Final Results
Mears Group PLC
3 April 2002
MEARS GROUP PLC - FINAL RESULTS
Mears Group PLC today announced its preliminary results for the year ended 31
December 2001.
Chairman's Statement
I am pleased to announce record profits for the year ended 31st December 2001.
Profits before tax were up 30% at £2,508,398 (2000 £1,928,479) on turnover of
£68,579,597. In 2000 turnover reached £70,680,186 but included discontinued
activities.
Earnings per share, after an actual tax charge and the amortisation of goodwill,
increased to 4.00p. The tax charge in both 2001 and 2000 was reduced as a result
of the tax losses from the Haydon acquisition. Had a full tax charge been
applied in 2000 and 2001, the earnings per share on this basis increased by 25%.
The Board recommends a final dividend of 0.6p per ordinary share making a total
dividend for the year of 0.8p (2000 0.65p). The final dividend is payable on 1
July 2002, to shareholders on the share register on 7 June 2002.
Trading Review
The Group had an excellent year with trading conditions buoyant. The current
initiatives from Central Government to improve the general condition of the
social housing stock on a national basis, provides outstanding opportunities for
growth. Within the last six months the Group has been awarded its two largest
ever contracts from Welwyn Hatfield Council and the Richmond Housing
Partnership, demonstrating the size and nature of the opportunities currently
available in the public sector.
Both these contracts adopt a partnership approach where the Group enjoy long
term contracts, for eight years at Welwyn and ten years at Richmond, and are as
a direct result of the Best Value legislation.
The order book is currently in excess of £260 million and the Group continues to
be seen as a preferred partner in each of its principal markets.
Of particular note again, is the successful management of cash, generating a
positive net inflow of funds in the year of £2,121,101 (2000 £303,785). Strong
cash management continues to be fundamental to the ethos upon which the Group
has been built to date.
Operational Structure
Each subsidiary company is headed by an experienced operational Managing
Director. Centralised administration provides accounting services and business
development, human resources and health and safety support for each subsidiary.
Public Sector Services
The majority of the Group's business continues to be in the provision of a range
of maintenance services in the social housing sector on a national basis. The
sector provides the Group with long term contracts with local authorities,
registered social landlords and housing associations. A recent Audit Commission
report indicates that £4.8 billion is to be spent in the current year on local
authority houses, with Central Government making available an additional £856
million for additional capital improvements. The Group is the largest provider
of such services in the public sector and the outlook for our primary business
has never been stronger.
Mechanical and Electrical Services
The business operates as Haydon and Company Limited, in the housing, education
and healthcare sectors providing primarily fast track mechanical and electrical
fit-out services to private sector customers. The business enjoys excellent
relationships with its customers, the majority of whom have dealt with Haydon
over many years. The business has become profitable since acquisition by the
Group in 1999 and provides a significant contribution to the Group.
Motor Vehicle Distribution
United Fleet Distribution ('UFD') was acquired by the Group in September 1998
and provides vehicle collection and delivery services to the commercial sector
with trade plated drivers who, typically, collect individual vehicles at the end
of their lease period and deliver the vehicles into the retail or vehicle
auction markets. UFD, which holds some of the largest contracts in the UK for
these services, has performed excellently in the year. The business is looking
to expand its activities significantly in the current year. Again, this business
is the market leader for trade plated drivers in the U.K.
Facility Management
In September 2001 the Group formed Mears Facility Management Limited with a
former senior manager of Interserve PLC. I welcome Paul Taylor into the Group
and can confirm that this business has already been awarded a number of
contracts. I look forward to bringing you news of further contract awards in the
future.
Strategy
The Group continues to operate a success based, reward environment with bonus
and incentive arrangements in place for tradesmen, administrators and all levels
of management. Every person in the Group is encouraged to contribute towards a
better and more cost effective way of working, with initiatives in place to stop
waste and encourage social responsibility. The initiative of a discreet
telephone help line for employees to voice any concerns has been highly
successful and helped to eradicate potential problems. Our Human Resources
department continues to support the business at all levels and has recently
implemented a company-wide management development programme. A recent in-house
conference brought together the top 60 managers from all parts of the Group to
improve their general awareness of human resources issues. Again the Group has
successfully retained both the Investor in People and the ISO9002 Quality
Management System awards. The attention to detail at the time of the induction
of the tradesmen is an important factor in contributing to another successful
year.
The Group intends to broaden the range of services provided. It is likely that
these additional services will arise as a result of both acquisitions and start
up companies.
We are currently in discussions with a number of individuals who wish to join
the Group. Typically these individuals are currently employed within the
facility services sector and are looking to build a business in which they can
participate in equity ownership and I hope to bring news of such initiatives in
the future. The Board continues to consider a number of acquisition
opportunities but will only acquire where it believes that the incoming
management team are equally committed to building a long term business model.
During the year the Group was recognised for a number of awards. These awards
are a reflection of the tremendous hard work that has been undertaken to build
our business to date. The basic foundations of profitable growth with positive
cash flow are ingrained within each and every manager of the Group.
The Board remains optimistic about the future with both a record order book and
significant opportunities in the public and private sectors and is mindful of
the tremendous support received from the Group's customers and suppliers.
I look forward to being able to report another excellent year of progress in
twelve months time and totally commend the commitment of staff at all levels.
R Holt
Chairman
2 April 2002
Consolidated Profit and Loss Account
For the year ended 31 December 2001
2001 2001 2000 2000
Note £ £ £ £
Turnover 2
Continuing operations 68,579,597 66,944,602
Discontinued operations - 3,735,584
-------------- --------------
68,579,597 70,680,186
Cost of sales (51,638,639) (55,108,694)
--------------- ---------------
Gross profit
Continuing operations 16,940,958 15,837,505
Discontinued operations - (266,013)
-------------- --------------
16,940,958 15,571,492
Administrative expenses (14,362,652) (14,897,151)
Exceptional item - 1,558,356
Operating profit
Continuing operations 2,578,306 2,232,697
Discontinued operations - -
-------------- --------------
2,578,306 2,232,697
Net interest (69,908) (304,218)
--------------- ---------------
Profit on ordinary activities
before taxation 2 2,508,398 1,928,479
Tax on profit on ordinary activities 3 (378,500) (139,654)
--------------- ---------------
Profit on ordinary activities
after taxation 2,129,898 1,788,825
Equity minority interests 10,157 (6,749)
--------------- ---------------
Profit for the financial year 2,140,055 1,782,076
Dividends 4 (444,131) (345,448)
--------------- ---------------
Profit retained 1,695,924 1,436,628
--------------- ---------------
Earnings per share
Basic 5 4.00p 3.50p
Basic - normalised 5 3.30p 2.64p
Diluted 5 3.61p 3.20p
Diluted - normalised 5 2.98p 2.41p
There were no recognised gains or losses other than the profit for the financial year.
Consolidated Balance Sheet
At 31 December 2001
2001 2001 2000 2000
£ £ £ £
Fixed assets
Intangible assets 2,243,136 2,193,119
Tangible assets 1,360,633 1,060,302
Investments 55,677 55,677
--------------- --------------
3,659,446 3,309,098
Current assets
Stocks 1,232,170 1,737,153
Debtors 15,739,056 16,192,676
Cash at bank and in hand 4,576,203 3,596,623
--------------- ---------------
21,547,429 21,526,452
Creditors: amounts falling due
within one year (18,194,870) (19,406,859)
--------------- ---------------
Net current assets 3,352,559 2,119,593
--------------- --------------
Total assets less current liabilities 7,012,005 5,428,691
Creditors: amounts falling due
after more than one year - (400,000)
Provisions for liabilities and charges - (6,500)
--------------- --------------
7,012,005 5,022,191
--------------- --------------
Capital and reserves
Called up share capital 537,352 525,152
Share premium account 2,397,851 2,163,151
Other reserve - (249,898)
Profit and loss account 4,059,730 2,613,704
--------------- --------------
Equity shareholders' funds 6,994,933 5,052,109
Equity minority interests 17,072 (29,918)
--------------- --------------
7,012,005 5,022,191
--------------- --------------
The financial statements were approved by the Board of Directors on 2 April 2002.
R Holt D J Robertson
Director Director
Consolidated Cash Flow Statement
For the year ended 31 December 2001
2001 2000
Note £ £
Net cash inflow from operating activities 6 4,288,850 2,483,465
Returns on investments and servicing of finance
Interest received 3,112 2,237
Interest paid (76,617) (323,816)
Finance lease and hire purchase interest paid - (459)
---------------- ---------------
Net cash outflow from returns on investments and servicing of (73,505) (322,038)
finance ---------------- ----------------
Taxation paid (104,912) (266,635)
Capital expenditure
Purchase of tangible fixed assets (665,169) (405,817)
Sale of tangible fixed assets 38,373 67,392
Purchase of investment - (55,658)
---------------- ----------------
Net cash outflow from capital expenditure (626,796) (394,083)
---------------- ----------------
Acquisitions
Purchase of subsidiary undertakings - (771,110)
Net cash acquired with subsidiary undertakings - -
---------------- ----------------
Net cash outflow from acquisitions - (771,110)
---------------- ----------------
Equity dividends paid (373,771) (287,455)
Financing
Issue of shares 111,275 81,597
Repayment of borrowings 7 (1,100,040) (200,000)
Capital element of finance leases and hire purchase rentals 7 - (19,956)
---------------- ----------------
Net cash outflow from financing (988,765) (138,359)
---------------- ---------------
Increase in cash 7 2,121,101 303,785
---------------- ---------------
Notes to the Accounts
For the year ended 31 December 2001
1. Basis of preparation
The financial information set out in the announcement does not constitute
the Company's statutory accounts for the years ended 31 December 2001 or
2000. The financial information for the year ended 31 December 2000 is
derived from the statutory accounts for that year which have been delivered
to the Registrar of Companies. The auditors reported on those accounts;
their report was unqualified and did not contain a statement under s237(2)
or (3) Companies Act 1985. The statutory accounts for the year ended 31
December 2001 will be finalised on the basis of the financial information
presented by the directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's annual
general meeting.
2. Segmental analysis
Turnover and profit on ordinary activities before taxation are attributable to
the following activities carried out entirely within the UK.
Turnover Profit before taxation Net assets
2001 2000 2001 2000 2001 2000
£ £ £ £ £ £
Maintenance,
mechanical
and electrical
services:
Continuing 59,775,925 59,695,251 1,914,434 1,526,436 5,925,985 4,355,135
Discontinued - 3,735,584 - - - -
Motor 8,803,672 7,249,351 593,964 402,043 1,086,020 667,056
vehicle ------------- ------------- ------------ ------------ ------------ ------------
distribution
68,579,597 70,680,186 2,508,398 1,928,479 7,012,005 5,022,191
------------- ------------- ------------ ------------ ------------ ------------
3. Tax on profit on ordinary activities
The tax charge represents:
2001 2000
£ £
United Kingdom corporation tax at 15.9% (2000: 7.3%) 405,000 150,000
Adjustments in respect of prior years
- deferred tax (6,500) -
- corporation tax (20,000) (10,346)
-------------- ---------------
378,500 139,654
-------------- ---------------
4. Dividends
2001 2000
£ £
Ordinary shares
- interim dividend of 0.20p (2000: 0.15p) per share paid 106,720 78,397
- proposed final dividend of 0.60p (2000: 0.50p) per share 337,411 267,051
--------------- --------------
444,131 345,448
--------------- --------------
5. Earnings per share
Basic earnings per share is based on equity earnings of £2,140,055 (2000:
£1,782,076) and 53,538,267 (2000: 50,962,979) ordinary shares at 1p each, being
the average number of shares in issue during the year.
For diluted earnings per share the average number of shares in issue is
increased to 59,232,325 (2000: 55,731,166) to reflect the potential diluting
effect of employee share schemes.
The earnings have been affected by the utilisation of tax losses in 2001
generated by Haydon and Company Limited in 1999 and 2000, and the write-back of
negative goodwill in both those years. A full tax earnings per share, shown as
normalised, is disclosed in order to show true performance undistorted by these
effects. The normalised earnings per share is based on equity earnings, subject
to a notional corporation tax charge of 30% (2000: 30%), of £1,766,036 (2000:
£1,343,186).
Basic Diluted
2001 2000 2001 2000
p p p p
Earnings per share 4.00 3.50 3.61 3.20
Effect of full tax adjustment (0.70) (0.86) (0.63) (0.79)
------------- ------------- ----------- -------------
Normalised earnings per share 3.30 2.64 2.98 2.41
------------- ------------- ------------ --------------
6. Net cash inflow from operating activities
2001 2000
£ £
Operating profit 2,578,306 2,232,697
Depreciation and amortisation/(write-back) of goodwill 451,398 (1,128,370)
Profit on disposal of fixed assets (2,178) (11,406)
Decrease in stocks 504,983 1,544,984
Decrease in debtors 473,620 2,132,631
Increase/(decrease) in creditors 282,721 (2,287,071)
----------------- ------------------
Net cash inflow from operating activities 4,288,850 2,483,465
----------------- ------------------
7. Reconciliation of net cash flow to movement in net funds/(debt)
2001 2000
£ £
Increase in cash in the year 2,121,101 303,785
Cash outflow from financing 1,100,040 200,000
Cash outflow from finance leases and hire purchase contracts - 19,956
------------------ ----------------
Change in net debt resulting from cash flows 3,221,141 523,741
Net debt at 1 January 2001 (608,394) (1,132,135)
------------------ ----------------
Net funds/(debt) at 31 December 2001 2,612,747 (608,394)
------------------ ----------------
8. Analysis of changes in net funds/(debt)
At Cash Flow At
1 January 2001 31 December 2001
£ £ £
Cash at bank and in hand 3,596,623 979,580 4,576,203
Overdrafts (3,104,977) 1,141,521 (1,963,456)
---------------------- ------------------- -------------------
491,646 2,121,101 2,612,747
Debt (1,100,040) 1,100,040 -
Finance leases and hire purchase contracts - - -
---------------------- -------------------- -------------------
(608,394) 3,221,141 2,612,747
----------------------- --------------------- --------------------
9. Calendar
i. The proposed final dividend will be paid on 1 July 2002 to shareholders on
the register on 7 June 2002 (ex-dividend date 5 June 2002).
ii. The Annual Report will be posted to shareholders on 30 April 2002 and will
be available from the registered office at Salter Street, Berkeley,
Gloucestershire, GL13 9DB.
iii. The Annual General Meeting will be held on 29 May 2002 at the offices of
Old Mutual Securities, Old Mutual Place, 2 Lambeth Hill, London, EC4 4GG.
iv. This preliminary announcement of results for the year ended 31 December 2001
was approved by the Directors on 2 April 2002.
End
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