RNS Number:4735O
Birse Group PLC
11 December 2001
Date Embargoed until 7.00am 11 December 2001
Contact Peter Watson, Chairman Telephone 01652 633 222
Martin Budden, Group Managing Director
Heather Appleford, Group Finance Director
Birse Group plc
Scott Fulton Telephone 0207 831 3113
Financial Dynamics
BIRSE GROUP plc - INTERIM RESULTS
Birse Group plc, the UK construction, plant hire and property group, today
announces results for the half year ended 31 October 2001.
These may be summarised as follows:-
- Pre-tax profits of #1.2million (2000: loss of #6.7million before
exceptional operating items).
- Improvement led by Birse Construction - operating profit of
#154,000 (2000: loss of #8.1million before exceptional operating
items).
- Plant Hire increases profit to #1.2million (2000: #1.0million).
- No exceptional items (2000: loss of #24million).
- Record Construction order book; #425million at 31 October 2001
(2000: #362million).
- Net cash at #9.2million (2000: #7.5million).
- Dividend held at 0.375p per share.
Commenting on the results, the Directors said:
"It is pleasing to report that your Group continues to make progress. We
believe that with each of the Group's areas of operation set to benefit from
strong construction orders, government spending targeted at its key markets,
growing capital spend by the water industry, low inflation and low interest
rates, your Group is in a position to build positively on the solid start made
to the year."
REPORT OF THE DIRECTORS
On the results for the six months ended 31 October 2001
It is pleasing to report that your Group continued the good progress seen in
the second half of 2000/2001. Pre-tax profits of #1.2million compare with
pre-tax losses, before exceptional operating items, of #6.7million for the
corresponding period last year.
Birse Construction was the main driver behind that improvement delivering an
operating profit of #154,000 (2000/2001: loss of #8.1million before
exceptional operating items) despite losses in its Process Engineering
Division of #2.2million. Plant Hire improved results increasing operating
profits by eighteen per cent to #1.2million. The absence of contracted
transactions meant that the Group's Commercial Property activities reported a
profit of #114,000 (2000/2001: profit of #793,000) in effect representing the
rental income net of overhead costs attributable to that business.
The net interest credit of #25,000 (2000/2001: charge of #133,000) reflects
the trend established by the Group over the last six years in managing a
reduction of its net borrowings. It is the first time in ten years that the
Group has reported a net interest credit. At 31 October 2001 the Group had a
net cash position of #9.2million including amounts held on deposit as
investments (31 October 2000: #7.5million).
Construction
Six months ended 31 October Year Ended
2001 2000 30 April 2001
Turnover Operating Turnover Operating Turnover Operating
profit/ (loss)/profit* (loss)/profit*
(loss)
#'000 #'000 #'000 #'000 #'000 #'000
Civil
Engineering 103,190 2,446 93,258 (77) 168,646 528
Building 132,221 (102) 82,920 (2,032) 221,626 3,643
Process
Engineering 8,852 (2,190) 14,205 (5,976) 24,647 (9,494)
244,263 154 190,383 (8,085) 414,919 (5,323)
* Before exceptional operating items.
Birse Construction has traded broadly in line with expectations albeit that
the Civil Engineering Division has performed ahead of plan whilst the Building
business has under achieved. The rate of losses incurred by the Process
Engineering Division continued to slow down and progress has been made in
securing the critical mass of turnover needed to effect fully the turnaround
of that business.
Secured workload for the company as a whole at the end of October 2001 stood
at #425million (31 October 2000: #362million).
The improved performance achieved by the Civil Engineering Division reflects
the increase in the number of available infrastructure opportunities. Demand
in all its major sectors namely rail, London Underground, roads, flood
defences and water has been robust. Provided the Government's published
spending plans are implemented and orders for the enhancement of the rail
network continue to be placed by Railtrack (in Railway Administration) demand
in this sector should remain strong for the foreseeable future.
In pursuance of our objective for each of our operating businesses to get
significantly closer to and better understand the needs of their customers our
London Underground and rail businesses, Birse Metro and Birse Rail
respectively, will be established as incorporated entities with effect from 1
May 2002. As trading companies independent of the Civil Engineering
business, incorporation will engender greater customer attention and enable
the directors of those businesses to build upon the increased number of market
opportunities that focus brings.
The results reported by the Building Division have been depressed by:-
i. poor returns on two of its larger projects which together contributed
#13million of turnover in the period; and
ii. a negative contribution of #335,000 arising in relation to an under-priced
contract.
Once below average returns are experienced in the Building sector there is
limited opportunity to make up such shortfalls with higher than average
margins on other contracts. In recent months the Building Division has
experienced a fall off in the level of enquiries received with throughput in
September and October being around fifty per cent of those experienced in the
earlier months of the year.
This is a set of circumstances with which we are very familiar in that the
Building market, particularly the developer led sector, is very sensitive to
macro economic sentiment. Any general economic uncertainty leads to an almost
immediate postponement of investment decisions. Likewise sentiment is just as
quickly reversed with investment reinstated once that uncertainty diminishes.
Some signs of a reversal were seen in the month of November when business
leads exceeded #200million. Whilst an element of uncertainty persists in
respect of the Building market its fundamentals remain strong given low
inflation, low interest rates and relatively high consumer spending.
Losses in the Process Engineering Division diminished reflecting the progress
made in turning that business around. Losses of #6million and #3.5million in
the first and second half respectively of 2000/2001 compare with the
#2.2million lost in the six months to 31 October 2001. Further progress has
been made in securing a critical mass of business with enquiries in the period
up from #26million to #40million with the majority of those enquiries coming
in the second quarter. Secured orders at the end of October 2001 amounted to
#13 million (31 October 2000: #11million). With the water industry about to
enter a period of high spend on capital projects, market conditions are
expected to become more favourable.
Included in debtors at 31 October 2001 is an aggregate value of #6.1million
(31 October 2000: #15.6million) attributable to two (31 October 2000: seven)
old contracts which remain the subject of arbitration or equivalent
proceedings. Since 31 October 2000 five cases have been settled by way of
negotiation, four in the second half of 2000/2001 and one in the period under
review.
Plant Hire
Six months ended 31 October Year Ended
2001 2000 30 April 2001
Turnover Operating Turnover Operating Turnover Operating
profit profit profit
#'000 #'000 #'000 #'000 #'000 #'000
Crawler Cranes 1,780 501 1,911 517 3,554 890
Piling Equipment 457 147 556 200 1,077 443
Site
Accommodation 1,920 567 637 309 1,263 716
4,157 1,215 3,104 1,026 5,894 2,049
With effect from 1 May 2001 the Group's internal Site Accommodation Division
was incorporated and commenced trading as an independent operating unit under
the name The Cabin Company Limited. Whilst in the period under review all its
turnover was transacted with other members of the Group, it will commence
trading with external customers in the second half of the year. It was with a
view to servicing this external market that the business was formed. All
comparative figures have been restated on a pro-forma basis as though The
Cabin Company Limited had operated independently from 1 May 2000.
The Crawler Cranes and Piling Equipment operations continue to trade as
divisions of BPH Equipment. Whilst the results of the Crawler Crane Division
compare with those achieved in the corresponding period in 2000/2001, demand
for its mechanical cranes has fallen whilst demand for its hydraulic machines
has increased. It is a medium term objective to build up a fleet comprising
exclusively of hydraulic machines. The Piling business suffered from a lack
of orders for its larger hammers. Given the expected increase in the
incidence of major road and marine projects prospects should improve.
Traditionally the performance of BPH is not as strong in the second half of
the year due to the reduction of available hires in and around the Christmas
and New Year holiday period.
Commercial Property
Six months ended 31 October Year Ended
2001 2000 30 April 2001
Turnover Operating Turnover Operating Turnover Operating
profit profit profit
#'000 #'000 #'000 #'000 #'000 #'000
- 114 1,696 793 4,409 1,965
During the period no contracted sales were completed (2000/2001: 2.9acres).
Whilst interest in the Warrington site remains strong we have adopted a
selective approach to sales with a view to optimising prices received and
maximising future development opportunities. During the period five acres of
land adjacent to the existing site were acquired giving rise to a land bank of
fifteen acres.
Dividend
An interim dividend of 0.375p per ordinary share (2000: 0.375p) will be paid
on 3 May 2002 to shareholders on the register on 5 April 2002.
Outlook
At the year end it was reported that we had a platform for positive progress.
Since that time uncertainties in relation to the macro economic picture and
the future ownership of Railtrack (in Railway Administration) have emerged.
Those uncertainties are however balanced by a strong construction order book,
government spending plans targeted at our key markets, a growing capital spend
by the water industry, low inflation and low interest rates. We believe that
each of our areas of operation will benefit from these factors leaving the
Group in a position to build positively on the solid start made to the year.
CONSOLIDATED RESULTS
FOR THE 6 MONTHS ENDED 31 OCTOBER 2001
6 Months 6 Months Year Ended
Ended Ended
31.10.01 31.10.00 30.04.01
Note #'000 #'000 #'000
Turnover 2 246,203 194,242 423,423
Operating profit/(loss) before
exceptional operating items 2 1,166 (6,522) (1,911)
Exceptional operating items 3 - (23,994) (27,663)
Operating profit/(loss) 2 1,166 (30,516) (29,574)
Net interest 25 (133) (159)
Profit/(loss) on ordinary
activities before taxation 2 1,191 (30,649) (29,733)
Taxation 4 (262) 1,006 3,525
Profit/(loss) for the financial
period 929 (29,643) (26,208)
Dividends on equity shares 5 (721) (721) (1,924)
Transferred to/(withdrawn from)
reserves 208 (30,364) (28,132)
Earnings/(loss) per ordinary
share
- basic 6 0.5p (15.4)p (13.6)p
- diluted 6 0.5p (15.6)p (13.8)p
- before exceptional items
- basic 6 0.5p (2.9)p 0.2p
- diluted 6 0.5p (3.0)p 0.2p
The above figures relate exclusively to continuing operations.
CONSOLIDATED BALANCE SHEET
AS AT 31 OCTOBER 2001
As at As at As at
31.10.01 31.10.00 30.04.01
Note #'000 #'000 #'000
Fixed Assets
Tangible Assets 12,697 12,127 12,241
Current Assets
Stocks 3,510 3,825 2,714
Debtors 7 137,164 128,131 127,789
Investments 3,816 3,663 3,743
Cash at bank and in hand 7,268 5,532 6,890
151,758 141,151 141,136
Creditors: Amounts falling due
within one year
Bank loans and overdrafts (400) (700) (400)
Other creditors (151,312) (144,596) (142,061)
(151,712) (145,296) (142,461)
Net Current Assets/(Liabilities) 46 (4,145) (1,325)
Total Assets less Current
Liabilities 12,743 7,982 10,916
Creditors: Amount falling due after
more than one year
Bank loans and overdrafts (526) - (100)
Other creditors (6,249) (4,544) (5,056)
(6,775) (4,544) (5,156)
Net Assets 5,968 3,438 5,760
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 (14,279) (16,809) (14,487)
Shareholders' Funds - equity
interest 5,968 3,438 5,760
CONSOLIDATED CASH FLOW STATEMENT
For the 6 months ended 31 October 2001
6 Months Ended 6 Months Ended Year Ended
31.10.01 31.10.00 30.04.01
#'000 #'000 #'000
Net cash inflow from operating
activities 1,850 2,289 5,591
Returns on investments and servicing
of finance 83 (120) (194)
Taxation - (327) (90)
Capital expenditure and financial
investment (1,135) (2,389) (3,131)
Acquisitions and disposals - - 150
Dividends paid to equity shareholders (721) (722) (1,924)
Cash inflow/(outflow) before
management of liquid resources
and financing 77 (1,269) 402
Management of liquid resources 11,946 3,536 (7,532)
Financing 374 677 444
Increase/(decrease) in cash in the 12,397 2,944 (6,686)
period
CONSOLIDATED CASH FLOW STATEMENT
For the 6 months ended 31 October 2001
6 Months 6 Months Year Ended
Ended Ended
31.10.01 31.10.00 30.04.01
#'000 #'000 #'000
Reconciliation of operating profit/
(loss) to net cash inflow from operating
activities
Operating profit/(loss) 1,166 (30,516) (29,574)
Depreciation net of profit on disposal
of fixed assets 852 860 1,704
(Increase)/decrease in stocks (796) 581 1,692
(Increase)/decrease in debtors (9,637) 19,386 22,448
Increase in creditors 10,265 11,978 9,321
Net cash inflow from operating 1,850 2,289 5,591
activities
Analysis of net funds
Cash at bank on demand 6,779 4,012 (5,618)
Cash at bank on short term deposit 489 1,520 12,508
Cash at bank on deposit with terms in
excess of seven days 2,816 2,663 2,743
Debt due within one year (400) (700) (400)
Debt due after one year (526) - (100)
Finance leases (419) (115) (298)
8,739 7,380 8,835
Reconciliation of cash flows to
movements in net funds
Increase/(decrease) in cash in the 12,397 2,944 (6,686)
period
Cash inflow from financing (374) (677) (444)
Cash (inflow)/outflow from management of
liquid resources (11,946) (3,536) 7,532
New finance leases and hire purchase
contracts (173) - (216)
Movement in net funds in the period (96) (1,269) 186
Net funds at 1 May 2001 8,835 8,649 8,649
Net funds at 31 October 2001 8,739 7,380 8,835
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 2001.
The Group's auditors, Deloitte & Touche, have carried out a review of the
interim accounts, which were approved by the Board of Directors on 11 December
2001, and their report is reproduced on page 13.
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 2001, 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
31.10.01 31.10.00 30.04.01
#'000 #'000 #'000
(As restated) (As restated)
Turnover
Contracting 244,263 190,383 414,919
Plant Hire 4,157 3,104 5,894
Commercial Property - 1,696 4,409
Intra-group (2,217) (941) (1,799)
246,203 194,242 423,423
Results
Contracting 154 (8,085) (5,323)
Plant Hire 1,215 1,026 2,049
Commercial Property 114 793 1,965
Group Centre (317) (256) (602)
Operating profit/(loss) before
exceptional operating items 1,166 (6,522) (1,911)
Exceptional operating items - - (23,994) (27,663)
Contracting
Operating profit/(loss) 1,166 (30,516) (29,574)
Net interest 25 (133) (159)
Profit/(loss) on ordinary activities
before taxation 1,191 (30,649) (29,733)
NOTES TO THE INTERIM ACCOUNTS
With effect from 1 May 2001 the Group's internal site accommodation hire
division was incorporated as an independent operation trading under the name
of The Cabin Company Limited. Its results are reported as part of the plant
hire sector with prior period results restated accordingly. In consequence,
plant hire and intra-group turnover have been increased by #637,000 and #
1,263,000 in the periods to 31 October 2000 and 30 April 2001 respectively and
profits of #309,000 and #716,000 have been reclassified as plant hire from
contracting in the same periods.
3. Exceptional Operating Items
6 Months Ended 6 Months Ended Year
Ended
31.10.01 31.10.00 30.04.01
#'000 #'000 #'000
Losses on contracts subject to - (23,994) (27,663)
litigation
4. Taxation
The tax charge for the period 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 (2000 - 0.375p) will be
paid on 3 May 2002 to shareholders on the register on 5 April 2002.
NOTES TO THE INTERIM ACCOUNTS
6. Earnings/(Loss) per ordinary share
6 Months Ended 6 Months Ended Year
Ended
31.10.01 31.10.00 30.04.01
#'000 #'000 #'000
The calculation of earnings/(loss) per
ordinary share is based on:
Earnings/(loss) for basic and diluted
earnings per ordinary share calculation 929 (29,643) (26,208)
Exceptional items - 23,994 27,663
Tax on exceptional items - - (1,000)
Earnings/(loss) before exceptional
items per ordinary share calculation 929 (5,649) 455
Thousands Thousands Thousands
Weighted average number of shares used
in earnings/(loss) per ordinary share
calculations 192,390 192,390 192,390
Adjustment to reflect dilutive shares under
options - (2,840) (2,470)
Weighted average number of shares used
in diluted earnings/(loss) per ordinary
share calculation 192,390 189,550 189,920
7. Debtors; Uncertainty Relating to Amounts on Contracts
Included in debtors is an aggregate value of #6.1million attributable to
contractual amounts relating to two contracts which are the subject of
arbitration or equivalent proceedings.
In consequence of the losses suffered on contracts subject to litigation in
the previous year the Directors have reconsidered the recoverability of the
amounts attributable to these and other old contracts. Whilst the Directors
believe that they are justified in concluding that these amounts will be
realised, the Directors acknowledge that there remains significant
uncertainty. However, it is not possible to quantify the effects.
Independent review report to Birse Group plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 October 2001 which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 7.
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 Financial Services Authority 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 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.
Uncertainty relating to amounts on contracts
In arriving at our review conclusion we have considered the accuracy of
disclosure made in Note 7 to the financial information concerning uncertainty
relating to amounts on contracts. In view of the significance of this
uncertainty, we consider it should be brought to your attention. Our review
conclusion is not qualified in this respect.
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 2001.
Deloitte & Touche
Chartered Accountants
10-12 East Parade
Leeds
LS1 2AJ
11 December 2001
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