RNS Number:9776E
Birse Group PLC
4 February 2000
BIRSE GROUP plc
INTERIM RESULTS
Birse Group plc, the leading UK construction group, today announces results
for the six months ended 31 October 1999.
Highlights:
- Pre-tax profits up to #2.4 million (1998 loss: #1.9 million)
- Net construction margin doubled to 1%
- Earnings per ordinary share of 0.9 pence (1998 loss: 0.8 pence)
- Separate disposals of BPH Aberdeen based division and Epping investment
property, raising #7.6 million cash
- Strengthened balance sheet with net cash of #5.5 million (30 April 1999 net
debt: #5.4 million)
- Dividend increased to 0.375p per share (1998: 0.3p)
Commenting of the results, Chief Executive Peter Watson said:
"These results reflect the success with which we have pursued better quality
work and improved margins. I am fully confident that by continuing to
concentrate on client relationships and operational efficiencies we can
continue to generate improving returns for shareholders."
Contacts:
Birse Group plc 01652 633222
Peter Watson, Chief Executive
Martin Budden, Finance Director
Financial Dynamics 020 7831 3113
Tom Baldock
Chief Executive's Statement
I am pleased to report that your Group continued the good progress seen in the
second half of 1998/99. Pre-tax profits of #2.4million compare with losses
for the corresponding period last year of #1.9millon. The profits for the
1998/99 full year were #2.2millon. Earnings per ordinary share at 0.9p
represent the best half year result achieved since 1991.
Group turnover fell by #13million to #181million mainly due to reduced
activities in the Construction business as a result of that company's pursuit
of better quality margins. Net construction margins of 1% delivered in the
period under review compare with corresponding margins of 0.5% achieved in the
1998/99 full year. Plant Hire also produced improved results, increasing
profits to #627,000 compared with #463,000 earned in the six months ended 31
October 1998. The loss of rental income from properties disposed of has given
rise to the lower level of profits produced from the Group's Commercial
Property activities.
The reported results also benefit from the #300,000 profit on the disposal by
BPH of its offshore equipment hire and diesel engine refurbishment division at
Aberdeen, completion of which took place on 31 October 1999.
The net interest charge for the period fell by #121,000 to #449,000 mainly as
a result of lower average borrowings. Given that the #2.5million proceeds
from the BPH disposal were only received on the last day of the period
prospects for even lower charges in the second half are encouraging.
The Group has moved to a net cash position of #5.5million from net debt of
#5.4million at 30 April 1999. This is due to property sales proceeds of
#6.3million, the BPH Aberdeen disposal which raised #2.5million plus profits
generated in the period after allowing for working capital requirements.
Although there is still some way to go before a net interest charge is
eliminated I am satisfied with the progress towards the achievement of this
stated objective.
Construction
Birse Construction continues to focus upon those client relationships offering
acceptable margins and reliable cash flows. In the main this means targeting
projects where competition is restricted and where competitors have a similar
cost base. Inevitably this leads to a concentration upon partnering and
negotiated forms of working where opportunities can only be secured through
consistent delivery of operational efficiencies which are achieved
increasingly by way of innovative technical solutions.
To enhance the focus upon client relationships and production efficiencies
Birse Construction will be organised into three distinct operating divisions;
Civil Engineering (to include Birse Rail), Building and Process Engineering.
Much of the groundwork to effect this structure has already been completed
with a view to full implementation by the beginning of the 2000/2001 financial
year. This divisionalisation will not only bring the added benefits of market
and client specialisation but will also facilitate a more structured
development of senior management.
Progress continues to be made towards the recovery of amounts owed to the
company on long term contracts. However, where resolution is subject to a
formal legal process the settlement timetable is largely outside the company's
control and in such circumstances it is imprudent to make predictions as to
when or how such matters will be concluded.
On a more positive note it is always pleasing to have our efforts recognised
by our contemporaries. I was therefore delighted when the results of the 1999
Contract Journal Construction Industry awards were published. Not only was
Birse Construction the winner of the Building Contractor of the Year Award but
the company also won nominations for the Civil Engineering Contractor of the
Year Award and the Long Term Partnering Award. My congratulations go out to
all those staff involved with the projects associated with these awards.
Plant Hire
The improvement in BPH's performance is derived from its mainstay crawler
crane and piling divisions where annual returns on capital employed now exceed
20%. Our objective is to focus the company on those activities earning an
acceptable return. This was the driving force behind the sale of the Aberdeen
based offshore equipment hire and diesel engine refurbishment division.
Property
The Group's property activities are now confined to the optimum realisation of
the profit inherent in its Warrington based business park. During the period
sales of 2.5 acres were completed which when combined with deferred
consideration received in respect of earlier completions gave rise to sales of
#1.2million. Having successfully developed over two thirds of the site there
now remains only 19 acres undeveloped. Interest and enquiry levels for both
joint venture and owner occupied developments are positive and a number of
proposals have been received the viability of which are currently under
evaluation.
Management
I would like to take this opportunity to acknowledge and thank Peter Birse for
his help and support following my appointment as Group Chief Executive and his
simultaneous withdrawal from the day to day activities of the Group. The
benefit of his counsel has enabled us to reap the positive aspects of such a
change. It is our intention to strengthen the Board with the appointment of
at least one additional Non-Executive Director before the end of the current
financial year.
Dividend
An increased interim dividend of 0.375p per ordinary share will be paid on 4
May 2000 to shareholders on the register on 7 April 2000.
Prospects
In pursuit of further margin growth Birse Construction is now positioned to
exploit better the market sectors within which the company has a track record
of delivery and where demand remains buoyant. It is important to create these
new opportunities to safeguard against the reduced level of capital spend on
new build forecast by the Water Industry. BPH will continue to concentrate on
those activities with the potential for earning strong returns on capital
employed. Sales at Warrington should continue at a rate corresponding with
the rate of disposals completed in the last year. I am, therefore, cautiously
encouraged at the possibilities for further growth, improved performance and
consequently the prospects for shareholders.
Consolidated Results
for the 6 months ended 31 October 1999
6 months 6 months Year
Ended Ended Ended
31.10.99 31.10.98 30.4.99
Note #'000 #'000 #'000
Turnover 2 181,105 193,718 357,525
Operating profit/(loss) 2 2,572 (1,291) 3,682
Profit on disposal of
business 3 300 - -
Profit/(loss) before
interest 2,872 (1,291) 3,682
Net interest (449) (570) (1,493)
Profit/(loss) on ordinary
activities before taxation 2 2,423 (1,861) 2,189
Taxation 4 (600) 372 (158)
Profit/(loss) for the
financial period 1,823 (1,489) 2,031
Dividends on equity shares 5 (721) (577) (1,542)
Transferred to/(withdrawn
from) reserves 1,102 (2,066) 489
Earnings/(loss) per
ordinary share - basic 0.9p (0.8)p 1.1p
- diluted 0.9p (0.8)p 1.1p
The above figures relate exclusively to continuing operations.
Consolidated Balance Sheet
as at 31 October 1999
As at As at As at
31.10.99 31.10.98 30.4.99
#'000 #'000 #'000
Fixed Assets
Tangible assets 14,249 16,611 16,469
Investments - 6,659 5,091
14,249 23,270 21,560
Current Assets
Stocks 3,826 5,343 4,415
Debtors 144,413 130,880 125,137
Cash at bank and in hand 6,774 3,657 3,856
155,013 139,880 133,408
Creditors: Amounts falling due
within one year
Bank loans and overdrafts (534) (12,919) (8,338)
Other creditors (129, 866) (114,519) (109,150)
(130,400) (127,438) (117,488)
Net Current Assets 24,613 12,442 15,920
Total Assets Less Current
Liabilities 38,862 35,712 37,480
Creditors: Amounts falling due
after more than one year
Bank loans and overdrafts (534) (1,067) (802)
Other creditors (4,344) (4,668) (4,046)
(4,878) (5,735) (4,848)
Provisions for Liabilities and
Charges (350) - (100)
Net Assets 33,634 29,977 32,532
Capital and Reserves
Called up share capital 19,239 19,239 19,239
Share premium account 93 93 93
Special reserve 308 308 308
Revaluation reserve 607 607 607
Profit and loss account 13,387 9,730 12,285
Shareholders' Funds - equity
interest 33,634 29,977 32,532
Consolidated Cash Flow Statement
for the 6 months ended 31 October 1999
6 months 6 months Year
Ended Ended Ended
31.10.99 31.10.98 30.4.99
#'000 #'000 #'000
Net cash inflow/(outflow) from 5,589 (13,555) (6,755)
operating activities
Returns on investments and
servicing of finance (522) (468) (1,320)
Taxation - (144) (803)
Capital expenditure and
financial investment 4,368 (3,130) (2,431)
Acquisitions and disposals 2,119 - -
Dividends paid to equity
shareholders (577) (575) (1,537)
Cash inflow/(outflow) before
management of liquid resources
and financing 10,977 (17,872) (12,846)
Management of liquid resources (3,564) (79) 742
Financing (8,059) 1,393 (2,761)
Decrease in cash in the period (646) (16,558) (14,865)
Consolidated Cash Flow Statement
for the 6 months ended 31 October 1999
6 months 6 months Year
Ended Ended Ended
31.10.99 31.10.98 30.4.99
#'000 #'000 #'000
Reconciliation of operating
profit/(loss) to net cash
inflow/(outflow) from operating
activities
Operating profit/(loss) 2,572 (1,291) 3,682
Depreciation net of profit on
disposal of fixed assets 1,224 1,354 2,365
Decrease/(increase) in stocks 589 (331) 597
(Increase)/decrease in debtors (19,376) 9,938 15,297
Increase/(decrease) in creditors 20,580 (23,225) (28,696)
Net cash inflow/(outflow) from
operating activities 5,589 (13,555) (6,755)
Analysis of net funds/(debt)
Cash at bank on demand/(bank
overdraft) 374 (673) 1,020
Cash at bank on short term
deposit 6,400 3,657 2,836
Debt due within one year (534) (12,246) (8,338)
Debt due after one year (534) (1,067) (802)
Finance leases (163) (131) (150)
Net funds/(debt) at 31 October
1999 5,543 (10,460) (5,434)
Reconciliation of cash flows to
movements in net funds/(debt)
Decrease in cash in the period (646) (16,558) (14,865)
Cash outflows from reduction in
debt and lease financing 8,059 319 4,473
Cash outflow/(inflow) from
management of liquid resources 3,564 79 (742)
Loan advances - (1,600) (1,600)
Movement in net debt in the
period 10,977 (17,760) (12,734)
Net (debt)/funds at 1 May 1999 (5,434) 7,300 7,300
Net funds/(debt) at 31 October
1999 5,543 (10,460) (5,434)
Notes to the Interim Accounts
1.Preparation of Interim Accounts
The interim accounts, which relate exclusively to continuing operations,
have been prepared on the basis of the accounting policies set out in the
Group's statutory accounts for the year ended 30 April 1999. Financial
Reporting Standard 15: Tangible Fixed Assets ("FRS 15") has been adopted
during the period, but has not resulted in any changes to the accounts.
Existing revalued assets have been frozen at book values prevailing at the
time of adoption of FRS 15.
The Group's auditors, Deloitte & Touche, have carried out a review of the
interim accounts, which were approved by the Board of Directors on 4
February 2000, and their report is reproduced on page 11.
The financial information presented is unaudited and does not amount to
full statutory accounts within the meaning of the Companies Act 1985. Full
accounts for the year ended 30 April 1999, upon which Deloitte & Touche
gave an unqualified audit report, have been delivered to the Registrar of
Companies.
2.Segment Information
6 months 6 months Year
Ended Ended Ended
31.10.99 31.10.98 30.4.99
#'000 #'000 #'000
Turnover
Contracting 176,287 189,445 346,386
Plant Hire 7,132 7,631 14,331
Commercial Property 1,177 221 3,582
Housing - - 41
Intra-group (3,491) (3,579) (6,815)
181,105 193,718 357,525
Results
Contracting 1,713 (2,424) 1,877
Plant Hire 627 463 472
Commercial Property 401 736 1,479
Housing - - -
Group Centre (169) (66) (146)
Operating profit/(loss) 2,572 (1,291) 3,682
Profit on disposal of 300 - -
business
Profit/(loss) before interest 2,872 (1,291) 3,682
Net interest (449) (570) (1,493)
Profit/(loss) on ordinary
activities before taxation 2,423 (1,861) 2,189
3.Disposal of Business
On 31 October 1999 BPH Equipment Limited disposed of its offshore equipment
hire and diesel engine refurbishment division, based at Aberdeen for a
gross consideration of #2,500,000. The amount of corporation tax
attributable to the profit on disposal of #300,000 is #90,000.
4.Taxation
The tax charge for the period is based upon an effective rate of 25 per
cent which has been calculated by reference to the projected rate for the
full year.
5.Dividends on Equity Shares
An interim dividend of 0.375p per ordinary share (1998 - 0.3p) will be paid
on 4 May 2000 to shareholders on the register on 7 April 2000.
6.Earnings/(Loss) per Ordinary Share
6 months 6 months Year
Ended Ended Ended
31.10.99 31.10.98 30.4.99
#'000 #'000 #'000
The calculation of basic
earnings/(loss) per ordinary
share is based on:
Earnings/(loss) for basic and
diluted earnings per ordinary
share calculation 1,823 (1,489) 2,031
6 months 6 months Year
Ended Ended Ended
31.10.99 31.10.98 30.4.99
Thousands Thousands Thousands
Weighted average number of
shares used in basic
earnings/(loss) per ordinary
share calculation 192,390 192,256 192,322
Dilutive effect of options - 4 -
Weighted average number of
shares used in fully diluted
earnings/(loss) per ordinary
share calculation 192,390 192,260 192,322
7.Year 2000 Computerisation
Following their initial review, the Directors continue to be alert to the
potential risks and uncertainties surrounding the year 2000 issue. As at
the date of this report the Directors are not aware of any significant
factors which have arisen, or that may arise, which will affect the
activities of the business. However, at this stage there can be no
guarantee that all issues have been identified due to the complexity of the
problem and the Group's reliance upon customers' and suppliers' own
compliance procedures being effective. Any future costs associated with
this issue are not anticipated to have a material impact upon Group
profitability.
Independent review report to Birse Group plc
Introduction
We have been instructed by the company to review the financial information set
out on pages 5 to 10, excluding note 7 in relation to Year 2000
computerisation, and 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 Listing
Rules of the London Stock Exchange 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. 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 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.
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 31 October 1999.
Deloitte & Touche
Chartered Accountants
10 - 12 East Parade
Leeds
LS1 2AJ
END
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