1st Feb 2008 07:00
Worthington Nicholls Group plc01 February 2008 For Immediate Release 1 February 2008 WORTHINGTON NICHOLLS GROUP PLC (the 'Company' or the 'Group') Notification of Preliminary Results & Trading Update Trading Worthington Nicholls Group (AIM: WNG) expects to announce its audited,preliminary results for the year ended 30 September 2007 in early March 2008.Following the appointment of Simon Beart, William Good and Rodney Mann to theBoard on 21 November 2007, Deloitte & Touche were appointed auditors to replaceHWCA. Since appointment, the Board has established that the Group's underlyingtrading, before the write offs disclosed on 7 December 2007, was showingmaterial losses. The Board also noted that since the Group's profit warning on17 August 2007, no effective management action had been taken to resolvecontractual uncertainties with customers nor any meaningful attempt made toimplement a rationalisation programme to reduce trading losses. As a result,trading for the quarter ended 31 December 2007 continued to show material losseswith an unaudited operating loss of approximately £1m. In the light of this poor trading, the Board closed a number of trading unitsand reduced Group headcount by approximately one third during December 2007. TheBoard has also imposed limits in respect of contracts to be accepted.Additionally, the Group has withdrawn from all overseas activity and anycontract where the location, margin or complexity is regarded as commerciallyunviable. The resultant closure costs, which will include redundancies, surplusproperty costs, stock write downs and losses on vehicle fleet disposal areestimated to be approximately £1m, of which £0.6m is estimated to be expended incash before 31 March 2008. In addition, a closure programme for several of theGroup's 14 offices has been initiated and one small loss making subsidiary hasbeen sold realising some £50,000. These restructuring costs are in addition to the provisions announced on 7December 2007 and will be accounted for in the six months ending 31 March 2008.Audited statutory accounts will be prepared for this period and announced inJune 2008. Cash Balances Net cash balances, inclusive of mortgage and hire purchase debt were £8.0m at 30January, 2008 (7 December, 2007: £8.8m). The Group currently has bankingarrangements with several clearing banks and no centrally arranged facilities.As a result, management of the Group's cash balances and banking has to datebeen inefficient. The mortgage in respect of the Group's investment property,amounting to £1.06m has been repaid to simplify banking arrangements. Accounting The Group had no professionally qualified, full time accounting staff for thetwo years prior to flotation in June 2006 and until January 2007.The Group hadno full monthly consolidated management accounts until April 2007, and nomeaningful contract accounting for the contracts undertaken by the primarytrading entity, Worthington Nicholls. The timing and availability of financial information across the Group isimproving and the focus of the Board on cash generation is now well understoodthroughout the business. However the implementation of an industry standardcontract accounting system and related IT solutions will take at least 12months. The Board has reviewed all trading units in detail and has noted poor standardsof budgeting, forecasting, contract management and cash-flow management acrossthe Group. Until these issues are resolved, market guidance for the Group inrespect of the year ending 31 March 2009 is not appropriate. Profitabilitytargets were not met at subsidiary level in the various periods to 31 December2007. Legal Matters Since August 2007, the Group has incurred costs to date of approximately£400,000 in respect of accounting, legal and other advice. It is not possible at this stage to quantify the legal costs that might beincurred in respect of ongoing legal matters, but the Board expects to make asubstantial, further provision for the six month period ending 31 March 2008. Outlook It is the intention of the Board to reduce costs and to manage loss making unitssuch that the Group is operating at an underlying, break even level by thecommencement of the new accounting year in April 2008. Following a furtherreview of trading during the quarter ending March 2008, the Board will thendetermine whether the recent rationalisations and provisions have beensufficient to achieve this objective. New business enquiries and market activity in the specialist hotel market remainreasonable and the Group continues to participate in bidding for a small numberof substantial contracts. Activity in the commercial markets appears muted andthe Group has a substantial exposure to the retail sector. Despite current challenges, the Group enjoys a strong market position, largecash balances and should benefit from the recent cost cutting measures and theimplementation of financial controls. FOR FURTHER INFORMATION, PLEASE CONTACT: Worthington Nicholls Group plc: Simon Beart, Chief Executive 07710 444370 William Good, Group Finance Director 01483 735700Cenkos Securities plc: Nick Wells 020 7397 8900 Stephen KeysBuchanan Communications: Richard Darby 020 7466 5000 Nicola Cronk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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