back of an improving market there. We havea 22% interest in ISG Asia and we are reviewing this level of stake given thelonger term potential for this market. We have also been identifying and considering acquisition targets to expand ourUK Regional business. Good quality companies at affordable prices that operatein the areas we seek are rare, but we believe the right acquisition couldproduce a step change both in our Regional business and in the Group's overallscale. Trading Our business carries out work for occupiers, fitting out space, and for ownerswho refurbish or build it. The following is a summary of fee income and grossvalue of work performed (GVWP) on a divisional basis: Fee Income GVWP6 months to December 2004 2003* 2004 2003* £m £m £m £mFit out (London & Regions) 9.0 11.1 87 115New build 3.9 5.7 38 66Refurbishment 4.2 3.4 39 45Asia 0.8 0.5 8 10Europe 0.5 0.6** 7 3 -------- ------- ------ ------ £18.4 £21.3 179 239 -------- ------- ------ ------* ongoing operations** restated Whilst the market and outlook for our services has improved during the period,actual trading conditions in the period continued to be difficult. With overall volumes down 25% period on period at £179m (2003 £239m) fee incomederived from it was £18.4m (2003 £21.3m). In Fit out, competitive pressure and a continuing dearth of larger projectsresulted in an overall drop in fee income of 19% compared to the same periodlast year. The Regions were particularly weak (down 43%) with London Fit out feeincome levelling out after a 3 year decline. The extent of the competitivepressure and weak marketplace in Fit out is evidenced by the closure in the last6 months of 3 medium sized competitors with an annual combined turnover of circa£150m. However, we are delighted to have been selected for the largest available Fitout project in London for 12 months - 750,000 ft2 for Allen & Overy - andbelieve this reinforces our leading position in the large scale Fit outmarketplace. In our New build business, which started the year with an in-year order book 20%ahead of 2003, we had an unusually large proportion of projects inpreconstruction activity and yet to start on site. As a result fee incomedropped 32% on volumes temporarily down over 40%, and we expect a commensurateimprovement as construction activity commences. In Refurbishment we generated an increase in fee income of 24%. There is agrowing market for Refurbishment and the quality of our offering means we arewell positioned to take advantage of this demand from owners. Combined fee income in Asia and Europe was up 18% on volumes up 15%. Europecontributed £0.2m profit before tax (2003 £0.3m) with Asia reducing its periodlosses to £0.1m (£0.2m in the previous 6 months). Prospects Our total order book continues to grow, from £407m in June 2004 to £500m inSeptember 2004 and at 31 December it was £574m. This increased order book will start to flow into increased volumes shortly,with our in year order book for the year commencing 1 July 2005 already over£300m compared to just over £100m at the same time a year ago. The timing andlevel of recovery in profitability that flows from this increased volume isdependent on the mix of work, and may be affected by further delays in projectstarts. With the improvement in the Fit out market now underway, we can expect to see anincreasing percentage of our workload to be in higher margin Fit out work. Thetake up of space in 2004 in London is back up to its previous long term runrates, although much of this is for prelet space where the buildings have yet tobe built and which will not come to the Fit out market until 05/06. It is clear that we are now in a recovery phase within an improving medium tolong term outlook for our business. However, in the short term, the precisetiming and extent of that recovery remains variable. David KingChief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNT6 months ended 31 December 2004Unaudited (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 Notes £'000 £'000 £'000 Gross value of work performed 2 179,427 254,099 445,779Less: relating to construction management share of joint ventures' and associates' turnover (12,384) (44,282) (76,913) (3,666) (4,737) (7,507) --------- --------- -------- TURNOVERGroup turnover - continuing operations 2, 3 163,377 205,080 361,359Cost of sales 3 (156,972) (194,577) (343,696) --------- --------- -------- Gross profit 3 6,405 10,503 17,663Administrative expenses: Amortisation of goodwill (30) (365) (630) Exceptional disposal costs - - (460) Other administrative expenses (5,867) (7,302) (13,567) --------- --------- -------- 3 (5,897) (7,667) (14,657)OPERATING PROFITGroup operating profit - continuing operations 3 508 2,836 3,006Share of operating profit in joint ventures and associates 60 110 95 --------- --------- -------- Total operating profit 568 2,946 3,101Loss on disposal of subsidiaries - - (1,829)Net interest receivable and similar income 650 498 1,030 --------- --------- -------- PROFIT ON ORDINARY ACTIVITIESBEFORE TAXATION 2 1,218 3,444 2,302Tax on profit on ordinary activities (444) (1,344) (1,835) --------- --------- -------- PROFIT ON ORDINARY ACTIVITIESAFTER TAXATION 774 2,100 467Equity minority interests - (10) - --------- --------- -------- PROFIT FOR THE FINANCIAL PERIOD/YEAR 774 2,090 467Equity dividends paid and proposed 5 (695) (690) (2,070) --------- --------- --------RETAINED PROFIT/(LOSS) FOR THEFINANCIAL PERIOD/YEAR 79 1,400 (1,603) ========= ========= ======== Basic earnings per ordinary share 6 3.07p 8.37p 1.86p --------- --------- -------- Diluted earnings per ordinary share 6 3.05p 8.30p 1.84p --------- --------- -------- Adjusted earnings per ordinary share before goodwill amortisation/impairment, exceptional administrative costs and loss on disposal of subsidiaries 6 3.19p 9.83p 13.48p --------- --------- -------- Dividend per ordinary share 5 2.75p 2.75p 8.25p --------- --------- -------- CONSOLIDATED BALANCE SHEET31 December 2004Unaudited (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 Notes £'000 £'000 £'000 FIXED ASSETSIntangible assets 931 8,092 961Tangible fixed assets 661 1,101 686 --------- --------- --------Investment in joint ventures: Share of gross assets - 118 - Share of gross liabilities - (144) - --------- --------- -------- - (26) -Investment in associates 1,151 1,313 1,208Other fixed asset investments - 1,558 - --------- --------- --------Total investments 1,151 2,845 1,208 --------- --------- --------TOTAL FIXED ASSETS 2,743 12,038 2,855 --------- --------- -------- CURRENT ASSETSStocks 115 202 121Debtors: amounts falling due within one year 53,341 55,448 59,636Debtors: amounts falling due after more than one year 6,557 4,765 5,622Cash at bank and in hand 30,364 33,868 31,387 --------- --------- -------- 90,377 94,283 96,766 CREDITORS: amounts falling due within one year (80,434) (90,913) (87,243) NET CURRENT ASSETS 9,943 3,370 9,523 --------- --------- --------TOTAL ASSETS LESS CURRENT LIABILITIES 12,686 15,408 12,378 --------- --------- -------- PROVISIONS FOR LIABILITIES AND CHARGES - (199) - EQUITY MINORITY INTERESTS - (10) - --------- --------- --------TOTAL NET ASSETS 12,686 15,199 12,378 ========= ========= ======== CAPITAL AND RESERVESCalled up share capital 262 259 260Share premium account 8 9,482 9,241 9,281Other reserves 8 436 1,607 436Own shares 8 (1,570) (1,763) (1,573)Profit and loss account 8 4,076 5,855 3,974 --------- --------- --------TOTAL EQUITY SHAREHOLDERS' FUNDS 7 12,686 15,199 12,378 ========= ========= ======== CONSOLIDATED CASH FLOW STATEMENT6 months ended 31 December 2004Unaudited (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 Notes £'000 £'000 £'000 Net cash flow from operating activities 9 (1,797) 1,347 (810)Dividends from associates 66 - -Returns on investments and servicing of finance 10 493 497 1,022Taxation 81 (946) (1,549)Capital expenditure and financial investment 10 (153) (79) (325)Acquisitions and disposals 10 1,464 (285) 979Equity dividends paid (1,380) (1,203) (1,900) --------- --------- --------Cash outflow before financing (1,226) (669) (2,583) --------- --------- -------- Financing: Issue of shares (net) 203 55 96 Capital element of payments under hire purchase contracts - (15) - Repayment of long term debt - (4,313) (4,313) --------- --------- --------Net cash outflow from financing 203 (4,273) (4,217) --------- --------- -------- --------- --------- --------Decrease in cash in the period/year 11 (1,023) (4,942) (6,800) ========= ========= ======== Reconciliation of net cash flow to movement in net funds (Note 11): Decrease in cash in the period/year (1,023) (4,942) (6,800)Cash outflow from debt financing - 4,328 4,337 --------- --------- -------- Change in net debt resulting from cash flows (1,023) (614) (2,463)Change in net debt resulting from non-cash changes - 224 349 --------- --------- -------- (1,023) (390) (2,114)Net cash brought forward 31,315 33,429 33,429 --------- --------- --------Net cash carried forward 30,292 33,039 31,315 ========= ========= ======== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES6 months ended 31 December 2004Unaudited (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000Profit for the financial period/year: Group 756 2,015 445 Joint ventures and associates 18 75 22 --------- --------- -------- 774 2,090 467 Unrealised gain arising on investments - 436 436Currency translation differences: Subsidiaries 35 3 (24)Currency translation differences: Joint ventures and associates (12) (106) (128) --------- --------- --------Total recognised gains and losses relating to the period/year 797 2,423 751 ========= ========= ======== Notes to the accountsUnaudited 1. ACCOUNTING POLICIES The Interim Accounts, which are unaudited, have been prepared on the basis of theaccounting policies set out in the 2004 group accounts. 2. SEGMENTAL INFORMATION Gross value of work performed, turnover and profit/(loss) before taxation may be analysed as follows: (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000Gross value of work performed by originand destination: United Kingdom 164,095 241,182 427,999 Europe 7,001 2,535 3,912 Asia 8,331 10,382 13,868 --------- --------- -------- 179,427 254,099 445,779 ========= ========= ========Turnover by origin and destination: United Kingdom 157,568 203,439 359,099 Europe 7,001 2,535 3,912 Asia 2,474 3,843 5,855 --------- --------- -------- 167,043 209,817 368,866Less: Share of joint ventures' and associates' turnover (3,666) (4,737) (7,507) --------- --------- -------- 163,377 205,080 361,359 ========= ========= ========Profit/(loss) on ordinary activities before taxation: United Kingdom 1,060 3,200 2,169 Europe 239 270 322 Asia (81) (26) (189) --------- --------- -------- 1,218 3,444 2,302 ========= ========= ======== Fee income, which we consider to be a key indicator, is derived as follows: Turnover 163,377 205,080 361,359Trade contractor costs recharged (145,443) (179,179) (313,571) --------- --------- -------- 17,934 25,901 47,788Interest receivable 497 498 1,114Less: Attributable to minority interests (2) (15) - --------- --------- --------Total fee income 18,429 26,384 48,902 ========= ========= ======== The majority of net assets are held in the United Kingdom. The group has one area of activity which is to provide construction services to its customersin the UK and internationally. In accordance with industry practice, gross value of work performed includes £12,384,000(December 2003 - £44,282,000; June 2004 - £76,913,000) in respect of the construction costs ofprojects on which the company acts as construction manager. These construction costs arebilled directly to the client and are not invoiced via the group. 3. ANALYSIS OF ONGOING OPERATIONS On 30 April 2004, the group disposed of its interest in the ordinary share capital of ISGOccupancy Limited and all of its subsidiaries. The results of those companies up to thedate of disposal and the comparatives for the 6 months ended 31 December 2003 are shownunder disposed operations. (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000Turnover: ongoing operations 163,377 191,649 339,033 disposed operations - 13,431 22,326 --------- --------- -------- 163,377 205,080 361,359 ========= ========= ========Cost of sales: ongoing operations 156,972 182,649 323,820 disposed operations - 11,928 19,876 --------- --------- -------- 156,972 194,577 343,696 ========= ========= ========Gross profit: ongoing operations 6,405 9,000 15,213 disposed operations - 1,503 2,450 --------- --------- -------- 6,405 10,503 17,663 ========= ========= ========Administrative expenses (see below): ongoing operations 5,897 5,913 11,445 disposed operations - 1,754 3,212 --------- --------- -------- 5,897 7,667 14,657 ========= ========= ========Operating profit/(loss): ongoing operations 508 3,087 3,768 disposed operations - (251) (762) --------- --------- -------- 508 2,836 3,006 ========= ========= ======== Included within Administrative expenses are the following amounts:Goodwill amortisation: ongoing operations 30 60 121 disposed operations - 305 509 --------- --------- -------- 30 365 630 ========= ========= ======== 4. RECONCILIATION OF ADJUSTED OPERATING PROFIT AND ADJUSTED PROFIT BEFORE TAXATION (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000 Total operating profit 568 2,946 3,101Amortisation of goodwill 30 365 630Exceptional costs - - 460 --------- --------- --------Adjusted operating profit 598 3,311 4,191 ========= ========= ======== Profit before taxation 1,218 3,444 2,302Amortisation of goodwill 30 365 630Exceptional costs - - 460Loss on disposal of subsidiaries - - 1,829 --------- --------- --------Adjusted profit before taxation 1,248 3,809 5,221 ========= ========= ======== We use adjusted operating profit and adjusted profit before taxation as measures tofacilitate comparisons between periods. 5. EQUITY DIVIDENDS PAID AND PROPOSED (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000 Ordinary dividends on equity shares 695 690 2,070 ========= ========= ======== Ordinary dividends per share 2.75p 2.75p 8.25p ========= ========= ======== The interim dividend of 2.75p per share will be paid on 26 April 2005. 6. EARNINGS PER SHARE (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000 Profit for the financial period/year 774 2,090 467 --------- --------- -------- Basic and diluted earnings attributable to ordinary shareholders 774 2,090 467Amortisation of goodwill 30 365 630Post-tax exceptional costs - - 460Loss on disposal of subsidiaries - - 1,829 --------- --------- --------Adjusted earnings attributable to ordinary shareholders 804 2,455 3,386 ========= ========= ======== Number Number Number '000 '000 '000 Weighted average number of ordinary shares 25,236 24,962 25,124Dilutive share options 132 223 216 --------- --------- --------Diluted weighted average number of ordinary shares 25,368 25,185 25,340 ========= ========= ======== 7. RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000 Profit for the financial period/year 774 2,090 467Equity dividends (695) (690) (2,070) --------- --------- -------- 79 1,400 (1,603)Foreign exchange loss 23 (103) (152)Unrealised gain arising on investments - 436 436Movement in own shares 3 94 284Proceeds from share issue 203 126 167 --------- --------- --------Net addition to/(deduction from) shareholders' funds 308 1,953 (868) --------- --------- --------Opening shareholders' funds 12,378 13,246 13,246 --------- --------- --------Closing shareholders' funds 12,686 15,199 12,378 ========= ========= ======== 8. GROUP RESERVES Share Other Own Profit and premium reserves shares loss account £'000 £'000 £'000 £'000 Balance at 1 July 2004 9,281 436 (1,573) 3,974Profit for the period - - - 774Equity dividends - - - (695)Share premium arising on issue of shares 201 - - -Movement in own shares - - 3 -Exchange differences - - - 23 -------- --------- --------- ---------Balance at 31 December 2004 9,482 436 (1,570) 4,076 ======== ========= ========= ========= 9. RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000 Operating profit 508 2,836 3,006Depreciation charges 184 464 691Amortisation of goodwill 30 365 630(Profit)/loss on sale of tangible fixed assets (3) 2 42Decrease in stocks 6 27 57Decrease/(increase) in debtors 4,060 7,863 (1,886)Decrease in creditors (6,582) (10,210) (3,350) --------- --------- ---------Net cash (outflow)/inflow from operating activities (1,797) 1,347 (810) ========= ========= ========= 10. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT (Audited) 6 months 6 months 12 months ended ended ended 31 December 31 December 30 June 2004 2003 2004 £'000 £'000 £'000Returns on investments and servicing of finance:Interest received 525 591 1,149Interest paid (32) (94) (127) --------- --------- ---------Net cash inflow for returns on investmentsand servicing of finance 493 497 1,022 ========= ========= ========= Capital expenditure and financial investment:Payments to acquire tangible fixed assets (173) (207) (569)Receipts from sales of tangible fixed assets 17 34 130Receipts from sales of financial investments 3 94 114 --------- --------- ---------Net cash outflow for capital expenditureand financial investment (153) (79) (325) ========= ========= ========= Acquisitions and disposals:Purchase of subsidiary undertakings - (285) (410)Proceeds from sale of subsidiary undertakings 1,409 - 1,561Net overdraft disposed of on sale of subsidiary undertakings - - (172)Proceeds from sale of joint venture 55 - - --------- --------- ---------Net cash inflow/(outflow) for acquisitions and disposals 1,464 (285) 979 ========= ========= ========= 11. ANALYSIS OF NET FUNDS 30 June Cash 31 December 2004 flow 2004 £'000 £'000 £'000 Cash at bank and in hand 31,387 (1,023) 30,364Overdraft - - - (1,023)Debt due within one year (72) - (72) -------- ------- --------- 31,315 (1,023) 30,292 ======== ======= ========= 12. APPROVAL OF INTERIM ACCOUNTS The Interim Accounts were approved by the Board of Directors on 14 March 2005. 13. STATUS OF FINANCIAL INFORMATION IN THIS ANNOUNCEMENT The financial information contained in this report does not constitute statutory accountswithin the meaning of section 240 of the Companies Act 1985. The financial information forthe six months to 31 December 2004 and the six months to 31 December 2003 is unaudited andhas not been reviewed by the group's auditors. The year ended 30 June 2004 comparativefigures have been extracted from the audited accounts. The accounts for the year ended30 June 2004, on which the auditors issued an unqualified audit report and which didnot contain a statement under either section 237 (2) or (3) of the Companies Act 1985,have been delivered to the Registrar of Companies. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ISG.L