Half Yearly Report

RNS Number : 3005T

Begbies Traynor Group PLC

12 December 2012

 



12 December 2012

Begbies Traynor Group plc

Half year results

for the six months ended 31 October 2012

Begbies Traynor Group plc ('the group'), the UK's leading independent business recovery practice, today announces its half year results for the six months ended 31 October 2012.

Financial highlights

·      Revenue of £26.1m (2011: £29.4m)

·      EBITA* (pre-exceptional items and acquisition-related costs) of £3.7m (2011: £4.6m)

·      Adjusted profit before tax** of £3.2m (2011: £4.1m)

·      Profit before tax of £2.0m (2011: £3.4m)

·      Profit for the period of £1.4m (2011: loss of £4.1m)

·      Earnings per share:

-      adjusted basic and diluted EPS*** from continuing operations was 2.5p (2011: 3.1p)

-      basic and diluted EPS from continuing operations of 1.5p (2011: 2.5p)

·      Interim dividend maintained at 0.6p (2011: 0.6p)

·      Net debt of £18.3m (Apr 12: £20.1m; Oct 11: £27.3m), comfortably within the banking facilities, with reduction in gearing to 32% (Apr 12: 34%; Oct 11: 46%) and strong interest cover of over seven times

* Earnings before interest, tax and amortisation of intangible assets arising on acquisitions

** Profit before tax from continuing operations of £2.0m (2011: £3.4m) plus amortisation of £0.2m (2011: £0.2m) plus finance charge arising from the discounting of deferred consideration of nil (2011: £0.1m) plus exceptional items and acquisition-related costs of £1.0m (2011: £0.4m)

*** See reconciliation in note 6

Operational highlights

·      First period in which the group has operated in its new shape, following sale of non-core divisions last year

·      Revenues impacted by subdued summer insolvency market

·      Broadly stable group profit levels compared to second half of last year

·      Insolvency and restructuring:

-      Challenging markets, exacerbated by summer events and continued low interest rate policy

-      Operating margins improved slightly compared to second half of last year

-      Notable cases in the period included Port Vale FC, Twickenham Film Studios and United Carpets

·      Global Risk Partners:

-      Improved and profitable financial performance, from loss making position in second half of last year

Current trading 

·      The level of UK corporate insolvencies expected to remain broadly stable, notwithstanding seasonality in the quarterly Government statistics

Commenting on the results, Ric Traynor, Executive Chairman of Begbies Traynor Group, said:

"Challenging market conditions have persisted with lower levels of activity in the insolvency market over the summer months. Overall, this led to a group performance with lower revenues and profits than the comparative period. In spite of this, the business remains profitable and continues to generate good operating margins through on-going management of the group's cost base."

"We anticipate an improvement in activity in the second half of the financial year during the traditionally busier winter months. Given this, we currently anticipate that the group's performance for the year as a whole will be broadly in line with last year. We will provide an update on third quarter trading in early March 2013."

A meeting for analysts will be held today at 10.00am at the offices of MHP Communications, 60 Great Portland Street, London, W1W 7RT.  Please contact Giles Robinson on 020 3128 8788 if you would like to attend.

Enquiries please contact:

Begbies Traynor Group PLC                                                                                            0161 837 1700

Ric Traynor - Executive Chairman

Nick Taylor - Group Finance Director

Canaccord Genuity Limited                                                                                             020 7523 8350

(Nominated Adviser and Joint Broker)

Bruce Garrow / Adam Miller

Shore Capital                                                                                                                       020 7408 4090

(Joint Broker)

Pascal Keane

MHP Communications                                                                                                      020 3128 8100

Reg Hoare / Katie Hunt / Giles Robinson

Information on Begbies Traynor Group can be accessed via the Group's website at

www.begbies-traynorgroup.com

CHAIRMAN'S STATEMENT

INTRODUCTION

This half year period has been the first in which the group has operated wholly in its new shape, focused on its core UK insolvency and restructuring business, following the sale of its non-core divisions last year. 

Challenging market conditions have persisted with lower levels of activity in the insolvency market, which were exacerbated by an exceptional summer of national events in addition to the continuing low interest rate policy and creditor forbearance. Overall, this led to a group performance with lower revenue and EBITA than the comparative period.

In spite of this, the business remains profitable and continues to generate good operating margins through on-going management of the group's cost base. Over the last two years, the group has reduced like for like costs in its continuing businesses by £5m per annum, whilst maintaining the potential to significantly improve its financial performance should more favourable market conditions return.

The group has delivered broadly stable profit levels on a sequential basis, despite reduced revenues, with EBITA of £3.7m compared to £3.9m in the second half of last year. This is due to improved operating margins, reflecting the reduced cost base. This sustainable level of profitability has enabled us to continue to pay a dividend, whilst making progress in reducing our debt levels.

RESULTS

The group's revenue from continuing operations in the half year decreased to £26.1m (2011: £29.4m). Earnings before interest, tax and amortisation ('EBITA') (pre-exceptional and acquisition-related costs) decreased to £3.7m (2011: £4.6m).  Adjusted profit before tax* decreased to £3.2m (2011: £4.1m).  Profit before tax decreased to £2.0m (2011: £3.4m). Exceptional and acquisition-related costs relating to continuing operations were £1.0m (2011: £0.4m).

The results on a sequential basis are as follows:

	Six months ended 31 October 2012		Six months ended 30 April 2012	Six months ended 31 October 2011
	£m	£m		£m
Revenue	26.1	28.3		29.4
EBITA	3.7	3.9		4.6
Adjusted profit before tax*	3.2	3.3		4.1
Profit before tax	2.0	2.1		3.4

Earnings per share ('EPS') from continuing operations^**, adjusted for the net of tax impact of amortisation, exceptional and acquisition-related costs and the finance charge arising from the discounting of deferred consideration liabilities, decreased to 2.5p (2011: 3.1p). Basic and diluted EPS from continuing operations were 1.5p (2011: 2.5p).

Net borrowings at 31 October 2012 were £18.3m (Apr 12: £20.1m; Oct 11: £27.3m), comfortably within the group's bank facilities, with a reduction in gearing to 32% (Apr 12: 34%; Oct 11: 46%) and strong interest cover of over seven times.

* Profit before tax from continuing operations of £2.0m (2011: £3.4m) plus amortisation of £0.2m (2011: £0.2m) plus finance charge arising from the discounting of deferred consideration of nil (2011: £0.1m) plus exceptional items and acquisition-related costs of £1.0m (2011: £0.4m)

** See reconciliation in note 6

DIVIDEND

The board remains committed to its long-term progressive dividend policy, which takes account of underlying growth in earnings, whilst acknowledging short-term fluctuations in profits and the requirement for continuing investment in the business.

Having considered financial performance in the current year, the outlook for the remainder of the financial year and the on-going requirements of the business, the board has recommended the interim dividend be maintained at 0.6p (2011: 0.6p).

The interim dividend will be paid on 9 May 2013 to shareholders on the register as at 12 April 2013, with an ex-dividend date of 10 April 2013.

OPERATIONAL REVIEW

Insolvency and restructuring

Begbies Traynor is the UK's leading independent business recovery practice, providing a partner-led service to stakeholders in troubled businesses.

Segmental profits decreased to £6.0m (2011: £7.2m) in the period as a result of a reduction in revenue to £24.0m (2011: £26.8m). Operating margins were 25.0% (2011: 26.9%).

The UK insolvency market remains challenging with lower levels of activity than expected, considering the levels of financial distress present in the wider economy. However, base rates of 0.5% (since May 2009) continue to provide a very benign financing environment for otherwise weak companies.

Our market was notably quieter over the summer months, with Government statistics showing national insolvencies to be 10% lower than the previous year for the quarter to September 2012. As the UK insolvency business with the largest market share, any volatility in national insolvency numbers has a direct impact on our operational volumes.

In light of the trading environment, we continue to keep our cost base under close review and aligned to current and projected activity levels. The number of people employed in the group's insolvency division has decreased to 449 as at 31 October 2012 from 466 at the start of the financial year. As a result of the lower cost base operating margins improved slightly on a sequential basis (compared to the second half of the previous financial year), from 24.7% to 25.0%.

We remain the market leader in UK mid-market insolvency and believe that the combination of our full national coverage, strong relationships with all major UK banks and excellent referral networks from other professional services organisations leaves the business well placed to take full advantage of this market.

High profile cases in the period include the successful sale of Port Vale Football Club from administration as a going concern, the sale of Twickenham Film Studios out of administration, and the pre-pack administration of United Carpets (Northern) Limited, a 73 store chain of carpet superstores.  The group continues to demonstrate strength and expertise in key sectors where financial distress has been most evident, notably including football clubs and high street retailers.

We will continue to develop this core division through a combination of senior recruitment, selective acquisitions and staff development, with the intention of progressively increasing our market share. Further development over the medium term will come from winning higher value, more complex instructions from existing clients and prospects, by demonstrating our growing capabilities and credentials.

Global risk partners

Global risk partners is a specialist risk consulting and forensic investigation consultancy. Its services include forensic technology and accountancy; risk and security consultancy; and corporate intelligence and investigations.

Revenues in this segment decreased to £2.2m (2011: £2.6m), generating a profit of £0.2m (2011: £0.2m). Operating margins increased to 10.2% (2011: 7.3%).

Financial performance has improved, from a loss-making position in the second half of the previous financial year, as a result of a restructuring of the cost base to reduce the level of operational gearing.

Overall, this division has grown through organic investment to date, has low working capital requirements, as well as a growing reputation and good future medium-term growth prospects, with a stable outlook for the second half.

The number of people employed in global risk partners decreased to 29 on 31 October 2012 from 34 at the start of the financial year.

INSOLVENCY MARKET

Trends in Government insolvency data demonstrate a flat market over the course of the last three calendar years from 2010 through to 2012.

Insolvency statistics

The number of corporate insolvencies (Source: The Insolvency Service) for the nine months ended 30 September 2012 was 16,035 (nine months ended 30 September 2011: 16,516) compared to a total of 21,858 for the calendar year 2011, a run rate reflecting the broadly flat market.

There are currently no signs of an increase in insolvency volumes, in spite of the many indicators of financial stress. R3, the insolvency trade body, estimates that there is an increasing number of 'zombie' businesses (defined as businesses only able to pay the interest on their debt but not pay off the debt itself) in the UK. As of November 2012, R3 estimated the current number at 160,000. Market commentators believe that around a third may enter an insolvency process if interest rates were to increase.

The board's expectations are that these flat market conditions will remain whilst interest rates remain at their current low levels.

Red Flag Alert

'Begbies Traynor Red Flag Alert' statistics, which are published quarterly, monitor adverse actions and other corporate distress signals, such as the issue of county court judgments and winding-up petitions, which are early warning signs of potential insolvency activity.

The most recent survey, published in October 2012, showed marked increases in financial distress amongst businesses based in the North as well as SMEs, whilst southern based and larger businesses have shown improvements in financial health.

The quarter on quarter increase in 'significant' distress levels amongst SMEs (up 10.5%) also mirrors the increase in zombie businesses found by R3 (and referred to above) and the impact they are having on the UK recovery cycle.

OUTLOOK

We expect the level of UK corporate insolvencies to remain broadly stable, notwithstanding seasonality in the quarterly Government statistics. The general economic conditions remain uncertain and the insolvency market remains challenging. The group's focus in this climate is to continue to ensure our resource base remains appropriate for the levels of activity.

We anticipate an improvement in activity in the second half of the financial year during the traditionally busier winter months. Given this, we currently anticipate that the group's performance for the year as a whole will be broadly in line with last year. We will provide an update on third quarter trading in early March 2013.

Whilst our markets continue to be challenging, we remain committed to maximising the performance of and growing our cash-generative and profitable business, both organically and through selective acquisitions.

Ric Traynor

Executive chairman

12 December 2012

FINANCIAL REVIEW

FINANCIAL HIGHLIGHTS

Group revenue for the period from continuing operations was £26.1m (2011: £29.4m), a decrease of £3.3m. EBITA (pre-exceptional and acquisition-related costs) decreased to £3.7m (2011: £4.6m), as a result of lower activity levels partially mitigated by cost reductions.

The table below summarises financial performance on a sequential basis for the last 18 months.

	Six months ended 31 October 2012		Six months ended 30 April 2012		Six months ended 31 October 2011
	£m		£m		£m
Revenue	26.1		28.3		29.4
Costs	(22.4)		(24.4)		(24.8)
EBITA	3.7		3.9		4.6
Margin	14.0%		13.7%		15.7%

During the current period, the group incurred exceptional restructuring costs of £1.0m (2011: £0.4m), related to the on-going activities to manage the group's cost base.

Amortisation of intangible assets arising on acquisitions was £0.2m (2011: £0.2m).

Finance costs reduced to £0.5m (2011: £0.6m), due to reduced borrowings compared to the comparative period. 

Adjusted profit before tax was £3.2m (2011: £4.1m).  Profit before tax was £2.0m (2011: £3.4m). The reconciliation between these profit measures is as follows:

	Six months ended 31 October 2012		Six months ended 30 April 2012		Six months ended 31 October 2011
	£m		£m		£m
Adjusted profit before tax from continuing operations	3.2		3.3		4.1
Less:
Amortisation of intangible assets arising on acquisitions	(0.2)		(0.2)		(0.2)
Finance charges arising on discounting of deferred consideration	-		-		(0.1)
Exceptional and acquisition-related costs	(1.0)		(1.0)		(0.4)
Profit before tax from continuing operations	2.0		2.1		3.4

The tax charge arising on pre-exceptional profit was £0.9m (2011: £1.2m), which represents an effective rate of 30% (2011: 33%). The tax charge for the period from continuing operations was £0.7m (2011: £1.1m), based on a weighted average expected tax rate for the full year of 33%.

Profit for the period from continuing operations was £1.4m (2011: £2.2m).

EARNINGS PER SHARE ('EPS')

EPS from continuing operations*, adjusted for the net of tax impact of the amortisation of intangible assets arising on acquisitions, exceptional costs, acquisition-related costs and the finance charge arising from the discounting of deferred consideration liabilities, was 2.5p (2011: 3.1p). Basic and diluted EPS from continuing operations was 1.5p (2011: 2.5p).

* See reconciliation in note 6

CASH FLOWS

Net cash flows from operating activities (after interest and tax) in the period increased to £2.8m (2011: outflow £0.7m), due to improved working capital cash flows compared to the comparative period.

Investing cash flows decreased to £0.5m (2011: £3.0m), due to lower acquisition and deferred consideration payments of £0.3m (2011: £2.6m). Net capital expenditure payments were £0.3m (2011: £0.5m).

Financing cash outflows of £1.6m (2011: inflow £0.2m) include a net repayment on the group's principal bank facilities of £1.0m (2011: drawdown £2.0m), dividend payments of £0.5m (2011: £1.1m) and a net repayment of other finance of £0.1m (2011: £0.8m).

FINANCING

Net borrowings at 31 October 2012 were £18.3m (2011: £27.3m), with a reduction in gearing to 32% (2011: 46%) and significant headroom within the total facilities of £35m. During the period, all bank covenants were met and the group's financial position remains robust.

NET ASSETS

At 31 October 2012 net assets were £57.6m (2011: £59.9m), equivalent to net assets per share of 64p (2011: 67p), and are analysed as follows:

	31 Oct 2012		30 Apr 2012		31 Oct 2011
	£m		£m		£m
Non-current assets	53.2		53.6		57.4
Current assets	44.1		43.8		45.2
Net borrowings	(18.3)		(20.1)		(27.3)
Current tax	(0.5)		-		(0.6)
Other liabilities	(20.9)		(18.9)		(17.6)
Net assets held for sale	-		0.1		2.8
Net assets	57.6		58.5		59.9

Nick Taylor

Group finance director

12 December 2012

Consolidated income statement

		Six months ended 31 October 2012 (unaudited) £'000				Six months ended 31 October 2011 (unaudited) £'000				Year ended 30 April 2012 (audited) £'000
	Before				Before				Before
	exceptional		Exceptional		exceptional		Exceptional		exceptional		Exceptional
	and		items and		and		items and		and		items and
	acquisition-		acquisition-		acquisition-		acquisition-		acquisition-		acquisition-
	related costs		related costs	Total	related costs		related costs	Total	related costs		related costs	Total
	£'000		£'000	£'000	£'000		£'000	£'000	£'000		£'000	£'000
Continuing operations
Revenue	26,136		-	26,136	29,392		-	29,392	57,737		-	57,737
Direct costs	(14,402)		(914)	(15,316)	(15,155)		(373)	(15,528)	(30,572)		(1,033)	(31,605)
Gross profit	11,734		(914)	10,820	14,237		(373)	13,864	27,165		(1,033)	26,132
Other operating income	195		-	195	-		-	-	-		-	-
Administrative expenses	(8,277)		(44)	(8,321)	(9,610)		(57)	(9,667)	(18,658)		(414)	(19,072)
Earnings before interest, tax and amortisation	3,652		(958)	2,694	4,627		(430)	4,197	8,507		(1,447)	7,060
Amortisation of intangible assets arising on acquisitions	(182)		-	(182)	(237)		-	(237)	(419)		-	(419)
Finance costs	(494)		-	(494)	(608)		-	(608)	(1,187)		-	(1,187)
Profit before tax	2,976		(958)	2,018	3,782		(430)	3,352	6,901		(1,447)	5,454
Tax	(893)		230	(663)	(1,248)		112	(1,136)	(1,839)		345	(1,494)
Profit for the period from continuing operations	2,083		(728)	1,355	2,534		(318)	2,216	5,062		(1,102)	3,960
Discontinued operations
Loss for the period from discontinued operations	-		-	-	(1,778)		(4,498)	(6,276)	(2,528)		(7,149)	(9,677)
Profit (loss) for the period	2,083		(728)	1,355	756		(4,816)	(4,060)	2,534		(8,251)	(5,717)
Earnings (loss) per share
From continuing operations
Basic and diluted				1.5p				2.5p				4.4p
From continuing and discontinued operations
Basic and diluted				1.5p				(4.5)p				(6.4)p

Consolidated statement of comprehensive income

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year  ended 30 April 2012 (audited)
	£'000	£'000	£'000
Profit (loss) for the period	1,355	(4,060)	(5,717)
Other comprehensive income
Exchange differences on translation of foreign operations	-	(57)	(5)
Total comprehensive income for the period	1,355	(4,117)	(5,722)

Consolidated statement of changes in equity

For the six months ended 31 October 2012 (unaudited)	Share	Share	Merger	Translation	Retained	Total
	capital	premium	reserve	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2012	4,651	17,524	17,584	(33)	18,740	58,466
Profit for the period	-	-	-	-	1,355	1,355
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	-	-	-
Total comprehensive income for the period				-	1,355	1,355
Dividends	-	-	-	-	(1,979)	(1,979)
Exchange differences recognised in income statement on disposals	-	-	-	33	-	33
Credit to equity for equity-settled share-based payments	-	-	-	-	72	72
Modification to cash settled share-based payments	-	-	-	-	(343)	(343)
Shares issued	5	27	-	-	-	32
At 31 October 2012	4,656	17,551	17,584	-	17,845	57,636

For the six months ended 31 October 2011 (unaudited)	Share	Share	Merger	Translation	Retained	Total
	capital	premium	reserve	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2011	4,579	17,443	17,584	(57)	26,312	65,861
Loss for the period	-	-	-	-	(4,060)	(4,060)
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	(57)	-	(57)
Total comprehensive income for the period	-	-	-	(57)	(4,060)	(4,117)
Dividends	-	-	-	-	(1,973)	(1,973)
Credit to equity for equity-settled share-based payments	-	-	-	-	84	84
Shares issued	9	44	-	-	-	53
At 31 October 2011	4,588	17,487	17,584	(114)	20,363	59,908

For the year ended 30 April 2012 (audited)	Share	Share	Merger	Translation	Retained	Total
	capital	premium	reserve	reserve	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2011	4,579	17,443	17,584	(57)	26,312	65,861
Loss for the year	-	-	-	-	(5,717)	(5,717)
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	(5)	-	(5)
Total comprehensive income for the year	-	-	-	(5)	(5,717)	(5,722)
Dividends	-	-	-	-	(1,973)	(1,973)
Exchange differences recognised in income statement on disposals	-	-	-	29	-	29
Credit to equity for equity-settled share-based payments	-	-	-	-	118	118
Shares issued	72	81	-	-	-	153
At 30 April 2012	4,651	17,524	17,584	(33)	18,740	58,466

The merger reserve arose on the formation of the group in 2004.

Consolidated balance sheet

	31 October 2012 (unaudited)	31 October 2011 (unaudited)	30 April 2012 (audited)
	£'000	£'000	£'000
Non-current assets
Intangible assets	50,675	51,165	50,942
Property, plant and equipment	2,512	6,255	2,677
	53,187	57,420	53,619
Current assets
Trade and other receivables	44,051	45,168	43,755
Current tax receivable	-	-	12
Cash and cash equivalents	4,910	574	4,302
Assets classified as held for sale	-	5,070	198
	48,961	50,812	48,267
Total assets	102,148	108,232	101,886
Current liabilities
Trade and other payables	(12,824)	(11,363)	(10,271)
Current tax liabilities	(468)	(621)	-
Borrowings	(158)	(1,509)	(212)
Provisions	(1,508)	(362)	(1,986)
Liabilities directly associated with assets classified as held for sale	-	(2,269)	(145)
	(14,958)	(16,124)	(12,614)
Net current assets	34,003	34,688	35,653
Non-current liabilities
Trade and other payables	(25)	(512)	(94)
Borrowings	(23,070)	(26,388)	(24,145)
Provisions	(1,282)	-	(1,542)
Deferred tax	(5,177)	(5,300)	(5,025)
	(29,554)	(32,200)	(30,806)
Total liabilities	(44,512)	(48,324)	(43,420)
Net assets	57,636	59,908	58,466
Equity
Share capital	4,656	4,588	4,651
Share premium	17,551	17,487	17,524
Merger reserve	17,584	17,584	17,584
Translation reserve	-	(114)	(33)
Retained earnings	17,845	20,363	18,740
Equity attributable to owners of the company	57,636	59,908	58,466

Consolidated cash flow statement

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year ended 30 April 2012 (audited)
	£'000	£'000	£'000
Cash flows from operating activities
Cash generated by operations	3,383	70	3,851
Income taxes paid	(31)	(503)	(778)
Interest paid	(568)	(305)	(719)
Net cash flows from operating activities	2,784	(738)	2,354
Investing activities
Proceeds on disposal of property, plant and equipment	40	126	3,771
Purchase of property, plant and equipment	(310)	(539)	(1,145)
Purchase of intangible fixed assets	-	(51)	(47)
Proceeds on disposal of businesses	10	-	2,466
Deferred consideration payments in the period	(280)	(2,195)	(2,792)
Acquisition of businesses	-	(380)	(380)
Net cash from investing activities	(540)	(3,039)	1,873
Financing activities
Dividends paid	(539)	(1,075)	(1,973)
Hire purchase finance received	-	315	315
Repayments of hire purchase finance obligations	(57)	(989)	(3,496)
Proceeds on issue of shares	32	53	153
Repayment of loans	(72)	(139)	(258)
(Repayment) drawdown of bank facility	(1,000)	2,000	1,000
Net cash from financing activities	(1,636)	165	(4,259)
Net increase (decrease) in cash and cash equivalents	608	(3,612)	(32)
Cash and cash equivalents at beginning of period	4,302	4,334	4,334
Cash and cash equivalents at end of period	4,910	722	4,302

1.     Basis of preparation and accounting policies

(a) Basis of preparation

The half year condensed consolidated financial statements do not include all of the information and disclosures required for full annual financial statements and should be read in conjunction with the group's annual financial statements as at 30 April 2012, which have been prepared in accordance with IFRSs as adopted by the European Union.

This condensed consolidated half year financial information does not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 30 April 2012 were approved by the board of directors on 5 July 2012 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

The directors have reviewed the financial resources available to the group and have concluded that the group is a going concern. This conclusion is based upon, amongst other matters, a review of the group's financial projections for a period of twelve months following the date of this announcement, together with a review of the cash and committed borrowing facilities available to the group.  Accordingly, the going concern basis has been used in preparing these half year condensed consolidated financial statements.

The condensed consolidated financial statements for the six months ended 31 October 2012 have not been audited nor subject to an interim review by the auditors.  IAS 34 'Interim financial reporting' is not applicable to these half year condensed consolidated financial statements and has therefore not been applied.

(b) Significant accounting policies

The accounting policies adopted in preparation of the half year condensed consolidated financial statements are consistent with those followed in the preparation of the group's annual financial statements for the year ended 30 April 2012.

2.     Segmental analysis by class of business

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year ended 30 April 2012 (audited)
	£'000	£'000	£'000
Continuing operations:
Revenue
Insolvency and restructuring	23,956	26,808	53,117
Global risk partners	2,180	2,584	4,620
	26,136	29,392	57,737
EBITA (before exceptional items and acquisition-related costs)
Insolvency and restructuring	5,982	7,198	13,700
Global risk partners	222	189	5
Shared and central costs	(2,552)	(2,760)	(5,198)
	3,652	4,627	8,507

3.     Finance costs

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year ended 30 April 2012 (audited)
	£'000	£'000	£'000
Continuing operations:
Interest payable	484	577	1,139
Unwinding of discount on deferred consideration liabilities	10	31	48
	494	608	1,187

4.     Exceptional and acquisition-related costs

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year ended 30 April 2012 (audited)
	£'000	£'000	£'000
Continuing operations:
Restructuring costs	958	430	1,437
Acquisition-related costs	-	-	10
	958	430	1,447

5.     Discontinued operations

The prior year results for the group's former tax, red flag and insolvency offshore businesses were disclosed as discontinued operations. The results of these operations were as follows:

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year ended 30 April 2012 (audited)
	£'000	£'000	£'000
Revenue	-	2,890	3,824
Direct costs	-	(2,830)	(3,419)
Gross profit	-	60	405
Administrative expenses	-	(2,061)	(3,101)
EBITA	-	(2,001)	(2,696)
Finance costs	-	(9)	(10)
Exceptional and acquisition-related costs	-	(4,519)	(4,803)
Loss before tax	-	(6,529)	(7,509)
Tax	-	253	178
Loss after tax	-	(6,276)	(7,331)
Loss on disposal	-	-	(3,391)
Tax on loss on disposal	-	-	1,045
Net loss attributable to discontinued operations	-	(6,276)	(9,677)

6.     Earnings (loss) per share

The calculation of the basic and diluted earnings (loss) per share is based on the following data:

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year ended 30 April 2012 (audited)
	£'000	£'000	£'000
Earnings
Profit for the period from continuing operations attributable to equity holders	1,355	2,216	3,960
Loss for the period from discontinued operations attributable to equity holders	-	(6,276)	(9,677)
Profit (loss) for the period attributable to equity holders	1,355	(4,060)	(5,717)

	31 October 2012 (unaudited)	31 October 2011 (unaudited)	30 April 2012 (audited)
	number	number	number
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share	89,958,215	89,706,357	89,788,660

	31 October 2012 (unaudited)	31 October 2011 (unaudited)	30 April 2012 (audited)
	pence	pence	pence
Basic and diluted earnings (loss) per share from:
Continuing operations	1.5	2.5	4.4
Discontinued operations	-	(7.0)	(10.8)
Total	1.5	(4.5)	(6.4)

The following additional earnings per share figures are presented as the directors believe they provide a better understanding of the trading position of the group:

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year ended 30 April 2012 (audited)
	£'000	£'000	£'000
Earnings
Profit for the period from continuing operations attributable to equity holders	1,355	2,216	3,960
Amortisation of intangible assets arising on acquisitions	182	237	419
Unwinding of discount on deferred consideration liabilities	10	31	48
Exceptional and acquisition-related costs	958	430	1,447
Tax effect of above items	(274)	(173)	(446)
Adjusted earnings	2,231	2,741	5,428

	31 October 2012 (unaudited)	31 October 2011 (unaudited)	30 April 2012 (audited)
	pence	pence	pence
Adjusted basic and diluted earnings per share from continuing operations	2.5	3.1	6.0

7.     Dividends

The interim dividend of 0.6p (2011: 0.6p) per share (not recognised as a liability at 31 October 2012) will be payable on 9 May 2013 to ordinary shareholders on the register at the close of business on 12 April 2013.  The final ordinary dividend of 1.6p per share as proposed in the 30 April 2012 financial statements and approved at the group's AGM was paid on 7 November 2012 and was recognised as a liability at 31 October 2012.

8.     Reconciliation to the cash flow statement

	Six months ended 31 October 2012 (unaudited)	Six months ended 31 October 2011 (unaudited)	Year ended 30 April 2012 (audited)
	£'000	£'000	£'000
Profit (loss) for the period	1,355	(4,060)	(5,717)
Adjustments for:
Tax	663	883	271
Finance costs	494	617	1,197
Amortisation of intangible assets	267	321	588
Depreciation of property, plant and equipment	438	900	1,745
Exceptional cost relating to impairment of assets	-	-	366
Exceptional restructuring costs relating to asset write downs	420	70	141
Loss on disposal of businesses	-	-	680
(Profit) loss on disposal of property, plant and equipment	(4)	2	(21)
Impairment of goodwill	-	4,437	4,437
Share-based payment expense	72	84	118
Operating cash flows before movements in working capital	3,705	3,254	3,805
Increase in receivables	(668)	(1,686)	(101)
Increase (decrease) in payables	1,069	(1,003)	(2,345)
(Decrease) increase in provisions	(723)	(495)	2,492
Cash generated by operations	3,383	70	3,851

 

END

 

 

IR FFEFWFFESEDE