TIDMEAGA
RNS Number : 0183S
Eaga plc
02 September 2010
2 September 2010
Eaga plc
PRELIMINARY RESULTS
Eaga plc (EAGA.L) a green support services company and the UK's leading provider
of residential energy efficiency solutions and an established deliverer of a
range of outsourced solutions, today announces its results for the year ended 31
May 2010.
HIGHLIGHTS
Results highlights
· Continued revenue and profit growth
· 3.1% rise in revenue to GBP762.2m (2009: GBP738.9m)
· 10.1% rise in EBITA1 to GBP52.0m (2009: GBP47.2m)
· 7.5% rise in PBTA1 to GBP51.0m (2009: GBP47.5m)
· 7.4% rise in adjusted2 diluted earnings per share to 14.37p (2009:
13.38p)
· 10.0% increase in final divided 2.64p (2009: 2.40p)
· Closing net cash3 balance of GBP37.9m (2009: GBP31.3m)
· Robust balance sheet and strong financial position
Key achievements
· Growth in Carbon Services despite delay in CERT funding
· Secured four CESP contracts with a combined value of approximately GBP50m
· Digital Switchover Help Scheme operating at scale in key regions
· Strategic partnerships in private sector heating operating at scale
· Significant progress on solar photovoltaic ('solar PV') project with
first social landlord contracts signed
· Other domestic renewables initiatives being advanced
Charles Berry, Chairman, commented:
"I am pleased to report on another successful year for Eaga in the delivery of
our strategic objectives. I believe that Eaga's strategic positioning across its
core markets leaves the business well placed to deliver future growth."
There will be a presentation for analysts at the offices of JP Morgan Cazenove,
20 Moorgate, London EC2R 6DA, at 9.30am on Thursday 2 September. For further
information please contact:
Eaga plc
0191
245 8501
Drew Johnson, Chief Executive Officer
Ian McLeod, Chief Financial Officer
Giles Sharp, Chief Financial Officer Designate
Neil Spann, Director of Investor Relations
Hogarth Partnership
020 7357 9477
Chris Matthews
Andrew Jaques
Ian Payne
¹ EBITA and PBTA are stated before Eaga Partnership Trust ('EPT') - funded
charges, exceptional costs and amortisation of intangible assets.
² Adjusted diluted eps is stated before EPT-funded charges, exceptional costs,
amortisation of intangible assets and related tax adjustments.
³ Net cash comprises cash and cash equivalents less loans and borrowings.
Notes to Editors:
· Eaga is a green support services and business process outsourcing
company. It is also the UK's largest residential energy efficiency provider.
· Eaga was established in Newcastle in 1990 and operates across the UK and
in the Republic of Ireland, India and Canada. It employs approaching 5,000
Partners.
· Eaga floated on the main market of the London Stock Exchange in June
2007. Approximately 37% of the shares in Eaga plc are owned by the Eaga
Partnership Trust which is an independent trust which holds the shares for the
benefit of all Partners.
CHAIRMAN'S STATEMENT
I am pleased to report another successful year for Eaga in which we have
delivered growth and gained significant momentum in the delivery of our
strategic objectives, particularly the development of key opportunities in
domestic renewables and carbon services.
This progress is encouraging when taken in the context of the economic and
political environment in the UK as well as certain factors that have impacted
the key markets in which the Group operates.
Revenues grew by 3.1% to GBP762.2m (2009: GBP738.9m) and EBITA¹ increased by
10.1% to GBP52.0m (2009: GBP47.2m). PBTA¹ increased by 7.5% to GBP51.0m (2009:
GBP47.5m). These results are stated after absorbing approximately GBP1.6m of
costs associated with the development of our solar PV project. Excluding these
costs, EBITA growth was 13.5% and PBTA growth was 11.0%.
Adjusted² diluted earnings per share increased 7.4% to 14.37p (2009:13.38p).
Net cash generated from operations was GBP33.4m (2009: GBP40.3m). We absorbed
approximately GBP6.8m of working capital into the development stage of our solar
PV project. Adjusting for this investment, net cash generated from operations
was GBP40.2m and the Group has delivered an underlying operating cash conversion
of 76%³ (2009: 85%). The Group held net cash balances (cash and cash
equivalents less loans and borrowings) of GBP37.9m (2009: GBP31.3m) at the year
end which together with our available banking facilities provides support and
funding flexibility for future growth opportunities.
Dividend
The Board is recommending a 10% increase in the dividend for the year as a
whole; this will comprise a final dividend of 2.64p per share which, when added
to the interim dividend of 1.21p per share, gives a total for the year of 3.85p.
At this level the dividend is covered 3.7 times by adjusted diluted eps.
Subject to approval by the shareholders, the final dividend will be paid on 12
November 2010 to shareholders on the Register at 15 October 2010.
Strategic Progress
The strategic opportunities in Eaga's core markets are significant and continue
to broaden. In last year's Annual Report I set out the Group's key operational
objectives for 2010. These were:
· In our Carbon Services business, to capitalise on the opportunities in
the CERT4 and CESP5 markets;
· In our Heating & Renewables business, to continue to grow our domestic
heating and renewables activities through the further development of strategic
partnerships; and
· In our Managed Services business, to continue to diversify our contract
base in the BPO market.
Overall we have made good progress against these key objectives when measured
against a background of fiscal tightening and political change. Alongside
working to meet these objectives, the Group has also continued to identify and
deliver efficiency and productivity savings by constantly challenging and
improving the way we deliver for our customers.
Our Carbon Services business performed well during the year as we have continued
to work in partnership with a number of the UK's leading energy suppliers. I am
particularly pleased with this performance given it has been delivered in a
market which became increasingly challenging across the year, given the delay in
the announcement of the extension to the CERT programme. Confirmation of the
extension to CERT was made on 30 June 2010 and we are already seeing encouraging
signs of improving demand following a slow-down towards the end of the 2010
financial year.
Building upon our expertise in CERT, we have made good progress under the
recently introduced CESP programme. We have so far secured contracts with four
UK power generators which have an aggregate value of approximately GBP50m and an
opportunity to 'match-fund' Local Authority and social housing programmes.
Our Heating business was subject to increasing pressure across the financial
year as excess supply in the delivery chain led to fierce competition for work.
The business performed well during the first half of the year, despite early
signs that the market was becoming increasingly competitive. However as we
indicated in the Interim Management Statement in April, during the second half
of the year performance was impacted by reduced installation volumes arising
from lower funding into the grant funded programmes, along with continued excess
supply pressures in the wider market resulting in more competitive pricing. In
response to these pressures, we employed a strategy of not bidding for work on
uncommercial terms which constrained growth but protected trading performance.
We expect to see a continuation of this competitive pressure through the current
financial year.
However, it is encouraging to report that there are a number of significant
opportunities in the Heating and Renewables markets. We have continued to
develop strategic partnerships to deliver growth in domestic heating through the
provision of services to a range of commercial customers. We are also encouraged
by the prospects in the domestic renewable energy market, which have been
stimulated by the introduction of Feed-in-Tariffs ('FiTs') in April 2010 and
which we anticipate will further benefit from the expected introduction of the
Renewable Heat Incentive during 2011. Of specific focus during the year was the
development of our solar PV programme and I expect this project to begin
delivering at scale during the current financial year.
In our Managed Services segment performance of our existing contracts was good.
Demand under both the grant funded fuel poverty programmes and Digital
Switchover Help Scheme has remained high. Whilst Government has signalled that
front line services will be least affected by a reduction in funding levels, we
do not expect further announcements on the future funding levels for the fuel
poverty programmes until the current Comprehensive Spending Review has been
completed later this year.
We started the financial year with a clear focus on diversifying our contract
base within Managed Services and made good progress being shortlisted in the
bidding for a number of contracts. However, the General Election and early
action of the new Government has slowed down the procurement processes for a
number of large Government outsourcing programmes. The resultant delays will
inevitably impact on our Managed Services segment in the short-term, but we
believe that Government's stated need to drive efficiencies and cost savings
will provide significant medium and long-term opportunities.
Key objectives for 2011
Our key objectives as we look forward to 2011, set against the backdrop of the
market factors outlined above, are to:
· Maintain our leading position in the CERT and CESP markets whilst
positioning Eaga for the opportunities presented by the Green Deal6;
· Deliver both our solar PV project at scale and prepare for significant
growth in other domestic renewables opportunities; and
· Capitalise on the momentum we have gained in diversifying our contract
base.
Our Partners
Eaga's unique ownership structure harnesses significant commitment from our
staff, whom we refer to as Partners. Our core values continue to be at the
heart of everything we do, the clear aim of which is to deliver outstanding
customer service. On behalf of the Board I would like to thank all of our
Partners for the contribution they have made to Eaga's success in 2010.
The Board
In September 2009 we announced the appointment of Willie MacDiarmid to the Board
in the role of Chief Operating Officer. Willie brings a wealth of experience to
Eaga having spent 19 years at ScottishPower, most recently in the role of
Managing Director of Energy Retail.
We also announced in June this year, that Ian McLeod, Chief Financial Officer,
will step down from the Board at the Group's Annual General Meeting in October.
Ian's decision reflects his desire to take a break from corporate life. We are
grateful to Ian for his service and commitment and wish him well for the future.
Ian will be succeeded by Giles Sharp who has been with Eaga for over five
years, most recently in the role of Group Finance and Investor Relations
Director, a position he assumed after leading Eaga's IPO implementation
programme in 2007.
UK Corporate Governance Code
Although the new Code applies to accounting periods beginning on or after 29
June 2010, I am pleased to report that Eaga already embraces its principles. We
verify this each year through our Board Performance Review which I see as
important in confirming that we operate to high standards and also in
identifying opportunities to improve further. Our reviews are externally
facilitated every year and in every third year also involve external scrutiny
and commentary. We consider, in a rigorous and structured fashion, the
performance of the Board, and its committees and individual Directors in terms
of overall conduct and effectiveness as well as our evolution in terms of
membership and skills.
In order to capture fully the issues that I should bear in mind as I chair the
Board, I meet with shareholders to gauge at first hand their views of all
aspects of Eaga and its management. My conclusions from these meetings are
shared first with Non-Executive Directors and then with the Board as a whole.
Overall I believe this approach is effective in ensuring Eaga operates to high
standards of governance.
Strategic Positioning
Climate change, energy security and resource conservation remain high on the
global political agenda. These issues are here to stay and with them an ongoing
commitment to reduce energy consumption and carbon emissions with a shift to
more efficient low carbon solutions. This is a priority area for our new
Government where there is a clear appetite, through mechanisms such as the Green
Deal, to increase the scale of domestic measures for low carbon energy
generation and reduced resource consumption through improved energy efficiency.
Equally, the Government has made it clear that significant savings are to be
made in the delivery of public policy and services. This is expected to be
driven through a combination of funding reductions and efficiency improvements -
with measures to include increased involvement of private sector financing in
policy delivery, and greater outsourcing of Government programmes and services.
The implementation of such change will present some challenges as policies
develop and significant longer term opportunity for Eaga with its track record
of delivery in these markets.
Over the last 15 years we have developed business platforms that allow us to
deliver efficient and innovative solutions targeted at those most in need. More
recently we have also demonstrated the ability to broaden our offering to the
retail market. Whilst we are experiencing some near term competitive challenges
and market uncertainty, I believe that Eaga's strategic positioning across its
core markets leaves the business well placed to deliver future growth. We have
identified a number of opportunities for 2011 and the Board is confident about
the prospects for the Group.
Charles Berry, Chairman
2 September 2010
1 EBITA and PBTA are stated before amortisation of intangible assets, Eaga
Partnership Trust ('EPT')-funded charges and exceptional costs.
2 Adjusted diluted eps is stated before EPT-funded charges, exceptional costs,
amortisation of intangible assets and related tax adjustments
3 Underlying cash conversion is calculated as cash generated from operations
excluding solar PV absorption of GBP6.8m and cash settled EPT-funded charges of
GBP0.3m divided by EBITA excluding solar PV development costs of GBP1.6m.
4 CERT - Carbon Emissions Reduction Target. This is a GBP1bn programme
requiring energy suppliers to deliver carbon savings through improvements in the
energy efficiency of the UK housing stock.
5 CESP - Community Energy Savings Programme. This is a requirement for the
energy generators and suppliers to spend GBP350m supporting localised
community-based energy efficiency schemes.
6 Green Deal is a new Government proposal in which homeowners will be entitled
to spend up to GBP6,500 improving the energy efficiency of their home with
repayments funded from future energy bills.
OPERATIONAL REVIEW
I am pleased to present this review of the financial year.
The economic and political backdrops throughout the year have contributed to a
challenging trading environment for the Group. The fact that, despite these
external factors, the Group has continued to deliver growth in both revenues and
profits whilst maintaining our commitment to delivering high quality services to
our customers shows the resilience of our business model. Alongside strong
operational delivery we have also made significant progress in the development
of key strategic projects for the Group.
During the first half of the year we completed an internal reorganisation to
align our operating units more closely to the core markets in which we operate.
As such we now report our results in three segments:
· Carbon Services - focuses on the developing carbon economy including
delivery into the CERT and CESP markets along with the opportunities arising in
the international carbon markets;
· Heating and Renewables Services - provides domestic central heating and
renewable energy solutions to Social Landlords, fuel poverty programmes and
private householders; and
· Managed Services - provision of outsourced end-to-end solutions to local
and central Government and other commercial organisations.
Carbon Services
CERT and CESP are the UK Government's mechanisms to obligate energy suppliers
and generators to reduce carbon emissions from residential housing in the UK by
making them more energy efficient. Together these programmes are worth in
excess of GBP1bn per annum and Eaga is a leading provider of carbon emissions
savings in these markets. Eaga has worked in this marketplace for over 15 years,
during which time we have developed good relationships with our customers, the
leading UK energy suppliers. As I set out below, there have been a number of
challenges in this market during the financial year, and it is our experience,
expertise and strong customer relationships which have enabled us to deliver
solid growth.
The key performance indicators ('KPIs') for the Carbon Services business for the
year to 31 May 2010 are as follows:
+----------------------+---------+---------+------------+
| KPI |Year to |Year to | Change |
| | 31 | 31 | |
| | May 10 | May 09 | |
+----------------------+---------+---------+------------+
| Revenue (GBPm) | 245.5 | 216.2 | +13.5% |
+----------------------+---------+---------+------------+
| EBITA (GBPm) | 23.9 | 17.7 | |
+----------------------+---------+---------+------------+
| EBITA % | 9.8% | 8.2% | +1.6% |
+----------------------+---------+---------+------------+
| Total CO2 savings | 11,900 | 9,100 | +30.8% |
| ('000 tonnes) | | | |
+----------------------+---------+---------+------------+
The business performed well during the first half of the year despite wider
market pressures stemming from lower levels of demand for traditional insulation
measures. This dynamic continued into the third quarter of the financial year,
where our ability to deliver innovative energy efficiency solutions at scale was
a key factor in maintaining our performance.
Overall however, underlying demand from the energy suppliers during the second
half of the year, especially during the fourth quarter, was weak, driven
primarily by the continued delay in the finalisation of the extension to the
CERT programme. We welcomed the confirmation on 30 June 2010 that the CERT
programme would be extended to December 2012. The form of the extension was
broadly in line with our expectations with the overall CERT targets being
increased on a pro rata basis. There were two important changes introduced to
the structure of CERT for the extension period. First, the CERT extension has
set out a requirement to deliver a higher proportion of savings through
professionally installed traditional insulation measures providing opportunities
for our insulation business, and second, the extension increased the focus on
the most vulnerable householders, through the creation of the 'Super Priority
Group' - Eaga has particular expertise in working with this market segment. We
had expected that whilst the extension would be a catalyst to increased demand,
it was likely to be the second half of the current financial year before this
resulted in materially increased activity levels. However, the response to the
extension announcement has been more immediate and we now expect activity to
increase during the second quarter.
The increase in segmental EBITA margin primarily reflects the change in measure
mix towards innovative measures in the second half of the financial year.
We have made good progress in securing work under the recently introduced CESP
initiative. Through CESP we work on behalf of the UK power generators to develop
and support community-based programmes which target energy efficiency
improvements in key geographic areas across the UK. The structure of CESP
promotes matched-funding with Social Landlords and therefore we will seek to
deliver programmes with a value materially higher than the CESP contribution.
At a time when public sector budgets are under strain we believe the opportunity
to offer funding to Social Landlords will become increasingly attractive and
will also provide significant opportunities for our external insulation
business.
During January we were pleased to announce that we had reached agreement with
Drax Group plc for the outsourced delivery of their entire CESP commitment. In
June we were able to announce further progress, having secured contracts with
three additional power generators for the delivery of their CESP commitments.
In total this brings the value of CESP contracts secured for delivery by
December 2012 to approximately GBP50m. We are continuing discussions with a
number of other power generators and are hopeful of securing additional
contracts in this area. Whilst the contribution from CESP during the year to 31
May 2010 has been modest there is a significant opportunity for the Group over
the next two years.
The CERT extension has provided a real stimulus to demand and with CESP provides
visibility through to 2012. The Government's recently announced Green Deal
initiative points to potential changes in the mechanisms to deliver residential
energy efficiency improvements from 2013. Whilst this may mean some changes to
the existing policy instruments, it reinforces the continued importance of
improving the energy efficiency of UK housing stock. Working in this marketplace
has been at the heart of Eaga's activities for 20 years, and we have a track
record of successful delivery on behalf of Government, Social Landlords and
utility customers. As such the Green Deal presents real opportunity for Eaga to
play an increasingly important role in the delivery of these improvements. What
is clear, however is that the delivery mechanisms are likely to change from
those currently in place and we recognise that we will need to maintain
flexibility in our delivery models if we are to fully capitalise on the
opportunity which Green Deal presents.
Heating and Renewables Services
The KPIs for the Heating and Renewables Services business for the year to 31 May
2010 are as follows:
+-----------------------+---------+---------+------------+
| KPI | Year |Year to | Change |
| | to 31 | 31 | |
| | May 10 | May 09 | |
+-----------------------+---------+---------+------------+
| Revenue (GBPm) | 198.8 | 202.2 | -1.7% |
+-----------------------+---------+---------+------------+
| EBITA (GBPm) | 17.5 | 19.8 | |
+-----------------------+---------+---------+------------+
| EBITA (GBPm)* | 19.1* | 19.8 | |
+-----------------------+---------+---------+------------+
| EBITA % | 9.6%* | 9.8% | -0.2% |
+-----------------------+---------+---------+------------+
| Heating installations | 37,200 | 44,800 | -17.0% |
+-----------------------+---------+---------+------------+
| Properties under |393,000 |443,000 | -11.3% |
| cover | | | |
+-----------------------+---------+---------+------------+
| Number of breakdown |525,000 |486,000 | +8.0% |
| visits | | | |
+-----------------------+---------+---------+------------+
* Excludes GBP1.6m development costs in relation to our solar PV project
Across the last 12 months, we have faced a number of challenges in our Heating
business, driven primarily by excess supply issues in the wider marketplace.
Alongside this however we have undertaken significant development on a number of
new long-term opportunities, particularly in domestic renewables.
Revenue in this segment includes GBP15.1m in respect of the contribution from
the acquisition of the remaining 50% of WarmSure Limited. Underlying revenues
were 9.1% lower compared to the prior year reflecting the impact of both lower
delivery into the fuel poverty programmes and our active management of the
effects of increased competition. Funding into the fuel poverty programmes was
lower in the period compared to the prior year, resulting in reduced
installation volumes. I indicated in our interim results, that price competition
had increased significantly during the first half of the financial year,
resulting primarily from excess capacity in the market as a whole. Given wider
market conditions, we decided that we would not bid for new work unless it could
be secured on acceptable commercial terms. Whilst this strategy has meant that
we have lost a small number of contracts, and has restricted the amount of new
work we have been able to win, it is pleasing that we have continued to be
successful on other tenders where quality and service have been more of a
priority for the customer. Overall across the financial year the number of
properties for which we provide breakdown and maintenance cover has declined by
11.3% reflecting a reduction of the number of fuel poverty households under
cover in line with the reduction in grant funding and a decrease in the number
of social houses under cover.
Competitively driven price pressure intensified during the second half of the
financial year, particularly during the fourth quarter, impacting both fuel
poverty programmes and the social housing market. We have worked hard to
minimise the impact on margins through a close focus on cost control and
productivity. Underlying margins, excluding the costs incurred in the
development of our solar PV project, have softened. Given current market
conditions we expect these short-term challenges to continue through the current
financial year, however we expect to maintain an acceptable level of margin.
We have continued to focus on the development of opportunities in the private
consumer market. The agreement with Ideal Boilers Limited on 31 August 2009 to
acquire their share of the WarmSure joint venture, our nationwide central
heating emergency breakdown and servicing business, provided a platform from
which we could broaden our delivery to a range of commercial customers. We
announced in our interim statement that we had secured a contract to deliver
emergency response services to the customers of Barclays Bank and Marsh
Insurance. This contract is now operating at scale and we are responding to
around 4,000 emergencies per month. We are working on a small number of similar
pilot programmes with other organisations and are hopeful that this will be an
area which will develop further during the coming year.
Our emergency breakdown services came under significant pressure at the
beginning of the new calendar year, as a result of the severe weather
conditions. Whilst this presented operational pressure I am indebted to our
Partners for their commitment and dedication which ensured that we minimised
service delivery issues during this period.
Following the introduction of FiTs in April 2010, an area of particular focus
for the Group has been the opportunities arising from the growing domestic
renewable energy market. Through the Government's 'Clean Energy Cashback'
programme, FiTs provide a mechanism to promote the generation of electricity in
the home. We expect that the focus on domestic renewable energy solutions will
further benefit from the anticipated introduction of the Renewable Heat
Incentive during 2011. There is an increasing range of opportunities in the
growing renewable energy market which build upon our expertise in delivering
residential improvements at scale across the UK.
The most significant opportunity we have pursued in the year has been the
development of a project to facilitate the large scale installation of solar PV
systems on the roofs of Social Landlords across the UK. The model, which has
been under development since late 2009, will utilise third party investment to
fund the installation of the equipment with a return being derived from the FiT
revenue arising from the electricity generated. We have invested significant
time into the early stage development of the project to ensure that we have a
scalable delivery model. To this end we have in place a robust end-to-end
operational platform. We have secured key supply chain contracts with European
manufacturers covering both PV panels and inverters which importantly provide
protection against current component shortages in this market.
During the second half of the financial year, we commenced a pilot installation
programme of 1,200 systems funded initially by Eaga. We have now installed 664
systems as part of this pilot. In developing the model across the 2010 financial
year we incurred costs totalling GBP1.6m, which have been charged against profit
and absorbed GBP6.8m into working capital.
Since the year end, discussions with Social Landlords have progressed well and
we have now signed the first delivery contracts. These contracts, with South
Wight Housing and London Borough of Ealing, together provide access to survey
over 16,000 properties. Whilst relatively modest in size, these agreements
represent an important milestone in the development of the project and provide a
platform upon which the Group can continue to develop its installation capacity.
Discussions with other Social Landlords are progressing well and we expect
further contracts to be signed in the near future.
The Group's funding negotiations in relation to providing third party funding
for this project are progressing well and we currently anticipate the completion
of these negotiations during the first half of our financial year.
In parallel, we are progressing a range of other potential renewable energy
installation projects spanning both the residential and commercial markets. One
of the first of these to reach the implementation stage is an agreement reached
in July 2010 with HomeSun Limited. HomeSun is a consumer retail offering for the
installation of solar PV systems, and Eaga has been appointed sole installation
and aftercare partner. We have taken just under a 10% equity stake in the
business for consideration of GBP1m. Following an initial publicity campaign in
August it has a significant number of leads to help it to deliver its first year
target of 2,000 installations.
Managed Services
The KPIs for the Managed Services business for the year to 31 May 2010 are as
follows:
+-----------------------+---------+---------+------------+
| KPI | Year |Year to | Change |
| | to 31 | 31 | |
| | May 10 | May 09 | |
+-----------------------+---------+---------+------------+
| Revenue (GBPm) | 429.5 | 439.6 | -2.3% |
+-----------------------+---------+---------+------------+
| EBITA (GBPm) | 10.6 | 9.7 | |
+-----------------------+---------+---------+------------+
| EBITA % | 2.5% | 2.2% | +0.3% |
+-----------------------+---------+---------+------------+
| Fuel poverty |218,000 |259,000 | -15.8% |
| households assisted | | | |
+-----------------------+---------+---------+------------+
| DSHS households |343,000 | 69,000 | +397.1% |
| assisted | | | |
+-----------------------+---------+---------+------------+
Our Managed Services business performed well during the year. Revenues declined
marginally reflecting lower funding and delivery into the Government's fuel
poverty programmes, partially offset by higher levels of activity in the Digital
Switchover Help Scheme.
Funding for the Warm Front scheme for the year to March 2010 was GBP350m, an 11%
reduction on the comparable period in the prior year. Revenue from the contract
was impacted by a slower rate of delivery than had been anticipated towards the
end of the financial year. Funding for the year to March 2011 is broadly
consistent with prior year at GBP345m. The Warm Front contract runs to 31 March
2011 with the opportunity for a two year extension dependent on future funding
levels. We expect to get visibility of future funding levels beyond March 2011,
when the Government's Comprehensive Spending Review is completed in October. As
part of our continuing focus on efficiency across the year we successfully
implemented a number of delivery improvements to the Warm Front scheme. These
changes were focused on improving the customer experience, were phased across
the year and concluded in May 2010.
The first half of the financial year saw a significant increase in delivery
activity for the Digital Switchover Help Scheme as this programme reached the
Granada television region. In total across the year we provided on the ground
assistance to over 343,000 eligible households and handled over 1.75m telephone
calls. We were encouraged with our performance across this period and are well
positioned for delivery during 2011 as the programme moves to switchovers in the
Central and Southern regions.
The increase in segmental EBITA margin primarily reflects the benefit of the
ongoing focus on efficiencies and process improvements as well as contract mix.
At the start of the financial year we set out our clear objective to broaden our
portfolio of outsourcing contracts. We made significant progress against this
objective during the first half of the financial year, being short-listed for a
number of large central Government contracts. However, as a result of the impact
of the lead-up to the General Election and the subsequent change in Government,
the procurement processes for the majority of these contracts have either been
suspended or delayed. As a result of these delays we have reviewed our
short-term targets for growth in this segment and recognise that it will be more
challenging to win material new revenues during the year to 31 May 2011. The
experience we have gained during the last 12 months of bidding will be important
as we develop our offering over the coming months. For example, we made good
progress in bidding for the Flexible New Deal programme until the tender process
was suspended in early summer pending a wider review of the Welfare to Work
agenda and we will use this experience during the tender process for the
enlarged 'Work Programme' in the coming year.
We are of the view that the economic pressures on Government will increase the
drive for efficiency and are likely to result in an increasing number of
outsourcing opportunities in the medium to long-term. We expect further clarity
on the shape of a number of Government programmes during the autumn.
Summary and outlook
The fundamental drivers underpinning each of our core markets, as set out above,
remain strong and indeed in certain markets including renewables are
significantly strengthening. I believe that the Group is well placed to
capitalise on the associated opportunities in both the short and medium-term.
Looking across our businesses I am encouraged by the increased volumes being
experienced in our Carbon business and this will pick up further momentum in the
second half. Our Heating and Renewable business is experiencing strong
competitive pressures in the heating market, but our selective approach to
tendering and focus on costs will mean we maintain an acceptable level of margin
albeit on slightly reduced volumes, and looking ahead we are very much
encouraged by the opportunities represented by the domestic renewables markets.
Given the current political processes our Managed Services business has yet to
see the award of the next phase of outsourcing contracts or contract extensions,
but we remain confident that we are well placed in this market.
Subsequent to the year end we have completed a voluntary redundancy programme
whereby we have agreed that 223 Partners will leave the business. This
programme is part of our ongoing efficiency programme to ensure that the Group
is structured appropriately to capitalise on the opportunities ahead of us. I
would like to personally thank all of the Partners that have left the business
under this programme for their contribution to the Group and wish them all the
best for the future.
Given the market and timing factors set out above we believe that the second
half of the current financial year will represent a greater proportion of the
full year performance than has been the case in the previous years and we remain
confident of delivering a good performance for our shareholders in the current
financial year. In order to do so we need to ensure that the Group continues to
keep our customers at the heart of what we do and both provide innovative
solutions to customers' needs as well as delivering efficiencies and
improvements to the way we do business.
I am confident that the Group remains well placed to deliver against our
strategic objectives.
Drew Johnson, Chief Executive Officer
2 September 2010
FINANCIAL REVIEW
Group Result
The Group has delivered growth in revenue and EBITA in the year to 31 May 2010.
Revenue has increased by GBP23.3m (3.1%) to GBP762.2m (2009: GBP738.9m).
Acquisitions accounted for GBP9.9m of this growth with the remaining GBP13.4m
delivered by the existing business.
EBITA increased by GBP4.8m (10.1%) to GBP52.0m (2009: GBP47.2m). Acquisitions
accounted for GBP1.0m of this growth with the remaining GBP3.8m arising from
existing businesses. Included within this growth in the year is GBP1.6m of costs
charged in respect of the solar PV project therefore underlying EBITA has grown
by GBP5.4m. This is summarised in the following table:
+--------------------------------+-----------+--------------+------------+
| | Revenue | Revenue | EBITA |
+--------------------------------+-----------+--------------+------------+
| | GBPm | growth % | GBPm |
+--------------------------------+-----------+--------------+------------+
| Year to 31 May 2009 | 738.9 | | 47.2 |
+--------------------------------+-----------+--------------+------------+
| | | | |
+--------------------------------+-----------+--------------+------------+
| Solar PV project development | - | - | (1.6) |
| costs | | | |
+--------------------------------+-----------+--------------+------------+
| | | | |
+--------------------------------+-----------+--------------+------------+
| Acquisition in the year | 15.1 | | 0.5 |
+--------------------------------+-----------+--------------+------------+
| Inter-segment eliminations of | (5.4) | | - |
| current year acquisitions | | | |
+--------------------------------+-----------+--------------+------------+
| Full year effect of prior year | 5.2 | | 0.5 |
| acquisitions | | | |
+--------------------------------+-----------+--------------+------------+
| Inter-segment eliminations of | (5.0) | | - |
| prior year acquisitions | | | |
+--------------------------------+-----------+--------------+------------+
| Sub total acquisition | 9.9 | 1.3% | 1.0 |
+--------------------------------+-----------+--------------+------------+
| | | | |
+--------------------------------+-----------+--------------+------------+
| Other growth | 13.4 | 1.8% | 5.4 |
+--------------------------------+-----------+--------------+------------+
| Year to 31 May 2010 | 762.2 | 3.1% | 52.0 |
+--------------------------------+-----------+--------------+------------+
The Board has proposed a final dividend of 2.64p (2009: 2.40p) per Ordinary
Share, payable on 12 November 2010 to shareholders on the Register at 15 October
2010. Together with the interim dividend of 1.21p (2009: 1.10p) this takes the
total proposed dividend for the year to 3.85p (2009: 3.50p); an increase of 10%
reflecting both the strong financial performance in the year and future
opportunities available to the Group.
Segmental Performance
In the first half of the year the Group completed an internal reorganisation to
align business and reporting structures with core markets. As noted in the
Operational Review following the restructuring the Group now reports under three
primary reporting segments comprising: Carbon Services; Heating and Renewables
Services; and Managed Services. The segmental information set out in note 2 for
the year to 31 May 2009 has been restated to reflect this change, which does not
have any impact on previously reported consolidated profits, net assets or
earnings per share of the Group. In addition, the Group has adopted the
requirements of IFRS8 'Operating Segments', no further change to segmental
reporting other than those set out above has been made as a result of the
adoption of this accounting standard.
The Group continues to monitor business performance using revenue, EBITA and
EBITA margin as the key indicators of financial performance. Year on year
differences in these performance metrics are summarised in the following table:
+----------------------------------------------+------------+-------------+---------+
| | 2010 | 2009 | Change |
| | | (restated)* | |
+----------------------------------------------+------------+-------------+---------+
| Revenue (GBPm) | | | |
+----------------------------------------------+------------+-------------+---------+
| Carbon Services | 245.5 | 216.2 | 29.3 |
+----------------------------------------------+------------+-------------+---------+
| Heating and Renewables Services | 198.8 | 202.2 | (3.4) |
+----------------------------------------------+------------+-------------+---------+
| Managed Services | 429.5 | 439.6 | (10.1) |
+----------------------------------------------+------------+-------------+---------+
| Eliminations | (111.6) | (119.1) | 7.5 |
+----------------------------------------------+------------+-------------+---------+
| Total Revenue | 762.2 | 738.9 | 23.3 |
+----------------------------------------------+------------+-------------+---------+
| EBITA (GBPm) | | | |
+----------------------------------------------+------------+-------------+---------+
| Carbon Services | 23.9 | 17.7 | 6.2 |
+----------------------------------------------+------------+-------------+---------+
| Heating and Renewables Services | 17.5 | 19.8 | (2.3) |
+----------------------------------------------+------------+-------------+---------+
| Heating and Renewables Services (excluding | 19.1 | 19.8 | (0.7) |
| solar PV project development costs) | | | |
+----------------------------------------------+------------+-------------+---------+
| Managed Services | 10.6 | 9.7 | 0.9 |
+----------------------------------------------+------------+-------------+---------+
| Total EBITA | 52.0 | 47.2 | 4.8 |
+----------------------------------------------+------------+-------------+---------+
| EBITA margin (%) | | | |
+----------------------------------------------+------------+-------------+---------+
| Carbon Services | 9.8% | 8.2% | 1.6% |
+----------------------------------------------+------------+-------------+---------+
| Heating and Renewables Services | 8.8% | 9.8% | (1.0%) |
+----------------------------------------------+------------+-------------+---------+
| Heating and Renewables Services (excluding | 9.6% | 9.8% | (0.2%) |
| solar PV project development costs) | | | |
+----------------------------------------------+------------+-------------+---------+
| Managed Services | 2.5% | 2.2% | 0.3% |
+----------------------------------------------+------------+-------------+---------+
| Group EBITA margin | 6.8% | 6.4% | 0.4% |
+----------------------------------------------+------------+-------------+---------+
| Group EBITA margin (excluding solar PV | 7.0% | 6.4% | 0.6% |
| project development costs) | | | |
+----------------------------------------------+------------+-------------+---------+
* Restated following internal reorganisation and the adoption of IFRS8, as noted
above
Carbon Services
Demand under CERT was high in the first half of the financial year, continuing
into the beginning of the second half of the financial year. In the latter part
of the financial year the business experienced a significant reduction in demand
for insulation measures from utility customers on the back of the delay in the
announcement of the extension to CERT. However our flexible model, has enabled
us to deliver a good financial performance for the year to 31 May 2010,
generating an increase in revenue in this segment of GBP29.3m (13.5%).
The EBITA margin has increased to 9.8% (2009: 8.2%). This primarily reflects
the change in mix of measures delivered in the second half of the financial
year.
Heating and Renewables Services
Revenue in this segment is GBP3.4m (1.7%) lower than in the prior year and EBITA
is GBP2.3m (11.9%) lower than in the prior year. As noted earlier in this
report during the year to 31 May 2010 we have absorbed GBP1.6m of development
costs in relation to our solar PV project. These costs reflect the requirement
to develop an appropriate infrastructure to operate at scale. Excluding this
cost, EBITA would have reduced by GBP0.7m (3.7%).
The reduction in revenue primarily reflects lower levels of installations on the
fuel poverty programmes due to reduced funding levels in the year.
During the year we have seen significantly increasing levels of competition and
pricing pressure in both our fuel poverty delivery contracts and in the social
housing sector. This has resulted in a highly competitive landscape and some
pressure on our operating margins. Excluding the solar PV start-up costs of
GBP1.6m, the EBITA margin for the year is 9.6% compared to 9.8% in the prior
year. We have managed to broadly maintain our margin against this competitive
landscape by continued focus on driving operational improvements and
efficiencies. This pressure on margins in the heating sector is likely to
continue into the current financial year and we are focused on driving further
efficiencies into our business processes and systems whilst making sure that we
do not compromise on quality.
Managed Services
Revenue in this segment is GBP10.1m (2.3%) lower than in the prior year. This
primarily reflects a reduction in funding levels on the Warm Front scheme and a
reduction in revenue on the Northern Ireland fuel poverty programme which we no
longer deliver partially offset by increased activity under the Digital
Switchover Help Scheme.
Warm Front revenue in the year to 31 May 2010 was GBP332m (2009: GBP374m) a
reduction of 11% mainly reflecting a reduction in funding levels. Funding under
the Warm Front scheme reduced from GBP395m to GBP350m, a decrease of 11%, from
the fiscal year 2008/09 to 2009/10. Funding has been further reduced in 2010/11
to GBP345m including the additional GBP150m included in the Pre-Budget Report
announcement of December 2009.
In the year to 31 May 2010 we have seen a significant increase in activity in
the Digital Switchover Help Scheme. We have now completed switchovers in some
key regions including Granada and we have seen significantly increased revenues
to GBP58.5m (2009: GBP12.0m).
EBITA margin increased to 2.5% (2009: 2.2%), reflecting operational improvements
and contract mix.
Tax
The effective rate of tax is 28.6% for the year to 31 May 2010 (2009: 28.5%).
The effective tax rate is 0.6% (2009: 0.5%) higher than the standard rate of tax
of 28.0% (2009: 28.0%) due to disallowable expenditure incurred by the Group.
Although the Chancellor announced changes to UK corporation tax rates for future
periods, as these rates were not substantively enacted at the year end, we have
continued to use 28.0% to calculate our current and deferred tax balances.
Exceptional Costs
There are no exceptional costs in the current year (2009: GBP345k). In the
prior year these costs related to a share-based payment charge arising on the
fair value of share options granted to certain senior management under the IPO
Key Management Plan which are now fully vested and will not recur.
Earnings Per Share
Diluted adjusted eps has increased by 7.4% to 14.37p (2009: 13.38p). Basic eps
increased by 10.0% to 11.76p (2009: 10.69p).
Acquisitions
The Group acquired the remaining 50% of WarmSure Limited, our previous joint
venture company with Ideal Boilers Limited on 31 August 2009 for net
consideration of GBP1.2m.
Treasury
Strategy and Management
The Group remains net cash positive and at 31 May 2010 had a GBP60m Revolving
Credit Facility ('RCF') and a GBP5m overdraft facility in place with Barclays
Bank plc. This provides the Group with flexibility in funding day to day cash
flow requirements although the majority of cash flow needs have to date been met
from internal cash generation. The Group's policy in relation to banking
facilities is to ensure that we have sufficient facilities in place to
facilitate financial flexibility. The RCF facility is in place to 17 March 2012
and the overdraft is renewable on 17 March 2011.
As at 31 May 2010 the Group's aggregate undrawn finance facilities were GBP65m.
These, together with the Group's net cash position of GBP37.9m (2009: GBP31.3m),
provide headroom of approximately GBP102.9m (2009: GBP96.3m).
The Group operates a centralised Treasury function that works closely with the
individual business units to ensure that the Group Treasury position is
maximised and that the Group's Treasury polices and procedures are adhered to.
The key Group Treasury policies are:
· Surplus cash is placed on deposit with a view to maximising investment
return
· Individual limit for cash deposits of GBP20m with any one financial
institution
· All institutions used for depositing of funds or indebtedness to be rated
AA- or better by Moodys
· All indebtedness requires Group Treasury approval
· All foreign exchange transactions greater than GBP50k require Group
Treasury approval
· All derivative financial instruments proposed require Group Treasury
approval
The Group does not have major exposure to interest rate movements as it does not
have any significant drawn floating rate liabilities in place. If such
liabilities are drawn down in the future then the Group will seek to manage its
exposure via appropriate hedging instruments.
The Group is experiencing an increased exposure to foreign currency
transactions, in particular through the purchase of solar PV equipment. The
largest exposure is with the Euro although in the future we expect some further
exposure to the US dollar. The Group has developed a hedging strategy which
looks to fix the exchange rate for a high percentage of the future probable
purchase commitments on a rolling six monthly basis. At the year end no open
hedging instruments were in place. Subsequent to the year end we have entered
into some forward foreign exchange contracts to hedge against forecast highly
probable cash flow requirements on our solar PV project.
The Group purchases approximately 5m litres of fuel each year for the fleet of
vans used by our installers. Given the potential volatile changes in fuel
prices, prior to the year end, the Group entered into a contract with a
financial institution to fix the price of fuel purchased for 90% of our
estimated fuel requirement for the year to 31 May 2011.
Liquidity and Cash Flows
The Group continues to be cash positive and at 31 May 2010 had cash and cash
equivalents of GBP38.4m (2009: GBP31.9m), an increase of GBP6.5m during the
year. This is after incurring a net cash outflow in the year in respect of our
solar PV project of GBP7.3m, comprising a working capital absorption of GBP6.8m
and capital expenditure of GBP0.5m. Therefore on an underlying basis cash and
cash equivalents increased by GBP13.8m.
The following table summarises the cash flows for the Group:
+-------------------------------------------------------+--------------+----------+
| | 2010 | 2009 |
+-------------------------------------------------------+--------------+----------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------------+----------+
| Cash generated from operations | 33.4 | 40.3 |
+-------------------------------------------------------+--------------+----------+
| Interest and tax | (7.0) | (3.0) |
+-------------------------------------------------------+--------------+----------+
| Cash generated from operating activities | 26.4 | 37.3 |
+-------------------------------------------------------+--------------+----------+
| Net capital expenditure | (8.3) | (4.7) |
+-------------------------------------------------------+--------------+----------+
| Acquisitions | (2.1) | (4.6) |
+-------------------------------------------------------+--------------+----------+
| Net financing including dividends | (9.5) | (11.4) |
+-------------------------------------------------------+--------------+----------+
| Increase in cash | 6.5 | 16.6 |
+-------------------------------------------------------+--------------+----------+
The increase in interest and tax cash outflow reflects the lower level of
deposit interest received in the year together with additional tax payments in
line with the profitability of the Group and reflecting the fact that the tax
losses generated on the flotation of the Company are now fully utilised.
The Group's net finance charge in the year was GBP0.9m (2009: GBP0.2m net
income). The increase in net finance costs reflects significantly lower levels
of deposit interest received together with a full year effect (2009: two months)
of the increased amortised cost of our RCF facility agreement and related
non-utilisation fee.
The increase in net capital expenditure reflects expenditure on specific
projects together with GBP2.8m incurred in relation to the fit out of leased
business premises.
Principal Risks and Uncertainties
The Group has a dedicated risk management team together with a risk forum and
Risk Review Board ('RRB') to monitor and evaluate the results of the risk
management process in each business unit. The RRB reports to the Board and Audit
Committee on a regular basis regarding the effectiveness of the risk
identification process and the action plans developed by the business to
mitigate significant risks.
The key risks facing the Group are summarised in the following table:
+----------------+--------------------+------------------------+
| Key risk | Impact and | Example of Mitigating |
| | Description | Actions |
+----------------+--------------------+------------------------+
| Government | The level of | · Diversified |
| funding may | Government funding | contract base |
| impact the | would impact the | · Appropriate |
| Group | delivery of | contractual |
| | current programmes | arrangements |
| | and also delay the | |
| | timing of awards | |
| | of new BPO or | |
| | similar contracts | |
+----------------+--------------------+------------------------+
| Failure to | The Group could be | · Access to |
| manage | exposed to | GBP65m of banking |
| financial | financial loss if | facilities |
| risks being | these risks are | · Treasury risk |
| credit risk, | not well managed | management policy in |
| liquidity | | place |
| risk and | | · Appropriate |
| foreign | | hedging strategy |
| currency risk | | developed |
| | | · Credit risk is |
| | | assessed on a regular |
| | | basis for significant |
| | | customers |
+----------------+--------------------+------------------------+
| The Group's | In certain parts | · Diversified |
| results could | of the business | business model |
| be impacted | the Group is | · Cost mitigation |
| by a down | exposed to demand | strategies |
| turn in | from organisations | |
| economic | which in a further | |
| conditions | recessionary | |
| | period could | |
| | reduce demand e.g. | |
| | house building | |
| | sector for our | |
| | insulation | |
| | business | |
+----------------+--------------------+------------------------+
| Change in | A significant | · Diversified |
| Government | change in | business model |
| policy could | Government policy | |
| impact the | in relation to | |
| Group | fuel poverty, | |
| | energy efficiency | |
| | or renewable | |
| | technologies could | |
| | impact on the | |
| | Group's business | |
| | model | |
+----------------+--------------------+------------------------+
| Continued | We have seen | · Continued focus |
| competition | significant | on efficiencies and |
| in heating | competition in | improved working |
| business | this business | practices |
| impacts Group | segment, which is | · Innovative |
| results | placing pressure | service offerings to |
| | on operating | Social Landlords |
| | margins | |
+----------------+--------------------+------------------------+
| Contracts may | There is a risk | · Regular quality |
| be lost | that due to | and service meetings |
| through poor | service or other | with customers |
| customer | quality issues | · Annual service |
| service | that contracts are | quality surveys and |
| | not renewed | audits |
+----------------+--------------------+------------------------+
| The Group has | There is a risk of | · Regular |
| a relatively | a contract loss or | contract/customer |
| small number | dispute on one of | meetings on all |
| of high value | the large | significant contracts |
| contracts | contracts that | · Focus on |
| | could have a | quality and customer |
| | material impact on | service |
| | the Group's | · Ongoing |
| | results | diversification of |
| | | contract concentration |
+----------------+--------------------+------------------------+
| There is | A significant IT | · Robust business |
| reliance on | failure could | continuity plans which |
| IT systems | impact our | are tested regularly |
| for | operational | · Board approval |
| operational | delivery | required for |
| delivery and | | significant IT changes |
| efficiency | | |
+----------------+--------------------+------------------------+
| The Group is | There is a risk of | · Ongoing |
| reliant on a | either a failure | financial appraisal of |
| range of | of a subcontractor | financial position of |
| third party | or poor | subcontractors |
| subcontractors | performance or | · Ongoing |
| for some of | quality | monitoring of quality |
| its | | and health and safety |
| operational | | performance of |
| commitments | | subcontractors |
+----------------+--------------------+------------------------+
| Adverse | Several prolonged | · Business |
| weather | severe weather | continuity and |
| conditions | events could cause | contingency plans in |
| impact our | significant | place |
| operational | operational | |
| delivery of | challenge and | |
| our field | additional costs | |
| based | to the Group | |
| operations | | |
+----------------+--------------------+------------------------+
| Failure to | The Group's | · Dedicated |
| operate | activities expose | health and safety |
| appropriate | it to a range of | professionals |
| health and | health and safety | · Regular health |
| safety | issues | and safety programmes |
| procedures | | and audits |
+----------------+--------------------+------------------------+
| Failure to | Performance, | · Appropriate |
| attract and | knowledge and | remuneration policies |
| retain key | skills of Partners | in place |
| employees | are central to the | · Talent |
| | Group achieving | development programmes |
| | its objectives | e.g. Future Leaders |
| | | programme |
+----------------+--------------------+------------------------+
Ian McLeod, Chief Financial Officer
2 September 2010
Consolidated Income Statement
For the year ended 31 May 2010 - Audited
+----------------+--------+-----------+------------+
| | | | Year |
| | | Year | ended |
| | | ended | |
+----------------+--------+-----------+------------+
| | | 31 May | 31 May |
+----------------+--------+-----------+------------+
| | | 2010 | 2009 |
+----------------+--------+-----------+------------+
| | Notes | GBP'000 | GBP'000 |
+----------------+--------+-----------+------------+
| Revenue | | 762,179 | 738,904 |
+----------------+--------+-----------+------------+
| Cost | | (607,093) | (591,946) |
| of | | | |
| sales | | | |
+----------------+--------+-----------+------------+
| Gross | | 155,086 | 146,958 |
| profit | | | |
+----------------+--------+-----------+------------+
| Administrative | | (112,687) | (109,475) |
| expenses | | | |
+----------------+--------+-----------+------------+
| EBITA1 | | 51,961 | 47,207 |
+----------------+--------+-----------+------------+
| Amortisation | | (5,332) | (7,820) |
| of | | | |
| intangible | | | |
| assets | | | |
+----------------+--------+-----------+------------+
| EPT-funded | 3 | (4,230) | (1,559) |
| charges | | | |
+----------------+--------+-----------+------------+
| Exceptional | 4 | - | (345) |
| costs | | | |
+----------------+--------+-----------+------------+
| Operating | | 42,399 | 37,483 |
| profit | | | |
+----------------+--------+-----------+------------+
| Finance | | 173 | 782 |
| income | | | |
+----------------+--------+-----------+------------+
| Finance | | (1,101) | (537) |
| expense | | | |
+----------------+--------+-----------+------------+
| Profit | | 41,471 | 37,728 |
| before | | | |
| tax | | | |
+----------------+--------+-----------+------------+
| Tax | | (11,864) | (10,758) |
| expense | | | |
+----------------+--------+-----------+------------+
| Profit | | 29,607 | 26,970 |
| for | | | |
| the | | | |
| year | | | |
+----------------+--------+-----------+------------+
| Profit | | | |
| for | | | |
| the | | | |
| year | | | |
| attributable | | | |
| to: | | | |
+----------------+--------+-----------+------------+
| Equity | | 29,349 | 26,703 |
| holders | | | |
| of the | | | |
| Company | | | |
+----------------+--------+-----------+------------+
| Minority | | 258 | 267 |
| interests | | | |
+----------------+--------+-----------+------------+
| | | 29,607 | 26,970 |
+----------------+--------+-----------+------------+
| Earnings | | | |
| per | | | |
| share | | | |
| (pence) | | | |
+----------------+--------+-----------+------------+
| - | 5 | 11.76 | 10.69 |
| basic | | | |
+----------------+--------+-----------+------------+
| - | 5 | 11.64 | 10.63 |
| diluted | | | |
+----------------+--------+-----------+------------+
| - | 5 | 14.37 | 13.38 |
| adjusted | | | |
| diluted2 | | | |
+----------------+--------+-----------+------------+
1 EBITA comprises profit before tax, interest, amortisation of intangible
assets, EPT-funded charges and exceptional costs.
2 Adjusted for amortisation of intangible assets, EPT-funded charges,
exceptional costs and related tax adjustments.
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2010 - Audited
+---------------+--------+---------+---------+
| | | Year | Year |
| | | ended | ended |
+---------------+--------+---------+---------+
| | | 31 May | 31 May |
+---------------+--------+---------+---------+
| | | 2010 | 2009 |
+---------------+--------+---------+---------+
| | | GBP'000 | GBP'000 |
+---------------+--------+---------+---------+
| Profit | | 29,607 | 26,970 |
| for | | | |
| the | | | |
| year | | | |
+---------------+--------+---------+---------+
| Cash | | (170) | - |
| flow | | | |
| hedge | | | |
+---------------+--------+---------+---------+
| Currency | | 262 | 225 |
| translation | | | |
| differences | | | |
+---------------+--------+---------+---------+
| Total | | 29,699 | 27,195 |
| recognised | | | |
| comprehensive | | | |
| income for | | | |
| the year | | | |
+---------------+--------+---------+---------+
| Attributable | | | |
| to: | | | |
+---------------+--------+---------+---------+
| Equity | | 29,444 | 26,925 |
| holders | | | |
| of the | | | |
| Company | | | |
+---------------+--------+---------+---------+
| Minority | | 255 | 270 |
| interests | | | |
+---------------+--------+---------+---------+
| | | 29,699 | 27,195 |
+---------------+--------+---------+---------+
Consolidated Balance Sheet
As at 31 May 2010 - Audited
+---------------+--------+---------+---------+
| | | 31 May | 31 May |
+---------------+--------+---------+---------+
| | | 2010 | 2009 |
+---------------+--------+---------+---------+
| | Notes | GBP'000 | GBP'000 |
+---------------+--------+---------+---------+
| Non-current | | | |
| assets | | | |
+---------------+--------+---------+---------+
| Goodwill | | 60,094 | 59,111 |
+---------------+--------+---------+---------+
| Intangible | | 3,771 | 8,054 |
| assets | | | |
+---------------+--------+---------+---------+
| Property, | | 16,494 | 13,712 |
| plant and | | | |
| equipment | | | |
+---------------+--------+---------+---------+
| Deferred | | 1,885 | 8,109 |
| tax | | | |
| assets | | | |
+---------------+--------+---------+---------+
| | | 82,244 | 88,986 |
+---------------+--------+---------+---------+
| Current | | | |
| assets | | | |
+---------------+--------+---------+---------+
| Inventories | | 22,479 | 12,721 |
+---------------+--------+---------+---------+
| Trade | | 109,196 | 97,530 |
| and | | | |
| other | | | |
| receivables | | | |
+---------------+--------+---------+---------+
| Derivative | | 182 | 566 |
| financial | | | |
| instruments | | | |
+---------------+--------+---------+---------+
| Current | | 7,713 | 8,644 |
| asset | | | |
| investments | | | |
+---------------+--------+---------+---------+
| Cash | | 38,439 | 31,905 |
| and | | | |
| cash | | | |
| equivalents | | | |
+---------------+--------+---------+---------+
| | | 178,009 | 151,366 |
+---------------+--------+---------+---------+
| Current | | | |
| liabilities | | | |
+---------------+--------+---------+---------+
| Trade | | 103,205 | 106,338 |
| and | | | |
| other | | | |
| payables | | | |
+---------------+--------+---------+---------+
| Derivative | | 170 | - |
| financial | | | |
| instruments | | | |
+---------------+--------+---------+---------+
| Loans | | 203 | 207 |
| and | | | |
| borrowings | | | |
+---------------+--------+---------+---------+
| Current | | 2,081 | 2,873 |
| tax | | | |
| liabilities | | | |
+---------------+--------+---------+---------+
| | | 105,659 | 109,418 |
+---------------+--------+---------+---------+
| Net | | 72,350 | 41,948 |
| current | | | |
| assets | | | |
+---------------+--------+---------+---------+
| Non-current | | | |
| liabilities | | | |
+---------------+--------+---------+---------+
| Other | | 522 | 474 |
| non-current | | | |
| liabilities | | | |
+---------------+--------+---------+---------+
| Loans | | 347 | 416 |
| and | | | |
| borrowings | | | |
+---------------+--------+---------+---------+
| Provisions | | 437 | 542 |
| for other | | | |
| liabilities | | | |
| and charges | | | |
+---------------+--------+---------+---------+
| | | 1,306 | 1,432 |
+---------------+--------+---------+---------+
| Net | | 153,288 | 129,502 |
| assets | | | |
+---------------+--------+---------+---------+
| Equity | | | |
+---------------+--------+---------+---------+
| Share | 6 | 251 | 251 |
| capital | | | |
+---------------+--------+---------+---------+
| Retained | | 125,747 | 97,709 |
| earnings | | | |
+---------------+--------+---------+---------+
| Other | | 26,547 | 30,968 |
| reserves | | | |
+---------------+--------+---------+---------+
| Total | | 152,545 | 128,928 |
| shareholders' | | | |
| equity | | | |
+---------------+--------+---------+---------+
| Minority | | 743 | 574 |
| interest | | | |
| in | | | |
| equity | | | |
+---------------+--------+---------+---------+
| Total | | 153,288 | 129,502 |
| equity | | | |
+---------------+--------+---------+---------+
Consolidated Cash Flow Statement
For the year ended 31 May 2010 - Audited
+---------------------+--------+----------+----------+
| | | Year | Year |
| | | ended | ended |
+---------------------+--------+----------+----------+
| | | 31 May | 31 May |
+---------------------+--------+----------+----------+
| | | 2010 | 2009 |
+---------------------+--------+----------+----------+
| | Notes | GBP'000 | GBP'000 |
+---------------------+--------+----------+----------+
| Operating | | 42,399 | 37,483 |
| profit | | | |
+---------------------+--------+----------+----------+
| Depreciation | | 5,394 | 4,721 |
| of property, | | | |
| plant and | | | |
| equipment | | | |
+---------------------+--------+----------+----------+
| Amortisation | | 5,332 | 7,820 |
| of | | | |
| intangible | | | |
| assets | | | |
+---------------------+--------+----------+----------+
| Increase | | (9,658) | (3,825) |
| in | | | |
| inventories | | | |
+---------------------+--------+----------+----------+
| Increase | | (10,573) | (21,674) |
| in trade | | | |
| and | | | |
| other | | | |
| receivables | | | |
+---------------------+--------+----------+----------+
| (Decrease)/increase | | (4,507) | 13,482 |
| in trade and other | | | |
| payables | | | |
+---------------------+--------+----------+----------+
| Decrease | | (105) | (44) |
| in | | | |
| provisions | | | |
+---------------------+--------+----------+----------+
| Loss | | 144 | 186 |
| on | | | |
| sale | | | |
| of | | | |
| property, | | | |
| plant and | | | |
| equipment | | | |
+---------------------+--------+----------+----------+
| Share-based | | 4,727 | 2,055 |
| exceptional | | | |
| cost | | | |
| credited | | | |
| directly to | | | |
| equity | | | |
+---------------------+--------+----------+----------+
| Fair | | 122 | 48 |
| value | | | |
| movements | | | |
| in | | | |
| derivatives | | | |
+---------------------+--------+----------+----------+
| Exchange | | 153 | 6 |
| differences | | | |
+---------------------+--------+----------+----------+
| Cash | | 33,428 | 40,258 |
| generated | | | |
| from | | | |
| operations | | | |
+---------------------+--------+----------+----------+
| Finance | | 133 | 782 |
| income | | | |
+---------------------+--------+----------+----------+
| Finance | | (797) | (1,152) |
| expense | | | |
+---------------------+--------+----------+----------+
| Taxation | | (6,398) | (2,543) |
| paid | | | |
+---------------------+--------+----------+----------+
| Cash | | 26,366 | 37,345 |
| generated | | | |
| from | | | |
| operating | | | |
| activities | | | |
+---------------------+--------+----------+----------+
| Cash | | | |
| flows | | | |
| from | | | |
| investing | | | |
| activities | | | |
+---------------------+--------+----------+----------+
| Purchase | | (1,047) | (681) |
| of | | | |
| intangible | | | |
| assets | | | |
+---------------------+--------+----------+----------+
| Purchase | | (7,431) | (4,949) |
| of | | | |
| property, | | | |
| plant and | | | |
| equipment | | | |
+---------------------+--------+----------+----------+
| Proceeds | | 244 | 885 |
| from | | | |
| sale of | | | |
| property, | | | |
| plant and | | | |
| equipment | | | |
+---------------------+--------+----------+----------+
| Purchase | | (1,166) | (748) |
| of | | | |
| subsidiary | | | |
| undertakings | | | |
| net of | | | |
| cash/overdrafts | | | |
| acquired | | | |
+---------------------+--------+----------+----------+
| Payment | | (965) | (3,852) |
| of | | | |
| deferred | | | |
| consideration | | | |
| including | | | |
| finance costs | | | |
+---------------------+--------+----------+----------+
| Net | | (10,365) | (9,345) |
| cash | | | |
| outflow | | | |
| from | | | |
| investing | | | |
| activities | | | |
+---------------------+--------+----------+----------+
| Cash | | | |
| flows | | | |
| from | | | |
| financing | | | |
| activities | | | |
+---------------------+--------+----------+----------+
| Repayment | | (10) | (6) |
| of bank | | | |
| loans | | | |
+---------------------+--------+----------+----------+
| Capital | | (66) | (96) |
| element | | | |
| of hire | | | |
| purchase | | | |
| agreements | | | |
+---------------------+--------+----------+----------+
| Purchase | | (4,820) | (2,658) |
| of own | | | |
| shares | | | |
| held in | | | |
| trust | | | |
+---------------------+--------+----------+----------+
| Dividends | | (99) | (67) |
| paid to | | | |
| minority | | | |
| shareholders | | | |
| of | | | |
| subsidiaries | | | |
+---------------------+--------+----------+----------+
| Dividends | | (5,721) | (4,884) |
| paid to | | | |
| equity | | | |
| holders | | | |
| of the | | | |
| Company | | | |
+---------------------+--------+----------+----------+
| Decrease/(increase) | | 931 | (3,706) |
| in current asset | | | |
| investments | | | |
+---------------------+--------+----------+----------+
| Proceeds | | 318 | - |
| from | | | |
| sale of | | | |
| derivative | | | |
| financial | | | |
| instruments | | | |
+---------------------+--------+----------+----------+
| Net | | (9,467) | (11,417) |
| cash | | | |
| outflow | | | |
| from | | | |
| financing | | | |
| activities | | | |
+---------------------+--------+----------+----------+
| Net | | 6,534 | 16,583 |
| increase | | | |
| in cash | | | |
| and cash | | | |
| equivalents | | | |
+---------------------+--------+----------+----------+
| Cash | | 31,905 | 15,322 |
| and | | | |
| cash | | | |
| equivalents | | | |
| at start of | | | |
| year | | | |
+---------------------+--------+----------+----------+
| Cash | | 38,439 | 31,905 |
| and | | | |
| cash | | | |
| equivalents | | | |
| at end of | | | |
| year | | | |
+---------------------+--------+----------+----------+
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 May 2010 - Audited
+--------------+---------+----------+----------+--------------+----------+---------+
| | | | | Attributable | | |
| | | | | to | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| | | | | the | | |
| | | | | equity | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| | | | | holders | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| | Share | Retained | Other | of the | Minority | Total |
+--------------+---------+----------+----------+--------------+----------+---------+
| | capital | earnings | reserves | Company | interest | equity |
+--------------+---------+----------+----------+--------------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------+---------+----------+----------+--------------+----------+---------+
| As at | 251 | 73,882 | 32,266 | 106,399 | 362 | 106,761 |
| 1 June | | | | | | |
| 2008 | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Profit | - | 26,703 | - | 26,703 | 267 | 26,970 |
| for | | | | | | |
| the | | | | | | |
| year | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Share-based | - | 2,046 | - | 2,046 | 9 | 2,055 |
| payments | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Dividends | - | - | - | - | (67) | (67) |
| paid to | | | | | | |
| minority | | | | | | |
| shareholders | | | | | | |
| of | | | | | | |
| subsidiary | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Dividends | - | (4,884) | - | (4,884) | - | (4,884) |
| paid to | | | | | | |
| equity | | | | | | |
| shareholders | | | | | | |
| of the | | | | | | |
| Company | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Purchase | - | - | (2,658) | (2,658) | - | (2,658) |
| of own | | | | | | |
| shares | | | | | | |
| held in | | | | | | |
| trust | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Share | - | (38) | 38 | - | - | - |
| options | | | | | | |
| exercised | | | | | | |
| in the | | | | | | |
| year | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Currency | - | - | 222 | 222 | 3 | 225 |
| translation | | | | | | |
| differences | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Issue | 0 | - | 1,100 | 1,100 | - | 1,100 |
| of | | | | | | |
| share | | | | | | |
| capital | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| At 31 | 251 | 97,709 | 30,968 | 128,928 | 574 | 129,502 |
| May | | | | | | |
| 2009 | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Profit | - | 29,349 | - | 29,349 | 258 | 29,607 |
| for | | | | | | |
| the | | | | | | |
| year | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Share-based | - | 4,714 | - | 4,714 | 13 | 4,727 |
| payments | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Dividends | - | - | - | - | (99) | (99) |
| paid to | | | | | | |
| minority | | | | | | |
| shareholders | | | | | | |
| of | | | | | | |
| subsidiary | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Dividends | - | (5,721) | - | (5,721) | - | (5,721) |
| paid to | | | | | | |
| equity | | | | | | |
| shareholders | | | | | | |
| of the | | | | | | |
| Company | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Purchase | - | - | (4,820) | (4,820) | - | (4,820) |
| of own | | | | | | |
| shares | | | | | | |
| held in | | | | | | |
| trust | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Share | - | (304) | 304 | - | - | - |
| options | | | | | | |
| exercised | | | | | | |
| in the | | | | | | |
| year | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Cash | - | - | (170) | (170) | - | (170) |
| flow | | | | | | |
| hedges | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| Currency | - | - | 265 | 265 | (3) | 262 |
| translation | | | | | | |
| differences | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
| At 31 | 251 | 125,747 | 26,547 | 152,545 | 743 | 153,288 |
| May | | | | | | |
| 2010 | | | | | | |
+--------------+---------+----------+----------+--------------+----------+---------+
Notes
1. Basis of preparation
The Board approved the preliminary statement covering the year ended 31 May 2010
on 2 September 2010. The financial information set out in this statement does
not constitute the Group's statutory financial statements for the year ended 31
May 2010, or for the year ended 31 May 2009, within the meaning of Section 435
of the Companies Act 2006. The financial information is based on audited
statutory financial statements for the year ended 31 May 2010.
The financial statements for the year ended 31 May 2009 were unqualified and
have been delivered to the Registrar of Companies. The financial statements for
the year ended 31 May 2010 were unqualified and will be sent to the shareholders
and delivered to the Registrar of Companies in due course. They will also be
available at the Registered Office of the Company.
The accounting policies are consistent with the accounting policies of the
statutory financial statements for the year to 31 May 2009 as described in those
financial statements with the exception of segmental reporting as explained
below.
During the period, the Group has completed an internal reorganisation to align
business and reporting structures more closely to the Group's core markets.
This is the first set of full year financial results presented under this
revised reporting structure. The change in reporting segments does not have any
impact on previously reported consolidated profits, net assets or earnings per
share of the Group.
Following this restructuring the Group will report under the three following
primary reporting segments:
· Carbon Services - focuses on the developing carbon economy, including
delivery into the CERT and CESP markets along with the opportunities arising in
the international carbon markets;
· Heating and Renewables Services - provides domestic heating and renewable
energy solutions to Social Landlords, fuel poverty programmes and private
householders; and
· Managed Services - provision of outsourced end-to-end solutions to local
and central Government and other commercial organisations.
The segmental information set out in note 2 to this report for year to 31 May
2009 has been restated to reflect this change in reporting structure.
In addition the Group has adopted the requirements of IFRS8 'Operating
Segments'. The standard requires the reporting of segmental information in line
with the information reviewed regularly by the Chief Operating Decision Maker
('CODM'). The Group has concluded that the CODM is the main Board of Directors.
The revised reporting segments, as set out in note 2, are in line with the
format of reporting to the main Board of Directors.
2. Segmental analysis
Year ended 31 May 2010 - Audited
+---------------+----------+------------+----------+--------------+-----------+
| | | Heating | | | |
| | | and | | | |
+---------------+----------+------------+----------+--------------+-----------+
| | Carbon | Renewables | Managed | | |
+---------------+----------+------------+----------+--------------+-----------+
| | Services | Services | Services | Eliminations | Total |
+---------------+----------+------------+----------+--------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------+----------+------------+----------+--------------+-----------+
| Revenue | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Third | 223,170 | 110,425 | 428,584 | - | 762,179 |
| party | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Inter-segment | 22,291 | 88,381 | 961 | (111,633) | - |
+---------------+----------+------------+----------+--------------+-----------+
| Total | 245,461 | 198,806 | 429,545 | (111,633) | 762,179 |
+---------------+----------+------------+----------+--------------+-----------+
| EBITA | 23,943 | 17,458 | 10,560 | - | 51,961 |
+---------------+----------+------------+----------+--------------+-----------+
| Amortisation | (827) | (4,053) | (452) | - | (5,332) |
| of | | | | | |
| intangible | | | | | |
| assets | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Segmental | 23,116 | 13,405 | 10,108 | - | 46,629 |
| operating | | | | | |
| profit | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| EPT-funded | | | | | (4,230) |
| charges | | | | | |
| (note 3) | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Operating | | | | | 42,399 |
| profit | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Net | | | | | (928) |
| finance | | | | | |
| expense | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Profit | | | | | 41,471 |
| before | | | | | |
| tax | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Tax | (5,881) | (3,411) | (2,572) | - | (11,864) |
| expense | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Profit | | | | | 29,607 |
| for | | | | | |
| the | | | | | |
| year | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Segment | 95,296 | 87,821 | 36,812 | - | 219,929 |
| assets | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Unallocated | | | | | 40,324 |
| assets | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Total | | | | | 260,253 |
| assets | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Segment | (38,421) | (34,992) | (30,921) | - | (104,334) |
| liabilities | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Unallocated | | | | | (2,631) |
| liabilities | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Total | | | | | (106,965) |
| liabilities | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Additions | 2,195 | 2,494 | 4,392 | - | 9,081 |
| to | | | | | |
| non-current | | | | | |
| assets | | | | | |
| included in | | | | | |
| above | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
Unallocated assets comprise cash and cash equivalents of GBP38,439,000 and a
deferred tax asset of GBP1,885,000. Unallocated liabilities comprise loans and
borrowings of GBP550,000 and a current tax liability of GBP2,081,000.
Year ended 31 May 2009 - Restated and Audited
+---------------+----------+------------+----------+--------------+-----------+
| | | Heating | | | |
| | | and | | | |
+---------------+----------+------------+----------+--------------+-----------+
| | Carbon | Renewables | Managed | | |
+---------------+----------+------------+----------+--------------+-----------+
| | Services | Services | Services | Eliminations | Total |
+---------------+----------+------------+----------+--------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------+----------+------------+----------+--------------+-----------+
| Revenue | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Third | 190,980 | 108,347 | 439,577 | - | 738,904 |
| party | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Inter-segment | 25,247 | 93,868 | 40 | (119,155) | - |
+---------------+----------+------------+----------+--------------+-----------+
| Total | 216,227 | 202,215 | 439,617 | (119,155) | 738,904 |
+---------------+----------+------------+----------+--------------+-----------+
| EBITA | 17,689 | 19,824 | 9,694 | - | 47,207 |
+---------------+----------+------------+----------+--------------+-----------+
| Amortisation | (840) | (6,597) | (383) | - | (7,820) |
| of | | | | | |
| intangible | | | | | |
| assets | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Segmental | 16,849 | 13,227 | 9,311 | - | 39,387 |
| operating | | | | | |
| profit | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| EPT-funded | | | | | (1,559) |
| charges | | | | | |
| (note 3) | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Exceptional | | | | | (345) |
| costs (note | | | | | |
| 4) | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Operating | | | | | 37,483 |
| profit | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Net | | | | | 245 |
| finance | | | | | |
| income | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Profit | | | | | 37,728 |
| before | | | | | |
| tax | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Tax | (4,602) | (3,613) | (2,543) | - | (10,758) |
| expense | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Profit | | | | | 26,970 |
| for | | | | | |
| the | | | | | |
| year | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Segment | 80,864 | 69,257 | 50,217 | - | 200,338 |
| assets | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Unallocated | | | | | 40,014 |
| assets | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Total | | | | | 240,352 |
| assets | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Segment | (26,770) | (25,224) | (55,360) | - | (107,354) |
| liabilities | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Unallocated | | | | | (3,496) |
| liabilities | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Total | | | | | (110,850) |
| liabilities | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
| Additions | 1,365 | 1,159 | 4,901 | - | 7,425 |
| to | | | | | |
| non-current | | | | | |
| assets | | | | | |
| included in | | | | | |
| above | | | | | |
+---------------+----------+------------+----------+--------------+-----------+
Unallocated assets comprise cash and cash equivalents of GBP31,905,000, and a
deferred tax asset of GBP8,109,000. Unallocated liabilities comprise loans and
borrowings of GBP623,000 and a current tax liability of GBP2,873,000.
3. EPT-FUNDED CHARGES - Audited
+------------+---------+---------+
| | Year | Year |
| | ended | ended |
+------------+---------+---------+
| | 31 May | 31 May |
+------------+---------+---------+
| | 2010 | 2009 |
+------------+---------+---------+
| | GBP'000 | GBP'000 |
+------------+---------+---------+
| EPT-funded | 4,230 | 1,559 |
| Share | | |
| Incentive | | |
| Plan | | |
+------------+---------+---------+
The Group operates a SIP under which qualifying Partners may receive free
shares. EPT waived its interim and final dividends paid during the year ended 31
May 2010 amounting to GBP3.3m (2009: GBP2.8m). These funds have been used to
finance awards under the SIP. This funding was utilised by the SIP trustee in
the year to acquire a number of shares in the Company to be held in order to
meet the future commitment of the SIP.
There is no commitment under the SIP to make any awards to Partners in excess of
those funded to date by EPT. Because this expense has been fully funded by EPT,
there is no material net impact on the Group's reserves over the contractual
life of the plan, cash or net assets against that which would have occurred had
EPT not waived its dividends. Accordingly, the associated share-based payment
charge incurred by the Company has been separately disclosed on the face of the
income statement and excluded from EBITA. The increase in the current year
charge reflects both the higher level of dividend waived by the EPT and the
removal of the previously included forfeiture provision in the SIP which means
that the awards impacted by this change vest immediately and the charge is
required to be taken in full.
4. EXCEPTIONAL COSTS - Audited
+-------------+---------+---------+
| | Year | Year |
| | ended | ended |
+-------------+---------+---------+
| | 31 May | 31 May |
+-------------+---------+---------+
| | 2010 | 2009 |
+-------------+---------+---------+
| | GBP'000 | GBP'000 |
+-------------+---------+---------+
| Share-based | - | 345 |
| payments | | |
+-------------+---------+---------+
Share-based payments comprise the IFRS2 charge arising in respect of the fair
value of share options granted to certain key management under the IPO Key
Management Plan by EPT. These awards were made solely in relation to successful
admission of the Company's shares to the London Stock Exchange. There was no
cash cost to the Group in respect of the IFRS2 charge for these share-based
payments and a credit of equal quantum was made to reserves, resulting in
unchanged net assets before recognising a deferred tax asset of GBPNil (2009:
GBP325,000) in the balance sheet, being the benefit of a statutory corporation
tax deduction under Schedule 23 Finance Act 2003 in respect of the share options
when they are exercised.
5. EARNINGS PER SHARE- Audited
Basic
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of Ordinary Shares
in issue during the year.
+--------------+---------+---------+
| | Year | Year |
| | ended | ended |
+--------------+---------+---------+
| | 31 May | 31 May |
+--------------+---------+---------+
| | 2010 | 2009 |
+--------------+---------+---------+
| Profit | 29,349 | 26,703 |
| attributable | | |
| to equity | | |
| shareholders | | |
| of the | | |
| Company | | |
| (GBP'000) | | |
+--------------+---------+---------+
| Weighted | 249,640 | 249,896 |
| average | | |
| number | | |
| of | | |
| Ordinary | | |
| Shares | | |
| in issue | | |
| (thousands) | | |
+--------------+---------+---------+
| Basic | 11.76 | 10.69 |
| earnings | | |
| per | | |
| share | | |
| (pence) | | |
+--------------+---------+---------+
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of Ordinary Shares outstanding to assume conversion of all potentially
dilutive Ordinary Shares.
+--------------+---------+---------+
| | Year | Year |
| | ended | ended |
+--------------+---------+---------+
| | 31 May | 31 May |
+--------------+---------+---------+
| | 2010 | 2009 |
+--------------+---------+---------+
| Profit | 29,349 | 26,703 |
| attributable | | |
| to equity | | |
| shareholders | | |
| of the | | |
| Company | | |
| (GBP'000) | | |
+--------------+---------+---------+
| Weighted | 249,640 | 249,896 |
| average | | |
| number | | |
| of | | |
| Ordinary | | |
| Shares | | |
| in issue | | |
| (thousands) | | |
+--------------+---------+---------+
| Adjustments | 2,526 | 1,256 |
| for | | |
| dilutive | | |
| effect of | | |
| share | | |
| options | | |
| (thousands) | | |
+--------------+---------+---------+
| Weighted | 252,166 | 251,152 |
| average | | |
| number | | |
| of | | |
| Ordinary | | |
| Shares | | |
| for | | |
| diluted | | |
| earnings | | |
| per | | |
| share | | |
| (thousands) | | |
+--------------+---------+---------+
| Diluted | 11.64 | 10.63 |
| earnings | | |
| per | | |
| share | | |
| (pence) | | |
+--------------+---------+---------+
Adjusted earnings per share
Adjusted earnings per share is stated excluding amortisation of intangible
assets, EPT-funded charges, exceptional costs and related tax adjustments as
follows:
+--------------+---------+---------+
| | Year | Year |
| | ended | ended |
+--------------+---------+---------+
| | 31 May | 31 May |
+--------------+---------+---------+
| | 2010 | 2009 |
+--------------+---------+---------+
| Profit | 29,349 | 26,703 |
| attributable | | |
| to equity | | |
| shareholders | | |
| of the | | |
| Company | | |
| (GBP'000) | | |
+--------------+---------+---------+
| - | 4,230 | 1,559 |
| EPT-funded | | |
| charges | | |
| (note 3) | | |
+--------------+---------+---------+
| - | - | 345 |
| exceptional | | |
| costs (note | | |
| 4) | | |
+--------------+---------+---------+
| - | 5,332 | 7,820 |
| amortisation | | |
| of | | |
| intangible | | |
| assets | | |
+--------------+---------+---------+
| - tax | (2,677) | (2,816) |
| effect | | |
| of | | |
| above | | |
| adjustments | | |
+--------------+---------+---------+
| Adjusted | 36,234 | 33,611 |
| profit | | |
| (GBP'000) | | |
+--------------+---------+---------+
| Adjusted | | |
| basic | | |
| earnings | | |
| per | | |
| share | | |
+--------------+---------+---------+
| Weighted | 249,640 | 249,896 |
| average | | |
| number | | |
| of | | |
| Ordinary | | |
| Shares | | |
| in issue | | |
| (thousands) | | |
+--------------+---------+---------+
| Adjusted | 14.51 | 13.45 |
| basic | | |
| earnings | | |
| per | | |
| share | | |
| (pence) | | |
+--------------+---------+---------+
| Adjusted | | |
| diluted | | |
| earnings | | |
| per | | |
| share | | |
+--------------+---------+---------+
| Weighted | 252,166 | 251,152 |
| average | | |
| number | | |
| of | | |
| Ordinary | | |
| Shares | | |
| for | | |
| diluted | | |
| earnings | | |
| per | | |
| share | | |
| (thousands) | | |
+--------------+---------+---------+
| Adjusted | 14.37 | 13.38 |
| diluted | | |
| earnings | | |
| per | | |
| share | | |
| (pence) | | |
+--------------+---------+---------+
6. SHARE CAPITAL - AUDITED
+--------------+---------+---------+
| | 31 May | 31 May |
+--------------+---------+---------+
| | 2010 | 2009 |
+--------------+---------+---------+
| | GBP'000 | GBP'000 |
+--------------+---------+---------+
| Authorised | | |
| equity | | |
| share | | |
| capital | | |
+--------------+---------+---------+
| 330,000,000 | 330 | 330 |
| (2009: | | |
| 330,000,000) | | |
| Ordinary | | |
| Shares of | | |
| GBP0.001 | | |
| each | | |
+--------------+---------+---------+
| Allotted | | |
| and | | |
| fully | | |
| paid | | |
| equity | | |
| share | | |
| capital | | |
+--------------+---------+---------+
| 251,408,802 | 251 | 251 |
| (2009: | | |
| 251,408,802) | | |
| Ordinary | | |
| Shares of | | |
| GBP0.001 | | |
| each | | |
+--------------+---------+---------+
Year ended 31 May 2009
On 31 August 2008 815,557 Ordinary Shares of GBP0.001 were allotted at a
mid-market price of 134.88p in respect of the acquisition of Horrocks Group plc.
The following is a reconciliation of the authorised and issued share capital:
+----------+--------+--------+-------------+-------------+
| | | | | |
+----------+--------+--------+-------------+-------------+
| | | | Authorised | Allotted |
+----------+--------+--------+-------------+-------------+
| | | | Ordinary | Ordinary |
| | | | Shares | Shares |
+----------+--------+--------+-------------+-------------+
| | | | at | at |
| | | | GBP0.001 | GBP0.001 |
| | | | each | each |
+----------+--------+--------+-------------+-------------+
| At 1 | | | 330,000,000 | 250,593,245 |
| June | | | | |
| 2008 | | | | |
+----------+--------+--------+-------------+-------------+
| Ordinary | | | - | 815,557 |
| Shares | | | | |
| allotted | | | | |
| on 31 | | | | |
| August | | | | |
| 2008 | | | | |
+----------+--------+--------+-------------+-------------+
| At 31 | | | 330,000,000 | 251,408,802 |
| May | | | | |
| 2009 | | | | |
| and 31 | | | | |
| May | | | | |
| 2010 | | | | |
+----------+--------+--------+-------------+-------------+
7. POST BALANCE SHEET EVENTS - AUDITED
Subsequent to the year end the Group announced a voluntary redundancy programme.
The cost of this programme is currently estimated to be GBP3.1m which will be
recognised in the year to 31 May 2011.
On 13 July 2010 the Group made an investment of GBP1m in HomeSun Holdings
Limited, a group involved in the sale of solar PV panels. This investment
represents a 9.1% share of HomeSun Holdings Limited's issued share capital.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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