TIDMMRL
RNS Number : 3019J
Marlowe PLC
04 December 2018
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via Regulatory Information
Service, this inside information is now considered to be in the
public domain.
4 December 2018
MARLOWE PLC
Half Year Results FY 2019
Marlowe plc ("Marlowe", the "Company" or the "Group"), the
support services group focused on acquiring and developing
companies that provide critical testing and maintenance services,
announces its unaudited results for the six-month period ended 30
September 2018 ("Interim Report").
ADJUSTED RESULTS(1) - Continuing
operations HY 2019 HY 2018 % Change
Revenue (GBPm) 56.4 36.0 57%
EBITDA (GBPm)* 5.0 3.1 59%
Operating profit (GBPm)** 4.2 2.6 59%
Profit before tax (GBPm)** 3.9 2.4 60%
EPS (p) 8.8 6.2 41%
(1) Refer to Note 4 of the Consolidated Interim Report for
a reconciliation between adjusted and statutory results
* Earnings Before Interest, Taxes, Depreciation and Amortisation
("EBITDA")
** Before amortisation of intangible assets, share based
payments, acquisition and restructuring costs
STATUTORY RESULTS - Continuing
operations HY 2019 HY 2018 % Change
--------- -----------
Revenue (GBPm) 56.4 36.0 57%
Operating profit
(GBPm) 1.0 0.7 32%
Profit before tax
(GBPm) 0.7 0.5 26%
Basic earnings per share
(p) 1.7 1.2 35%
Net cash (GBPm) 4.9 3.2 55%
Summary:
-- Revenue up 57% to GBP56.4m; current 12 month run-rate revenues of approximately GBP130m
-- Adjusted EBITDA up 59% to GBP5.0m; adjusted profit before tax up 60% to GBP3.9m
-- Oversubscribed placing to raise GBP20m completed in July 2018, adjusted EPS up 41%
-- Completion of four acquisitions during the period and a
further two since the period end, extending the scale and breadth
of the Group and, in particular, the Water Treatment & Air
Quality division
-- Adjusted EBITDA for Fire & Security and Water & Air up 18% and 114% respectively
-- New GBP30m debt facility to provide further resources for the Group's acquisition strategy
-- Net cash of GBP4.9m at period end
-- Well-developed pipeline of acquisition opportunities to
continue to add further scale and capabilities to the Group focused
on regulated and health and safety related service sectors
-- Appointment of Kevin Quinn to the Board as Non-Executive Director and Chairman Designate
Commenting on the results Alex Dacre, Chief Executive, said:
"We are pleased with the Group's performance in the first half,
during which we delivered further profitable growth and made good
progress in the execution of our strategy. We will continue to
pursue our strategy of organic and acquisitive growth and are well
positioned to gain further market share across all of our business
streams. The second half of the year has started well and, taking
into account good trading across our divisions supplemented by the
positive contribution of recent acquisitions, we expect to deliver
a full year performance ahead of current market expectations."
For further information: www.marloweplc.com
Marlowe plc 0203 813 8498
Alex Dacre, Chief Executive IR@marloweplc.com
Mark Adams, Group Finance
Director
Cenkos Securities 0207 397 8900
Nicholas Wells
FTI Consulting 0203 727 1340
Nick Hasell
Alex Le May
CHIEF EXECUTIVE'S REVIEW
RESULTS SUMMARY AND STRATEGY
The Group performed strongly during the first half of the
financial year with further significant improvements in revenue,
profit and earnings per share, alongside significant M&A
activity and further focus and investment on operational
improvements. Both divisions, Fire Protection & Security
Systems ("Fire & Security") and Water Treatment & Air
Quality ("Water & Air"), continued to deliver on their growth
strategies, with the integration of the acquisitions completed in
the period proceeding to plan. During the first half, the Group
acquired four businesses across our two divisions, with two further
acquisitions following the period-end. The Group has continued to
execute its strategy at pace in the first half and our run rate
revenues are now in the region of GBP130m (HY 2018: c. GBP80m).
Adjusted EBITDA for the six months to 30 September 2018 grew by
59% to GBP5.0m (HY 2018: GBP3.1m) on sales of GBP56.4m (HY 2018:
GBP36.0m), an increase of 57%.
Adjusted profit before tax before exceptional items,
amortisation and share based payments grew 60% to GBP3.9m (HY 2018:
GBP2.4m). Adjusted earnings per share for the period increased by
41% to 8.8p (HY 2018: 6.2p).
In July, the Group raised approximately GBP20m through an
oversubscribed share placing which, when combined with our recently
agreed GBP30m debt facility, provides us with the funding for the
Group to continue its acquisition-led growth strategy and pursue
the opportunities that we have identified.
Marlowe's strategy has swiftly developed since our formation and
admission to AIM in April 2016 and is now focused on attractive
health and safety related service markets that are governed by
statutory compliance regulations: our Group's key competitive
strength and differentiator is that it provides a range of
closely-related critical testing and maintenance services each of
which is delivered by one of our specialist Fire & Security or
Water & Air businesses. Individually, these businesses are
leaders in their fields but together form a Group that can provide
our customers with a comprehensive and integrated approach to their
safety, regulatory compliance and the upkeep of the building
systems they rely on.
Our strategy for growth is focused on building the Group into
the leader in the provision of critical and regulated testing,
maintenance and risk management services to commercial properties
across the UK through further organic growth and targeted
acquisitions.
The two key recent events were the acquisition of Suez Water
Conditioning Services ("Suez WCS"), significantly extending the
scale and breadth of our water treatment and hygiene activities,
and the acquisition of Tersus Consultancy ("Tersus"), broadening
the Group's testing and inspection capabilities.
The acquisition in August of Suez WCS is a further significant
step in our strategy of consolidating the UK water treatment market
and strengthens our position as a leading national player. Our
run-rate annual revenues related to water treatment and hygiene
services are now in the region of GBP40m, giving us the critical
mass to enhance service efficiency. As a result of the acquisition,
the Group now benefits from the capability to manufacture certain
chemicals used in water treatment applications, further
strengthening our customer proposition in this market.
The acquisition in October of Tersus extends the Group's
capabilities to provide a range of testing, inspection and training
services with a focus on the risk of hazardous materials in
commercial buildings. Tersus' activities are highly complementary
to those of DCUK, which the Group acquired in July 2017. The market
Tersus occupies shares attractive key characteristics with the
Group's other service markets, including a significant element of
non-discretionary spend, strong regulatory and legislative drivers,
a degree of operational and technical complexity which favours
outsourcing, and the same channel to market, which provides
opportunities for cross-selling. This market is currently highly
fragmented and offers significant scope for consolidation. Both
Suez WCS and Tersus have traded in line with expectations since
acquisition and their integration programmes are on track.
FIRE & SECURITY
Our Fire & Security division delivered adjusted EBITDA of
GBP2.5m (HY 2018: GBP2.1m) and adjusted operating profit of GBP2.1m
(HY 2018: GBP1.7m) on revenues of GBP29.9m (HY 2018: GBP26.1m) with
the contribution of the recently acquired Flamefast Fire Systems
and Island Fire Protection supplementing organic growth.
The division now comprises the twelve acquisitions that have
been conducted since April 2016, one of which was completed
following the period-end, which have been merged to form one of the
UK's market leaders in the provision of a broad range of integrated
Fire & Security services. This sector offers significant
advantages to operators with national coverage and scale as
customers continue to consolidate their suppliers and to benefit
from the competitive advantages offered by larger service
providers. Flamefast Fire Systems has now been fully integrated
into the Group, and we have closed two further regional offices as
anticipated. In April we completed the acquisition of Island Fire
Protection, which has performed in line with expectations since
acquisition. Our focus continues to be on growing our base of
contracted maintenance revenues. We have made good progress on this
objective and refocused acquired businesses towards these recurring
revenues during their integration programmes to enhance our forward
revenue visibility.
Our investments in technology are progressing to plan, with the
entire division now operating from a unified IT operating platform,
significantly improving control and leading to improvements in
efficiency in back office processes and service delivery. Our focus
within the division has continued to be on investing in the
development of our nationwide operating platform in preparation for
further growth, alongside developing and investing in our
engineering teams to enhance standards of service and compliance at
customers' sites. In a market that depends to a large extent upon
the technical expertise of our field-based engineers, attracting
and retaining talent is expected to be a continued focus of our
operations. We expect our broad-based initiatives to continue to
deliver improvements in our operating margins in the medium term
and our near term operational focus continues to be on leveraging
our increased scale.
WATER & AIR
Our Water & Air division traded strongly during the first
half with adjusted EBITDA of GBP3.1m (HY 2018: GBP1.4m) and
adjusted operating profit of GBP2.7m (HY 2018: GBP1.3m) on revenues
of GBP26.5m (HY 2018: GBP9.9m) which grew by 166% following good
organic growth and significant M&A activity.
Our water treatment and hygiene business has been formed through
the acquisition and integration of seven businesses, the most
recent of which, Suez WCS, was acquired in August 2018. This
acquisition has significantly developed the scale and scope of the
business, making us one of the leading players in the market and
broadening our capabilities into the manufacture of water treatment
chemicals, further strengthening our competitive position. During
the period we also acquired Kingfisher Environmental, further
extending the Group's capabilities and geographic footprint. The
integration programmes for both businesses are on track and we
expect synergies to exceed those identified at the time of
acquisition.
Our air quality activities comprise of the activities of DCUK,
the market leader in ventilation hygiene and contamination
remediation, and Tersus Consultancy which was acquired during
October significantly extending our capabilities into the
complementary testing and inspection market. DCUK traded well
during the period and delivered strong organic growth, particularly
within the ventilation hygiene market which remains immature and
continues to benefit from increased regulatory enforcement. We have
also been able to accelerate growth through cross-selling air
quality services to other Group customers.
In May we acquired the business and assets of Forest
Environmental, which was immediately integrated into DCUK extending
the scale of our contamination remediation activities with the
addition of some large and attractive blue-chip customers.
We continue to see the benefits of our increased scale and the
effectiveness of our focus on operating efficiencies across the
division.
BALANCE SHEET
Group net assets at 30 September 2018 were GBP68.2m (31 March
2018: GBP48.1m) reflecting the proceeds of the GBP20m share placing
in July.
Net cash at 30 September 2018 was GBP4.9m (31 March 2018: net
debt GBP2.9m). Following the recent refinancing, the Group's debt
facility comprises a GBP30m revolving credit facility and a GBP15m
accordion facility, giving the Group access to significant further
resources to support its acquisition-led growth strategy.
CASH FLOW
The net cash generated from operations in the period was GBP1.9m
(HY 2018: GBP0.9m), including a net working capital outflow of
GBP3.1m (HY 2018: outflow GBP2.2m). Post-acquisition working
capital investments in acquired businesses, in particular Forest
Environmental and Suez WCS, amounted to approximately GBP2.0m of
this outflow with the remainder a result of further organic growth
across the Group.
NON-IFRS MEASURES
The Interim Report includes measures which are not defined by
generally accepted accounting principles such as IFRS. We believe
this information, along with comparable IFRS measures, is useful as
it provides investors with a basis for measuring the operating
performance of the Group on a comparable basis. The Board and our
managers use these financial measures to evaluate our operating
performance. Non-IFRS financial measures should not be considered
in isolation from, or as a substitute for, financial information
presented in compliance with IFRS. Similarly, non-IFRS measures as
reported by us may not be comparable with similar measures reported
by other companies. For further information on the reconciliation
between IFRS and non-IFRS measures refer to Note 2 and 4 of the
Notes to the Consolidated Interim Report.
BOARD
As separately announced today we are delighted to welcome Kevin
Quinn to the Board as Non-Executive Director and Chairman Designate
as the Group prepares for significant further planned growth. He is
expected to become Chairman upon the retirement of Derek O'Neill
following the end of the Group's current financial year.
Kevin has extensive experience of the FTSE 250 support services
sector, gained through his 13-year tenure as Chief Financial
Officer at Berendsen plc, a leading European textile service
business, where he played a significant role in its growth from a
market capitalisation of less than GBP700 million during 2005 to a
total implied equity value of approximately GBP2.2 billion as part
of its sale to Elis SA in 2017. Prior to Berendsen, Kevin held a
number of senior finance roles at Amersham plc and was previously a
partner at PriceWaterhouseCoopers. He is currently a Non-Executive
Director and Chair of the Audit Committee at Benchmark Holdings
plc.
PEOPLE
Since our first acquisition in April 2016 our Group has rapidly
increased in scale and now employs over 1,700 people across the UK.
As we continue to grow and develop, both organically and through
acquisition, we have been fortunate to be able to attract such a
high calibre of people to the Marlowe Group who buy into our
collective vision and are looking to progress their careers with
us, whilst sharing in our continued success. As a service business
our Group is predicated upon the continued professionalism,
technical expertise and significant contribution of all of our
people. The strength of these results reflects this
contribution.
OUTLOOK
Marlowe's defensive market qualities, strong channel to market,
organic growth momentum and potential to acquire new businesses
strongly position us to continue to create shareholder value. The
integration of our acquisitions is proceeding to plan and we have a
well-developed pipeline of attractive opportunities to add further
scale to Marlowe as we continue to implement our strategy of
building the leader in the provision of critical and regulated
testing, maintenance and risk management services to commercial
properties across the UK through further organic and
acquisition-led growth.
The second half of the year has started well and, taking into
account good trading across our divisions supplemented by the
positive contribution of recent acquisitions, we expect to deliver
a full year performance ahead of current market expectations.
Alex Dacre
Chief Executive 4 December 2018
Independent review report to Marlowe plc
Introduction
We have been engaged by Marlowe plc (the "Company") to review
the financial information in the half-yearly financial report for
the six months ended 30 September 2018 which comprises the
Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Changes in Equity, the Consolidated Statement of
Financial Position, the Consolidated Statement of Cash Flows and
the related notes. We have read the other information contained in
the half-yearly financial report which comprises only the Chief
Executive's Review, and considered whether it contains any apparent
misstatements or material inconsistencies with the financial
information.
This report is made solely to the Company in accordance with
guidance contained in Independent Standard on Review Engagements
(UK and Ireland) 2410, 'Review of Interim Financial Information
performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. Our review work has been undertaken so
that we might state to the Company those matters we are required to
state to it in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusion we have
formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The AIM Rules for Companies of
the London Stock Exchange require that the accounting policies and
presentation applied to the financial information in the
half-yearly financial report are consistent with those which will
be adopted in the annual accounts having regard to the accounting
standards applicable for such accounts.
As disclosed in Note 1, the annual financial statements of
Marlowe plc and its subsidiaries (the "Group") are prepared in
accordance with IFRSs as adopted by the European Union. The
financial information in the half-yearly financial report has been
prepared in accordance with the basis of preparation in Note 1.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the financial information in the half-yearly financial report based
on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the financial information in the
half-yearly financial report of the Company for the six months
ended 30 September 2018 is not prepared, in all material respects,
in accordance with the basis of accounting described in Note 1.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
4 December 2018
Consolidated Statement of Comprehensive Income
For the six months ended 30 September
2018
Unaudited Unaudited Audited
six months six months year
ended ended 30 ended
30 September September 31 March
2018 2017 2018
Note GBP'm GBP'm GBP'm
Revenue 2 56.4 36.0 80.6
Cost of sales (36.3) (23.7) (54.2)
Gross profit 20.1 12.3 26.4
Administrative expenses (15.9) (9.7) (20.2)
Acquisition and other costs 2 (3.2) (1.9) (6.2)
-------------- ------------ ----------
Operating profit 1.0 0.7 -
Finance costs (0.3) (0.2) (0.4)
Profit/(loss) before tax 0.7 0.5 (0.4)
Income tax charge 3 (0.1) (0.1) (0.3)
0.6 0.4 (0.7)
Profit/(loss) and total comprehensive
income for the period from
continuing operations
Profit/(loss) attributable
to owners of the parent 0.6 0.4 (0.7)
======================================= ===== ============== ============ ==========
Earnings per share attributable
to owners of the parent (pence)
Total
- Basic 4 1.7p 1.2p (2.2p)
- Diluted 4 1.7p 1.2p (2.2p)
Consolidated Statement of Changes
in Equity
For the six months ended 30
September 2018
Share Share Other Retained Total
capital premium reserves earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm
Balance at 1 April 2017 15.5 18.7 0.3 0.5 35.0
Profit for the period - - - 0.4 0.4
Total comprehensive income for
the period - - - 0.4 0.4
------------------------------------ --------- ------------- ------------- ------------- --------
Transaction with owners
Issue of share capital 1.7 11.6 - - 13.3
Issue costs - (0.3) - - (0.3)
Share-based payments charge - - 0.2 - 0.2
1.7 11.3 0.2 - 13.2
------------------------------------ --------- ------------- ------------- ------------- --------
Balance at 30 September 2017
(unaudited) 17.2 30.0 0.5 0.9 48.6
==================================== ========= ============= ============= ============= ========
Balance at 1 October 2017 17.2 30.0 0.5 0.9 48.6
Loss for the period - - - (1.1) (1.1)
Total comprehensive income for
the period - - - (1.1) (1.1)
------------------------------------ --------- ------------- ------------- ------------- --------
Transaction with owners
Issue of share capital 0.1 0.4 - - 0.5
Issue costs - - - - -
Share-based payments charge - - 0.1 - 0.1
0.1 0.4 0.1 - 0.6
------------------------------------ --------- ------------- ------------- ------------- --------
Balance at 31 March 2018 (audited) 17.3 30.4 0.6 (0.2) 48.1
==================================== ========= ============= ============= ============= ========
Balance at 1 April 2018 17.3 30.4 0.6 (0.2) 48.1
Profit for the period - - - 0.6 0.6
Total comprehensive income for
the period - - - 0.6 0.6
------------------------------------ --------- ------------- ------------- ------------- --------
Transaction with owners
Issue of share capital 2.1 17.9 - - 20.0
Issue costs - (0.7) - - (0.7)
Share-based payments charge - - 0.2 - 0.2
2.1 17.2 0.2 - 19.6
------------------------------------ --------- ------------- ------------- ------------- --------
Balance at 30 September 2018
(unaudited) 19.4 47.6 0.8 0.4 68.2
==================================== ========= ============= ============= ============= ========
Consolidated Statement of Financial
Position
At 30 September 2018
Audited
Unaudited Unaudited 31
30 September 30 September March
2018 2017 2018
Note GBP'm GBP'm GBP'm
ASSETS
Non-current assets
Intangible assets 6 50.1 37.3 42.4
Property, plant and equipment 6.2 4.5 4.2
Deferred tax asset 0.1 0.1 -
56.4 41.9 46.6
------------------------------------ ----- -------------- -------------- --------
Current assets
Inventories 3.3 2.1 2.7
Trade and other receivables 34.1 22.0 24.6
Cash and cash equivalents 17.2 10.7 7.7
54.6 34.8 35.0
------------------------------------ ----- -------------- -------------- --------
Total assets 111.0 76.7 81.6
------------------------------------ ----- -------------- -------------- --------
LIABILITIES
Current liabilities
Trade and other payables (28.2) (18.5) (19.9)
Financial liabilities - borrowings 8 (3.0) (1.8) (2.3)
Other financial liabilities (0.8) (0.3) (0.3)
Current tax liabilities (0.4) (0.6) (0.5)
Provisions (0.2) (0.2) (0.2)
(32.6) (21.4) (23.2)
------------------------------------ ----- -------------- -------------- --------
Non-current liabilities
Financial liabilities - borrowings 8 (8.2) (5.2) (7.7)
Deferred tax liabilities (1.7) (1.3) (1.3)
Other financial liabilities (0.3) (0.2) (1.3)
(10.2) (6.7) (10.3)
------------------------------------ ----- -------------- -------------- --------
Total liabilities (42.8) (28.1) (33.5)
Net assets 68.2 48.6 48.1
==================================== ===== ============== ============== ========
Equity
Share capital 19.4 17.2 17.3
Share premium account 47.6 30.0 30.4
Other reserves 0.8 0.5 0.6
Retained earnings 0.4 0.9 (0.2)
Equity attributable to owners
of parent 68.2 48.6 48.1
==================================== ===== ============== ============== ========
Consolidated Statement of Cash
Flows
For the six months ended 30 September
2018
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 September 30 September 31 March
2018 2017* 2018*
Note GBP'm GBP'm GBP'm
Cash flows from operating activities
Net cash generated from operations 11 1.9 0.9 3.2
Net finance costs (0.2) (0.2) (0.4)
Income taxes paid (0.4) (0.4) (0.4)
---------------------------------------- ----- -------------- ------ -------------- ------ --------------
Net cash generated from operating
activities before restructuring
costs 1.3 0.3 2.4
Restructuring costs (1.9) (1.0) (3.6)
Net cash used in operating activities (0.6) (0.7) (1.2)
----------------------------------------------- -------------- ------ -------------- ------ --------------
Cash flows from investing activities
Purchases of property, plant
and equipment 2 (0.9) (0.2) (0.5)
Disposal of property, plant
and equipment 0.2 0.1 0.3
Purchase of subsidiaries including
acquisition costs, net of cash
acquired (9.5) (7.3) (11.2)
Net cash flows used in investing activities (10.2) (7.4) (11.4)
--------------------------------------------------- -------------- ------ -------------- ------ --------------
Cash flows from financing activities
Proceeds from share issues 20.0 10.0 10.0
Cost of share issues (0.7) (0.3) (0.3)
Repayment of borrowings (2.3) (2.5) (5.2)
New bank loans raised 3.5 2.0 6.7
Finance lease repayments (0.3) (0.2) (0.7)
Other financing activities 0.1 2.0 2.0
Net cash generated in financing activities 20.3 11.0 12.5
----------------------------------------------- -------------- ------------------ ----------------
Net increase/(decrease) in cash and
cash equivalents 9.5 2.9 (0.1)
Cash and cash equivalents at start
of period 7.7 7.8 7.8
Cash and cash equivalents at the end
of period 17.2 10.7 7.7
----------------------------------------------- -------------- ------------------ ----------------
Cash and cash equivalents shown above
comprise:
Cash at bank 17.2 10.7 7.7
---------------------------------------- ----- -------------- ------ -------------- ------ --------------
* See Note 1 for details of a prior year/period presentational
restatement
Notes to the Consolidated Interim Report
For the six months ended 30 September 2018
1 Basis of preparation
Basis of preparation
The consolidated interim financial information of the Group for
the six months ended 30 September 2018 was approved by the Board of
Directors and authorised for issue on 4 December 2018. The
disclosed figures are not statutory accounts in terms of Section
434 of the Companies Act 2006. Statutory accounts for the year
ended 31 March 2018, on which the auditors gave an audit report
which was unqualified and did not contain a statement under section
498(2) or (3) of the Companies Act 2006, have been filed with the
Registrar of Companies. The annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union.
The comparative figures for the financial year ended 31 March
2018 and the six months ended 30 September 2017 are consistent with
the Group's annual financial statements and interim financial
statements respectively.
Going concern
Based on the Group's cash flow forecasts and projections, the
Directors are satisfied that the Group has adequate resources to
continue in operational existence for the foreseeable future. They
continue to adopt the going concern basis of accounting in
preparing these interim financial statements.
Accounting policies
This interim report has been prepared on a basis consistent with
the accounting policies expected to be applied for the year ending
31 March 2019. The Group has adopted IFRS 15 (Revenue from
Contracts with Customers) since 1 April 2018. The standard's core
principle is for entities to recognise revenue to depict the
transfer of goods and services to customers in amounts that reflect
the consideration to which the entity expects to be entitled in
exchange for those goods and services. The Group has also adopted
IFRS 9 (Financial Instruments) whose requirements include a logical
model for classification and measurement, a single, forward-looking
"expected loss" impairment model and a substantially reformed
approach to hedge accounting. No restatements have been required as
a result of these standards.
All other accounting policies and methods of computation applied
are consistent with those applied for the year ended 31 March
2018.
Critical accounting estimates and judgements continue to be
applied to the valuation of separable intangibles on acquisition,
impairment of trade receivables, restructuring costs, impairment of
non-financial assets and provisions.
The Group will be required to adopt IFRS 16 (Leases) for the
year ending 31 March 2020. The core principle of the new standard
is for entities to recognise a leased asset and a lease liability
for almost all leases and requires them to be accounted for in a
consistent manner. This introduces a single lessee accounting model
and eliminates the previous distinction between an operating lease
and a finance lease. The Directors are still considering the impact
that the adoption of this Standard will have in future periods.
There were no new relevant Standards or Interpretations to be
adopted for the six months ended 30 September 2018.
Representation of comparative Cash Flow Statements
Following recent discussions with the Financial Reporting
Council's ("FRC") FRC's Corporate Reporting Review team, which
highlighted that the prior year presentation of restructuring cost
cash flows within investing activities did not satisfy the
requirements of IAS 7 "Statement of Cash Flows", we have
re-presented restructuring cost cash flows within operating
activities.
2 Segmental information
The Group is organised into two main operating segments, Fire
Protection & Security Systems ("Fire & Security") and Water
Treatment & Air Quality ("Water & Air"). Services per
segment operate as described in the Chief Executive's review. The
key profit measures are adjusted operating profit and adjusted
EBITDA and are shown before acquisition and restructuring costs,
exceptional loss on customer liquidation, share-based payments and
amortisation of intangible assets. The vast majority of trading of
the Group is undertaken within the United Kingdom. Segment assets
include intangibles, property, plant and equipment, inventories,
receivables and operating cash. Central assets include deferred tax
and head office assets. Segment liabilities comprise operating
liabilities. Central liabilities include deferred tax, corporate
borrowings and head office liabilities. Capital expenditure
comprises additions to computer software, property, plant and
equipment and includes additions resulting from acquisitions
through business combinations. Segment assets and liabilities are
allocated between segments
on an actual basis.
REVENUE
The revenue from external customers was derived from the Group's
principal activities primarily in the UK (where the Company is
domiciled) as follows:
Six months ended 30 September
2018
Unaudited
Water Head
Fire & Security & Air Office Total
GBP'm GBP'm GBP'm GBP'm
Revenue 29.9 26.5 - 56.4
Segment adjusted operating
profit/(loss) 2.1 2.7 (0.6) 4.2
---------------------------------- ---------------- ------- -------- ------
Acquisition costs (0.3)
Restructuring costs (1.9)
Amortisation of acquisition
intangibles (0.6)
Share-based payments (0.4)
Operating profit 1.0
Finance costs (0.3)
Profit before tax 0.7
Tax charge (0.1)
Profit after tax 0.6
---------------------------------- ---------------- ------- -------- ------
Segment assets 18.8 19.3 72.9 111.0
Segment liabilities 7.3 10.8 24.7 42.8
Capital expenditure 0.2 0.7 - 0.9
Depreciation and amortisation 0.4 0.4 0.6 1.4
---------------------------------- ---------------- ------- -------- ------
Six months ended 30 September
2017
Unaudited
Water Head
Fire & Security & Air Office Total
GBP'm GBP'm GBP'm GBP'm
Revenue 26.1 9.9 - 36.0
Segment adjusted operating
profit/(loss) 1.7 1.3 (0.4) 2.6
-------------------------------- ---------------- ------- -------- ------
Acquisition costs (0.3)
Restructuring costs (1.0)
Amortisation of acquisition
intangibles (0.4)
Share-based payments (0.2)
Operating profit 0.7
Finance costs (0.2)
Profit before tax 0.5
Tax charge (0.1)
Profit after tax 0.4
-------------------------------- ---------------- ------- -------- ------
Segment assets 17.8 10.3 48.6 76.7
Segment liabilities 7.2 5.7 15.2 28.1
Capital expenditure 0.1 - - 0.1
Depreciation and amortisation 0.4 0.1 0.4 0.9
-------------------------------- ---------------- ------- -------- ------
Year ended 31 March 2018
Audited
Water Head
Fire & Security & Air Office Total
GBP'm GBP'm GBP'm GBP'm
Revenue 51.9 28.7 - 80.6
Segment adjusted operating
profit/(loss) 3.9 3.3 (1.0) 6.2
-------------------------------- ---------------- ------- -------- ------
Acquisition costs (0.6)
Restructuring costs (3.6)
Exceptional loss on customer
liquidation (0.7)
Amortisation of acquisition
intangibles (0.9)
Share-based payments (0.4)
Operating profit -
Finance costs (0.4)
Loss before tax (0.7)
Tax charge (0.3)
Profit after tax 0.7
-------------------------------- ---------------- ------- -------- ------
Segment assets 16.8 11.3 53.5 81.6
Segment liabilities 6.9 5.0 21.6 33.5
Capital expenditure 0.3 0.2 - 0.5
Depreciation and amortisation 0.7 0.3 0.9 1.9
-------------------------------- ---------------- ------- -------- ------
Reconciliation of segment adjusted operating profit to adjusted
EBITDA
Unaudited
six months
ended
Fire & Water Head 30 September
Security & Air Office 2018 Total
GBP'm GBP'm GBP'm GBP'm
Segment adjusted operating
profit/(loss) 2.1 2.7 (0.6) 4.2
Depreciation 0.4 0.4 - 0.8
----------------------------- ---------- ------- -------- --------------
Adjusted EBITDA 2.5 3.1 (0.6) 5.0
----------------------------- ---------- ------- -------- --------------
Unaudited
six months
ended
Fire & Water Head 30 September
Security & Air Office 2017 Total
GBP'm GBP'm GBP'm GBP'm
Segment adjusted operating
profit/(loss) 1.7 1.3 (0.4) 2.6
Depreciation 0.4 0.1 - 0.5
----------------------------- ---------- ------- -------- --------------
Adjusted EBITDA 2.1 1.4 (0.4) 3.1
----------------------------- ---------- ------- -------- --------------
Audited
Fire & Water Head year ended
Security & Air Office 2018 Total
GBP'm GBP'm GBP'm GBP'm
Segment adjusted operating
profit/(loss) 3.9 3.3 (1.0) 6.2
Depreciation 0.7 0.3 - 1.0
----------------------------- ---------- ------- -------- --------------
Adjusted EBITDA 4.6 3.6 (1.0) 7.2
----------------------------- ---------- ------- -------- --------------
The above tables reconcile segment adjusted operating
profit/(loss), which excludes separately disclosed acquisition and
other costs, to the standard profit measure under International
Financial Reporting Standards (Operating Profit). This is the
Group's Alternative Profit Measure used when discussing the
performance of the Group. The Directors believe that adjusted
EBITDA and operating profit is the most appropriate approach for
ascertaining the underlying trading performance and trends as it
reflects the measures used internally by senior management for all
discussions of performance and also reflects the starting profit
measure when calculating the Group's banking covenants.
Adjusted EBITDA is not defined by IFRS and therefore may not be
comparable with other companies' adjusted operating profit
measures. It is not intended to be a substitute, or superior to,
IFRS measurements of profit.
3 Tax
The underlying tax charge is based on the expected effective tax
rate (19%) for the year ending 31 March 2019 applied to taxable
trading profits for the period.
4 Earnings per ordinary share
Basic earnings per share have been calculated on the profit
after tax for the period and the weighted average number of
ordinary shares in issue during the period.
Unaudited Unaudited Audited
six months six months year
ended 30 ended 30 ended
September September 31 March
2018 2017 2018
Weighted average number of shares in
issue 36,219,829 32,075,473 33,296,260
Total profit/(loss) after tax for the
period GBP0.6m GBP0.4m (GBP0.7m)
----------------------------------------- ------------ ------------ -----------
Total basic earnings per ordinary share
(pence) 1.7 1.2 (2.2)
----------------------------------------- ------------ ------------ -----------
Weighted average number of shares in
issue 36,219,829 32,075,473 33,296,260
Executive incentive plan 141,223 116,947 157,880
Weighted average fully diluted number
of shares in issue 36,361,052 32,195,420 33,454,140
Total fully diluted earnings per share
(pence) 1.7 1.2 (2.2)
----------------------------------------- ------------ ------------ -----------
The Directors believe that adjusted basic earnings per share
provide a more appropriate representation of the underlying
earnings derived from the Group's business. The adjusted items are
shown in the table below:
Unaudited Unaudited
six months six months Audited
ended 30 ended year ended
September 30 September 31 March
2018 2017 2018
GBP'm GBP'm GBP'm
Profit/(loss) before tax for
the period 0.7 0.5 (0.4)
Adjustments:
Acquisition costs 0.3 0.3 0.6
Restructuring costs 1.9 1.0 3.6
Exceptional loss on customer
liquidation - - 0.7
Amortisation of acquisition
intangibles 0.6 0.4 0.9
Share-based payments 0.4 0.2 0.4
Adjusted profit before tax for
the period 3.9 2.4 5.8
---------------------------------- ------------ -------------- ------------
Finance charges 0.3 0.2 0.4
---------------------------------- ------------ -------------- ------------
Adjusted operating profit 4.2 2.6 6.2
---------------------------------- ------------ -------------- ------------
Depreciation 0.8 0.5 1.0
5.0 3.1 7.2
----------------------------------
Earnings Before Interest, Taxes,
Depreciation and Amortisation
("EBITDA")
---------------------------------- ------------ -------------- ------------
The adjusted earnings per share,
based on weighted average number
of shares in issue during the
period, is calculated below:
Unaudited Unaudited
six months six months Audited
ended 30 ended 30 year ended
September September 31 March
2018 2017 2018
Adjusted profit before tax (GBP'm) 3.9 2.4 5.8
Tax at 19/20/20% (0.8) (0.4) (1.1)
------------ ------------ ------------
Adjusted profit after taxation
(GBP'm) 3.1 2.0 4.7
------------
Adjusted basic earnings per
share (pence) 8.8 6.2 14.0
------------------------------------ ------------ ------------ ------------
Adjusted fully diluted earnings
per share (pence) 8.8 6.2 13.9
------------------------------------ ------------ ------------ ------------
5 Dividends
The Company has not declared any dividends in respect of the
current or prior period.
6 Intangible assets
Customer Order
Goodwill relationships backlog Total
GBP'm GBP'm GBP'm GBP'm
Cost
1 April 2017 21.7 5.4 0.1 27.2
Acquired with subsidiary 9.4 1.7 - 11.1
30 September 2017 31.1 7.1 0.1 38.3
------------------------------- --------- --------------- --------- ------
1 October 2017 31.1 7.1 0.1 38.3
Acquired with subsidiary 4.8 0.8 - 5.6
31 March 2018 35.9 7.9 0.1 43.9
------------------------------- --------- --------------- --------- ------
1 April 2018 35.9 7.9 0.1 43.9
Acquired with subsidiary 5.5 2.8 - 8.3
30 September 2018 41.4 10.7 0.1 52.2
------------------------------- --------- --------------- --------- ------
Accumulated amortisation
and
impairment
1 April 2017 - 0.5 0.1 0.6
Charge for the period - 0.4 - 0.4
30 September 2017 - 0.9 0.1 1.0
------------------------------- --------- --------------- --------- ------
1 October 2017 - 0.9 0.1 1.0
Charge for the period - 0.5 - 0.5
31 March 2018 - 1.4 0.1 1.5
------------------------------- --------- --------------- --------- ------
1 April 2018 - 1.4 0.1 1.5
Charge for the period - 0.6 - 0.6
30 September 2018 - 2.0 0.1 2.1
------------------------------- --------- --------------- --------- ------
Carrying amount
30 September 2017 - Unaudited 31.1 6.2 - 37.3
31 March 2018 - Audited 35.9 6.5 - 42.4
------------------------------- --------- --------------- --------- ------
30 September 2018 - Unaudited 41.4 8.7 - 50.1
------------------------------- --------- --------------- --------- ------
An additional GBP0.1m of goodwill has been recognised during the
period as further assessments have been made to the provisional
fair values of acquisitions made in the prior year.
7 Net cash
Analysis of net cash
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GBP'm GBP'm GBP'm
Cash and cash equivalents 17.2 10.7 7.7
Bank loans and overdrafts
due within one year (3.0) (1.8) (2.3)
Bank loans due after one year (8.2) (5.2) (7.7)
Finance leases due within
one year (0.8) (0.3) (0.3)
Finance leases due after one
year (0.3) (0.2) (0.3)
4.9 3.2 (2.9)
------------------------------- -------------- -------------- ----------
8 Financial liabilities - Borrowings
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GBP'm GBP'm GBP'm
Current
Bank loans - secured 3.0 1.8 2.3
3.0 1.8 2.3
---------------------- -------------- -------------- ----------
Non - current
Bank loans - secured 8.2 5.2 7.7
11.2 7.0 10.0
---------------------- -------------- -------------- ----------
The bank debt is due to Lloyds Bank plc and is secured by a
fixed and floating charge over the assets of the Group. Under the
bank facility the Group is required to meet quarterly covenant
tests in respect of cashflow cover, interest cover and
leverage.
9 Called up share capital
The following shares were issued during the period:
No. of shares Share capital Share premium
'm GBP'm GBP'm
Balance at 1 April 2017 30.9 15.5 18.7
28 July 2017 - Consideration Shares
("DCUK") 0.9 0.4 2.9
28 July 2017 - Subscription Shares 2.6 1.3 8.7
Directly attributable costs - - (0.3)
Balance as 30 September 2017 34.4 17.2 30.0
11 January 2018 - Consideration
Shares ("DCUK") 0.1 0.1 0.4
Balance at 31 March 2018 34.5 17.3 30.4
18 July 2018 - Subscription Shares 4.2 2.1 17.9
Directly attributable costs - - (0.7)
-------------------------------------- -------------- -------------- --------------
Balance at 30 September 2018 38.7 19.4 47.6
====================================== ============== ============== ==============
On 18 July 2018, the Group raised gross proceeds of GBP20
million before expenses through the issue of 4,210,000 new ordinary
shares of 50 pence each at a placing price of 475 pence per share
to certain new and existing investors. Directly attributable costs
related to the placing were GBP0.7 million.
10 Business combinations
Acquisition of Island Fire
On 23 April 2018 the Group acquired Island Fire Protection
Limited ("Island Fire"), a provider of fire protection services,
for a total consideration of GBP1.4 million, satisfied by the
payment of GBP1.2 million in cash on completion and a cash payment
of up to GBP0.2m payable subject to the achievement of certain
performance targets by the acquired business 12 months post
acquisition. The provisional fair values are as follows:
Provisional fair value at acquisition GBP'm
---------------------------------------------- ------
Intangible assets - customer relationships 0.5
Cash 0.3
Trade and other receivables 0.2
Property, plant and equipment 0.1
Trade and other payables (0.2)
Deferred tax liabilities (0.1)
Finance leases (0.1)
Net assets acquired 0.7
---------------------------------------------- ------
Goodwill 0.7
---------------------------------------------- ------
One hundred percent of the equity of Island Fire was acquired in
this transaction. Deferred tax has been provided on the value of
the intangible assets at the tax rate applicable at the time the
asset is expected to be realised. Acquisition costs of GBP14k have
been charged to profit or loss.
Acquisition of Forest Environmental Services Limited
On 17 May 2018 the Group acquired the business and assets of
Forest Environmental Services Limited ("Forest"), a provider of
asbestos remediation services, for a total consideration of GBP0.5
million, satisfied in cash on completion. The provisional fair
values are as follows:
Provisional fair value at acquisition GBP'm
--------------------------------------- ------
Property, plant and equipment 0.1
Trade and other receivables 0.7
Trade and other payables (1.0)
Net liabilities acquired (0.2)
--------------------------------------- ------
Goodwill 0.7
--------------------------------------- ------
Acquisition costs of GBP20k have been charged to profit or
loss.
Acquisition of Kingfisher Environmental Services Limited
On 25 July 2018 the Group acquired Kingfisher Environmental
Services Limited ("Kingfisher"), a provider of water treatment and
hygiene services, for a total consideration of GBP3.1 million,
satisfied by the payment of GBP2.4 million in cash on completion
and a cash payment of up to GBP0.7m payable subject to the
achievement of certain performance targets by the acquired business
12 months post acquisition. The provisional fair values are as
follows:
Provisional fair value at acquisition GBP'm
---------------------------------------------- ------
Intangible assets - customer relationships 1.7
Trade and other receivables 0.5
Loans receivable 0.1
Trade and other payables (0.9)
Deferred tax liabilities (0.3)
Net assets acquired 1.1
---------------------------------------------- ------
Goodwill 2.0
---------------------------------------------- ------
One hundred percent of the equity of Kingfisher was acquired in
this transaction. Acquisition costs of GBP25k have been charged to
profit or loss.
Acquisition of Suez Water Conditioning Services Limited
On 24 August 2018 the Group acquired Suez Water Conditioning
Services Limited ("Suez WCS"), a provider of water treatment and
hygiene services, for a total consideration of GBP4.7m, satisfied
by the payment of GBP4.7m in cash on completion. The provisional
fair values are as follows:
Provisional fair value at acquisition GBP'm
-------------------------------------------- ------
Trade and other receivables 2.9
Property, plant and equipment 1.5
Intangible assets - customer relationships 0.6
Inventories 0.5
Cash 0.3
Trade and other payables (3.1)
Net assets acquired 2.7
-------------------------------------------- ------
Goodwill 2.0
-------------------------------------------- ------
One hundred percent of the equity of Suez WCS was acquired in
this transaction. Acquisition costs of GBP54k have been charged to
profit or loss.
11 Cash inflow from operations
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2018 2017 2018
GBP'm GBP'm GBP'm
Profit/(loss) before tax 0.7 0.5 (0.4)
Depreciation of property, plant
and equipment 0.8 0.5 1.0
Amortisation of intangible
assets 0.6 0.4 0.9
Net finance costs 0.3 0.2 0.4
Acquisition costs 0.3 0.3 0.6
Restructuring costs 1.9 1.0 3.6
Share-based payments 0.4 0.2 0.4
Gain on disposal of property,
plant and equipment - - (0.1)
(Increase)/decrease in inventories (0.2) 0.5 0.3
(Increase) in trade and other
receivables (4.3) (1.4) (1.2)
Increase/(decrease) in trade and
other payables 1.4 (1.3) (2.3)
Net cash generated from operations 1.9 0.9 3.2
------------------------------------------- -------------- -------------- ----------
12 Post balance sheet events
Subsequent to the period end the Group made the following
acquisitions:
On 3 October 2018, the Group acquired Tersus Consultancy
Limited, a provider of health and safety and risk management
services.
On 18 October 2018, the Group acquired Firecrest Services
Limited, a provider of fire protection services.
The total consideration for these acquisitions was satisfied by
the payment of GBP3.3m cash on completion. One hundred percent of
the equity was acquired in these transactions.
Purchase price allocations have not yet been performed as the
Group is still in the process of establishing the fair value of the
assets and liabilities acquired in these acquisitions.
On 22 October 2018, the Group entered into a new, enlarged
revolving credit facility with HSBC and National Westminster Bank.
The new facility replaces the Group's existing GBP18 million
facilities and comprises a three-year, GBP30 million revolving
credit facility and an additional accordion facility of GBP15
million.
13 Related parties and key management compensation
Related parties
There were no related part transactions during the period.
Key management compensation
Transactions between the Group and key management personnel in
the period relate to remuneration consistent with the policy set
out in the Directors' Remuneration Report within the Group's 2018
Annual Report.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BCBDDDXGBGIX
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