7th Dec 2006 07:00
Redhall Group PLC07 December 2006 For Immediate Release 7 December 2006 Redhall Group plc ("Redhall" or the "Group") Preliminary Results for the year ended 30 September 2006 Redhall Group plc, the specialist engineering support services group, announcesits preliminary results for the year ended 30 September 2006. Key points • Turnover up 29% at £31.6 million (2005: £24.6 million) • First annual operating profit since 2001 • Operating profit of £933,000 (2005: operating loss of £223,000)* • Profit after taxation and exceptional items of £780,000 (2005 restated: loss of £3.7 million) • Earnings per share of 5.77p (2005: loss per share of 28.27p) • Dividend reinstated at 1.0p per share (2005: nil) • Strong operating cashflow - net cash position of £0.7 million (2005: net debt of £88,000) • Forward order book of £40 million * 2005 results exclude exceptional charges reported in that year and have beenrestated to reflect the adoption of FRS17. David Jackson, Chairman and Chief Executive of Redhall, commented: "We are very encouraged by the progress achieved in the first full year of ourmanagement of the business which has resulted in the re-instatement of thedividend. The Group has begun the current financial year with a strong orderbook and quality contracts giving us good prospects for the coming year. Thiscoupled with the nil gearing leaves us in a strong position to take the Grouponto the next stage of its development both in terms of the organic developmentof the business and potential acquisitions." For more information please contact:Redhall Group plc Tel: +44 (0)1924 385 386 David Jackson, Chairman and Chief ExecutiveSimon Foster, Deputy Chief ExecutiveChristopher Lewis-Jones, Group Finance Director Buchanan Communications Tel: +44 (0) 20 7466 5000Tim Anderson / Isabel Podda CHAIRMAN'S STATEMENT INTRODUCTION The Board is delighted to be able to report an annual operating profit for thefirst time since 2001 which shows an improvement of £1.2 million on the prioryear, clearly demonstrating the substantial progress made to date. Each of ourtrading subsidiaries has made an operating profit in line with or ahead ofmanagement expectations. The contractual disputes referred to in last year's statement have now beenfully resolved and there are no major contractual issues outstanding to affectfuture prospects. We have a strong order book, an increasing level of enquiriesand quality contracts giving us good prospects for the coming year. We have no debt, excluding hire purchase, since we repaid the two remainingtranches of unsecured loan stock outstanding last year and our current accountwith the Bank of Scotland remains in credit. In summary, I believe we are in a good position to take this Group on to thenext stage of its development. TRADING RESULTS Trading on ordinary activities for the year ended 30 September 2006 produced anoperating profit of £933,000 (2005 restated: £223,000 operating loss beforeexceptional items) with a 28.7% increase in turnover in the year to £31.6million (2005: £24.6 million post exceptional items). Profit after interest andtaxation was £780,000 compared to a loss of £449,000 in 2005 (restated andbefore exceptional items). Basic earnings per share stood at 5.77p compared to a loss per share of 28.27pin 2005 (restated). Whilst being pleased with this trading performance, I believe there are furtherimprovements available to us. The Group, as presently constituted, is capable ofmaking operating profits, after allocation of central costs, of between 4% and5% compared to our performance this year of 3%. TRADING HIGHLIGHTS The Group's manufacturing operations, Jordan Manufacturing and Booth Industries,have driven this year's performance. Booth Industries had a record year with afocus on major tunnel projects and Jordan Manufacturing achieved its turnaroundwith renewed nuclear engineering activity. Jordan Nuclear and CHB-JordanEngineering made major contributions in the second half which augur well for thenew financial year. The removal of legacy contract issues and the improved cost and contract controlimplemented in the first half of the year have allowed our businesses toconcentrate on future opportunities more effectively. A detailed trading review of our operating subsidiaries can be found in thesection of this report entitled 'Business Review'. FINANCIAL POSITION Cash generated from operating activities was £348,000. As a consequence theGroup has no debt excepting minor hire purchase commitments of £22,000. TheGroup's gearing position is therefore nil. We have unutilised facilities from Bank of Scotland of £3 million to coverworking capital and minor acquisition requirements. Equity shareholder funds stood at £2.0 million after fully providing for thedeficit on our pension scheme under FRS 17 (net of deferred taxation). This alsoreflects the placing of 1.3 million shares at 68p which raised £857,000 net ofcosts in August this year. The proceeds assisted the repayment of the final £1.4million of outstanding loan stock relating to the acquisition of the Jordanbusinesses in 2001. We have paid no taxation in the year due to losses brought forward. Taxation in2006/7 should be minimal and we are examining ways of structuring our businessto recover further tax losses of more than £3 million. DIVIDEND As stated last year, the Board believes it is appropriate to reinstate thepayment of a dividend when the profits of the Group are sustainable. Followingthis year's successful turnaround, the Board views the future with someconfidence and as such a dividend of 1.0p per share is being recommended. Ourpolicy is to cover the dividend by a minimum of three times after tax earnings. The dividend will be paid on 27 February 2007 to shareholders on theregister on 2 February 2007. BOARD APPOINTMENT I am pleased to announce the appointment of Paul Kirk as a non-executivedirector with effect from 1 January 2007. Paul is a chartered engineer withexperience as Managing Director of Carillion Transport and Carillion Rail andprior to that as Group Manufacturing Director for Rover Group. Paul will jointhe Audit, Remuneration and Nominations Committees. STRATEGY Our primary strategic objective is to grow the four operating subsidiariesorganically. We anticipate growth overall in 2006/2007 of approximately 40%, themajority coming from our nuclear engineering operations. Our strategy to growthese businesses is as follows:- 1. Booth Industries There are major opportunities available to us in the tunnelling sector as aresult of our experience on the Channel Tunnel Rail Link and Dublin Port Tunnelcontracts. We also believe that there are additions possible to the productrange, some of which have been researched during the last 12 months. We have acontinuous programme of research to develop the Booth Industries range ofproducts. 2. Jordan Nuclear The opportunities for this business lie in the nuclear sites in the UKparticularly at Sellafield, and, also at Aldermaston with the Atomic WeaponsEstablishment. We are currently bidding for two major framework contracts inassociation with alliance groups at Sellafield and we also have major projectopportunities in decommissioning at Sellafield. There is a noticeableacceleration in the nuclear decommissioning programme now the NuclearDecommissioning Authority ("NDA") has agreed its near term work plans. 3. CHB-Jordan Engineering We are targeting certain major maintenance contracts across the UK and arelooking to extend our maintenance activity geographically. We have targeted theNorth East as the major relevant area not presently covered by our facilitiesmanagement business. We are in final negotiations with a major UK oil refinerywhich should lead to a minimum of £2 million of maintenance work per annum forthree years. 4. Jordan Manufacturing The major opportunities lie in the nuclear sector with several enquiries forresidue storage facilities and transport vessels. We are specialists in thesupply of components manufactured to exacting standards used in the storage ofcontaminated fuel. There is a surge in the volume of tenders in this area and weanticipate securing major contracts in an activity in which we are marketleaders. However, we intend to continue to pursue our diversification policy,with contracts in the architectural sphere and also in process industriesremaining high on the list of priorities. In addition to our organic growth we are now seeking to grow by acquisition. Wehave good support from our bankers, Bank of Scotland, and we also believe wehave the institutional support to do a major equity fundraising if required. Weare concentrating primarily on businesses that will complement and acceleratethe growth of our existing activities whilst considering niche contractingbusinesses whose market dynamics provide suitable opportunity for future growth. PROSPECTS The order book currently stands at £40 million and provides a strong platformfor the years 2006/7 and 2007/8. However the real strength in our currentposition lies in the tendering activity which remains at a very high levelparticularly in nuclear engineering. David J JacksonChairman & Chief Executive7 December 2006 BUSINESS REVIEW Booth Industries, which designs and manufactures specialist door and wallsystems for the oil, gas, tunnel and security sectors, performed ahead ofexpectations with a record year with sales up 10% on 2005. The successfulcompletion of the £2.2 million Dublin Port Tunnel Door contract and theincreasing demand for blast and fire protection for onshore refineries andoffshore installations contributed to the increased sales and improved operatingmargins of 10.6% (2005: 7.8%). This is a strong result given the significantinvestment made in the year on fire and blast testing for new legislativestandards in the oil and gas sector together with the research and developmentof new products such as tunnel and high performance acoustic doors. The businesshas also benefited from strong sales in repair and maintenance as clients seekto prolong the useful life of their offshore assets. Whilst the oil and gas sector remains a key component of the business withrecent contract wins such as the £1.2 million Aker Kvaerner Norwegian rigscontract and the blast and fire protection contract at the Dragon LiquefiedNatural Gas Facility at Milford Haven, 2006/7 will be a year of diversificationwith a drive towards blast and shield protection for the nuclear industry. CHB-Jordan Engineering, the Group's site based oil, gas and petrochemicalfacilities maintenance business, performed in line with expectations with salesgrowing by 5% on 2005. A series of successful annual shutdowns with its coreclients together with the renewal of the Polimeri Europa facilities managementcontract for a further five years improved resource utilisation in the secondhalf and operating margins to 3.1% (2005: 2.1%). Cost control is critical to thesuccess of CHB-Jordan Engineering, however in the short-term, investment isbeing made to extend its operations geographically. Moving into the newfinancial year it is pleasing to report that following recent significantefforts, the business has been approved by the Atomic Weapons Establishment("AWE") at Aldermaston for on-site mechanical project works which we expect willcommence this year. Lastly, we are in final negotiations with a globalpetrochemical group for a three year contract to support and maintain a major UKfacility. Jordan Nuclear, our Sellafield based nuclear engineering services business, hasseen trading improve in the second half. Tendering and site activity hasincreased markedly and our resource has more than doubled in the past fewmonths. Turnover in the year fell compared to 2005, however, Jordan Nucleardelivered strong operating margins of 5.1% (2005: 5.2%). The NDA's acceleration of decommissioning and management of legacy wastefacilities are areas of activity that Jordan Nuclear supports. For the operationof Sellafield alone £1.2 billion is expected to be spent during 2007/8 (source:NDA Draft Annual Plan 2007/8). Following the award of the two year Sellafielddecommissioning framework contract as reported at the half year the allianceteam, of which Jordan Nuclear is a major part, has been awarded its firstproject, the dismantling of B204, the instrument and testing facility. Beforethe year end Jordan Nuclear also extended its existing installation scope on theSellafield Product Residue Store ("SPRS") with the provision of steelwork andplant on site valued at £1.5 million. Jordan Nuclear has also consolidated itsgeographic reach with a stronger foothold at Trawsfynydd and new contract winsat Oldbury and Winfrith. Its key principles of safety, security and environmental performance togetherwith its qualified resource with a reputation for delivery means Jordan Nuclearis well placed for growth over the coming year. Jordan Manufacturing, the Group's Bristol based stainless steel fabricationoperation has seen a dramatic turnaround with turnover 200% ahead of thecomparable period in 2005. Following years of underperformance, the business hasreturned to profit with an operating margin of 4.8%. Major contributions weremade from the nuclear sector with the SPRS nuclear store and Dounreay shielddoor contracts. The strategy of diversification into the process andarchitectural markets has also paid dividends. The Group's unique manufacturingand installation capabilities have secured high profile London basedarchitectural projects at St Pancras, Coleman Street and Aldermanbury Square.Inroads have also been made into the process industry with projects completedfor the waste to energy sector and we have commenced a major plant renewalproject for a global aero engine manufacturer. The business has also secured a £1.2 million contract for nuclear transportvessels. The ongoing assessment of the UK's nuclear legacy liabilities providessignificant opportunities for the future manufacture of both storage andtransport vessels. New opportunities also exist given the renewed interest innuclear power generation. We have also commenced a programme through the BritishStainless Steel Association to educate architects, engineers and constructiongroups which we expect to yield benefits particularly ahead of the Olympics in2012. PEOPLE The Group attaches great importance to the health and safety of all those in andaround our business. We work in challenging environments where a strong healthand safety culture is critical. As such we have invested in additionalcapability in this area to support the Group nationwide. In the face of significant change across the Group in the past twelve months,the Board would like to thank our people who have demonstrated tremendouscommitment and enthusiasm which has been an important ingredient in theexcellent progress of the Group in the past year. R Simon FosterDeputy Chief Executive7 December 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 30 September 2006 Restated 2006 2005 £000 £000 Turnover 31,618 24,573 Cost of sales and operating costs (30,685) (28,122) --------- ---------Total operating profit/(loss) 933 (3,549) --------- --------- Profit on sale of land - 148 Net interest payable (48) (143)Other finance charges (113) (121) --------- --------- (161) (116) --------- ---------Profit/(loss) on ordinary activities before taxation 772 (3,665) Tax on profit/(loss) on ordinary activities 8 (110) --------- ---------Profit/(loss) on ordinary activities after taxtransferred to reserves 780 (3,775) ========= ========= Earnings/(loss) per share - basic 5.77p (28.27)p - diluted 5.12p (28.27)p CONSOLIDATED BALANCE SHEET As at 30 September 2006 Restated Note 2006 2005 £000 £000Fixed assetsTangible assets 2,543 2,444 --------- ---------Current assets Stocks 218 184Debtors 10,130 7,954Cash at bank 723 1,442 --------- --------- 11,071 9,580Creditors - amounts falling due within one year (8,751) (7,306) --------- --------- Net current assets 2,320 2,274 --------- --------- Total assets less current liabilities 4,863 4,718 Creditors - amounts falling due after more than oneyear (8) (1,390) --------- ---------Net assets excluding pension scheme deficit 4,855 3,328 Pension scheme deficit (2,871) (3,345) --------- ---------Net assets/(liabilities) including pension schemedeficit 1,984 (17) ========= ========= Capital and reserves Called-up share capital 3,664 3,338Share premium account 1,110 578Merger reserve 294 294Revaluation reserve 1,005 1,033Profit and loss account (4,089) (5,260) --------- ---------Equity shareholders' funds 2 1,984 (17) ========= ========= CONSOLIDATED CASH FLOW STATEMENT Year ended 30 September 2006 Note 2006 2005 £000 £000 £000 £000Cash inflow from operating 3 348 206activities Returns on investments andservicing of financeInterest paid (334) (185)Interest received 17 48Interest element of financelease rentals (2) (319) (1) (138) ------- ------- Taxation UK corporation tax paid - - Capital expenditure andfinancial investmentPurchase of tangible fixed assets (337) (200)Proceeds from disposals oftangible fixed assets 11 (326) 277 77 ------- ------- Disposal Disposal of Oakland ElevatorsLimited: Cash proceeds - 846 DividendsEquity dividends paid - - ------- -------Net cash (outflow)/ inflowbefore financing (297) 991 FinancingIssue of new shares 858 -Finance lease repayments (23) (11)Loan stock repayments (1,157) (528)Medium term loan repayments (100) (422) (200) (739) ------- ------- ------- ------- (Decrease)/increase in cash inthe year 4 (719) 252 ======= ======= CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 30 September 2006 Restated 2006 2005 £000 £000 Profit/(loss) for the financial year 780 (3,775) Actuarial gain/(loss) in respect of defined benefitpension scheme 518 (254) Movement on deferred tax relating to defined benefitpension scheme deficit (155) 76 Surplus on revaluation of properties - 14 --------- ---------Total recognised gains/(losses) relating to the year 1,143 (3,939) --------- Prior year adjustment in connection with the adoption ofFRS 17 (3,435) ---------Total recognised loss since the last annual report (2,292) ========= NOTES TO THE FINANCIAL STATEMENTS 1. Prior year adjustment In preparing the financial statements for the year, the Group has adopted FRS 17'Retirement Benefits', which has resulted in a change in accounting policy forretirement benefits. This change in accounting policy has resulted in a prior year adjustment for theGroup with a decrease in shareholders' funds at 1 October 2004 of £3,144,000;the introduction of FRS 17 charges comprising operating charges of £90,000,finance charges of £121,000 and the associated charge for deferred tax of£32,000; a charge to the statement of total recognised gains and losses of£254,000 and the associated credit for deferred tax of £76,000; and a credit tothe profit and loss account of £130,000 in connection with SSAP 24 for the yearended 30 September 2005. 2. Reconciliation of movement in shareholders' funds Restated 2006 2005 £000 £000New shares allotted 858 -Profit/(loss) for the year 780 (3,775)Actuarial gain/(loss) recognised in the pension scheme 518 (254)Movement in deferred tax relating to the pension scheme (155) 76Surplus on revaluation - 14 --------- ---------Net movement in shareholders' funds 2,001 (3,939) Opening shareholders' funds (see below) (17) 3,922 --------- ---------Closing shareholders' funds 1,984 (17) ========= ========= Opening shareholders' funds originally £3,418,000 before prior year adjustmentof £(3,435,000). 3. Reconciliation of operating profit/(loss) to net cash inflowfrom operating activities Restated 2006 2005 £000 £000Operating profit/(loss) 933 (3,549)Difference between pension charge and cash contributions (271) (230)Depreciation charge 250 191Loss/(profit) on sale of tangible fixed assets 2 (3)(Increase)/decrease in stock (34) 3(Increase)/decrease in debtors (2,120) 3,285Increase in creditors 1,588 509 --------- ---------Net cash inflow from operating activities 348 206 ========= ========= 4. Reconciliation of net cash flow to movement in net debt 2006 2005 £000 £000(Decrease)/increase in cash in the year (719) 252Cash outflow from decrease in debt and lease financing 1,280 739 --------- ---------Change in net debt arising from cash flows 561 991 New finance leases (24) (16)Loan stock 252 (30) --------- ---------Decrease in net debt during the year 789 945Opening net debt at 1 October (88) (1,033) --------- ---------Closing net funds/(debt) at 30 September 701 (88) ========= ========= 5. General Information The financial information set out above for the years ended 30 September 2006and 2005 ("the financial information"), has been prepared with consistentaccounting policies except for the adoption of FRS 17 Retirement Benefits whichhas been treated as a prior year adjustment. The Group has also adopted thefollowing Financial Reporting Standards in the year: FRS 21 Events After TheBalance Sheet Date; FRS 22 Earnings Per Share; FRS 25 Financial Instruments:Disclosure and Presentation; FRS 28 Corresponding Amounts. None of thesestandards have had a financial effect on the financial information, other thanaccounting for dividends under FRS 21, for which the proposed dividend is notnow recognised as a liability at 30 September 2006 in these financialstatements. There was no equivalent impact in respect of the prior year. The financial information does not constitute the statutory financial statementsfor those years. The 2006 financial statements, upon which the auditors issuedan unqualified opinion, have not yet been delivered to the Registrar. The 2005financial statements have been delivered to the Registrar and included theauditors' report which was unqualified and did not contain a statement eitherunder sections 237 (2) or 237 (3) of the Companies Act 1985. The annual reportand accounts for the year ended 30 September 2006 will be posted toshareholders. Copies will be available from the company's registered office, 1Red Hall Court, Wakefield, WF1 2UN. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RHL.L