Final Results

Montpellier Group PLC 13 January 2004 MONTPELLIER GROUP PLC ('Montpellier' or the 'Group') Preliminary results for the year ended 30 September 2003 Montpellier is a construction and property Group listed on the Alternative Investment Market Financial Highlights • Group turnover of £434m (2002: £445m) • Profit before tax of £4.7m (2002: £4.9m) • Profit after tax of £5.7m (2002: £5.2m) • Basic earnings per share of 7.27p (2002: 7.25p) • Strong cash at bank position at year end of over £20m • Total dividend for the year of 1.65p, an increase of 50% Significant Group restructuring • Successful sale of Investment Division • Sale of non-core, underperforming construction businesses • Procedural and management changes in Construction Division implemented Commenting on the results, Paul Sellars, Group Managing Director, said: 'While the results for the year are a little disappointing, we have now completed the restructuring of the business, which is wholly focused on construction with revenue continuing to be generated from our property interests. 'We have initiated significant procedural and management changes which should result in improved performance going forward. The newly strengthened Board is confident that the platform is now in place to grow the business in line with the Group's strategy.' 13 January 2004 ENQUIRIES: Montpellier Group Tel: 020 7522 3200 Paul Sellars, Group Managing Director College Hill Tel: 020 7457 2020 Matthew Gregorowski CHAIRMAN'S STATEMENT This has been a year of restructuring for the Group. The Construction Division has performed below expectations with problems experienced in certain operating companies. Changes in management and controls have now been implemented. Since the year-end the Investment Division has been sold leaving the new management team to focus on the core construction business. Cash remains strong with £20.1m in the bank at 30 September 2003 (2002: £6.4m) boosted by further property disposals. The Group continues to manage its pension liability and is confident of a long-term resolution of this issue. Dividend for the full year is 1.65p per share, an increase of 50% over last year. Financial Review Turnover for the year was £434m (2002: £445m). Profit before tax for the year was £4.7m (2002: £4.9m) and profit after tax was £5.7m (2002: £5.2m). Basic earnings per share for the year were 7.27p (2002: 7.25p). Dividend The Board has carefully considered the future dividend strategy for the Group. It believes that a healthy sustainable dividend forms an important part of the future return to shareholders, and is confident that strong dividend growth can be maintained, in line with trading performance. A final dividend of 1.15p per Ordinary Share will be paid to shareholders on the Register on the 13 February 2004 payable on the 12 March 2004. This, together with the interim dividend of 0.5p, gives a total dividend for the year of 1.65p, an increase of 50% over last year. Sale of Investment Division On 16 September I wrote to you outlining the terms under which it had been agreed to sell the Investment Division to Browallia for a consideration of £4.1m of cash and Loan Notes and the purchase for cancellation by Montpellier of 20 million Montpellier shares, owned by Browallia, at 40p per share. Whilst the Investment Division had been successfully established as a profit centre, your Board considered that the inherent risks and unpredictable timing of the returns from its investments were incompatible with the Group's objectives of delivering consistent and sustainable growth in earnings and dividends to shareholders. It was felt that disproportionate cash and management resource was committed to the Investment Division, and that the diversity of the Group's investments in other quoted companies was also restricting its ability to develop a wider following within the investment community. The Board therefore determined that Montpellier should focus its resources on improving the profitability and growth of its core construction business, and managing its property assets in the UK and the USA. In its new form, Montpellier sits comfortably within the Construction Sector of quoted companies. The transaction was approved by shareholders on 20 October 2003. As a result, Browallia's shareholding has reduced from approximately 51% to approximately 34%. This change should also contribute to the desired broadening of the Group's shareholder base. Construction Division The YJL Construction Division had a disappointing result, reporting an operating profit for the period of £3.0m (2002: £5.8m). The decline in profitability was due to a number of problem contracts in the YJL Construction, Allenbuild Midlands and Allenbuild North East operating subsidiaries. The Board has reviewed these contracts and consider that the problems stemmed from the initial acceptance of work and pricing process that lead to ongoing difficulties in contract performance. To prevent such problems in the future, management changes have been introduced in certain companies as considered necessary. Turnover of £434m (2002: £445m) was down slightly on the previous year in line with the strategy of reducing the Group's exposure to large residential construction projects. The Group has made provision for the costs of settling two central London residential contracts, and I am glad to report that since the year end these two disputes have been resolved with no further provisions required. The Group is also engaged in an arbitration claim in respect of another central London residential development. Management is confident of a successful outcome on the total claim, which will ensure full recovery of amounts recorded in the accounts - although settlement is not likely before the end of 2004. Losses were also sustained in certain smaller subsidiaries, acquired or started during the past three years. Four of these unprofitable and non-core enterprises have been divested, and the Group has also sold its 30% shareholding in McLaren Construction for its book value. These businesses are shown as discontinuing in the results for the year. The established businesses continued to develop satisfactorily and profitably, assisted by a planned increase in publicly funded work. These businesses have strong niche positions in their respective markets, and have good growth prospects at satisfactory margins. In particular Bullock, Walter Lilly, VHE and Britannia have continued to build their businesses and are projecting further growth in both turnover and margins. Roger Feast, the Chief Executive of the Construction Division, left the Group on 31 October 2003 and Paul Sellars, Group Managing Director, assumed direct responsibility for the Construction Division with new regional responsibilities vested in John Gaffney, Managing Director of Bullock Construction and Philip Underwood, Managing Director of VHE who have been appointed to the Group Board. Their many years' experience in the construction sector will significantly strengthen the management of the Construction Division. The results in the past year were undoubtedly a setback for the Group's core Construction Division as a whole, which did not achieve the level of return that was planned. Your Board believes that the management restructuring and improved controls already implemented will result in enhanced future performance, in line with the Group's long-term strategy. Property Division - UK Good progress has continued in the disposal of property assets, including the sale, in excess of book value, of 38 acres of land in South Yorkshire which was acquired with the VHE business. Two pre-let office schemes in Wigan and Leeds have been sold. A distribution depot pre-let to DHL in Perth, Scotland has also been sold. The history of cash collections on mortgage debtors combined with the increasing value of the underlying mortgaged property portfolio enabled the Group to release provisions of £1.1m in this year (2002: £1.2m) whilst maintaining a reasonable provisioning policy against mortgage debtor exposure. America The American land development business has performed well during the year with further profits of £3.5m recognised through the release of provisions that are no longer required on the basis of expected future cashflows. It is pleasing to see that after many years of investment the potential of the land portfolio is steadily being realised, with real benefits to future cash-flow and profits expected, although the Group continues to maintain a reasonable level of provisions to reflect the long-term nature of the realisation of the land portfolio. Two significant planning consents have been achieved. The first, at Center 9500 in Maryland, where consent has been received for a Seniors development adjoining Route 95. The entire site is now under contract and the first receipt of funds should be in November 2004. The second, at the Tilghman Island waterside development on the Chesapeake Bay where consent has been granted for a further 54 residential units which will form the third phase of this prestigious and valuable development. The first phase was completed in 2002 and the majority of the second phase has now also been sold. Cash As at the year end the Group cash at bank position was £20.1m (2002: £6.4m). The net cash funds at the year end were £5.0m (2002: net borrowings £2.8m). Strong cash management continues to be a cornerstone of the Group's future strategy. Pensions In common with many other long established businesses the Group has a substantial final salary scheme. Management has worked very closely with the Trustees over recent years to manage the Group's exposure to the scheme. The Group closed scheme membership to new employees several years ago. A further decision was taken in 2001 to close the scheme to all active members other than those retiring within five years. The Group continues to account for pension costs in accordance with SSAP24. The last SSAP24 valuation was carried out in March 2000. The Board took the view that the next valuation should take place at 30 September 2003 in line with the Group's accounting date. The 30 September 2003 SSAP24 evaluation shows a deficit of £34.2m compared to the March 2000 deficit of £6.6m. Using similar assumptions the FRS17 valuation as at the same date shows a deficit of £33.2m (September 2002: deficit £7.8m). The movements in both the SSAP24 and FRS17 deficits are principally due to the combined effect of a downward movement in asset values following the trend of stock markets in the period, lower interest rates and increasing liability dictated by updated mortality rates. The rules of the defined benefit scheme provide that the Group is only obligated to fund the scheme to the level required by the minimum funding requirement (MFR) regulations. As at March 2003 the scheme actuary has calculated an MFR deficit of £8.6m on the scheme assets of £113m. The MFR deficit is being paid in accordance with MFR requirements and scheme rules over a period of 10 years, with £1m being paid in 2003. The total pensions charge for the year was £4.5m (2002: £2.5m) of which £2.8m was in respect of the defined benefit scheme. This includes an appropriate charge to reflect the spreading of the 30 September 2003 SSAP24 deficit in accordance with the requirements of that standard. It is the view of the Board that the short-term measurement of pension scheme assets and liabilities, and the accounting for pensions under either SSAP24 or FRS17, is inconsistent with the long-term relationship between the Group and the pension scheme. The Board continues to work actively to reduce the Group's exposure to the pension scheme and these actions combined with the recent upward movements in stock markets and the current upward pressure on interest rates are expected to reduce the pensions deficit in future periods. Employees On behalf of the Board I would like to take the opportunity to thank all Montpellier Group employees for their dedication and hard work during the past year. Board Of Directors Shortly after the year-end under review, there were significant changes to the Group Board. Roger Feast, Chief Executive of the YJL Construction Division, resigned from the Board on 3 October 2003, in order to pursue his negotiations for the purchase of three small businesses from the Group. Mr Feast subsequently left the Group on 31 October. John Gaffney, (53) Managing Director of Bullock Construction, was appointed to the Board on 3 October 2003, with additional responsibility for the Midland companies. Philip Underwood, (50) Managing Director of the VHE Group, was appointed to the Board on 3 October 2003, with additional responsibility for the Northern companies. Roy Harrison, (56) a former Chief Executive of Tarmac plc, was appointed to the Board on 19 November 2003 as a non-executive Director. Mr Harrison chairs the Audit Committee and is a member of the Remuneration and Nominations Committees. Arnold Wagner, OBE, (54) Director, Human Resources at Smiths Group plc, was appointed to the Board on 19 November 2003 as a non-executive Director. Mr Wagner chairs the Remuneration and Nominations Committees, and is a member of the Audit Committee. I am delighted to welcome the four new Directors to the Group Board, to which they will contribute much experience. Outlook The Group is now a focused construction business supported by profits and cash flows generated from its property assets. Although 2003/2004 will be a challenging year for the new management team, I am confident that they will succeed in realising the potential of the Group's businesses and assets. Our strategy is to concentrate on improving the profitability of our core businesses. We have the financial resources and the management team to acquire further specialist and well established construction businesses, and shall continue to seek new opportunities to strengthen the Group. Cedric Scroggs CHAIRMAN Group Profit & Loss Account Notes Total Total For the year ended 30 September 2003 2002 £000 £000 Turnover: Group ongoing operations and share of joint ventures 425,283 441,240 Less share of joint ventures' turnover (2,473) (2,621) Ongoing operations 422,810 438,619 Discontinuing operations 11,246 6,616 Total continuing operations 434,056 445,235 Discontinued operations 0 0 Group turnover 434,056 445,235 Cost of sales (399,776) (409,306) Gross profit 34,280 35,929 Administrative expenses (36,675) (32,584) Other operating income 5,477 756 Group operating profit 3,082 4,101 Income from joint ventures 0 0 Share of associates' profit / (loss) 521 (426) Recognition of goodwill on associates 1,191 1,251 Ongoing operations (454) 5,981 Discontinuing operations (1,407) (1,815) Total continuing operations (1,861) 4,166 Discontinued operations 6,655 760 Total operating profit before interest, including share of joint 4,794 4,926 ventures and associates Share of associates' exceptional profits 1 1,222 0 Loss on disposal of discontinued operations 1 (335) 0 Profit on ordinary activities before interest 5,681 4,926 Bank interest receivable 639 703 Interest payable (1,076) (639) Share of associates' interest payable (561) (139) Profit on ordinary activities before taxation 4,683 4,851 Taxation receivable on ordinary activities 2 1,123 393 Share of associates' taxation payable 2 (93) (30) Profit for the financial year before minority interests 5,713 5,214 Minority interests 0 (147) Profit for the financial year 5,713 5,067 Dividends 3 (1,077) (862) Retained profit for the financial year 4,636 4,205 Basic earnings per Ordinary Share 4 7.27p 7.25p Diluted earnings per Ordinary Share 4 7.19p 7.13p Group Statement of Total Recognised Gains & Losses Total Total For the year ended 30 September 2003 2002 £000 £000 Profit for the financial year 5,713 5,067 Exchange movements in reserves (96) (63) Prior year adjustment (FRS19 implementation) 0 82 Total gains recognised since last annual report 5,617 5,086 There are no material differences between the profit as reported and on an unmodified historical cost basis. Group Balance Sheet At 30 September 2003 2003 2002 £000 £000 Restated Fixed assets Intangible assets: Goodwill 5,209 5,811 Tangible assets 18,963 19,226 Investments 32 30 Investments in joint ventures: Loans to joint 1,811 526 ventures Share of gross 17,983 18,832 assets Share of gross (11,469) (12,136) liabilities 8,325 7,222 Investments in associated undertakings 0 8,295 32,529 40,584 Current assets Stocks and work in progress 13,460 22,868 Debtors: due after more than one year 14,297 10,340 Debtors: due within one year 85,020 81,748 Current asset investments 17,283 6,488 Cash at bank and in hand 20,144 6,446 150,204 127,890 Creditors: amounts falling due in less than one year (129,255) (117,142) Net current assets 20,949 10,748 Total assets less current liabilities 53,478 51,332 Creditors: amounts falling due after more than one year Long-term debt (8,363) (8,363) Other creditors (4,685) (8,635) Provisions for liabilities and (1,500) 0 charges (14,548) (16,998) Net assets 38,930 34,334 Capital and reserves Share capital 7,881 7,838 Share premium account 5,795 5,782 Revaluation reserve 73 73 Capital reserve 1,846 1,846 Profit and loss account 23,335 18,795 Equity shareholders' funds 38,930 34,334 Group Cash Flow Statement Total Total For the year ended 30 September 2003 2002 £000 £000 Net cash inflow from operating activities 4,700 6,520 Returns on investments and servicing of finance Interest received 1,203 181 Interest paid (1,439) (276) (236) (95) Taxation Net corporation tax received/ (paid) 569 (332) Capital expenditure and financial investment Payments to acquire tangible fixed assets (1,840) (2,526) Payments to acquire current asset investments (6,082) (5,517) Payments to acquire other investments (2) 0 Proceeds on sale of tangible fixed assets 285 1,184 Proceeds on sale of current asset investments 2,196 491 Loans (advanced to)/ repaid by joint venture (212) 830 (5,655) (5,538) Acquisitions and disposals Payments to acquire subsidiary undertakings and 0 (11,740) connected assets Cash acquired on acquisition of subsidiaries 0 532 Payments to acquire associated undertakings (251) (3,571) Receipt from sale of associate 9,467 0 9,216 (14,779) Equity dividends paid to shareholders (865) (1,001) Cash inflow/(outflow) before use of liquid resources and financing 7,729 (15,225) Management of liquid resources Decrease in liquid resources 1,890 2,883 Financing Issue of share capital 56 4 Acquisition of own shares 0 0 Movement in short-term borrowings 6,110 (5,168) Movement in long-term borrowings 0 7,973 Finance lease payments (197) (440) 5,969 2,369 Increase / (decrease) in cash during the year 15,588 (9,973) 1. EXCEPTIONAL ITEMS 2003 2002 £000 £000 Share of Associates' exceptional profits 1,222 0 Loss on disposal of discontinued operations (335) 0 The share of associates' exceptional profits represents the Group's share of the profits on the sale of subsidiary undertakings, fixed asset investments or other fixed assets by the associates. The loss on disposal of discontinued operations represents the excess of the carrying value of the Group's investment in associate undertakings over the proceeds received on the disposal of the investment division to Browallia that was approved by the shareholders on 20 October 2003. 2. TAXATION 2003 2002 £000 £000 Current tax: UK corporation tax on profits of the year 0 32 Adjustments in respect of previous periods 369 317 369 349 Foreign tax 10 5 Total current tax 379 354 Deferred tax 744 39 Group taxation 1,123 393 Share of associates' tax (93) (30) Taxation receivable on profit on ordinary 1,030 363 activities 3. DIVIDENDS 2003 2002 Pence Pence Interim dividend 0.50 0.50 Final dividend 1.15 0.60 Total dividend 1.65 1.10 £000 £000 Interim 395 392 Final 682 470 Total dividend 1,077 862 4. EARNINGS PER SHARE 2003 2002 Weighted Weighted average number average number Earnings of shares EPS Earnings of shares EPS £000 000s Pence £000 000s Pence FRS14 Basis Basic earnings per share 5,713 78,589 7.27 5,067 69,893 7.25 Dilutive effect of options 0 891 (0.08) 0 1,137 (0.12) Diluted earnings per share 5,713 79,481 7.19 5,067 71,030 7.13 5. PRELIMINARY STATEMENT This preliminary statement, which has been agreed with the auditors, was approved by the Board on 12 January 2004. It is not the Group's statutory accounts. The statutory accounts for the year ended 30 September 2002 have been delivered to the Registrar of Companies and received an audit report which was unqualified and did not contain statements under s237(2) of the Companies Act 1985. The statutory accounts for the year ended 30 September 2003 have not yet been approved, audited or filed. This information is provided by RNS The company news service from the London Stock Exchange

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