Interim Results

Montpellier Group PLC 30 June 2005 Montpellier Group Plc ('Montpellier' or the 'Group') Interim Results for the six months ended 31 March 2005 Montpellier, the UK construction business, today announces further progress in its recovery with strong trading in all its businesses and a 31% increase in its forward order book. Highlights • Turnover of £225m (2004: £212m) • Profit after tax and exceptional items of £147,000 (2004: loss of £19.53m as restated) • Earnings per share of 0.25p (2004: loss per share of 31.82p as restated) • Forward order book of £582m (2004: £444m) • Appointment of Group Chief Executive • Discussions with management of Bullock Construction regarding possible sale Roy Harrison, Executive Chairman, said: 'I am pleased to report another period of good progress in the Group's recovery. Trading in all of our businesses has been strong, with our chosen market sectors buoyant and offering significant growth opportunities. This has resulted in a much improved order book of £582m.' 'The Board is confident that the actions it has taken, and continues to take, will restore the Group's financial position by the year end, providing a stable platform for the future.' 30 June 2005 Enquiries: Montpellier Group Plc Tel: 020 7522 3200 Roy Harrison, Executive Chairman Sandy McArthur, Group Financial Controller College Hill Tel: 020 7457 2020 Matthew Gregorowski Mark Garraway MONTPELLIER GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005 CHAIRMAN'S STATEMENT Introduction I am pleased to report another period of good progress in the Group's recovery. The Group has benefited from its strategy of focusing on its three chosen market sectors - Social Housing, Remediation and Building in Partnership - areas in which the Group's businesses have core contracting skills, good market share and strong regional and national brands. Each of these markets is buoyant and offers significant growth opportunities. During the period we continued to encounter problems in the finalisation of certain legacy contract settlements. At the interim stage last year, we announced contract exposures which led to considerable provisions being made at the half year, the majority of which were retained at the year end. The Board has continued to review all its contracts on a regular basis and has decided to provide an additional £1.9 million at this half year in respect of identified legacy contract exposures. The Board will continue to keep these legacy issues under close review. Despite these, the Group was still profitable for the period. In December, following the reorganisation of Allenbuild through the autumn of last year, we announced a number of actions which would reduce the Group's exposure to higher risk, lower margin businesses. As part of these actions, we subsequently closed down YJL Construction and reallocated its ongoing contracts to our Walter Lilly business, which is now successfully managing these out. Our approach of phasing out exposure to high risk, low margin business areas and the control mechanisms which are in place across the Group are resulting in a much reduced risk profile going forward. The Board anticipates that the total exceptional cost for the year, related to all the Group's reorganisations and restructuring, will be in the region of £6 million. Results and Dividend Turnover for the six months to 31 March was £225 million (2004: £212 million) and profit after tax and exceptional items was £147,000 (2004: operating loss of £19.53 million as restated). Earnings per share were 0.25p (2004: loss per share of 31.82p as restated). The Board is not recommending the payment of a dividend. Approach for Bullock Construction As reported on 24 May, the Board received an approach by the management of Bullock Construction, the Group's principal social housing business, for a potential management buy out. The Board has received expressions of interest from a number of third parties and has subsequently decided to progress discussions with management, which may or may not lead to an agreement for the sale of the business to them. The Board recognises that a sale of Bullock would provide the Group with the scope to deal comfortably with all legacy contract and property valuation issues, significantly improve the Group's balance sheet and provide cash to support the development of the Group's remaining core businesses. These businesses have good strength and depth of management and have considerable capacity for growth. The strengthened balance sheet would also provide greater financial leverage for the Group and greater security for the members of its closed pension scheme. Appointment of Group Chief Executive As previously announced, Brian May was appointed Group Chief Executive on 20 June. Brian has extensive experience in the construction industry, previously as Chief Executive of HBG Construction and Laing Construction respectively, and having spent most of his career at Tarmac Construction and John Mowlem, latterly as Managing Director of Mowlem's Building Division. The Board welcomes Brian to the Group, and has every confidence that with his extensive industry knowledge and experience the business will now take maximum advantage of the strong markets available to the Group under his leadership. I will remain as Executive Chairman for such a period of time to facilitate an effective handover of the day to day running of the business, after which time I will revert to a non-executive role. Operational Review Remediation Through VHE Construction the Group provides a number of specialist remediation services across the UK. VHE itself deals with brownfield land reclamation, principally of former industrial sites to enable development and includes soil and waste treatment services. Shepley Engineers focuses on nuclear decommissioning, and the refurbishment and rebuilding of wrought and cast iron historical structures. All of VHE's specialist services are in high demand, underpinned by the Government's commitment to the development of brownfield land and to maintenance and decommissioning of UK nuclear assets, a long-term multi-billion pound commitment by the Nuclear Decommissioning Authority. Shepley Engineers is retained at BNFL's nuclear site at Sellafield for the next two years and currently has orders of £33 million. VHE carry out remediation projects throughout the UK, currently for such clients as the Welsh Development Agency at Abercwmboi in South Wales, and for RWE Thames Water in Reading. The Division's order book at 31 March was £55 million, 60% up on the same period last year, with orders of six to twelve months average duration. Building in Partnership The Division consists of a number of regional construction businesses - Allenbuild, Britannia, YJL London and Walter Lilly - each of which operates in niche market sectors and benefits from strong regional brands. All of these businesses are taking advantage of good growth opportunities and, following the reorganisation of Allenbuild, are all winning new work through partnering agreements with key clients in both the public and private sectors. Walter Lilly has won two significant contracts in London to refurbish the Caledonian Club and extend the Jodrell Laboratory at the Royal Botanical Gardens in Kew; Allenbuild has won two major contracts to build custodial centres in Preston and Lancashire for Lancashire Constabulary; and as framework contractor for Tesco, Britannia Construction has recently been awarded four further major contracts to extend and refurbish stores in Swindon, Midsomer Norton, Worcester and New Milton. The combined order book of the Group's Building companies at the end of the half year was £203 million (2004: £272 million). This is a reduction on the previous year, reflecting the closure of YJL Construction, and Allenbuild's more measured approach to winning new work. Social Housing Through its Bullock Construction and Allenbuild subsidiaries, the Group provides new build and refurbishment services to the social housing sector in partnership with Housing Associations and Local Authorities. Bullock Construction, which operates across the North and Midlands regions, is a market leader in social housing refurbishment and continues to benefit from the Government's Decent Homes Initiative. It has just commenced a major five year housing improvement programme with Bradford Community Housing Trust and was recently appointed to deliver an ALMO (Arms Length Management Organisation) improvements programme for Leeds South Homes over the next five years. Allenbuild provides new build services in the South East, and as part of the Gentect Homes consortium is building hundreds of affordable homes of varying tenure over the next few years. The first project commenced in late 2004. The Social Housing order book at 31 March was £324 million (2004: £137 million), with contracts of three years average duration. Property Portfolio The Group continues its strategy of realising value from its portfolio of UK and US property assets in order to generate additional cash. The existing property assets are being actively managed and the Group is currently reassessing the potential realisable value for a number of its properties in order to facilitate their sale. During the period the Group did not realise proceeds from intended property disposals. The Group is not pursuing the acquisition of any new sites. Outlook Following a period of great change and an enormous amount of hard work by all the Group's employees, I am pleased to be able to hand over a business to our new Chief Executive which has a clear strategy and focus centred on its niche businesses. The Group's core divisions operate in strong and growing market sectors and continue strengthening their regional presence, focused on margin improvement and low risk contracting. Trading in all the Group's businesses is strong. The Group's order book has seen some significant growth and was valued at £582 million as at 31 March 2005, up from £444 million at the same period last year. In addition, these orders are of a much higher quality, predominantly generated from framework and partnering agreements with the Group's key clients. The Board is confident that the actions it has taken, and continues to take, will restore the Group's financial position by the year end, providing a stable platform for the future. Roy Harrison Executive Chairman 29 June 2005 MONTPELLIER GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005 GROUP PROFIT AND LOSS ACCOUNT Notes Six months ended Year ended 31 March 30 September Restated 2005 2004 2004 £000 £000 £000 Turnover: Group ongoing operations and share of joint ventures 227,320 212,603 461,695 Less share of joint ventures' turnover (2,113) (258) (3,036) Ongoing operations 221,321 193,857 405,598 Discontinuing operations 3,886 18,488 53,061 Group turnover - continuing 225,207 212,345 458,659 Cost of sales (including exceptional losses on problem contracts) 1 (204,995) (210,521) (442,534) Gross profit 20,212 1,824 16,125 Administrativeexpenses (including exceptional income & costs) 1 (18,633) (20,552) (22,834) Other operating income - 584 2,098 Ongoing operations 3,721 (8,591) 6,027 Discontinuing operations (2,142) (9,553) (10,638) Group operating profit/(loss) - continuing 1,579 (18,144) (4,611) Loss on disposal of subsidiary companies 1 - (495) (495) Loss on closure of operations 1 (864) - - Profit/(loss) on ordinary activities 715 (18,639) (5,106) before interest Net interest (payable)/receivable (328) 66 88 Other finance charges - FRS 17 pension (240) (961) (1,921) Profit/(loss) on ordinary activities before taxation 147 (19,534) (6,939) Taxation 3 - - (106) Profit/(loss) for the period 147 (19,534) (7,045) Dividends 4 - - - Retained profit/(loss) for the period 147 (19,534) (7,045) Basic earnings/(loss) per Ordinary Share 5 0.25p (31.82p) (11.62p) Diluted earnings/(loss) per Ordinary Share 5 0.25p (31.82p) (11.62p) MONTPELLIER GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005 GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months ended Year ended 31 March 30 September Restated 2005 2004 2004 £000 £000 £000 Profit/(loss) for the period 147 (19,534) (7,045) Exchange movements in reserves (67) (461) 110 Surplus on revaluation of landfill assets - - 416 Movement on actuarial deficit in the pension scheme - - 11,294 Movement on deferred tax relating to the pension deficit (103) 121 (8,943) Total recognised losses since last annual report (23) (19,874) (4,168) MONTPELLIER GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005 GROUP BALANCE SHEET Notes 31 March 30 September Restated 2005 2004 2004 £000 £000 £000 Fixed assets Intangible assets: Goodwill 4,753 5,057 4,905 Tangible assets: Investment Properties - 7,110 - Other Tangible Fixed Assets 16,169 16,674 16,969 Investments 30 31 30 Investments in joint ventures: Loans to joint ventures 444 2,058 625 Share of gross assets 9,495 18,661 13,241 Share of gross liabilities (4,905) (12,713) (8,105) 5,034 8,006 5,761 25,986 36,878 27,665 Current assets Stocks and work in progress 16,574 10,928 8,641 Debtors: due after more than one year 8,252 16,632 10,160 due within one year 87,698 83,298 94,500 Current asset investments - assets held for resale 7,375 - 7,388 Cash at bank and in hand 9,823 7,011 18,068 129,722 117,869 138,757 Creditors: amounts falling due within one year (134,122) (128,564) (145,383) Net current liabilities (4,400) (10,695) (6,626) Total assets less current liabilities 21,586 26,183 21,039 Creditors: amounts falling due after more than one year Long-term debt (8,363) (8,363) (8,363) Other creditors (6,066) (4,999) (5,215) Net assets excluding pension liability 7,157 12,821 7,461 Pension liability 2 (2,065) (23,494) (2,346) Net assets/(liabilities) 5,092 (10,673) 5,115 Share capital 6 5,990 5,939 5,990 Share premium account 5,893 5,862 5,893 Capital redemption reserve 2,050 2,050 2,050 Revaluation reserve 489 73 489 Capital reserve 1,846 1,846 1,846 Profit and loss account (11,176) (26,443) (11,153) Equity shareholders' funds/(deficit) 7 5,092 (10,673) 5,115 MONTPELLIER GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005 GROUP STATEMENT OF CASH FLOW Notes Six months ended Year ended 31 March 30 September 2005 2004 2004 £000 £000 £000 Net cash (outflow)/inflow from operating activities 8 (21,974) (5,384) 1,677 Returns on investments and servicing of finance Net interest (paid)/received (218) 66 87 Taxation Net corporation tax received - 380 527 Capital expenditure and financial investment Payments to acquire tangible fixed assets (659) (9,525) (9,687) Proceeds on sale of tangible fixed assets 142 2,572 2,681 Proceeds on sale of current asset investments - 150 150 Loans repaid by joint venture 155 (392) 1,053 Proceeds on sale of shared equity portfolio 2,019 - - 1,657 (7,195) (5,803) Acquisitions and disposals Cash disposed on disposal of subsidiaries - (1,076) (1,076) Receipt from sale of business - 2,000 3,746 - 924 2,670 Equity dividends paid to shareholders - (682) (682) Cash outflow before financing (20,535) (11,891) (1,524) Financing Issue of share capital - 174 256 Acquisition of own shares - (192) (192) Movement in short-term borrowings 3,600 (1,104) (1,103) Finance lease payments (240) (120) (360) 3,360 (1,242) (1,399) Decrease in cash during the period (17,175) (13,133) (2,923) MONTPELLIER GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005 NOTE 1 DISCONTINUING OPERATIONS & EXCEPTIONAL ITEMS (a) Discontinuing Operations Discontinuing operations relate to the activities of YJL Construction (excluding YJL Infrastructure) and a division of Britannia Interior Contracts Limited, which are in the process of being closed down. These activities are shown as discontinuing as they do not meet the definition of discontinued as defined by FRS 3. (b) Operating Exceptional Items The operating profit/(loss) includes the following amounts that the Directors regard as exceptional because of their value and nature, but which do not fall to be recorded as non-operating exceptional items under the requirements of FRS 3. Six months ended Year ended 31 March 30 September 2005 2004 2004 £000 £000 £000 Reduction in pension deficit following settlements of liabilities (i) - - 19,250 Cost of incentives to members connected to the settlements (i) - - (4,959) - - 14,291 Contract losses on specific problem contracts incepted in prior years (ii) (2,899) (15,741) (21,674) Write down of properties for resale (iii) - (1,617) (1,617) Redundancy and reorganisation costs (iv) (345) (882) (882) (3,244) (18,240) (9,882) (i) Defined benefit pension scheme During the year ended 30 September 2004 the Directors made a number of offers to deferred members of the scheme to transfer their entitlements under the defined benefit scheme to a defined contribution arrangement and a number of offers to pensioners of the scheme to buy out certain benefits attributable under the scheme. The figure recorded above shows the movement on the FRS 17 actuarial deficit relating to these transfers and the costs reflect the sums paid to facilitate these transfers. (ii) Contract losses During the year ended 30 September 2004 the Group suffered a number of contractual issues that relate to contracts incepted in prior years where the difficulties relating to these contracts were not identified in the prior period or became more apparent in this period as negotiations to resolve the contract terms progressed. During the period ended 31 March 2005 additional contract losses have been incurred to resolve legacy contract issues. (iii) Write down of properties held for resale Provision was made in the prior year against the purchase value of two properties to reflect their market value as at 31 March 2004 and 30 September 2004. (iv) Redundancy and reorganisation costs During the current and preceding periods a number of exceptional costs, which primarily relate to redundancies, have been incurred as a result of reorganisations within the Group which do not constitute a fundamental reorganisation as defined by FRS 3. In the period to 31 March 2005 these costs relate to the reorganisation of Allenbuild. With the exception of contract losses which have been included in gross margin, all other operating exceptionals are reflected in the administrative expenses in the profit and loss account. (c) Non-Operating Exceptional Items Six months ended Year ended 31 March 30 September 2005 2004 2004 £000 £000 £000 Loss on disposal of subsidiary companies - (495) (495) Loss on closure of operations (864) - - The loss on disposal of subsidiary companies relates to the disposal, during the year ended 30 September 2004, of the Group's loss-making subsidiaries Cornhill Interiors Limited, Lodge and Sons (Builders) Limited and YJL Facilities Limited. The loss on closure of operations is in respect of redundancy costs directly connected with the closure of YJL Construction (excluding YJL Infrastructure) and a division of Britannia Interior Contracts Limited. Note 2 Defined Benefit Pension Scheme During the year ended 30 September 2004, the Group fully adopted the requirements of FRS 17 'Retirement Benefits'. The deficit (net of a related deferred tax asset) shown on the balance sheet as at 31 March is the amount calculated as at 30 September adjusted for contributions, charges and finance costs in the period, offset by the associated movement in the deferred tax asset. No interim valuation of the assets and liabilities of the scheme has been carried out and, accordingly, there is no actuarial gain or loss shown in the STRGL in respect of the interim period. Actuarial gains and losses in respect of the whole year and the deficit/surplus at the end of the year will be reported in the annual financial statements. This change in accounting policy resulted in a prior year adjustment and restatement of comparatives in the last annual report. Accordingly, comparatives for the six month period ended 31 March 2004 have been restated in this report. Set out below is the impact on the profit and loss account, consolidated statement of total recognised gains and losses, and the Group balance sheet for the six months ended 31 March 2004. Six months ended 31 March 2004 SSAP 24 Reverse Total pre Apply FRS 17 SSAP 24 pension FRS 17 £000 £000 £000 £000 £000 Profit & loss account Operating loss (20,242) 2,150 (18,092) (52) (18,144) Loss after tax (20,671) 2,150 (18,521) (1,013) (19,534) Statement of total recognised gains and losses Movement on deferred taxation - - - 121 121 Balance sheet Net assets/(liabilities) 9,780 3,041 12,821 (23,494) (10,673) The restatement of the 31 March comparatives has resulted in the balance sheet total as at 31 March 2004 decreasing by £20.5m from net assets of £9.8m to net liabilities of £10.7m. As reported in the 2004 Annual Report, the Group implemented a number of pension transfer initiatives to both deferred members and pensioners of the scheme during the second half of 2004, which resulted in a reduction in the pension scheme deficit of £19.2m at a total cost of £5m. The benefit of this reduction combined with actuarial movements and ongoing payments into the scheme resulted in the FRS 17 deficit reducing to £3.3m (£2.3m net of deferred tax) as at 30 September 2004. Further details of the most recent formal FRS 17 valuation and the impact of the pension scheme initiatives are set out in the 2004 Annual Report. Note 3 Taxation on profit on ordinary Activities Six months ended Year ended 31 March 30 September 2005 2004 2004 £000 £000 £000 Current tax: UK corporation tax on profits/(losses) for the - - - period Adjustments in respect of previous periods - - 150 - - 150 Foreign tax - - 33 Total current tax - - 183 Deferred tax - - (289) Taxation charge on profit/(loss) on ordinary - - (106) activities The Group and Company have significant unused tax losses available to carry forward against future taxable profits. A significant element of these losses relate to activities which are not forecast to generate the level of profits needed to utilise these losses. A deferred tax asset has been recognised to the extent considered reasonable by the Directors, where recovery is expected to be recognisable within 12 months of the balance sheet date. Note 4 Dividends No dividends were paid or proposed in the current or preceding period. Note 5 Earnings per Ordinary share Six months ended Year ended 2005 2004 2004 31 March 31 March 30 September Weighted Weighted Weighted average average average number of EPS number of EPS number of EPS Earnings shares Pence Earnings shares Pence Earnings shares Pence £000 000 £000 000 £000 000 Restated Restated Basic earnings per share 147 59,899 0.25 (19,534) 61,381 (31.82) (7,045) 60,609 (11.62) Dilutive effect of options - - - - - - - - - Diluted earnings per share 147 59,899 0.25 (19,534) 61,381 (31.82) (7,045) 60,609 (11.62) Note 6 Share capital 31 March 30 September Group 2005 2004 2004 £000 £000 £000 Authorised: 100,000,000 Ordinary Shares of 10p each 10,000 10,000 10,000 10,000 10,000 10,000 Allotted, called up and fully paid: 59,898,927 (2004: March 59,388,757 and September 59,898,927) Ordinary Shares of 10p each 5,990 5,939 5,990 5,990 5,939 5,990 Changes in share capital No 10p Ordinary Shares have been issued since 1 October 2004. Note 7 Reconciliation of movements in Group shareholders' funds 31 March 30 September Restated 2005 2004 2004 £000 £000 £000 Profit/(loss) for the period 147 (19,534) (7,045) Other recognised gains and losses for the year (net) (170) (340) 2,877 Share issue - 175 257 Share buyback - (8,192) (8,192) Net movement on shareholders' funds (23) (27,891) (12,103) Opening shareholders' funds 5,115 17,218* 17,218 Closing shareholders' funds 5,092 (10,673)** 5,115 * Previously opening shareholders' funds at 1 October 2003 amounted to £38,930,000 before prior year adjustment in respect of the adoption of FRS 17, amounting to £21,712,000, as detailed in the Annual Report for the year ended 30 September 2004. ** Previously closing shareholders' funds at 31 March 2004 amounted to £9,780,000 before prior year adjustment in respect of the adoption of FRS 17, amounting to £20,453,000. Note 8 Net cash (outflow)/inflow from operating activities Six months ended Year ended 31 March 30 September Restated 2005 2004 2004 £000 £000 £000 Operating profit/(loss) 1,579 (18,144) (4,611) Non operating exceptional items (864) (495) (495) 715 (18,639) (5,106) Depreciation 1,380 767 1,839 Amortisation of subsidiary goodwill 152 152 304 (Increase)/decrease in stocks and work in progress (7,933) 2,529 4,816 Profit on sale of fixed assets (50) (473) (91) Impairment of current asset investments - 1,616 1,616 Decrease/(increase) in operating debtors and prepayments 6,691 (769) (7,338) (Decrease)/increase in creditors and accruals (22,810) 10,786 24,795 Decrease in pension deficit (625) (2,098) (20,434) Foreign exchange and other non-cash movements 506 745 1,276 Net cash (outflow)/inflow from operating (21,974) (5,384) 1,677 activities Note 9 Basis of preparation (a)The accounts for the six months ended 31 March 2005 and the equivalent period in 2004 have not been audited or reviewed by the Company's auditors. They have been prepared on a going concern basis in accordance with applicable accounting standards consistent with the accounting policies set out in the 2004 Annual Report. The interim report was approved by the Directors on 29 June 2005. (b) The abridged information in this statement relating to the year ended 30 September 2004 is derived from full accounts upon which the auditors issued an unqualified opinion and which did not contain a statement under S237(2) of the Companies Act 1985 and which have been delivered to the Registrar of Companies. (c) The Group continues to have net current liabilities at the period end and has incurred a cash outflow during the period, partly because of delays in realising cash from contracts (including legacy problem contracts) and from disposals of assets held for resale. On the basis of expected realisations of cash from its contracts, assets held for resale and other assets, which might include the disposal of Bullock, and its ongoing banking facilities the Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. This interim statement is being sent to all shareholders and is also available upon request from the Company Secretary, Montpellier Group Plc, 39 Cornhill, London EC3V 3NU, or via the website www.montpelliergroup.plc.uk. This information is provided by RNS The company news service from the London Stock Exchange

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