RNS Number:4930C
International Nuclear Solutions PLC
20 August 2007
International Nuclear Solutions plc
Interim Results for the six months ended 30 June 2007
International Nuclear Solutions plc (INS), a company supplying engineering
support services to the nuclear industry for over 25 years, announces a 25%
increase in turnover with operating profits before exceptional items at a
similar level to the comparable period in 2006.
Financial Highlights
6 months ended 6 months ended 12 months ended
30/6/07 30/6/06 31/12/06
#'000 #'000 #'000
Turnover 15,675 12,577 31,745
Operating Profit* 1,027 1,008 2,501
Profit before taxation 812 179 1,708
Basic Earnings per share 0.78p 0.06p 1.68p
Adjusted Earnings per share* 1.22p 1.40p 3.01p
Net Cash Inflow 352 458 2,370
Net cash and cash equivalents 3,086 822 2,734
* Before exceptional items relating to costs of the demerger from Robotic
Technology Systems PLC (RTS) and admission to AIM in 2006, and before
exceptional items relating to the offer for INS by Babcock International Group
PLC (Babcock) in 2007.
KEY POINTS
Turnover in the period increased by 25% from #12.6m to #15.7m.
Offer from Babcock provides an excellent return for shareholders.
Changing market place bringing uncertainty for INS in a market with increasing
penetration from larger corporations.
Retention and recruitment remains difficult and there are significant labour
cost pressures.
Reconstitution of the Board with the appointment to the Board of two Babcock
representatives and the move of the current executive directors to a full time
management committee role.
Chris Brown, Chairman of INS, said today:
"INS has successfully completed its first year of trading as a listed company
following the demerger from RTS. The offer from Babcock so soon after demerger
was unexpected but the Directors believe that it provides an excellent return to
shareholders. In the light of the rapidly changing UK market place shareholders
can crystallize their investment while the company gains a stronger position
from which to address these new challenges."
20 August 2007
Enquiries
International Nuclear Solutions plc Tel: 0161 777 2043
Chris Brown, Chairman
Collins Stewart Europe Limited Tel: 020 7523 8350
Chris Wells, Mark Connelly, Stewart Wallace
College Hill Tel: 020 7457 2020
Matthew Smallwood, Matthew Gregorowski
International Nuclear Solutions plc
Interim results for the six months ended 30 June 2007
Chairman's Statement
Overview
International Nuclear Solutions plc ("INS") successfully completed its first
year of trading as a listed company following the demerger from Robotic
Technology Systems PLC ("RTS") on 31st May 2006.
In the six months to 30 June 2007, turnover was #15.7m (2006: #12.6m), which is
broadly in line with our expectations. The order book at the end of June was
#6.4m (2006: #11.4m) which is behind forecast and reflects contracts being
placed at a slower rate than anticipated, particularly at our major operating
site at Sellafield.
Nearly 40% of revenues came from Tier 2 prime contractors or consortia where INS
was either a subcontractor or a teaming member but not the lead organisation.
This is further evidence of the changing nature of the nuclear sector - fewer
but larger contracts and framework agreements - which we have forecast
previously.
The net cash inflow over the period was #0.4m (2006: #0.5m) and the closing cash
balance stood at #3.1m as compared to #0.8m at the half year in 2006.
Operating profit before exceptional charges over the first 6 months remained at
a similar level at #1m (2006: #1m). Escalating labour costs are the primary
cause of the lower profit margin achieved. Labour costs have been running ahead
of national average earnings as a result of a shortage of skilled personnel and
an increasing demand from industry in general.
The basic earnings per share after exceptional costs was 0.78p (2006: 0.06p).
The adjusted basic earnings per share before exceptional costs is 1.22p (2006:
1.40p).
An exceptional charge of #0.28m relates to the costs arising in the period from
the offer by Babcock International Group PLC (Babcock). The total cost of this
in the full year is anticipated to be in excess of #0.5m.
On 2 August 2007 Babcock announced that it had acquired or had received valid
acceptances for 58.5% of the existing share capital of INS. The fact that
Babcock now owns more than 50% of the shares means that INS will now be
considered as a subsidiary of Babcock while remaining a separately listed
company.
INS will be publishing its first annual financial statements prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU) for the year ended 31 December 2007. In accordance with
the AIM Rules for Companies, INS's interim report for the six months ended 30
June 2007 has been prepared on the basis of the accounting policies which will
be applied in those financial statements.
Operational Review
Whilst revenues in the first six months of the year were at the highest level
ever recorded, the order book was significantly lower than anticipated. This was
a result of a slowdown in tendering and contract placement for projects both at
Sellafield and the Magnox sites.
Even where contracts have been placed with INS, either directly or as part of a
consortium, projects have been slow to mobilise or have received only partial
funding as part of a phased funding approach.
INS, as part of the ACCORD Alliance (a consortium of AMEC, INS and DGP
International - now part of the Scott Wilson Group), has been successful in
winning the next stage of design for the B41 Silo project at Sellafield, one of
the highest hazard rated facilities on the Sellafield site.
INS has also been successful in winning our first framework agreement for
engineering services for The United Kingdom Atomic Energy Authority (UKAEA) at
Dounreay, the second largest site in the Nuclear Decommissioning Authority (NDA)
portfolio.
An order has been received for the continued evaluation of the INS Encapsulation
process - a technology that has been developed by INS for the encapsulation of
nuclear waste materials for which it has applied for a patent. INS is one of
only three companies selected to continue to the next stage of evaluation.
The UK's nuclear support services market is going through a period of
consolidation and re-structuring as demonstrated by the recent sale of Nukem and
the acquisition of BNFL's Magnox Reactor sites management company by large
overseas conglomerates. There will be further consolidation following the
decision by the UK Government to sell the nuclear decommissioning division of
the UKAEA, which employs over 2,000 people. The Directors of INS believe that
the larger nuclear-focused companies and consortia will become more dominant in
the industry and that INS, as a smaller independent organisation, will become
more reliant on these larger organisations as they increase their penetration
into the UK nuclear sector.
Retention and recruitment remains difficult and there are significant labour
cost pressures reflecting the capacity constraints arising from a buoyant market
place for skilled engineering personnel and the competition for this labour by
the larger multi-national corporations.
We will continue to concentrate on staff retention and recruitment, which is one
of the biggest challenges currently facing the business.
INS was a finalist in the North West Business Awards for Innovation and has also
won two RoSPA (Royal Society for the Prevention of Accidents) awards, one being
a prestigious sector award.
The Executive Directors (Tony Moore, Steve McGowan and Geoff Mellor) will step
down from the Board with effect from today to full time roles as part of a
management committee, under the supervision of a non-executive Board, to allow
them to concentrate on the day to day operation of the business. I, along with
my fellow independent Non Executive Director, John Ridings will remain on the
Board. We have invited Archie Bethel (54) and Kevin Thomas (53), both senior
Babcock executives, with extensive experience of the nuclear business to join
the Board as Non Executive Directors. The new directors' appointment will take
effect from today. A list of the new Directors' current and past directorships
is attached at the end of this announcement. Other than as disclosed in the
list, there are no disclosures to be made under Schedule Two, para G of the AIM
Rules for Companies.
Outlook
Whilst order intake has been slow in the first half of the year, quotation
activity has increased significantly at the start of the second half of the year
reflecting increased activity on a number of significant projects. The delay in
some major projects is likely to affect overall revenues for 2007. However, we
remain optimistic about the outlook for 2008 particularly since the level of
annual spend at the Aldermaston Weapons Establishment (AWE) is expected to
increase over the next few years and there are a significant number of
opportunities there that are of interest to INS.
Chris Brown, Chairman
20 August 2007
Consolidated Income Statement for the six months ended 30 June 2007 (IFRS)
6 months 6 months 12 months
ended ended ended
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
Continuing operations Notes #'000 #'000 #'000
Revenue 15,675 12,577 31,745
Cost of sales (12,771) (10,165) (26,006)
Gross profit 2,904 2,412
5,739
Distribution costs (157) (168) (364)
Administrative expenses (1,995) (2,072) (3,706)
Operating profit before exceptional charges 1,027 1,008 2,501
Exceptional administrative expenses included in
administrative expenses above 4 (275) (836) (832)
Operating profit 752 172 1,669
Finance income 60 8 41
Finance costs - (1) (2)
60 7 39
Profit before taxation 812 179 1,708
Taxation 5 (327) (140) (663)
Profit for the year attributable to equity
shareholders
485 39 1,045
Earnings per share deriving from both total and
continuing operations
Basic 6 0.78p 0.06p 1.68p
Diluted 6 0.77p 0.06p 1.67p
* Comparative information for the six months ended 30 June 2006 and the year
ended 31 December 2006 was previously reported under UK GAAP and has been
restated under IFRS as adopted by the EU. The reconciliations from UK GAAP to
IFRS for each period are shown in note 8.
Consolidated Statement of Changes in Shareholders' Equity for the six months
ended 30 June 2007 (IFRS)
6 months ended 6 months ended 12 months ended
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
Note #'000 #'000 #'000
At 1 January 1,527 2,420 2,420
Profit for the financial period 485 39 1,045
Equity shares issued - 623 623
Preference shares issued - 50 50
Preference shares redeemed - (50) (50)
Reserve arising on demerger - 23,064 23,064
Reverse acquisition reserve - (23,687) (23,687)
Dividend paid - (1,964) (1,964)
Movement on other reserves relating to share options 23 2 26
At end of period 9 2,035 497 1,527
Group Balance Sheet at 30 June 2007 (IFRS)
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
#'000 #'000 #'000
Assets
Non-current assets
Property, plant and equipment 993 908 1,038
Other intangible assets 197 170 193
1,190 1,078 1,231
Current assets
Trade and other receivables 4,077 3,898 5,238
Amounts due from customers for contract work 1,734 3,488 2,117
Cash and cash equivalents 3,086 822 2,734
8,897 8,208 10,089
Liabilities
Current liabilities
Trade and other payables (6,065) (5,804) (7,970)
Amounts due to customers for contract work (1,668) (2,851) (1,376)
Current tax liabilities (319) (134) (447)
(8,052) (8,789) (9,793)
Net current assets/(liabilities) 845 (581) 296
Net assets 2,035 497 1,527
Equity shareholders' funds
Called up share capital 623 623 623
Merger reserve 23,064 23,064 23,064
Capital redemption reserve 50 50 50
Reverse acquisition reserve (23,687) (23,687) (23,687)
Other reserves 49 2 26
Retained earnings 1,936 445 1,451
Total equity attributable to equity holders of the
parent 2,035 497 1,527
Group Cash Flow Statement for the six months ended 30 June 2007 (IFRS)
6 months 6 months 12 months
ended ended ended
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
Note #'000 #'000 #'000
Net cash inflow from operating activities 7 849 3,508 5,908
Cash flows from investing activities
Purchase of property, plant and equipment (54) (903) (1,161)
Purchase of intangible assets (41) (190) (244)
Interest received 60 8 41
Net cash used in investing activities (35) (1,085) (1,364)
Cash flows from financing activities
Interest paid - (1) (2)
Taxation paid (462) - (208)
Dividend paid - (1,964) (1,964)
Net cash used in financing activities (462) (1,965) (2,174)
Net increase in cash and cash equivalents in the
period
352 458 2,370
Opening cash and cash equivalents 2,734 364 364
Closing cash and cash equivalents 3,086 822 2,734
Notes to the Financial Information
General information and basis of preparation
The consolidated interim financial statements have been prepared in accordance
with the AIM Rules for Companies and on a basis consistent with the accounting
policies set out in note 2, which will be applied when the Group prepares its
first set of annual financial statements in accordance with IFRS as adopted by
the EU for the financial year ending 31 December 2007.
These are the Group's first interim financial statements prepared under IFRS as
adopted by the EU, with the exception of IAS 34 (Interim Financial Reporting),
which is not mandatory for UK groups, and therefore IFRS 1 "First-time Adoption
of International Financial Reporting Standards" has been applied. The
disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS as
adopted by the EU are given in note 8.
The interim financial statements are unaudited and do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
financial information for the year ended 31 December 2006 has been derived from
the published statutory accounts as restated by the IFRS adjustments set out in
note 8. A copy of the full accounts for that period, on which the auditors
issued an unqualified report that did not contain statements under Section 237
(2) or (3) of the Companies Act 1985, has been delivered to the Registrar of
Companies.
The preparation of financial statements in conformity with IFRS as adopted by
the EU requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the
Group's accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements, are disclosed in Note 3.
Accounting policies
The financial statements have been prepared under the historical cost convention
and are in accordance with the Companies Act 1985 and applicable accounting
standards.
The accounting policies adopted during the period have been reviewed as part of
the conversion to IFRS and are largely consistent with those adopted previously
under UK GAAP. As these are the first set of accounts prepared under IFRS as
adopted by the EU, the accounting policies are set out in full below:
First time adoption of IFRS
The year ended 31 December 2007 will be the Group's first financial statements
prepared in accordance with IFRS. Accordingly, IFRS 1 "First time adoption of
International Financial Reporting Standards" has been applied in the interim
consolidated financial statements. The Group's transition date to IFRS is 1
January 2006, and the Group prepared its opening balance sheet at that date in
accordance with IFRS effective at 30 June 2007.
Comparative information for the six months ended 30 June 2006 and the year ended
31 December 2006 was previously reported under UK GAAP and has been restated
under IFRS as adopted by the EU. The reconciliations from UK GAAP to IFRS for
each period are shown in note 8. In addition, there is a reconciliation of
equity at the transition date for the Group, being 1 January 2006.
The Group has not taken advantage of any of the exemptions to IFRS 1.
Basis of consolidation
In preparing the consolidated financial statements, INS Innovation Limited has
been deemed to be the acquirer and the Company, the legal parent, has been
deemed to be the acquiree. Under IFRS 3 "Business Combinations", the acquisition
of INS Innovation Limited by the Company has been accounted for as a reverse
acquisition and the consolidated IFRS financial information of the Company is
therefore a continuation of the financial information of INS Innovation Limited.
The effect of this transaction is that the net assets of INS Innovation Limited
at the date of the transaction are presented at book value and those of the
legal parent are shown at fair value. However, two large and opposing reserves
are created which are shown gross on the face of the balance sheet. The net of
these two reserves is the difference between the share capital of the legal
parent (INS plc) and the substantive parent (INS Innovation Ltd).
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more
than one half of the voting rights. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
subject to impairment in relation to the asset transferred. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Employee share option schemes
The Group operates an equity-settled share-based compensation plan. The fair
value of the employee services received in exchange for the grant of share
options is measured by reference to the fair value of the share options at the
date of grant, and is recognised in the income statement on a straight line
basis over the vesting period, based on the Company's estimate of shares that
will eventually vest. The associated credit is recognised in other reserves.
Fair value is determined by reference to the Binomial option pricing model in
respect of the EMI scheme and the Black Scholes option pricing model in respect
of the SAYE scheme.
If dividends are paid on the underlying shares during the period between vesting
date and the end of the option's life an early exercise is more likely. In these
circumstances the Binomial model is the most appropriate option pricing model to
estimate the fair value of the options. This is because the Binomial model can
compare the benefit of option exercise with its time value at each step of the
option's life where exercise is possible.
SAYE options have term to expiration equal to the vesting period and an option
of an early exercise is not applicable. Therefore, the Black-Scholes model is
the most appropriate and accurate method to evaluate these options.
At each balance sheet date, the Company revises its estimate of the number of
options that are expected to become exercisable.
When share options are exercised, the proceeds received, net of any transaction
costs, are credited to share capital (nominal value) and share premium.
Investment in subsidiary undertakings
The investment in INS Innovation Ltd in the Company balance sheet is recorded at
the cost, which is based on the fair value of shares issued. This is calculated
by multiplying the share price on flotation by the number of shares issued at
acquisition.
In these consolidated interim accounts, the investment is cancelled out against
the shares issued on acquisition, which gives rise to the creation of the
reverse acquisition reserve in the consolidated balance sheet.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any impairment losses. Cost comprises the purchase price together with any
directly attributable costs.
Depreciation commences when an asset is available for use. Depreciation is
provided to write-off the depreciable amount of assets to their residual values
on a straight line basis, over their expected useful economic lives. Where there
is evidence of impairment, assets are written down to their recoverable amounts.
Depreciation is calculated at the following annual rates:
Leasehold buildings - Over length of the lease
Fixtures, fittings and equipment - 20%
Plant and machinery - 20%
Residual values are assessed each year and where material are restated to their
current values.
Intangible assets
Purchased computer software is carried at cost less accumulated amortisation,
plus any impairment losses. Amortisation is calculated on a straight line basis
over 5 years.
Impairment of tangible and intangible assets
At each balance sheet date, the Group assesses whether there is any indication
that its assets have been impaired. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of
the impairment, if any.
The recoverable amount of an asset is the higher of its fair value less costs to
sell and its value in use. The value in use is the present value of the future
cash flows expected to be derived from an asset.
If the recoverable amount of an asset is less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. That
reduction is recognised as an impairment loss and is recognised immediately in
the income statement.
If an impairment loss subsequently reverses, the carrying amount of the asset is
increased to the revised estimate of its recoverable amount. A reversal of an
impairment loss is recognised in the income statement.
Revenue
Revenue is derived from the design and installation of equipment and systems and
the provision of design services. Such services are provided under one of four
contract types:
Reimbursable contracts are generally for services under which initial design
ideas and concepts are produced. Under these contracts, INS is reimbursed in
full for work done with an agreed percentage uplift. Costs incurred and
associated revenue is recognised as incurred.
Target price contracts. Target total costs and profit percentage uplift are
agreed with the customer at the start of the contract. Any cost savings or
overruns are shared 50% with the customer up to an agreed maximum payable
contract price. Costs are recognised as incurred, along with revenue equalling
costs incurred and a percentage profit uplift based on total expected profits.
Incentivised contracts. Costs are recharged to the customer as incurred, plus a
variable percentage profit uplift. The amount of uplift varies in accordance
with an agreed formula based on the performance of INS against an agreed set of
KPI's. Performance against KPI's is reviewed on a monthly basis. Costs are
recognised as incurred and revenue is calculated in accordance with the results
of the monthly reviews.
Fixed price contracts are entered into when a detailed specification of the
final design is known. Costs are recognised as incurred, along with revenue
equalling costs incurred and a percentage profit uplift based on total expected
profits.
In the case of all types of contract, any anticipated losses are provided
immediately in full.
Long-term contracts
Amounts recoverable on each long term contract are stated at cost plus
attributable profits, less provision for any known or anticipated losses and
payments on account, and are included in trade and other receivables. Payments
on account in excess of amounts recoverable on each long term contract are
included in payables.
Pre-contract costs
Where pre-contract costs can be separately identified and measured reliably and
it is probable that the contract will be obtained, they are included as part of
the contract costs and taken to cost of sales as incurred.
Where it is not possible to identify or measure them reliably, or where the
probability of obtaining the contract is uncertain, pre-contract costs are
recognised as expenses as incurred and charged to the income statement.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on the taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years, and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax liabilities are recognised for all taxable temporary differences
and deferred tax assets to the extent that it is probable that taxable profit
will be available against which the deductible temporary difference can be
utilised, except for goodwill and differences arising through business
combinations.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Leases
Leases are classified as finance leases wherever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
Assets held under finance leases are recognised as assets in the balance sheet
at their fair values or, if lower, at the present value of the minimum lease
payments, both determined at the inception of the lease. The corresponding
obligation is recorded as finance lease obligations and presented within
payables. Lease payments are apportioned between finance charges and a
reduction of the lease obligation. The finance charge is allocated to each
period during the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
Rentals due under operating leases are charged to the income statement on a
straight line basis over the term of the lease.
Pension costs
Contributions to defined contribution pension schemes are charged to the income
statement in the year in which they become payable.
Research and development
Expenditure on research is recognised as an expense when incurred. Development
costs are capitalised only when it is probable that future economic benefit will
result from the project and the following criteria are met:
The technical feasibility of the product has been ascertained;
Adequate technical, financial and other resources are available to complete and
sell or use the intangible asset;
The Group can demonstrate how the intangible asset will generate future economic
benefits and the ability to use or sell the intangible asset can be
demonstrated;
It is the intention of management to complete the intangible asset and use it or
sell it; and
The development costs can be measured reliably.
Currency exposure
These consolidated interim financial statements are presented in pounds
sterling, which represents the functional currency of the Group
Monetary assets and liabilities denominated in foreign currencies are translated
to Sterling at the rates of exchange at the balance sheet date. Transactions in
foreign currencies are recorded at the rate ruling at the date of the
transaction. All differences are recognised in the income statement.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance
sheet when the Group becomes a party to the contractual provisions of the
instrument.
Trade and other receivables
Trade and other receivables do not carry any interest and are stated at their
fair values reduced by appropriate allowances of estimated irrecoverable
amounts.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits on call with banks and
bank overdrafts. Bank overdrafts are disclosed as current borrowings on the
balance sheet.
Trade and other payables
Trade and other payables are not interest bearing and are stated at their
settlement amount.
Financial risk management
Price risk
The Company has no significant exposure to securities price risk, as it holds no
listed equity investments.
Credit risk
The Group's principal financial assets are bank balances, cash, and trade
receivables, which represent the Group's maximum exposure to credit risk in
relation to financial assets.
The Group's credit risk is primarily attributable to its trade receivables.
Credit risk is managed by monitoring the aggregate amount and duration of
exposure to any one customer depending upon their credit rating. The amounts
presented in the balance sheet are net of allowances for doubtful debts,
estimated by the Group's management based on prior experience and their
assessment of the current economic environment.
The credit risk on liquid funds is limited because the counterparties are banks
with high credit-ratings assigned by international credit-rating agencies. The
Group has no significant concentration of credit risk, with exposure spread over
a large number of counterparties and customers.
Financial risk management (continued)
Cash flow interest rate risk
Interest bearing assets comprise cash and bank deposits, all of which earn
interest at a fixed rate. The interest rate on the bank overdraft is at market
rate and the Group's policy is to keep the overdraft within defined limits such
that the risk that could arise from a significant change in interest rates would
not have a material impact on cash flows. The Group's policy is to maintain
other borrowings at fixed rates to fix the amount of future interest cash flows.
The directors monitor the overall level of borrowings and interest costs to
limit any adverse effects on financial performance of the Group.
Undrawn bank facilities
The Group has an undrawn committed floating rate bank borrowing facility of
#4million. The facility is for the purpose of providing flexibility in the
management of liquidity and is subject to annual review and confirmation.
Key estimates and judgements
The key area of accounting requiring the exercise of judgment by the Group is
recognition of revenue and profit for target price, incentivised and fixed price
contracts as detailed in the revenue accounting policy on page 12. All
contracts are the subject of monthly management review.
Exceptional items
The profit before taxation is stated after charging the following exceptional
items:
6 months ended 6 months ended 12 months ended
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
#'000 #'000 #'000
Costs in connection with demerger from RTS and admission to
AIM
- 836 832
Costs in connection with the offer for INS by Babcock. 275 - -
275 836 832
The above items have been highlighted as operating exceptional costs on the
basis that they are considered as one-off items that do not relate to the
underlying performance of the Group.
Taxation
The taxation charge for the period ended 30 June 2007 is significantly higher
than the standard rate of UK corporation tax due to the tax treatment of certain
costs in respect of the offer for the Company by Babcock.
The taxation charge for the period ended 30 June 2006 is significantly higher
than the standard rate of UK corporation tax due to the demerger from RTS and
the tax treatment of certain costs in respect of the subsequent flotation of the
Company.
Earnings per Share
Earnings per ordinary share has been calculated using the weighted average
number of shares in issue during the relevant period. The calculation of basic
earnings per share for the six months ended 30 June 2007 is based upon a profit
after tax of #485,000 (30 June 2006: #39,000; 31 December 2006: #1,045,000). The
weighted average number of shares used in the calculation of basic earnings per
share for the current and comparative periods is 62,335,374.
6 months ended 6 months ended 12 months ended
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
Pence Pence Pence
Basic earnings per share 0.78 0.06 1.68
Diluted earnings per share (see below) 0.77 0.06 1.67
Adjusted basic earnings per share (see below) 1.22 1.40 3.01
The weighted average number of shares used in the dilution calculation is as
shown below.
6 months ended 6 months ended 12 months ended
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
Number Number Number
Weighted average number of ordinary shares for the purposes
of basic earnings per share 62,335,374 62,335,374 62,335,374
Effect of dilutive potential ordinary shares in respect of
share options 474,343 49,701 94,766
Weighted average number of ordinary shares for the purposes
of diluted earnings per share 62,809,717 62,385,075 62,430,140
Earnings per share before the exceptional items has been calculated using the
adjusted profit after tax as follows:
6 months ended 6 months ended 12 months ended
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
#'000 #'000 #'000
Profit after taxation 485 39 1,045
Exceptional item in administrative expenses (note 4) 275 836 832
Adjusted profit after tax 760 875 1,877
Reconciliation of Profit before Taxation to Net Cash Inflow from Operating
Activities
6 months 6 months 12 months
ended ended ended
30/06/07 30/06/06 31/12/06
(Unaudited) (Unaudited*) (Unaudited*)
#'000 #'000 #'000
Profit before taxation 812 179 1,708
Adjustments for:
Depreciation 137 81 240
Finance income (60) (8) (41)
Finance expense - 1 2
Share option charge 23 2 26
Changes in working capital:
Decrease in trade and other receivables 1,551 3,493 3,213
(Decrease)/increase in payables (1,614) (240) 760
Net cash inflow from operating activities 849 3,508 5,908
Reconciliation of equity and profit under UK GAAP to IFRS
International Nuclear Solutions plc reported under UK GAAP in its previously
published financial statements for the year ended 31 December 2006 and interim
report for the six months ended 30 June 2006. The analysis below shows a
reconciliation of equity and profit as reported under UK GAAP as at 31 December
2006 and 30 June 2006 to the revised equity and profit under IFRS. In addition,
there is a reconciliation of equity under UK GAAP to IFRS at the transition date
for the Group, being 1 January 2006.
Reconciliation of consolidated profit for the year ended 31 December 2006
(a)
IAS 19
Employee
UK GAAP benefits IFRS
#'000 #'000 #'000
Revenue 31,745 - 31,745
Cost of sales (26,007) 1 (26,006)
Gross profit 5,738 1 5,739
Distribution costs (364) - (364)
Administration expenses (2,871) (3) (2,874)
Exceptional administrative expenses (832) - (832)
Operating profit 1,671 (2) 1,669
Finance income 41 - 41
Finance costs (2) - (2)
Profit before taxation 1,710 (2) 1,708
Taxation (663) - (663)
Profit attributable to equity shareholders 1,047 (2) 1,045
Reconciliation of consolidated profit for the six months ended 30 June 2006
(a)
IAS 19
Employee
UK GAAP benefits IFRS
#'000 #'000 #'000
Revenue 12,577 - 12,577
Cost of sales (10,126) (39) (10,165)
Gross profit 2,451 (39) 2,412
Distribution costs (163) (5) (168)
Administration expenses (1,217) (19) (1,236)
Exceptional administrative expenses (836) - (836)
Operating profit 235 (63) 172
Finance income 8 - 8
Finance costs (1) - (1)
Profit before taxation 242 (63) 179
Taxation (159) 19 (140)
Profit attributable to equity shareholders 83 (44) 39
The consolidated profit for the period ended 30 June 2006 and the consolidated
equity shareholders' funds at 1 January 2006 disclosed in the unaudited 2006
interim results have been increased/reduced by #50,000 respectively. The
adjustments were reflected in the audited financial statements for the year
ended 31 December 2006.
Reconciliation of consolidated equity at 31 December 2006
(a) (b) (c)
IAS 19 IAS 38 IFRS 3
Employee Intangible Business
UK GAAP benefits assets combinations IFRS
#'000 #'000 #'000 #'000 #'000
Non-current assets
Property, plant and equipment 1,231 - (193) - 1,038
Other intangible assets - - 193 - 193
1,231 - - - 1,231
Current assets
Trade and other receivables 5,238 - - - 5,238
Amounts due from customers for 2,117 - - - 2,117
contract work
Cash and cash equivalents 2,734 - - - 2,734
10,089 - - - 10,089
Current liabilities
Trade and other payables (7,952) (18) - - (7,970)
Amounts due to customers for (1,376) - - - (1,376)
contract work
Current tax liabilities (452) 5 - - (447)
(9,780) (13) - - (9,793)
Net current assets 309 (13) - - 296
Net assets 1,540 (13) - - 1,527
Shareholders' equity
Called up share capital 623 - - - 623
Merger reserve (623) - - 23,687 23,064
Capital redemption reserve 50 - - - 50
Reverse acquisition reserve - - - (23,687) (23,687)
Other reserves 26 - - - 26
Retained earnings 1,464 (13) - - 1,451
1,540 (13) - - 1,527
Reconciliation of consolidated equity at 30 June 2006
(a) (b) (c)
IAS 19 IAS 38 IFRS 3
Employee Intangible Business
UK GAAP benefits assets combinations IFRS
#'000 #'000 #'000 #'000 #'000
Non-current assets
Property, plant and equipment 1,078 - (170) - 908
Other intangible assets - - 170 - 170
1,078 - - - 1,078
Current assets
Trade and other receivables 3,898 - - - 3,898
Amounts due from customers for 3,488 - - - 3,488
contract work
Cash and cash equivalents 822 - - - 822
8,208 - - - 8,208
Current liabilities
Trade and other payables (5,725) (79) - - (5,804)
Amounts due to customers for (2,851) - - - (2,851)
contract work
Current tax liabilities (158) 24 - - (134)
(8,734) (55) - - (8,789)
Net current liabilities (526) (55) - - (581)
Net assets 552 (55) - - 497
Shareholders' equity
Called up share capital 623 - - - 623
Merger reserve (623) - - 23,687 23,064
Capital redemption reserve 50 - - - 50
Reverse acquisition reserve - - - (23,687) (23,687)
Other reserves 2 - - - 2
Retained earnings 500 (55) - - 445
552 (55) - - 497
Reconciliation of consolidated equity at 1 January 2006 (date of transition to
IFRS)
(a)
IAS 19
UK GAAP Employee benefits IFRS
#'000 #'000 #'000
Non-current assets
Property, plant and equipment 66 - 66
Other intangible assets - - -
66 - 66
Current assets
Trade and other receivables 8,304 - 8,304
Amounts due from customers for contract work 2,568 - 2,568
Cash and cash equivalents 364 - 364
11,236 - 11,236
Current liabilities
Trade and other payables (8,408) (16) (8,424)
Amounts due to customers for contract work (163) - (163)
Current tax liabilities (300) 5 (295)
(8,871) (11) (8,882)
Net current assets 2,365 (11) 2,354
Net assets 2,431 (11) 2,420
Shareholders' equity
Retained earnings 2,431 (11) 2,420
2,431 (11) 2,420
Explanation of reconciling items between UK GAAP and IFRS
The standards and interpretations giving rise to the changes to the previously
reported profit and equity of the Group are:
(a) IAS 19 Employee benefits
Under IAS 19, any unused paid holiday entitlement that has accumulated at the
balance sheet date must be charged to the income statement in the year to which
it relates.
(b) IAS 38 Intangible assets
Under UK GAAP, all capitalised computer software was included within tangible
fixed assets. IAS 38 requires software that is not an integral part of an item
of computer hardware to be classified within intangible assets.
(c) IFRS 3 Business combinations
Under UK GAAP, the demerger of INS Innovation Ltd from Robotic Technology
Systems plc was accounted for by merger accounting in accordance with FRS 6 "
Acquisitions and mergers". IFRS 3 requires that the acquirer be identified as
the party that gains control of the other party. Therefore under IFRS, the
transaction is accounted for as a reverse acquisition.
Cash flows
Income taxes and dividends which were presented as separate categories of cash
flows under UK GAAP have been included in financing cash flows under IFRS.
There are no other significant adjustments to the cash flows presented under
IFRS.
Equity
Analysis of Changes in Consolidated Shareholders' Equity for the six months
ended 30 June 2007
Capital Reverse Profit and
Share redemption Merger acquisition Other loss
capital reserve reserve reserve reserve account Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
At 1 January 2007 623 50 23,064 (23,687) 26 1,451 1,527
Profit for the period - - - - - 485 485
Share based payments
credit
- - - - 23 - 23
At 30 June 2007 623 50 23,064 (23,687) 49 1,936 2,035
Analysis of Changes in Consolidated Shareholders' Equity for the year ended 31
December 2006
Capital Reverse Profit and
Share redemption Merger acquisition Other loss
capital reserve reserve reserve reserve account Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
At 1 January 2006 - - - - - 2,420 2,420
Profit for the - - - - - 1,045 1,045
period
Dividend paid - - - - - (1,964) (1,964)
Equity shares issued 623 - - - - - 623
Preference shares 50 - - - - - 50
issued
Preference shares (50) 50 - - - (50) (50)
redeemed
Reserve arising on - - 23,064 - - - 23,064
demerger
Reverse acquisition - - - (23,687) - - (23,687)
reserve
Share based payments - - - - 26 - 26
credit
At 30 June 2006 623 50 23,064 (23,687) 26 1,451 1,527
Analysis of Changes in Consolidated Shareholders' Equity for the six months
ended 30 June 2006
Capital Reverse Profit and
Share redemption Merger acquisition Other loss
capital reserve reserve reserve reserve account Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
At 1 January 2006 - - - - - 2,420 2,420
Profit for the - - - - - 39 39
period
Dividend paid - - - - - (1,964) (1,964)
Equity shares issued 623 - - - - - 623
Preference shares
issued
50 - - - - - 50
Preference shares
redeemed
(50) 50 - - - (50) (50)
Reserve arising on
demerger
- - 23,064 - - - 23,064
Reverse acquisition
reserve
- - - (23,687) - - (23,687)
Share based payments
credit
- - - - 2 - 2
At 30 June 2006 623 50 23,064 (23,687) 2 445 497
Current and Past Directorships
of Archibald anderson Bethel and Kevin richard Thomas
Archibald anderson Bethel
Current Directorships
Alstec Airports Limited
Alstec Automation Limited
Alstec Defence Limited
Alstec Group Limited
Alstec Limited
Alstec Power Systems Limited
Appledore Shipbuilders (2004) Limited
Armstrong Technology Associates Limited
Babcock Design & Technology Limited
BSN Environmental Services Limited
Defence Supply Chain Solutions Limited
Devonport Management Limited
Devonport Royal Dockyard Limited
FMA Services Limited
FN Consultancy Limited
FNC Group Limited
FNC Limited
Frazer-Nash Consultancy Group Limited
Frazer-Nash Consultancy Limited
Locam Limited
LSC Group Holdings Limited
LSC Group Limited
Marine Engineering & Fabrications (Holdings) Limited
Marine Engineering & Fabrications Limited
Rosyth Royal Dockyard Limited
Past Directorships
Caledonian Compressors Limited
Clayton Walker Limited
MB Aerospace Limited
MB Faber Limited
MB Inspection Limited
MB Material Handling Systems Limited
MB Plastics Limited
MBMHS 3 Limited
Merelake Plastics Limited
Motherwell Bridge Engineering Limited
Motherwell Bridge Fabricators Limited
Motherwell Bridge Holdings Limited(i)
Motherwell Bridge Thermal Limited
Nousenomore 20 Limited
Nowoutofdate 2 Limited
Precision Machining (Edinburgh) Limited
Resin Glass Products Limited
Roberts Brothers Engineering Limited
Sort 4 Limited
Torch Technical Services Limited
KEVIN RICHARD THOMAS
Current Directorships
Alstec Airports Limited
Alstec Automation Limited
Alstec Defence Limited
Alstec Group Limited
Alstec Limited
Alstec Power Systems Limited
Babcock Support Services Limited
FMA Services Limited
X-CMR Consultants Limited
Debut Services (South West) Limited
Past Directorships
Air Power International Limited
Babcock Dyncorp Limited
Debut Services (South West) Limited
Debut Services Limited
Mouchelparkman Babcock Education Ltd
Debut Services Limited
Omnisure Property Management Limited
SGI (Holdings) Limited
The Conservation Practice Architects & Specialist Consultants Ltd
Neither of the newly appointed Non Executive Directors will have a shareholding
in the Company on appointment.
--------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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