PARKWOOD HOLDINGS PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005
Parkwood Holdings plc, the support services group, is pleased to announce its
interim results for the 6 months ended 30 June 2005. The operational and
financial highlights reflect the adoption of International Financial Reporting
Standards for the period.
Highlights
* Overall significant first half improvement.
* Continued strong trading from Parkwood Leisure and Healthcare's continuing
improvement offset by weaker trading within the Glendale division.
* January 2005 acquisition of Ecological Sciences Limited ("EcoSci") for a
total cash consideration of �710,000. EcoSci is a Devon based business
which operates Green Waste Management Contracts and has an annual turnover
of around �1 million.
* Post period end acquisition of the Coblands group of companies, a well
established nursery and wholesale plant centre business, enabling the
commencement of Glendale Horticulture.
* Setting up of new joint venture for the funding of Leisure PFIs starting
with the transfer of Penzance Leisure Limited to the joint venture.
* Order book increased by 17% since 31 December 2004 to �326 million (Dec
2004: �278 million)
* Revenue increased by 26% to �39.1 million (2004: �31.2 million)
* Operating profit (before joint venture and associate results) increased by
43% to �0.83 million (2004: �0.58 million)
* Profit before tax increased by 114% to �0.80 million (2004: �0.37 million)
* Earnings per share increased by 136% to 2.6p (2004: 1.1p)
* Interim dividend per share increased to 1.0p (2004: 0.9p)
Tony Hewitt, Executive Chairman, commented:
"*..results have continued to improve and having achieved a good first half
year I expect the Group to have a satisfactory year end result."
Enquiries:
Parkwood Holdings plc
Tony Hewitt, Executive Chairman 01772 627111
Charles Bithell, Group Finance Director 01772 627111
Notes for Editors;
Parkwood Holdings plc specialises in providing outsourced and support services
mainly to the public sector across England and Wales under long term contracts.
Its four main areas of operation are as follows:
Glendale. The majority of the business comes from long term contracts with
local authority clients, involving amenity horticulture, grass cutting,
arboriculture, care of sports pitches, golf courses, parks and open spaces. The
division also includes golf course management, green waste recycling,
environmental consultancy and horticulture.
Parkwood Leisure. The majority of the business comes from long term contracts
with local authorities, managing a diverse range of leisure facilities,
including swimming pools, sports halls, gyms, squash courts and catering
operations.
Healthcare. Consisting of a nursing agency and an ambulance and patient
transport business, Parkwood Healthcare operates in London and the South East,
dealing both with the NHS and the private sector.
PFI Projects. This division undertakes PFI, PPP and similar bids on behalf of
joint ventures and the Group. Parkwood PFI is also responsible for project
management of contracts and the management of other funds such as the lifecycle
funds associated with the project agreement.
Chairman's Statement
The six months to 30th June 2005 have seen an improvement in Parkwood's results
compared to the same period last year with a strong performance in Parkwood
Leisure being responsible for much of the gain. Significantly, the Group sold
for the first time a proportion of equity and sub-ordinated debt in one of its
early PFI projects to Hendersons (HPC Nominees Limited) under an arrangement
which is expected to see other PFI investments sold in due course. Also of note
was a decision to accelerate the reduction in the Group's pensions deficit by
an additional payment of �0.25 million.
Group Results
Group revenue increased to �39.1 million (2004: �31.2 million) a 26% increase,
and profit before tax more than doubled to �0.80 million (2004: �0.37 million).
Operating profit (prior to reorganisation costs of �0.19 million in 2004)
increased by 8% to �0.83 million (2004: �0.77 million). These results are
reported in line with the new International Financial Reporting Standards
(IFRS) with comparatives restated, further details of which are set out later
in this report.
Parkwood's forward order book at the period end stands at �326 million against
�308 million at the same time a year earlier.
The Board is pleased to increase its interim dividend to 1.0p per share (2004:
0.9p) payable on 14th October 2005, to all shareholders on the register on 23rd
September 2005.
Board and Management
Brian May was appointed as a third non-executive director to the Group Board on
28th April 2005. Brian brings with him strategic and executive operational
experience having previously been in senior board roles with Mowlem, Laing and
HBG. He is currently Chief Executive of the Montpellier Group plc.
Leisure division
The Group's leisure division continues to be the most profitable activity
within Parkwood. It is also highly cash generative and the Group's largest
employer. Sales in Parkwood Leisure for the period were �15.8 million (2004:
�10.7 million), this increase being principally due to the acquisition of CCL
Leisure Limited ("CCL") in May 2004 for which only two months results were
included in the prior period. The consolidation of this business into the
existing business of Parkwood Leisure has been very successful. The division's
result rose to �1.02 million for the period to 30th June 2005 (2004: �0.71
million, before reorganisation costs of �0.19 million).
The Group has during this period and into the summer been successful in
negotiation extensions to 5 existing contracts and in total manages 41 centres
including the newly opened centres designed and built by the Group's project
management company. Parkwood Leisure is now seeking further organic growth
whilst at the same time looking for small acquisitions involving up to four or
five clubs in the private sector market. Architects have also been commissioned
to draw up plans for the business to build its own private health and fitness
clubs.
Leisure PFI's and PPP's
Construction was completed during or shortly after the period end on
�28 million of leisure centres at Erith and Bexleyheath in the London Borough of
Bexley, and for the town of Penzance in Cornwall on behalf of Penwith District
Council. The new Crook Log centre at Bexleyheath was officially opened by Her
Majesty The Queen on July 26th as part of the celebrations to commemorate the
fortieth anniversary of the founding of the Borough. Financial close is awaited
on two further PFI/PPP's, with Breckland District Council and Solihull
Metropolitan Borough Council together with an addition to the Bexley contract
with a new centre at Sidcup. Negotiations for the next tranche are underway. In
the meantime new leisure PPP's have been announced and are being investigated,
some of which are of the design, build, operate and maintain (DBOM) model.
Glendale
Glendale increased its sales in the period to �19.8 million (2004: �17.1
million) but failed to produce the profits expected of the division which fell
to �0.27 million from the �0.42 million reported in the previous year. This was
in part a result of the increased activity in Glendale's new golf management
business where winter losses and start up costs have influenced the phasing of
profits in the division as a whole. Glendale Golf with six courses under
management on June 30th now represents 8% of the division's activity.
The acquisition of EcoScience, enabling the commencement of Glendale's Green
Waste Recycling in January, has proceeded smoothly and early results have fully
justified the Group's investment in this sector.
On 2nd September 2005 Parkwood completed the important acquisition of Coblands
Nurseries. This acquisition enables the division to fulfil its long held
ambition of establishing Glendale Horticulture as a new trading activity. With
four plant cash and carry centres around the M25 and a wholesale nursery based
at Tonbridge, Kent, Coblands Nurseries will form a platform for the development
of further plant centres and offers a horticultural expertise and synergies in
tree, shrub and plant production relevant to the rest of Glendale's business.
Sales in the first year after acquisition are expected to be in the region of
�4 million.
Parkwood Healthcare
Parkwood Healthcare's loss reduced to �0.12 million (2004: loss of �0.18
million) on sales of �3.19 million (2004: �2.99 million). This improvement is
expected to continue in the second half, the business having been refocused
under the guidance of the Chairman. In August the Group was informed that it
had re-won two small patient transport contracts in London. The LAP III (London
Agency Project) which took effect on 15th August will impact the Nursing Agency
business which is experiencing a profound change as it moves its business into
the non-NHS sector whilst maintaining as many of its NHS customers as it can.
Parkwood Healthcare welcomed Mark Boothroyd, age 45, as its new Managing
Director in mid August. Mark has prior experience of the NHS and the healthcare
market and will work with the Chairman over the next few months while he
settles into the post.
Parkwood PFI Projects
During the year this business presented a new strategy that will focus more
heavily on project management during the next 2-3 years. The PFI company
appointed Justin Black ACCA with previous PFI experience to its board as
Commercial Director in May and Jeremy Lightfoot was promoted from within to
Project Management Director in July. Now fully resourced, the business is
seeking new opportunities whilst maintaining its presence in its existing
leisure, cultural and defence sectors.
An operating loss (prior to investment income) of �0.27 million in the period
(2004: profit of �0.02 million) is after charging abortive costs of �0.2
million relating to a leisure PFI/PPP with the London Borough of Croydon; the
Group being consoled in that Parkwood Leisure was asked to operate the centres
concerned for an interim period whilst the Council reviews its options for the
future.
In May, Parkwood PFI Projects opened a second office near Sevenoaks in Kent to
service the projects it manages in the South East and to develop new non-PFI
project management work which it is now beginning to bid for.
Funding and Cash Flow
During the six months to 30 June 2005, the Group has invested a total of
�882,000 in interest bearing subordinated debt in PFI ventures and a net
�464,000 on the acquisition of EcoScience. In the same period, the Group's net
debt has decreased from net borrowings of �4.73 million at 31st December 2004
to �3.05 million at 30 June 2005, aided by the transfer of Penzance Leisure
Limited to the 50% owned joint venture. The Group has enjoyed cash in the bank
for most of the first half, resulting in bank interest income of �28,000. Net
debt includes �2.7 million of hire purchase funding for Group operating assets.
The gearing of the Group computed on the basis of net debt compared to net
assets at 30 June 2005 was 123% (2004: 173%).
Interest cover for the Group for the period based on Group profit before
interest and tax excluding joint ventures and associates compared to the net
interest cost including pension financing was 10 times (2004: 5 times).
The Group has recognised a net pension liability to defined benefit pension
schemes of �1.5 million on its balance sheet at June 2005 as part of the
adoption of IFRS. During the 6 months to 30 June 2005, a special contribution
of �250,000 was made in addition to the planned schedule of payments agreed
with the actuary to reduce the total deficit more quickly.
Outlook
The EcoScience and Coblands Nursery acquisitions have added green waste
recycling and horticulture to Glendale's now diverse `green services' and
together with organic growth in this division, and contract extensions and more
modest growth in Parkwood Leisure will mean that Group turnover should rise to
�80 million for the full year (2004: �68 million). Tenders have during the
summer, been submitted for many large long term contracts in all divisions, but
most notably for Liverpool City Council, South Tyneside, Milton Keynes, and the
London Borough of Bexley for Glendale, Bristol City Council for Parkwood
Leisure, and Birmingham Heartlands Hospital and the Feltham Young Offenders
Centre for Parkwood Healthcare. Parkwood's results have continued to improve
and having achieved a good first half I expect the Group to have a satisfactory
year end result.
In the meantime the search will commence shortly for a new Chief Executive who
I would expect to be in post by summer 2006.
A W HEWITT
Executive Chairman
12th September 2005
Financial Highlights
Interim Interim %
2005 2004 Change
Revenue (excluding joint ventures and associates) �39.1m �31.2m +26%
Operating profit (before joint venture and �0.83m �0.58m +43%
associate results)
Profit before tax �0.80m �0.37m +114%
Earnings per share 2.6 p 1.1 p +136%
Dividends proposed per share 1.0p 0.9p +11%
Order Book �326m �308m +6%
Gearing (1) 123% 173%
(1) Calculated by expressing net debt as a percentage of net assets.
Financial Calendar
Interim Dividend Paid 14th October 2005
Full Year Results Announced 13th March 2006
Annual General Meeting May 2006
This statement is being sent to all shareholders. Copies are available from the
Company's website on www.parkwood-holdings.co.uk or from the registered office:
Parkwood House, Cuerden Park, Berkeley Drive, Bamber Bridge, Preston PR5 6BY
Consolidated Income Statement
Six months ended 30 June 2005
Six months ended Year ended
30 June 31 December
(unaudited) (audited)
Note 2005 2004 2004
�000 �000 �000
Continuing operations
Revenue 39,733 31,874 69,042
Less: share of joint ventures (616) (720) (1,385)
revenue
Group revenue - continuing 39,117 31,154 67,657
operations
Cost of sales (29,769) (22,858) (51,234)
Gross profit 9,348 8,296 16,423
Administrative expenses (8,518) (7,716) (14,990)
Group operating profit before 830 766 1,682
reorganisation costs
Reorganisation costs - (186) (249)
Group operating profit 830 580 1,433
Share of results after tax of 30 21 (122)
associate
Share of results after tax of joint (83) (153) (144)
ventures
Total operating profit 777 448 1,167
Investment income 99 31 63
Finance costs (81) (107) (170)
Profit before tax 795 372 1,060
Tax 4 (299) (163) (493)
Profit for the period from 496 209 567
continuing operations
Attributable to:
Equity holders of the parent 496 209 567
Earnings per share
Basic earnings per share 6 2.6 p 1.1 p 3.0 p
Diluted 6 2.6 p 1.1 p 3.0 p
There were no discontinued operations in the period.
Consolidated balance sheet as at 30 June 2005
30 June 31
December
2005 2004 2004
(unaudited) (unaudited) (audited)
�000 �000 �000
Non-current assets
Goodwill 691 570 406
Property, plant and equipment 7,333 9,872 11,395
Investments in joint ventures and 752 235 88
associate
Other investments 140 - -
Deferred tax asset 1,625 2,422 2,407
10,541 13,099 14,296
Current assets
Inventories 922 848 863
Trade and other receivables 12,204 10,250 8,814
Cash 24 1,737 2,110
13,150 12,835 11,787
Total assets 23,691 25,934 26,083
Current liabilities
Trade and other payables 13,422 12,068 11,381
Tax liabilities 691 365 323
Obligations under finance leases 902 1,099 934
Bank overdrafts and loans 361 - -
15,376 13,532 12,638
Net current liabilities (2,226) (697) (851)
Non-current liabilities
Bank loans - 2,708 4,458
Retirement benefit obligations 2,168 2,106 2,418
Long-term provisions 1,848 3,592 2,892
Obligations under finance leases 1,811 1,772 1,447
Total non-current liabilities 5,827 10,178 11,215
Net assets 2,488 2,224 2,230
Equity
Share capital 196 196 196
Share premium account 2,227 2,227 2,227
Investment in own shares (156) (175) (164)
Capital redemption reserve 401 401 401
Retained earnings - deficit (180) (425) (430)
Equity attributable to equity holders of 2,488 2,224 2,230
the parent
Consolidated statement of changes in shareholders' equity
For the six months ended 30 June 2005
Share Share Investment Capital Retained Total
capital premium in own redemption earnings
shares reserve
�000 �000 �000 �000 �000 �000
Balance at 1st January 196 2,227 (188) 401 1,447 4,083
2004 under
UK GAAP
Adoption of IFRS (note - - - - (1,902) (1,902)
10)
Balance at 1st January 196 2,227 (188) 401 (455) 2,181
2004 under
IFRS
Actuarial gains on - - - - 47 47
defined benefit pension
schemes (net of tax)
Profit for the period - - - - 209 209
Total recognised income - - - - 256 256
for the period
Share based payments - - 13 - - 13
Dividends - - - - (226) (226)
Balance at 30th June 196 2,227 (175) 401 (425) 2,224
2004
Balance at 1st January 196 2,227 (188) 401 (455) 2,181
2004 under
IFRS
Actuarial losses on - - - - (125) (125)
defined benefit pension
schemes (net of tax)
Profit for the period - - - - 567 567
Total recognised income - - - - 442 442
for the period
Share based payments - - 24 - - 24
Dividends - - - - (417) (417)
Balance at 31st December 196 2,227 (164) 401 (430) 2,230
2004
Balance at 1st January 196 2,227 (164) 401 (430) 2,230
2005
Profit for the period - - - - 496 496
Total recognised income - - - - 496 496
for the period
Share based payments - - 8 - - 8
Dividends - - - - (246) (246)
Balance at 30th June 196 2,227 (156) 401 (180) 2,488
2005
All recognised income and expense is attributable to the equity holders of the
parent.
Cash flow statement
For the six months end 30 June 2005
Six months ended Year ended
30 June 31
December
Note 2005 2004 2004
(unaudited) (unaudited) (audited)
�000 �000 �000
Net cash from operating activities 8 1,032 1,664 3,444
Investing activities
Interest received 39 31 113
Dividends received from associate 44 - -
Proceeds on disposal of property, plant - 31 283
and equipment
Purchases of property, plant and (2,009) (2,920) (5,608)
equipment
Subordinated debt (invested in)/ repaid (742) - 3
by joint ventures
Subordinated debt invested in other (140) - -
investments
Sales of own shares by employee benefit 8 13 24
trust
Acquisition of subsidiary (net of cash 7 (464) 1,750 1,750
acquired)
Disposal of subsidiary to joint venture (653) - -
(net of cash disposed)
Net cash used in investing activities (3,917) (1,095) (3,435)
Cash flows from financing activities
Interest paid (41) (77) (159)
Dividends paid (246) (224) (401)
Repayments of obligations under finance (551) (549) (1,107)
leases
New bank loans raised 1,276 2,708 4,458
Net cash from financing activities 438 1,858 2,791
Net (decrease)/increase in cash and cash (2,447) 2,427 2,800
equivalents
Cash and cash equivalents at beginning 2,110 (690) (690)
of period
Cash and cash equivalents at end of (337) 1,737 2,110
period
Comprising:
Cash 24 1,737 2,110
Bank overdraft and loans (361) - -
(337) 1,737 2,110
Notes to the interim report
Six months ended 30 June 2005
General information
The financial information for the six months ended 30 June 2005 does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985 and has not been audited. No statutory accounts for the period have been
delivered to the Registrar of Companies.
The financial information in respect of the year ended 31 December 2004 has
been produced using extracts from the statutory accounts prepared under UK GAAP
for this period and amended by adjustments arising from the implementation of
International Financial Reporting Standards (IFRS). The statutory accounts for
this period have been filed with the Registrar of Companies. The auditors'
report on these accounts was unqualified and did not contain a statement under
Sections 237 (2) or (3) of the Companies Act 1985 which deal respectively with
the maintaining of proper accounting books and records and the availability of
information to the auditors.
The financial information presented on pages 6 to 22 has been prepared based on
the adoption of IFRS, including International Accounting Standards (IAS) and
interpretations issued by the International Accounting Standards Board (IASB)
and its committees, as interpreted by any regulatory bodies relevant to the
Group. These are subject to ongoing amendment by the IASB and subsequent
endorsement by the European Commission and are therefore subject to change. As
a result the accounting policies used to prepare the interim financial report
will need to be updated for any subsequent amendment to IFRS required for first
time adoption, or any new standards that the Group may elect to adopt early.
Accounting policies
Parkwood Holdings plc and its subsidiary undertakings have adopted the
accounting policies set out below in the preparation of this financial
information. All of these policies have been applied consistently. The
accounting policies and resultant balance sheet and income statement are to be
regarded as preliminary and will only be determined with certainty when the
first full year IFRS financial statements for the year ending 31 December 2005
are issued.
Basis of Accounting
The financial statements have been prepared under the historical cost basis and
in accordance with the Group's expected 2005 IFRS accounting policies for the
first time.
First Time Application of IFRS
IFRS1 "First time adoption of International Reporting Standards" sets out the
procedures that the Group must follow when it adopts IFRS for the first time as
the basis for preparing its consolidated financial statements.
The Group is required to establish its IFRS accounting policies as at 31
December 2005 and, in general, apply these retrospectively to determine the
IFRS opening balance sheet at its date of transition, 1st January 2004.
This standard provides a number of optional and mandatory exemptions to this
general principle. The most significant of these are set out below, together
with a description in each case of the exemption adopted by the Group.
Business combinations (IFRS 3)
The Group has elected not to apply IFRS3 retrospectively to business
combinations that took place before the date of transition. Accordingly
combinations prior to 1 January 2004 have not been restated. As a result, the
carrying value of goodwill is frozen at 1 January 2004.
Employee benefits (IAS 19)
The Group has elected to recognise all cumulative actuarial gains and losses in
relation to employee benefit schemes at the date of transition. The Group has
recognised all subsequent actuarial gains and losses in full in the statement
of changes in equity in accordance with the amendment to IAS 19, issued on 16
December 2004.
Share based payments (IFRS 2)
The Group has elected to apply IFRS2 only to relevant share-based payment
transactions granted after 7 November 2002 and not vested as at 1 January 2005.
Property Plant and Equipment (IAS 16)
The Group has elected on adoption of IFRS to freeze the cost of plant, property
and equipment value at their historic cost at the date of transition.
Reconciliations and descriptions of the effect of transition from UK GAAP to
IFRS on the Group equity net income are provided in note 10. There are only
presentational adjustments in respect of the Group's cash flows.
Basis of Consolidation
The financial information consolidates the financial information of Parkwood
Holdings plc and all of its subsidiary undertakings and incorporates the
results of its joint ventures and associate for the six months ended 30 June
2005. The Group uses the acquisition method of accounting to consolidate the
results of subsidiary undertakings. The results of subsidiary undertakings are
included from the date of acquisition or to the date of disposal.
Revenue
Revenue is the total amount receivable by the Group for goods supplied and
services provided in the normal course of business, excluding VAT. Revenue is
matched to the periods for which a service is being provided to a customer.
Goodwill
Goodwill arising on the acquisition of a subsidiary is the difference between
the fair value of the consideration paid and the fair value of the assets and
liabilities acquired. Goodwill is recognised as an asset and reviewed for
impairment at least annually. Any impairment is recognised immediately in the
income statement and is not subsequently reversed.
Negative goodwill arising on acquisitions is credited to the income statement
in the period of acquisition.
On disposal of a subsidiary, associate or jointly controlled entity, the
attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any accumulated impairment losses. Finance costs related to the
construction of property, plant and equipment are capitalised during the
construction period. Depreciation is provided to write-off the cost, less
estimated residual values, of all property, plant and equipment, over their
expected useful lives. The annual rates generally applicable are:
Vehicles - 25% straight line
Plant and machinery - 12.5 - 25% straight line
Fixtures and fittings - 10 - 33.3% straight line
Leasehold Improvements - Over the remaining life of the lease or their useful
life if shorter
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, over the term of the
relevant lease.
Investments
Investments held as fixed assets are stated at cost less any accumulated
impairment losses.
Associates and joint ventures
Investments in associates and joint ventures are accounted for using the equity
method. The consolidated income statement includes the Group's share of these
undertakings' profits less losses while the Group's share of net assets is
shown in the consolidated balance sheet. Goodwill arising on the acquisition of
associates and joint ventures is accounted for in accordance with the policy
set out above. Any unamortised balance of goodwill is included in the carrying
value of the investment in associates and joint ventures.
The Group's investments in associates and joint ventures all relate to PFI/PPP
contracts where the Group's interest is held in a special purpose vehicle.
PFI/PPP contracts - bid costs
All costs of bidding for PFI and PPP contracts are expensed as they are
incurred until virtual certainty is reached that the project will be
successfully completed.
Inventories
Inventories are valued at the lower of cost and net realisable value.
Long term contracts
The attributable profit on long-term contracts is recognised once their outcome
can be assessed with reasonable certainty. The profit recognised reflects the
proportion of work completed to date on the project.
The Group presents as an asset the gross amount due from customers for contract
work for all contracts in progress for which costs incurred plus recognised
profit (less recognised losses) exceeds progress billings.
Full provision is made for losses on all contracts in the year in which the
loss is first foreseen.
Taxation
Current tax, including UK corporation tax is provided at amounts expected to be
paid (or recovered) using the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
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 and Hire Purchase Contracts
Assets held under finance leases and hire purchase contracts are capitalised in
the balance sheet and depreciated over their expected useful lives. The
interest element of lease payments represents a constant proportion of the
capital balance and is charged to the income statement over the period of the
lease.
All other leases are regarded as operating leases and the payments made under
them are charged to the income statement on a straight line basis over the
lease term.
Employee Benefits - Retirement Benefit Costs
Defined Contribution Scheme
The pension costs charged against profits represent the amount of the
contributions payable to the scheme in respect of the accounting period.
Defined Benefit Scheme
The liability recognised in the balance sheet in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the
balance sheet date less the fair value of plan assets. The defined benefit
obligation is calculated annually by independent actuaries using the projected
unit credit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest
rates of high-quality corporate bonds approximating to the terms of the related
pension liability. Unrealised gains and losses are recognised in equity as an
item within the statement of changes in equity.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payments. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that had not vested as of 1
January 2005. The Group issues equity-settled benefits to certain employees.
These equity-settled share-based payments are measured at fair value at the
date of grant. The fair value is determined at the grant date and is expensed
on a straight-line basis over the vesting period, based on the Group's estimate
of shares that will eventually vest.
Fair value is measured by use of the Black-Scholes option pricing model.
Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a
liability in the Group's financial statements in the period in which the
dividends are approved.
3. Business segments
For management purposes, the Group is currently organised into four operating
divisions - Glendale, Parkwood Leisure, Healthcare and PFI Projects. These
divisions are the basis on which the Group reports its primary segment
information.
Principal activities are as follows
Glendale The majority of the business comes from long term contracts with local
authority clients, involving amenity horticulture, grass cutting,
arboriculture, care of sports pitches, golf courses, parks and open spaces. The
division also includes golf course management and green waste recycling.
Parkwood Leisure The majority of the business comes from long term contracts
with local authorities, managing a diverse range of leisure facilities,
including swimming pools, sports halls, gyms, squash courts and catering
operations.
Healthcare Consisting of a nursing agency and an ambulance and patient
transport business, Parkwood Healthcare operates in London and the South East,
dealing both with the NHS and the private sector.
PFI Projects This division undertakes PFI, PPP and similar bids on behalf of
joint venture and the Group. Parkwood PFI is also responsible for project
management of contracts and the management of other funds such as the lifecycle
funds associated with the project agreement.
Segmental information about these divisions is presented below.
Six months ended Glendale Leisure Healthcare PFI Other Total
30 June 2005 Projects
2005 2005 2005 2005 2005 2005
�000 �000 �000 �000 �000 �000
Revenue 19,843 15,814 3,189 191 80 39,117
Group operating 363 962 (77) (267) (151) 830
profit / (loss)
Share of results of - - - - 30 30
associate
Share of results of - - - - (83) (83)
joint ventures
Total operating 363 962 (77) (267) (204) 777
profit / (loss)
Investment income - - - - 99 99
Interest expense (91) 54 (45) - 1 (81)
Profit / (loss) 272 1,016 (122) (267) (104) 795
before tax
Six months ended Glendale Leisure Healthcare PFI Other Total
Projects
30 June 2004 2004 2004 2004 2004 2004 2004
�000 �000 �000 �000 �000 �000
Total revenue 17,128 10,683 2,989 325 29 31,154
Results
Profit before 551 677 (142) 22 (342) 766
interest
Reorganisation costs - (186) - - - (186)
Group operating 551 491 (142) 22 (342) 580
profit / (loss)
Share of results of - - - - 21 21
associate
Share of results of - - - - (153) (153)
joint ventures
Total operating 551 491 (142) 22 (474) 448
profit / (loss)
Investment income - - - - 31 31
Interest expense (131) 35 (38) - 27 (107)
Profit / (loss) 420 526 (180) 22 (416) 372
before tax
4. Tax
Corporation tax for the interim period to 30 June 2005 is charged at 35% (2004:
30%) of profit excluding amortisation, joint ventures and associates
representing the best estimate of the weighted average annual corporation tax
rate expected for the full financial year.
5. Dividends
Six months Year
ended ended 31
30 June December
2005 2004 2004
�000 �000 �000
Amounts recognised as distributions to
equity holders in the period:
Dividends for the year ended 31 246 226 417
December 2004 of 2.2p comprising
interim dividend 0.9p and final
dividend 1.3p (2003: Interim of 0.9p
and final of 1.3p) per share.
6. Earnings per share
Earnings per share relate to continuing operations and have been calculated on
earnings for the period divided by the weighted average number of ordinary
shares in issue of 18.97 million (December 2004: 18.91 million; June 2004:
18.88 million).
7. Acquisition of subsidiary
On 31 January 2005, the group acquired 100% of the issued share capital of
Ecological Sciences Limited ("EcoSci") for cash consideration of �660,000 plus
deferred consideration of �50,000. EcoSci is the parent company of a group of
companies involved in green waste management and associated activities. This
transaction has been accounted for by the purchase method of accounting.
Following the assigning of provisional fair values to the completion accounts
of EcoSci, the provisional goodwill recognised on the acquisition is �286,000.
8. Net cash from operating activities
Six months ended Year ended
30 June 31 December
2005 2004 2004
�000 �000 �000
Group operating profit 830 580 1,433
Adjustments for:
Depreciation of property, plant and equipment 1,413 943 1,845
Loss/(gain) on disposal of property, plant and 15 (9) 8
equipment
Decrease in provisions (464) (66) (434)
Operating cash flows before movements in working 1,794 1,448 2,852
capital
Increase in inventories (55) (160) (175)
(Increase)/decrease in receivables (3,379) (1,145) 434
Increase in payables 2,602 1,521 506
Cash generated by operations 962 1,664 3,617
Income taxes received/(paid) 70 - (173)
Net cash from operating activities 1,032 1,664 3,444
9. Events after the balance sheet date
Acquisition
On 2nd September 2005 Parkwood completed the acquisition of Coblands Wholesale
Limited and Coblands Broadwater Plants Limited for a total consideration of �
25,000. The businesses operate in the Horticulture marketplace and have five
sites involved in production and growing-on of plants, with the main site and
head office based in Tonbridge, Kent and four plant "Cash and Carry" centres
for trade buyers around the M25.
Dividend
Following the balance sheet date, the Board of Directors has approved a
dividend of 1.0p per share (2004: 0.9p) payable on 14th October 2005 to all
shareholders on the register on 23rd September 2005.
10. Explanation of transition to IFRS
The reconciliations of equity and profit below together with the explanations
of the changes are provided to facilitate the understanding of the changes
arising from the adoption of IFRS.
Differences between IFRS and UK GAAP
IAS19
The Group has adopted IAS 19 "Employee Benefits" in respect of its defined
benefit pension schemes. The balance sheet impact of the implementation of this
standard is to recognise a pension liability in the Group's IFRS balance sheet
as at 1 January 2004 in place of the SSAP 24 net prepayment previously held
under UK GAAP. The cost of providing benefits as reported in the income
statement is determined using the Projected Unit Credit Method.
IFRS2
Under IFRS 2, "Share-based payments" an amount has been charged to reflect the
fair value of such payments in accordance with the Group's accounting policy.
The fair value of the liability for share based payments has been accrued on
the balance sheet.
IFRS3 and IAS 36
IFRS 3 "Business combinations" no longer permits the amortisation of goodwill.
Instead goodwill is carried at cost and is subject to regular impairment
reviews. As there is no impairment of goodwill required at 1 January 2004, the
balance has been frozen at UK GAAP levels. IAS36 "Impairment of assets"
requires that goodwill balances are tested for impairment at least annually.
IAS10
As required by IAS 10 "Events after the Balance Sheet Date", no provision is
made within these accounts for the final proposed dividend because at the
balance sheet date it was still subject to approval and is thus not considered
to be an adjusting event.
IAS16
As required by IAS 16, the depreciation of fixed assets in the Group's joint
ventures and associates has been made on a straight line basis, rather than an
annuity basis as allowed under UK GAAP. The result is to increase the
depreciation charge in the early years of each project.
IAS12
Deferred tax has been charged in respect of a rolled over gain as required
under IAS 12.
10a. Reconciliation of equity at 1 January 2004
The following table sets out a reconciliation of the balance sheet and equity
of the Group as at 1 January 2004 from UK GAAP to IFRS as described in note 2.
Adjustments
UK GAAP IAS 19 IFRS 2 IAS 10 IAS 16 IFRS
�000 �000 �000 �000 �000 �000
Goodwill 525 - - - - 525
Property, plant and 4,773 - - - - 4,773
equipment
Investments in 258 - - - (67) 191
joint ventures
Investment in 351 - - - (104) 247
associate
Deferred tax asset - 664 - - - 664
Total non-current 5,907 664 - - (171) 6,400
assets
Inventories 518 - - - - 518
Trade and other 8,412 (670) - - - 7,742
receivables
Total current 8,930 (670) - - - 8,260
assets
Total assets 14,837 (6) - - (171) 14,660
Current liabilities
Trade and other 7,535 - - (226)
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