RNS Number:2987L
Connaught PLC
20 May 2003
CONNAUGHT PLC ("CONNAUGHT")
INTERIM RESULTS
FOR THE SIX MONTHS TO 28 FEBRUARY 2003
HIGHLIGHTS
Six months Six months % Change
ended 28 ended 28
February 2003 February 2002
# million # million
Turnover 76.97 54.07 + 42.4
Operating profit* 2.57 1.48 + 73.7
Profit before tax 1.70 1.21 + 40.4
Headline fully diluted earnings per share* 9.4p 8.6p 9.3
Interim dividend per share 2.6p 2.5p 4.0
* Pre FRS10
* Order book currently stands at #610 million, up from #220 million one year
ago.
* Partnering orders - increased to #400 million from #150 million.
* Two new partnering contracts won in the South East as per our strategy -
#27 million contract for the London Borough of Hounslow and a #20 million
contract for the London Borough of Hackney.
* 75% of Livingspace's anticipated turnover for 2003/04 has now been
secured.
* Successful cross-selling of GasForce services into our core social housing
market with a #4 million five-year contract for South Somerset Homes.
* Huge opportunities for the further development of the growing gas
servicing market.
Commenting on the results, chairman, Tim Ross said:
"The first half of this financial year has been another period of considerable
progress for the Group. Our order book now stands at #610 million up from #220
million a year ago. This largely reflects the success we have achieved in
winning long-term business based on partnership arrangements within the social
housing market. Agreements of this nature considerably improve the visibility of
our earnings and I am pleased to report that we have commenced the initial
contracts announced to shareholders last year.
"At the same time GasForce, the UK's leading commercial gas servicing business,
which we purchased in August 2002 for #21.7 million, is on track to meet our
expectations of a substantial increase in profit in the current year.
"Turnover for the current year is largely secured and the order book for 2003/04
already stands at #150 million. With partnering in its infancy, the prospects
within the social housing market are significant for Connaught. The development
of our infrastructure in anticipation of growth will enable us to enhance
margins and improve shareholder value. Together with the success of the GasForce
acquisition, we have laid the foundation for the creation of a much larger
support services business over the next five years."
For further information please contact:
Connaught plc Mark Tincknell, Chief Executive (On the Day) 020 7448 1000
David Pike, Finance Director (Thereafter) 01392 444 546
Biddicks Zoe Biddick/James Benjamin Tel: 020 7448 1000
Company website:
www.connaught.plc.uk
INTERIM RESULTS
CHAIRMAN'S STATEMENT
Introduction
The first half of this financial year has been another period of considerable
progress for the Group. Our order book now stands at #610 million up from #220
million a year ago. This largely reflects the success we have achieved in
winning long-term business based on partnership arrangements within the social
housing market. Agreements of this nature considerably improve the visibility of
our earnings and I am pleased to report that we have commenced the initial
contracts announced to shareholders last year. At the same time GasForce, the
UK's leading commercial gas servicing business, which we purchased in August
2002 for #21.7 million, is on track to meet our expectations of a substantial
increase in profit in the current year.
Financial Results
The financial results for the six months to 28th February 2003 show an increase
in turnover of 42% over the comparable period to #77 million (2002: #54 million)
and an increase in headline operating profit of 74% to #2.6 million (2002: #1.5
million). This includes the integration costs of both GasForce and bluu, the
design and project management business, which was acquired in July 2002.
Fully diluted earnings per share before goodwill amortisation rose by 9.3% to
9.4p (2002: 8.6p). This rise incorporates the substantial increase in the
Group's share capital as a result of the GasForce acquisition.
An interim dividend of 2.6p (2002: 2.5p) will be paid on 20th June 2003 to
shareholders on the register on 30th May 2003.
Cash Utilisation
The significant increase in Group activity has inevitably had a short-term
effect on operating cash which, in accordance with our forecasts, has seen a net
outflow of #8.3 million in the period. We anticipate the working capital
requirement to reduce substantially by the year-end as many of the contracts
commenced in the half year begin to mature. In April, the net cash position had
already improved by around #6 million.
GasForce
The integration of GasForce is almost complete. We were aware at the time of
acquisition that investment was required to develop fully its capabilities. This
includes new systems for financial, human resources and enhanced customer
relationship management. We have appointed a new Managing Director, formerly
with the Automobile Association, who has considerable experience of the
business-to-business market. We are now implementing a marketing plan aimed at
increasing our share of the gas servicing market.
Cross-selling
When we acquired GasForce we anticipated being able to cross-sell its services
into our core social housing market. Our confidence has proved well founded and
I am pleased to announce that we have been awarded a #4 million five-year
contract for South Somerset Homes to service and maintain 7,500 gas appliances.
We are now selling this service to the wider social housing market focussing
initially on our existing partnering customers.
GasForce has created cross-selling opportunities for other businesses within the
Group. New contracts, which would not otherwise have arisen, include the
provision of services to Hilton Hotels, HSBC and Land Securities.
Cross selling is core to our sales strategy and I believe these new contract
successes demonstrate the huge potential of this acquisition as well as the
positive and co-operative culture that exists across the Group.
Livingspace
This division continues to take full advantage of its leading position within
the buoyant social housing market. Our partnering order book has now risen to
#400 million (2002: #150 million). Furthermore, at the end of last year we
informed shareholders that we anticipated being able to develop the partnering
market in the South East. I am pleased to report that the newly enlarged order
book includes a #27 million contract for the London Borough of Hounslow and a
#20 million contract for the London Borough of Hackney.
We believe that partnering is at an early stage of development and will continue
to provide a significant growth opportunity for the foreseeable future. The
long-term nature of these contracts and the open book style in which they are
undertaken reduces our risk and has greatly increased the Group's visibility and
quality of earnings in the last two years. This is underpinned by the fact that
75% of this division's anticipated turnover for 2003/04 has now been secured.
Workspace
Our Workspace division provides services to the office and retail sectors. In
the current economic climate, the commercial office sector has come under
pressure. We anticipated this change and towards the end of the last financial
year acquired bluu, with the aim of shifting the emphasis of our project based
services towards facilities management. bluu's design and project management
capabilities have provided us with an excellent platform for the development of
the business in this area. New customers include Swiss Re, Fred Perry and
Deutsche Bank. We anticipate this repositioning will result in significant
growth and improved earnings visibility in future years.
Our existing facilities services businesses operate primarily in the retail
sector - and here we are experiencing positive growth. We continue to work with
our key client, Arcadia and have recently secured an #8.5million per year
contract for Tesco. The latter has been a long-term customer of the Group in the
South East and we now clean stores throughout Kent, Gloucestershire, Bristol and
South Wales.
Economies of scale
Connaught understands that fast growth must be managed effectively if it is to
make a positive impact on the bottom line. For some years we have invested in
our internal infrastructure to support the operational businesses. This is
designed to support and manage a much larger organisation and I therefore expect
to see the Group enjoying significant economies of scale in future years.
Board changes
It is with some regret that I report the departure from the board of my
predecessor as Chairman, Bob Henry, at the end of March 2003, due to other
commitments. He has been involved with the Group since 1996, through a period of
great change. On behalf of the whole board, I would like to thank him for his
contribution over this period.
Outlook
Turnover for the current year is largely secured and the order book for 2003/04
already stands at #150 million. With partnering in its infancy, the prospects
within the social housing market are significant for Connaught. The development
of our infrastructure in anticipation of growth will enable us to enhance
margins and improve shareholder value. Together with the success of the GasForce
acquisition, we have laid the foundation for the creation of a much larger
support services business over the next five years.
This growth will be aligned with our strategy of enhancing the quality of
earnings to improve visibility, increase margins and reduce risk.
The outlook for the Group is very positive and I look forward to advising you of
further developments.
Tim Ross
Chairman
Connaught plc
Consolidated profit and loss account
for the six months ended 28 February 2003
Unaudited Unaudited Audited
28 February 28 February 31 August
2003 2002 2002
#'000 #'000 #'000
Turnover 76,970 54,071 108,343
Cost of Sales (65,050) (47,124) (94,695)
Gross Profit 11,920 6,947 13,648
Administrative expenses (10,021) (5,589) (10,235)
Operating profit before goodwill amortisation 2,570 1,479 3,718
Goodwill amortisation (671) (121) (305)
Operating Profit 1,899 1,358 3,413
Profit on disposal of discontinued operations - - 250
Profit on ordinary activities before interest 1,899 1,358 3,663
Interest Receivable 335 9 97
Interest Payable (539) (159) (428)
Profit on ordinary activities before taxation 1,695 1,208 3,332
Taxation (600) (417) (1,079)
Profit on ordinary activities after taxation 1,095 791 2,253
Dividends paid and proposed - equity (484) (260) (1,185)
Retained profit for the financial period/year 611 531 1,068
Earnings per share
Basic 5.9p 7.9p 21.7p
Basic before goodwill amortisation 9.5p 9.1p 24.7p
Diluted 5.8p 7.4p 21.2p
Diluted before goodwill amortisation 9.4p 8.6p 24.1p
Connaught plc
Consolidated balance sheet
as at 28 February 2003
Unaudited Unaudited Audited
28 February 28 February 31 August
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible 25,367 4,656 25,976
Tangible 2,506 1,789 2,524
Investments 291 104 217
28,164 6,549 28,717
Current assets
Stock 1,155 301 1,191
Debtors due within one year 45,206 27,912 33,899
Cash at bank and in hand 3,988 4,246 19,171
50,349 32,459 54,261
Creditors: amounts falling due within one year (43,097) (27,071) (47,732)
Net current assets 7,252 5,388 6,529
Total assets less current liabilities 35,416 11,937 35,246
Creditors: amounts falling due after one year (6,816) (4,039) (7,350)
Net assets 28,600 7,898 27,896
Capital and reserves
Called up share capital 1,871 1,026 1,867
Share premium account 21,422 2,713 21,333
Capital redemption reserve 526 526 526
Profit and loss account 4,781 3,633 4,170
Shareholders' funds 28,600 7,898 27,896
Connaught plc
Consolidated cash flow statement
for the six months ended 28 February 2003
Unaudited Unaudited Audited
28 February 28 February 31 August
2003 2002 2002
#'000 #'000 #'000
Reconciliation of operating profit to net cash flow from
operating activities
Operating profit 1,899 1,358 3,413
Depreciation charge 403 253 556
Amortisation of goodwill 671 121 305
Loss on sale of fixed assets 16 6 7
Movement in stocks 35 - -
Movement in debtors (11,308) (4,272) (5,979)
Movement in creditors 15 1,908 2,213
Net cash flow from operating activities (8,269) (626) 515
Cash flow statement
Net cash flow from operating activities (8,269) (626) 515
Returns on investment and servicing of finance (204) (150) (331)
Taxation (909) (776) (1,281)
Capital expenditure (24) (31) (327)
Acquisitions (135) - (2,090)
Equity dividends paid (926) (459) (716)
Cash (outflow) before financing and management of liquid (10,467) (2,042) (4,230)
resources
Financing (4,716) 4,026 21,139
(Decrease)/increase in cash (15,183) 1,984 16,909
Reconciliation of net cash flow to movements in net funds
(Decrease)/increase in cash (15,183) 1,984 16,909
Cash used to decrease debt and lease financing 4,809 (3,937) (8,164)
Change in net funds resulting from cash flows (10,374) (1,953) 8,745
Finance lease and hire purchase contracts acquired with - - (63)
subsidiary
New finance leases (375) (282) (282)
Loan notes issued on the acquisition of subsidiary undertakings - - (11,926)
Liquid resources acquired with subsidiary - - -
Movement in net debt in the period/year (10,749) (2,235) (3,526)
Net funds at the beginning of the period/year (3,830) (304) (304)
Net debt at the end of the period/year (14,579) (2,539) (3,830)
Notes
1 The Interim Statement has been drawn up under the same accounting policies as those
used for the Report and Accounts for the year ended 31 August 2002. The results for
the six months ended 28 February 2003 and for the comparative period are not statutory
accounts and have not been audited. The results for the year ended 31 August 2002
constitute non-statutory accounts extracted from the statutory accounts for that year
which have been filed with the Registrar of Companies and on which the auditors gave
an unqualified report under Section 235 of the Companies Act 1985.
2 The taxation charge is calculated by applying the directors' best estimate of the
annual tax rate to the profit for the period.
3 Basic earnings per share of 5.9p (six months to 28 February 2002: 7.9p; year ended 31
August 2002: 21.7p) have been calculated on earnings of #1,095,000 (six months to 28
February 2002: #791,000; year ended 31 August 2002: #2,253,000) divided by the average
number of ordinary shares in issue in the period (excluding those held by Connaught
ESOP Trustee Limited) of 18,510,190 (six months to 28 February 2002: 10,075,615; year
ended 31 August 2002: 10,376,870).
Earnings per share before deduction of goodwill amortisation of 9.5p (six months to 28
February 2002: 9.1p; year ended 31 August 2002: 24.7p) are based upon earnings of
#1,766,000 (six months to 28 February 2002: #912,000; year ended 31 August 2002:
#2,558,000).
Diluted earnings per share of 5.8p (six months to 28 February 2002: 7.4p; year ended
31 August 2002: 21.2p) have been calculated on earnings of #1,095,000 (six months to
28 February 2002: #791,000; and year ended 31 August 2002: #2,253,000) and after
including the effects of all dilutive potential ordinary shares, which increases the
average number of shares to 18,806,431 (six months to 28 February 2002 - 10,648,171;
year ended 31 August 2002 - 10,617,609).
Diluted earnings per share before goodwill amortisation of 9.4p (six months to 28
February 2002: 8.6p; year ended 31 August 2002: 24.1p) have been calculated on
earnings of #1,766,000 (six months to 28 February 2002: #912,000; and year ended 31
August 2002: #2,558,000) and after including the effects of all dilutive potential
ordinary shares, which increases the average number of shares to 18,806,431 (six
months to 28 February 2002 - 10,648,171; year ended 31 August 2002 - 10,617,609).
4 Analysis of debt At 28 February At 31 August
2002 2001
#'000 #'000
Obligations under finance leases and hire purchase contracts
In one year or less, or on demand 238 182
Between one and five years 512 304
750 486
Bank loans
In one year or less, or on demand 1,483 1,483
Between one and five years 6,154 6,896
7,637 8,379
Loan notes
In one year or less, or on demand 10,030 13,986
Between one and five years 150 150
10,180 14,136
5 A dividend of 2.6 pence per share will be paid on 20th June to holders on the register
on 30th May 2003.
6 This interim statement is being sent to all shareholders. Copies may be obtained from
the Company Secretary at the Registered Office of the Company: Connaught House, Pynes
Hill, Rydon Lane, Exeter EX2 5TZ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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