RNS Number:0987Q
Tenon Group PLC
24 September 2003
Tenon Group PLC
("Tenon" or "the Group")
Interim Results for the six months to 30 June 2003
Tenon, the professional services group, today announces interim results for the
six months to 30 June 2003.
* Turnover from continuing operations of #37.3m (2002: #41.6m)
* Pre-tax profit of #0.9m, before goodwill amortisation, terminated
operations and other exceptional items (2002: #6.9m)
* Business review successfully completed with significant re-organisation
and action taken to rebase the group: pre-tax exceptional costs
incurred of #13.0m (2002: #0.3m) (including losses of terminated
operations)
* After goodwill amortisation, terminated operations and other
exceptional items, the group made a loss of #12.9m, before interest and
tax (2002: profit of #2.5m)
* Actions taken have brought the group "back to basics" with operating
management and stronger infrastructure
* Benefits from cost savings and improved business practices beginning to
be demonstrated
* Management strengthened from Board to operational levels
* Strategy remains to build Tenon into a leading professional services
business with strong management focus
Andy Raynor, Chief Executive, commented:
"The actions taken over the last six months have taken us back to the core
basics and values of the Tenon business model. We believe that, with the skills
our operational teams provide, we are better positioned to take advantage of any
potential improvement in the marketplace."
24 September 2003
ENQUIRIES:
Tenon Group PLC Tel: 020 7535 5775
Andy Raynor, Chief Executive
Matthew Brabin, Finance Director
College Hill Tel: 020 7457 2020
Kate Pope
Tenon Group PLC
("Tenon" or "the Group")
Chairman's statement
I am pleased to be able to report that the company returned to underlying
profitability in the first half of the calendar year for 2003. This was a
significant turnaround from the deteriorating overall loss position experienced
in the second half of 2002.
The extensive programme of restructuring undertaken between February and June
2003 has inevitably had some impact on performance in the first half. I am
confident that this will seem a relatively small price to pay for the
far-reaching benefits we anticipate in the future. In effect, the first half of
2003 has provided a transitional bridge to our new leaner and more effective
business model.
A comprehensive review of all our business activities was undertaken with a
careful assessment of our processes, products and people. Rapid action was
undertaken to resolve a number of major issues including the disposal of a small
number of businesses which did not fit our new plans. A corresponding reduction
in head count, at all levels, was planned and implemented to more accurately
match both resource and cost to the business.
These changes have fundamentally strengthened our business model to better
withstand fluctuations in our marketplace - including those opportunities
available when presented by an improving business climate.
Throughout the period your Board's objective has been to create a stable
operating platform for the business from which we can then grow. It has been
pleasing to note a re-invigorated and positive attitude from the business
leaders within Tenon following the rebalancing of the business. Much needed
changes have been followed through, and the confidence of our own staff and most
importantly our clients has been restored.
We are not immune from external market pressures and in the period, in common
with many comparable businesses, we continued to feel the effects of uncertainty
in the general business climate. However, as the continuing benefit from the
very difficult and sometimes costly restructuring in the period comes to
fruition, the second half of 2003 and subsequent trading periods will benefit
from these prior achievements.
Financial Results
Turnover from continuing operations of #37.3m (2002: # 41.6m).
Our continuing operations, without the benefit of our restructuring having taken
effect in the period under review, produced an operating profit of #2.0m (2002:
#7.7m) and operating cash inflow before terminated operations and other
exceptional items of #2.9m (2002: #1.1m).
The period under review is fundamentally one of change and revision in our
businesses. As such, it was expected that significant exceptional costs would
be incurred to secure benefits for the future. Exceptional costs and losses of
discontinued and terminated operations amounted to #13.0m (2002: #0.3m). Our
loss for the period after amortisation of goodwill, terminated operations and
other exceptional items was #13.6m (2002: loss of #0.3m).
During the period, existing facilities with Lloyds TSB Bank PLC have been
renewed and restructured in order to better meet the needs of our business. Our
attention to the improvement of working capital management continues.
Shareholders will shortly receive a proposal to reduce the company's share
premium account which, if approved at the extraordinary general meeting called
for 21 October 2003, will place Tenon in a position to pay dividends in the
future when profits are earned and the Directors consider it appropriate.
Finally, I should like to thank my colleagues for all their hard work over the
past nine months. Without their effort and personal commitment this turnaround
would not have been possible.
Neil Johnson
Chairman
24 September 2003
Tenon Group PLC
("Tenon" or "the Group")
Operating review
The six months to 30 June 2003 have been a period of significant re-organisation
within the group, in which our objective has been to rebase the business and to
provide the services, management, resources, culture and focus necessary to
realise the group's potential.
Strategy and actions
Our Business Review has now been successfully completed with the necessary
action taken to focus and re-establish the business and to provide clear and
confident management to our operating units.
During the six months under review and subsequently the group has:
* Appointed Neil Johnson as Chairman, Andy Raynor as Chief
Executive, Bill Davidson as Executive and Matthew Brabin as Finance
Director
* Created an Operating Board responsible for all the operations of the
business
* Formed a Senior Management Group responsible for the
detailed management and motivation of their teams, acting as a
fundamental agent of change
* Disposed of under-performing areas of the business,
resulting in significant savings for the future through reductions in the
fixed cost base
* Developed and implemented improved capital rewards for key management
* Aligned support functions closely to the operational capabilities of the
business with the closure of head office
* Implemented programmes to change our purchasing and property commitments
* Restructured banking facilities
The result of these actions is that many of the issues that previously impeded
the group's progress have been resolved and a dynamic, adaptable and
incentivised business has been created.
Objectives
Our group provides excellent business advice and associated services
predominantly to the owner-managed sector.
Our objective in the initial rapid development of the group by acquisition was
the expansion of highly commercial, locally-based businesses into a cohesive
national operation.
Our revised management responsibilities reflect this strategy. Every area of
our business is now managed by operational expertise sourced from the acquired
businesses. Our people in all disciplines are charged with a high degree of
personal responsibility for performance as well as the maintenance and
development of our client base.
The market
The difficulties of parts of the business services market have been well
documented. Our clients are not exempt from the pressures of the market and
conditions have not always been conducive to organic growth.
Additionally, the performance of our core business lines has, during this
period, been impacted by the far-reaching Business Review and subsequent
restructuring programme.
However, the fundamental concept of the group remains sound and is the key to
our future: private and medium sized businesses are the drivers of growth in the
UK economy and deserve the best advice.
The actions we have taken to reconfirm the prominence of the operational teams
within the business and the refinement of services place us in a strong position
to take advantage of economic improvements when they return.
Services
Our Business Review and restructuring has directly resulted in a reduced
turnover in a number of our business lines, predominantly:
* the disposal of certain corporate finance businesses and
subsequent restructuring of this service line in order to become more
appropriately tuned to our particular market sector
* restructuring, relocating and closing certain offices and
operating units within our Business Services and Strategic Tax operations
to reduce costs
* completing the restructuring of parts of the Corporate
Recovery business.
Operating performance and exceptional costs
The actions outlined above have enabled us to largely complete a program of
operational re-organisation and have resulted in a transitional performance in
the first half of the calendar year.
Our continuing operations, without the benefit of our restructuring having taken
effect in the period, produced an operating profit of #2.0m (2002: #7.7m) and
operating cash inflow before terminated operations and other exceptional items
of #2.9m (2002: #1.1m).
As reported in the Chairman's Statement the exceptional costs and losses of
discontinued and terminated operations incurred in the process of these changes
amounted to #13.0m (2002: #0.3m). Our loss for the period after amortisation of
goodwill, terminated operations and other exceptional items was #13.6m (2002:
loss of #0.3m).
Funding and balance sheet
During the period, existing facilities with Lloyds TSB Bank PLC have been
renewed and restructured in order to better meet the needs of our business. Our
attention to the improvement of working capital management continues.
Financial and operational management
The new management structure has been a major contribution to the successful
re-organisation of our businesses for the future. With the exception of our new
finance director Matthew Brabin, who has joined us from LogicaCMG, our team is
taken entirely from the operating teams of acquired businesses, each of whom has
a track record of business success.
The emphasis is upon practical management, financial prudence and consistent
delivery of commitments.
The Operating Board has set and agreed objectives for the business both in terms
of financial performance and in organisational and business development. These
objectives are communicated through our Senior Management Group and directors in
each of our service lines and locations.
People
During a period of rapid change, our people have contributed wholeheartedly to
our new direction. Restructuring a people business is a sensitive matter and
our teams have been constructive and commercial in their judgements.
Our staff retain approximately 45% of the issued share capital of our business,
including some 7% purchased during the period arising from the disposal of
certain of the Corporate Finance businesses. We believe that through these
shareholdings they hold a significant capital incentive to succeed.
We intend to continue our programme of providing capital incentives to staff
geared to performance of the group and ultimately shareholder returns. During
the period options over 11.1m shares were awarded to staff through our various
option schemes.
The future
Our work in establishing Tenon as a leading provider of professional services
will continue. We will seek to improve on our performance, properly to reflect
the excellence of our people.
Andy Raynor
Chief executive
24 September 2003
Tenon Group PLC
("Tenon")
Interim Results for the six months ended 30 June 2003
Independent Review Report To Tenon Group PLC
Introduction
We have been instructed by the company to review the financial information which
comprises the consolidated profit and loss account, consolidated statement of
total group recognised gains and losses, consolidated balance sheet,
consolidated cash flow statement and the related notes. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the AIM Rules of
The London Stock Exchange which require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
the AIM Rules of the London Stock Exchange and for no other purpose. We do not,
in producing this report, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
London
24 September 2003
Notes:
(a) The maintenance and integrity of the Tenon Group PLC website is
the responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the interim report
since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
Tenon Group PLC
("Tenon")
Consolidated profit and loss account for the six months ended 30 June 2003
Before goodwill Goodwill Before Goodwill
goodwill
amortisation, amortisation, amortisation, amortisation,
terminated terminated terminated terminated
operations operations Six months operations operations Six months
and other and other to 30 June and other and other to 30 June
exceptional exceptional 2003 exceptional exceptional 2002
items items (note 8) Total items items Total
Notes Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 7
Continuing operations 37,327 409 37,736 41,565 3,292 44,857
Discontinued operations - 977 977 - 4,781 4,781
37,327 1,386 38,713 41,565 8,073 49,638
Movement in gross work in 84 (473) (389) (864) 903 39
progress
Other operating income 2,062 - 2,062 2,209 - 2,209
External charges: direct (1,257) (242) (1,499) (1,308) (790) (2,098)
expenses
Staff costs and similar charges (25,935) (5,543) (31,478) (25,347) (4,302) (29,649)
Depreciation and impairment (1,237) (1,799) (3,036) (1,257) - (1,257)
Goodwill impairment - - - - - -
Goodwill amortisation - (1,831) (1,831) - (4,900) (4,900)
Goodwill impairment and - (1,831) (1,831) - (4,900) (4,900)
amortisation
Other operating charges (9,064) (6,405) (15,469) (7,300) (4,223) (11,523)
Operating profit/(loss)
Continuing operations 1,980 (12,364) (10,384) 7,698 (5,199) 2,499
Discontinued operations - (2,543) (2,543) - (40)
(40)
1,980 (14,907) (12,927) 7,698 (5,239) 2,459
Profit on disposal of
discontinued operations - 195 195 - - -
Provision for loss on disposal
of discontinued operations - (144) (144) - - -
Profit on disposal of fixed - - - - - -
assets
Profit/(loss) before interest
and Taxation 1,980 (14,856) (12,876) 7,698 (5,239) 2,459
Interest receivable and
similar income 162 - 162 598 - 598
Interest payable and similar (1,235) - (1,235) (1,349) - (1,349)
charges
Profit/(loss) on ordinary
activities
before taxation 907 (14,856) (13,949) 6,947 (5,239) 1,708
Tax on profit/(loss) on
ordinary Activities 2 (317) 662 345 (2,090) 102 (1,988)
Retained profit/(loss) for the
Period 590 (14,194) (13,604) 4,857 (5,137) (280)
Earnings/(loss) per 10p share 3
Basic (8.77) (0.18)
Diluted (8.77) (0.18)
Adjusted basic 0.38 3.17
Adjusted diluted 0.37 3.17
Tenon Group PLC
("Tenon")
Consolidated profit and loss account for the six months ended 30 June 2003
(continued)
Before goodwill Goodwill
amortisation, amortisation,
terminated terminated
operations operations Year to
and other and other 31 December
exceptional exceptional 2002
items items Total
Audited Audited Audited
Notes #'000 #'000 #'000
Turnover 7
Continuing operations 74,387 8,833 83,220
Discontinued operations - 8,734 8,734
74,387 17,567 91,954
Movement in gross work in progress 602 (1,113) (511)
Other operating income 4,113 - 4,113
External charges: direct expenses (1,892) (3,017) (4,909)
Staff costs and similar charges (50,446) (9,895) (60,341)
Depreciation and impairment (2,223) - (2,223)
Goodwill impairment - (106,000) (106,000)
Goodwill amortisation - (9,865) (9,865)
Goodwill impairment and - (115,865) (115,865)
amortisation
Other operating charges (15,516) (8,970) (24,486)
Operating profit/(loss)
Continuing operations 9,025 (121,212) (112,187)
Discontinued operations - (81) (81)
9,025 (121,293) (112,268)
Profit on disposal of discontinued
Operations - - -
Provision for loss on disposal
of discontinued operations - - -
Profit on disposal of fixed assets - 250 250
Profit/(loss) before interest and
Taxation 9,025 (121,043) (112,018)
Interest receivable and similar 1,071 - 1,071
income
Interest payable and similar (2,952) - (2,952)
charges
Profit/(loss) on ordinary
activities before taxation 7,144 (121,043) (113,899)
Tax on profit/(loss) on ordinary
Activities 2 (2,593) 1,778 (815)
Retained profit/(loss) for the
Period 4,551 (119,265) (114,714)
Earnings/(loss) per 10p share 3
Basic (74.39)
Diluted (74.39)
Adjusted basic 2.95
Adjusted diluted 2.95
Tenon Group PLC
("Tenon")
Consolidated statement of total group recognised gains and losses
for the six months ended 30 June 2003
Six months Six months Year to
to 30 June 2003 to 30 June 2002 31 December 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Loss for the period (13,604) (280) (114,714)
Revaluation of investments 17 15 35
Total recognised losses for the period (13,587) (265) (114,679)
Tenon Group PLC
("Tenon")
Consolidated balance sheet at 30 June 2003
Notes 30 June 2003 30 June 2002 31 December 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Fixed assets
Intangible assets 65,010 178,675 66,841
Tangible assets 5,040 7,550 7,751
Investments 539 598 512
70,589 186,823 75,104
Current assets
Work in progress 4,827 5,349 4,738
Debtors 28,854 35,154 31,952
Investments 5 12,885 31,285 16,349
Cash at bank and in hand 1,130 3,555 1,687
47,696 75,343 54,726
Creditors: amounts falling due within one year (27,669) (58,620) (44,283)
Net current assets 20,027 16,723 10,443
Total assets less current liabilities 90,616 203,546 85,547
Creditors: amounts falling due after more than
one year (35,186) (22,860) (19,129)
Provisions for liabilities and charges (4,136) (1,588) (1,537)
Net assets 51,294 179,098 64,881
Capital and reserves
Called up share capital 15,519 15,486 15,519
Share premium account 80,128 79,962 80,128
Merger reserve 6 31,322 83,885 32,204
Investment revaluation reserve 77 40 60
Profit and loss account (75,752) (275) (63,030)
Equity shareholders' funds 10 51,294 179,098 64,881
Tenon Group PLC
("Tenon")
Consolidated cash flow statement for the six months ended 30 June 2003
Six months to Six months to Year to
30 June 2003 30 June 2002 31 December 2002
Unaudited Unaudited Audited
Notes #'000 #'000 #'000
Cash inflow/(outflow) from operating activities
Cash inflow from trading, before terminated
operations and other exceptional items 2,910 1,084 7,453
Cash outflow from terminated operations and other
Exceptional items (7,469) (339) (5,178)
Net cash (outflow)/inflow from operating activities 11 (4,559) 745 2,275
Returns on investments and servicing of finance
Interest received 337 1,130 1,812
Interest paid (1,369) (1,011) (2,505)
Interest paid on finance leases (51) (34) (120)
Net cash (outflow)/inflow from returns on
investments
and servicing of finance (1,083) 85 (813)
Taxation 81 (583) (462)
Capital expenditure and financial investment
Purchase of tangible fixed assets (620) (3,249) (5,581)
Proceeds from sale of tangible fixed assets 28 99 2,802
Purchase of fixed asset investments (10) (81) (86)
Proceeds from sale of fixed asset investments - - 103
Net cash outflow from capital expenditure and
financial investment (602) (3,231) (2,762)
Acquisitions and disposals
Purchase of subsidiary undertakings - - (633)
Repayment of former partners' current accounts (282) (1,065) (186)
Payment of deferred consideration on purchase of
subsidiary undertakings - (1,240) (1,140)
Funds placed on loan stock deposit on acquisitions - - (658)
Net consideration on disposal of group businesses 745 - -
Net cash inflow/(outflow) from acquisitions and 463 (2,305) (2,617)
disposals
Cash outflow before management of liquid resources
and financing (5,700) (5,289) (4,379)
Management of liquid resources
Decrease in bank deposits - 606 1,278
Net cash inflow from management of liquid resources - 606 1,278
Financing
Issue of ordinary share capital for cash - - 7
Loan received 35,350 - 5,400
Repayment of loans (29,796) (89) (3,884)
Capital element of finance lease
(repayments)/additions (411) 431 (695)
Net cash inflow from financing 5,143 342 828
Decrease in cash in the period 13 (557) (4,341) (2,273)
Tenon Group PLC
("Tenon")
Notes to the interim results for the six months ended 30 June 2003
1. Accounting Policies
The interim results have been prepared under the historical cost convention and
are in accordance with the group's accounting policies as set out in the
financial statements for the year ended 31 December 2002. The interim results
were approved by the board on the 24 September 2003 and are unaudited.
The financial information contained in this interim statement does not
constitute accounts as defined by Section 240 of the Companies Act 1985.
The financial information for the year ended 31 December 2002 is derived from
the statutory accounts which have been delivered to the Registrar of Companies
and on which the auditors gave an unqualified opinion.
Following the change of year end to 30 June to fit more suitably with the
activity patterns of our business, interim statements to 30 June 2003 and 31
December 2003 will be produced.
2. Taxation
The tax charge before goodwill amortisation, terminated
operations and other exceptional items accrued in these interim results reflects
an estimated tax rate of 35% for the period to 30 June 2004. Due to the offset
of losses brought forward, the overall effective tax rate reduces to a credit of
2.5%.
3. Earnings/(loss) per share
Earnings/(loss) per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of shares in issue during
the period. The weighted average number of shares in issue was 155,189,194 (six
months to 30 June 2002: 153,410,959; year to 31 December 2002: 154,215,384).
Adjusted earnings per share is calculated and shown in order to demonstrate
earnings per share before goodwill amortisation, terminated operations and other
exceptional items, as the directors believe this figure more accurately reflects
the performance of the group before these significant items.
None of the share options or share warrants give rise to a dilution in the
unadjusted loss per share due to the losses incurred in the period (six months
to 30 June 2002: non-dilutive; year to 31 December 2002: non-dilutive). There
are 2,422,000 share options (30 June 2002: 132,000; 31 December 2002: Nil) that
give rise to a dilution to the adjusted earnings per share.
4. Interim dividend
No interim dividend is proposed.
5. Loan stock deposits
Included within current asset investments is an amount of #12,885,000 (30 June
2002: #31,235,000; 31 December 2002: #16,274,000) relating to loan stock
deposits. This amount represents restricted bank deposits that act as security
for the loan stock issued by the company and from which redemptions are paid.
Loan stock of #12,885,000 (30 June 2002: #31,285,000; 31 December 2002:
#16,274,000) is included within creditors due within one year.
6. Merger Reserve
The merger reserve has reduced during the period following a transfer to the
profit and loss reserve of #882,000 (six months to 30 June 2002: #2,450,000;
year to 31 December 2002: #54,129,000) in respect of the amortisation of
goodwill.
7. Turnover
Turnover is attributable to the principal activity of the group and arises
substantially in the United Kingdom.
The business analysis of turnover is as follows:
Six months to Six months to Year to
30 June 2003 30 June 2002 31 December 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Business Services and related taxation 22,151 25,308 48,179
Tax Specialisms 1,265 3,078 5,664
Financial Services 3,983 4,256 7,788
Corporate Finance 1,517 5,080 10,085
Corporate Recovery and Insolvency 7,448 9,577 15,863
Services
Other activities, including Outsourcing,
Technology and Forensic Services 2,349 2,339 4,375
38,713 49,638 91,954
8. Goodwill amortisation, terminated operations and other exceptional items
During the period, the group carried out a major restructuring exercise, which
involved the streamlining of its operations and the closure of certain offices,
including the sale of the group's technology practice and a substantial part of
its corporate finance business.
In view of the significant impact of this restructuring on the group's results,
the losses of the terminated operations and other exceptional costs have been
reported separately within the profit and loss account. Goodwill amortisation
has also been reported separately.
Terminated operations and other exceptional items amounted to #13,025,000 and
are analysed as follows:
#'000
Terminated operations and other exceptional items (13,076)
Net profit on disposal of discontinued operations 51
(13,025)
An analysis and description of the items reported within terminated operations
and other exceptional items is shown below:
Terminated operations and other exceptional items
Other exceptional items:
Terminated Redundancy Onerous Asset Other
operations costs leases impairment costs Total
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 1,386 - - - - 1,386
Movement in gross work in
progress (473) - - - - (473)
External charges: direct (242) - - - - (242)
expenses
Staff costs and similar charges (2,440) (3,103) - - - (5,543)
Depreciation and impairment (38) - - (1,761) - (1,799)
Other operating charges (3,243) - (1,263) - (1,899) (6,405)
(5,050) (3,103) (1,263) (1,761) (1,899) (13,076)
Goodwill amortisation (1,831)
Operating loss (14,907)
Terminated operations include the following:
(a) Losses incurred by the Tenon Technology business and certain of the
corporate finance businesses (#2,543,000), both of which were disposed of by the
group during the period. These operations represent material business segments
and have been disclosed within discontinued operations, in accordance with
Financial Reporting Standard 3.
(b) Losses of various other offices and operating units (#2,507,000), which were
closed during the period. Whilst these operating units have ceased trading
permanently, they are considered to be part of the group's continuing
operations.
Other exceptional items all relate to the group's continuing operations and
comprise the following:
(a) As a result of the restructuring and the closure of offices referred to
above, certain staff members were made redundant. Payments in lieu of notice and
other redundancy costs amounting to #3,103,000 were incurred.
(b) The closures referred to above also gave rise to a number of vacant
offices. In accordance with Financial Reporting Standard 12, provision has been
made for the cost of the resulting onerous leases, based on management's best
estimate of the period over which the offices will remain vacant.
(c) As a result of the restructuring and office closures, various leasehold
improvements, equipment and other fixed assets became surplus to the group's
requirements and were considered to be impaired. In accordance with Financial
Reporting Standard 11, these assets were written down to their estimated
recoverable amounts.
(d) The group restructuring also gave rise to other direct costs, including
professional fees incurred in connection with the re-financing of the group's
loan facilities and bad debt write-offs.
Net profit on disposal of discontinued operations
On 1 April 2003 the group disposed of certain of the trade and assets of Tenon
Livingstone Guarantee PLC as part of the overall restructuring within the
corporate finance division. On 8 May 2003 the company disposed of the trade and
assets of Tenon Technology, a division within the group. The net profit on
disposal has been calculated as follows:
#'000 #'000 #'000
Corporate finance business
Consideration 930
Less direct costs of disposal (107)
Net consideration 823
Other consequential costs:
Redundancy costs 120
Bad debt write offs 160
(280)
Net assets disposed of:
Fixed assets 161
Investments 75
Work In Progress 21
(257)
Profit on disposal of corporate finance business 286
Tenon Technology:
Consideration 425
Consequential costs of disposal:
Redundancy costs 490
Bad debt write offs 26
(516)
Loss on disposal of Tenon Technology (91)
Profit on disposal of discontinued operations 195
Provision for loss on disposal of discontinued operations (144)
Net profit on disposal of discontinued operations 51
The net cash consideration for the corporate finance business amounted to
#930,000, with up to a further #1.1 million receivable by the group over a
period of three years, subject to the future trading performance of the business
sold. The cash consideration was partially financed from the sale of Tenon
shares by the purchasers of the corporate finance business to current employees
of Tenon Group at the closing mid market share price of 10.25 pence as at 26
March 2003.
The net cash consideration for the Tenon Technology business amounted to
#425,000. Contingent consideration of up to #325,000 is receivable, subject to
the target profitability levels of the business being achieved over a two year
period, commencing from the date of disposal of the business. Total
consideration is capped at #750,000.
The contribution of the discontinued businesses to the group's net cash flows
are not separately identifiable. The directors are satisfied, however, that the
amounts are not material and that the disposals will not significantly impact
upon the group's net cash flow.
The provision for loss on discontinued operations of #144,000 relates to the
provision for the cost of an onerous lease which has arisen as a result of the
disposal of certain corporate finance activities.
9. Employees
The average number of persons (including executive directors) employed by the
group during the period was as follows:
Six months Six months Year to
to 30 June to 30 June 31 December
2003 2002 2002
Unaudited Unaudited Audited
Number Number Number
Management and professional staff 1,129 1,189 1,248
Support and administrative staff 282 325 362
1,411 1,514 1,610
10. Reconciliation of movements in equity shareholders' funds
30 June 30 June 31 December
2003 2002 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Loss for the period (13,604) (280) (114,714)
New shares issued - - 2,027
Deferred share consideration - - (1,830)
Movement in fair value of contingent consideration - (173) (173)
Movement in revaluation reserve 17 15 35
Net movement in equity shareholders' funds (13,587) (438) (114,655)
Opening equity shareholders' funds 64,881 179,536 179,536
Closing equity shareholders' funds 51,294 179,098 64,881
11. Net cash (outflow)/inflow from operating activities
Six months Six months Year to
to 30 June to 30 June 31 December
2003 2002 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Operating (loss)/profit (12,927) 2,459 (112,268)
Depreciation of tangible fixed assets 1,276 1,257 2,223
Impairment of tangible fixed assets 1,760 - -
Loss/(profit) on disposal of fixed assets 18 24 (180)
Impairment of intangible assets - - 106,000
Amortisation of intangible assets 1,831 4,900 9,865
(Increase)/decrease in work in progress (110) (355) 323
Decrease/(increase) in debtors 2,647 (9,634) (5,603)
(Decrease)/increase in creditors (1,653) 2,204 2,076
Increase/(decrease) in provisions 2,599 (110) (161)
Net cash (outflow)/inflow from operating activities (4,559) 745 2,275
12. Analysis and reconciliation of movement in net debt
1 January Non-cash 30 June
2003 Cash flow Items 2003
#'000 #'000 #'000 #'000
Cash balances
Cash at bank and in hand 1,687 (557) - 1,130
Debt
Loan stock deposit 16,274 (3,389) - 12,885
Loan stock (16,274) 3,389 - (12,885)
Bank loans due within one year (11,669) (5,554) 16,349 (874)
Bank and other loans due after one year (18,369) - (16,349) (34,718)
Finance leases due within one year (735) 411 (292) (616)
Finance leases due after one year (760) - 292 (468)
(31,533) (5,143) - (36,676)
Net debt (29,846) (5,700) - (35,546)
13. Reconciliation of net cash flow to movement in net debt
Six months Six months Year to
to 30 June to 30 June 31 December
2003 2002 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Decrease in cash (557) (4,341) (2,273)
Less cash inflow from movement in debt and lease financing (5,143) (342) (821)
Less cash inflow from decrease in liquid resources - (606) (1,278)
Changes in net debt resulting from cash flows (5,700) (5,289) (4,372)
Loan stock repaid on acquisitions - - 50
Loans and finance leases acquired with subsidiary undertakings - - (79)
New finance leases - - (1,265)
Other non cash changes - - (142)
Movement in net debt in the period (5,700) (5,289) (5,808)
Net debt at beginning of period (29,846) (24,038) (24,038)
Net debt at end of period (35,546) (29,327) (29,846)
14. Copies of the interim report will be sent to shareholders and copies will
also be available for inspection at the company's registered office at 66
Chiltern Street, London, W1U 4GB.
This information is provided by RNS
The company news service from the London Stock Exchange
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