Preliminary Results
Montpellier Group PLC
17 December 2002
MONTPELLIER GROUP PLC
Preliminary results for the year ended 30 September 2002
Montpellier Group, the AIM listed construction, property and investment Group,
announces a 44% increase in turnover and 37% increase in profit before tax for
the year ended 30 September 2002.
• Turnover up 44% to £445m (2001: £310m)
• Profit before tax up 37% to £4.9m (2001: £3.5m)
• Profit after tax up 43% to £5.2m (2001: £3.7m)
• Basic earnings per share up 36% to 7.25p per share (2001: 5.34p per
share)
• Net asset value up 12.6% to 43.8p per share (2001: 38.9p per share)
• Construction Division order book of £518m (2001: £277m)
• Total dividend up 10% to 1.1p per share
Commenting on the results, Paul Sellars, Managing Director, said:
'This is an excellent set of results, and a tribute to the positive direction
the company has taken over the past year. We continue to evaluate all
opportunities across our three distinctive income streams with a focus on
enhancing value for shareholders.'
17 December 2002
Enquiries:
Montpellier Group Tel: 020 7522 3200
Paul Sellars, Group Managing Director
College Hill Tel: 020 7457 2020
Matthew Gregorowski
Chairman's Statement
I am pleased to announce another successful year for the Montpellier Group. The
acquisition of Union Investment Management Limited during the year has
strengthened the Investment Division. With strong performances in the
Construction Division and positive contributions from Allenbuild and VHE which
were acquired during 2001 the Group's turnover increased by 44% over the
previous year with basic earnings per share increasing by 36%. In line with our
policy of a steady growth in shareholder value I am delighted to announce an
increase in dividends of 10% compared to last year.
Financial Review
Turnover for the year was £445m (2001: £310m) an increase of 44%. Profit before
tax for the year was up 37% to £4.9 million (2001: £3.5m) and profit after tax
was up 43% to £5.2m (2001: £3.7m).
Basic earnings per share for the year were 7.25p (2001: 5.34p) an increase of
36%, while net assets per share increased by 12.6% to 43.8p (2001: 38.9p).
Dividend
A final dividend of 0.6p per Ordinary Share will be paid to shareholders on the
register on 7 February 2003, payable on 3 March 2003. This, together with the
interim dividend of 0.5p gives a total dividend for the year of 1.1p, up 10% on
last year, reflecting the Group's strategy of maintaining a steady dividend
growth for shareholders financed from increasing profits.
Construction Division
The acquisitions of Allenbuild and VHE were completed during 2001. Both
businesses are trading profitably and have been successfully integrated into the
Construction Division which now offers clients a complete construction service
throughout England. The Division commands a wide range of construction skills
ranging from land reclamation, through refurbishment, to new build and fitout.
In line with the Division's strategy of achieving a balance of work between the
public and private sectors it has increased its presence in the public sector
with contracts recently awarded by London Underground and Local Authorities in
the residential, education and health sectors. These include the contract for
c. £150m over seven years for regeneration of the Northern Line for London
Underground and for £58m in respect of social housing renovations for Bradford
Community Housing Trust.
The Division continues to have considerable involvement in the private sector,
particularly in the residential housing and pharmaceutical markets.
The order book has been considerably strengthened and currently stands at £518m
(2001: £277m).
The Board is conscious of the risks inherent in any construction business and
seeks to control this risk by operating through a limited number of businesses,
each dedicated to its own specialisation and geographical boundaries. The good
reputation of the operating businesses allows them to maintain and develop
relationships with clients as a method of procuring new work rather than relying
on the more traditional tendering procurement process. This not only enables
them to provide a better service for established clients but also improves
profit margins.
With the successful integration of the recent acquisitions, the Division is now
well positioned to benefit from organic growth while evaluating any further
opportunities that may arise.
Property Division
The Group has a number of sizeable property investments and development
opportunities in the United Kingdom. The role of the Property Division is to
manage these assets through the planning process and to contribute both cash and
profits to the Group in the short and medium term.
In addition to managing the Group's property portfolio, Cheltenham Land has
secured a number of significant appointments to provide advice to third party
clients. These will yield a continuing source of fees and profit share in
future years.
The history of cash collections on mortgage debtors combined with the increase
in value of the underlying mortgaged property portfolio enabled the Group to
release provisions of £1.2m this year whilst maintaining a reasonable
provisioning policy against mortgage debtor exposures.
During the year the Group acquired the freehold of 39 Cornhill in the City of
London, which is now occupied by the head office team together with three of the
companies within the Construction Division. The balance of the space at
Cornhill will be sublet.
Lovell America
The policy of realising maximum financial benefit from the Group's existing land
holdings in the United States continues. A further $2m has recently been
repatriated.
Improved planning permissions have been obtained on three of Lovell America's
schemes during the year, which should result in significant benefits to the
Group. There are now five sites remaining, two of which are commercial and
three are residential. These developments are owned through wholly owned
subsidiaries and partnerships and investment in two joint ventures. The
improvement in planning permissions and a better visibility of the realisations
for the developments has enabled the recognition of profits of £2m in this year
whilst maintaining a reasonable and prudent provision against development
issues.
Investment Division
In March 2002, the Group acquired Union Investment Management Limited, which is
regulated to carry out both corporate finance and investment business. Union
has been established in the City since 1885 and brings with it a substantial
network of contacts which will assist Montpellier in growing its Investment
Division. It has been the intention of Montpellier to strengthen its investment
team, and the acquisition of Union Investment Management achieves this
objective, bringing executives who will assist the Group both in making direct
investments and in providing advice to third parties.
The Board believes that the 'small-cap' sector of the stock market offers
excellent potential for profitable investment for organisations which have the
skills to identify attractive opportunities. The Montpellier Group deploys an
unusual range of such skills and experience, including the ability to provide
advice and support for companies in which investments are made. These
enterprises are invariably backed by substantial assets, typically including
properties for which Cheltenham Land can provide development expertise and
advice. Even in the present challenging economic and business environment the
Board believes that good opportunities are available, following thorough
research and the evaluation of risk against reward. The chosen strategy is
always to work closely with the management of companies in which investments are
made, in order to enhance and realise shareholder value for the Group as a
whole.
During the year the Group made significant investments in a number of listed
companies as part of its overall investment strategy. These are recognised as
associates where the Group has a shareholding of more than 20% and a significant
influence is exercised, often via a seat on the Board, over the strategic
decisions of the investee company concerned.
Share Capital
The total number of shares in issue as at 30 September 2002 was 78,376,138.
(2001: 60,888,538).
The increases in share capital in the year comprised 17,461,834 shares issued in
respect of the Union acquisition and 25,766 shares issued through the SAYE
scheme.
Pensions
In line with many long established companies the Group has a substantial Final
Salary pension scheme. Some years ago this pension scheme enjoyed the benefit
of a surplus of assets over liabilities, but following changes in the tax
treatment of dividends, low rates of both interest and inflation combined with a
falling stock market, the scheme now shows a deficit. As reported last year,
the Group has taken steps to reduce its exposure to the Final Salary scheme.
Apart from those employees who were to retire within the next 5 years, all
active members have now been transferred to a Money Purchase scheme. During the
course of this current year the Group will be actively offering transfer values
to the deferred members in order to reduce the overall size of the scheme.
The Board considers that the actions taken and being taken will have a
considerable impact on the Final Salary scheme and its actuarial deficit and we
will continue to monitor the funding and accounting requirements in conjunction
with the actuary and other advisors to the scheme. In this period of transition
of the scheme, additional and ongoing member contributions are being made in
accordance with guidance received from the actuary and are recorded in the
accounts for this year and the comparative year as they have been funded.
While being a difficult decision for the Board to close the Final Salary scheme
to the majority of active members, this action was taken in the long term
interest of shareholders. Under the new accounting requirements of FRS17 the
deficit is identified as £7.8m (2001: £4.7m) on scheme assets of £113.2m (2001:
£115.3m).
Employees
On behalf of the Board I would like to take this opportunity to thank all
Montpellier Group employees for their dedication and hard work during the past
year.
The Future
The Montpellier Group is now established as a Construction, Property and
Investment Group. With these three distinctive operating divisions now in
place, and having achieved substantial growth in the recent past, the Board
approaches the future with confidence. It is the Board's intention to maintain
a steady and secure growth in earnings, assets per share and dividends, and
despite the uncertain times I am convinced that this versatile, diverse and
asset backed group of businesses will generate real and sustainable future
growth for shareholders.
Group Profit & Loss Account
Notes Total Total
2002 2001
For the year ended 30 September £000 £000
Restated*
Turnover: Group and share of joint ventures 447,856 311,917
Less share of joint ventures' turnover (2,621) (2,156)
Total continuing operations 445,235 297,951
Discontinued operations - 11,810
Group turnover 445,235 309,761
Cost of sales (409,306) (282,219)
Gross profit 35,929 27,542
Administrative expenses (32,584) (25,331)
Other operating income 756 557
Group operating profit 4,101 2,768
Income from joint ventures - -
Share of associates' losses (426) -
Amortisation of goodwill on associates 1,251 -
Total continuing operations 4,926 3,944
Discontinued operations - (1,176)
Total operating profit including share of joint ventures and associates 4,926 2,768
Profit on sale of properties 2 - 637
Loss on disposal of discontinued operations 2 - (101)
Profit on ordinary activities before interest 4,926 3,304
Bank interest receivable 703 781
Interest payable (639) (551)
Share of associates' interest payable (139) -
Profit on ordinary activities before taxation 4,851 3,534
Taxation receivable on profit on ordinary activities 3 393 120
Share of associates' taxation payable 3 (30) -
Profit for the financial year before minority interests 5,214 3,654
Minority interests (147) (41)
Profit for the financial year 5,067 3,613
Dividends 4 (862) (609)
Retained profit for the financial year 4,205 3,004
Basic earnings per Ordinary Share 5 7.25p 5.34p
Diluted earnings per Ordinary Share 5 7.13p 5.30p
Group Statement of Total Recognised Gains & Losses
2002 2001
For the year ended 30 September Notes £000 £000
Restated*
Profit for the financial year 5,067 3,613
Exchange movements in reserves (63) 384
Prior year adjustment 82 -
Total gains recognised since last annual report 5,086 3,997
No property revaluation gains were realised during the year (2001: £1,046,000).
There are no other material differences between the profit as reported and on an
unmodified historical cost basis.
Balance Sheets
Group Company
2002 2001 2002 2001
At 30 September £000 £000 £000 £000
Restated* Restated*
Fixed assets
Intangible assets:
Positive goodwill 5,811 2,018 - -
Negative goodwill - (946) - -
5,811 1,072 - -
Tangible assets 19,226 12,329 1,703 1,411
Investments 30 30 87,713 94,176
Investments in joint ventures:
Loans to joint 526 1,448 - -
ventures
Share of gross 18,306 20,877 - -
assets
Shares of gross (11,610) (15,881) - -
liabilities
7,222 6,444 - -
Investments in associated undertakings 8,295 - 7,638 -
40,584 19,875 97,054 95,587
Current assets
Stocks and work in progress 30,012 25,730 - -
Debtors: due after more than one year 2,390 2,594 1,253 1,252
due within one year 82,554 88,267 29,579 17,684
Current asset investments 6,488 3,285 3,577 3,285
Cash at bank and in hand 6,446 18,268 4,450 6,459
127,890 138,144 38,859 28,680
Creditors: amounts falling due in less than one year (125,642) (129,450) (110,378) (105,872)
Net current assets/(liabilities) 2,248 8,694 (71,519) (77,192)
Total assets less current liabilities 42,832 28,569 25,535 18,395
Creditors: amounts falling due after more than one year
Long-term debt (8,363) (390) - -
Other creditors (135) (860) - -
(8,498) (1,250) - -
Net assets 34,334 27,319 25,535 18,395
Group Company
2002 2001 2002 2001
At 30 September £000 £000 £000 £000
Restated* Restated*
Capital and reserves
Share capital 7,838 6,089 7,838 6,089
Share premium account 5,782 1,066 5,782 1,066
Revaluation reserve 73 73 73 73
Capital reserve 1,846 1,846 1,846 1,846
Profit and loss account 18,795 14,653 9,996 9,321
Equity shareholders' funds 34,334 23,727 25,535 18,395
Minority interests - 3,592 - -
34,334 27,319 25,535 18,395
Approved by the Board and signed on its behalf:
R Feast, P Sellars (Directors)
17 December 2002
Summarised Consolidated Cash Flow Statement
Total Total
For the year ended 30 September 2002 2001
£000 £000
Restated*
Net cash inflow from operating activities 6,520 2,224
Returns on investments and servicing of finance
Interest received 181 739
Interest paid (276) (551)
(95) 188
Taxation
Net corporation tax paid (332) (1,003)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (2,526) (1,701)
Proceeds on sale of tangible fixed assets 1,184 3,202
Payments to acquire current asset investments (5,517) (836)
Proceeds on sale of current asset investments 491 -
Loans repaid by joint venture 830 1,769
(5,538) 2,434
Acquisitions and disposals
Payments to acquire subsidiary undertakings and connected assets (11,740) (5,652)
Cash acquired on acquisition of subsidiary undertakings 532 12,838
Payments to acquire associated undertakings (3,571) -
Receipt from sale of business - 11
(14,779) 7,197
Equity dividends paid to shareholders (1,001) -
Cash inflow before use of liquid resources and financing (15,225) 11,040
Management of liquid resources
Movement of liquid resources 2,883 1,876
Financing
Issue of share capital 4 -
Acquisition of own shares - (2,730)
Movement in short term borrowings (5,168) (5,568)
Movement in long term borrowings 7,973 225
Finance lease payments (440) (143)
2,369 (8,216)
(Decrease)/ increase in cash in the year (9,973) 4,700
1. ACCOUNTING FOR PENSIONS COSTS
The Group accounts for pensions costs under the requirements of SSAP24, which in
normal circumstances has the effect of spreading the cost of final salary
pensions over the estimated residual working lives of the employees within the
final salary pension scheme. As reported in the Chairman's statement to this
preliminary announcement, in order to protect the interests of shareholders from
the recent deficits accruing within the scheme, the Board has taken the decision
to close the scheme to both new members and existing members other than those
retiring within five years. This has significantly reduced the number of
current members of the scheme. The Group has a current commitment to pay
£980,000 per annum as additional contributions to fund the current deficit
recorded in this scheme over the period 1 August 2002 to 31 July 2012. This
liability has not been recorded within the net assets shown in this preliminary
announcement. Discussions are currently taking place with the auditors as to
whether the scheme deficit under SSAP24 should be treated as a liability of the
Group and it is not therefore available to be spread forward. The Board
considers that as a consequence of these discussions it is possible that the
Group accounts may receive an audit qualification in this respect.
2. NON-OPERATING EXCEPTIONAL ITEMS
The profit on ordinary activities before taxation is stated after
charging/(crediting) the following exceptional items:
2002 2001
£000 £000
Profit on sale of properties within continuing operations - (637)
Loss on disposal of discontinued operations - 101
- (536)
3. TAXATION
2002 2001
£000 £000
UK corporation tax on profits of the period 32 93
Adjustments in respect of previous periods 235 (1)
267 92
Foreign tax 5 (54)
Current tax 272 38
Deferred tax 121 82
Group taxation 393 120
Share of associates' taxation (30) -
Taxation receivable on profit on ordinary activities 363 120
The taxation assessed for the year is lower than the standard rate of tax in the
United Kingdom as a result of the realisation of tax losses available within the
Group. In accordance with the requirements of FRS 19 deferred tax has been
provided in respect of losses where the recoverability can be assessed with
reasonable certainty.
4. DIVIDENDS
An interim dividend of 0.5 pence (2001: nil) was paid during the year, totalling
£392,000 (2001: £nil). A final dividend of 0.6 pence per Ordinary Share was
proposed during the year (2001: 1.0 pence). This amounts to a final dividend of
£470,000 (2001: £609,000).
The total dividend paid and proposed for the year was 1.1 pence (2001: 1.0
pence), amounting to a total dividend of £862,000 (2001: £609,000).
5. EARNINGS PER ORDINARY SHARE
The basic earnings per Ordinary Share is based upon the profit of the Group of
£5,067,000 (2001: £3,613,000) divided by 69,893,352 (2001: 67,602,684), being
the weighted average number of Ordinary Shares in issue during the year.
After taking account of the share option adjustment, the weighted average number
of shares is 71,030,219 (2001: 68,179,810) giving diluted earnings per Ordinary
Share of 7.13p (2001: 5.3p).
6. NEW FINANCIAL REPORTING STANDARD AND ACCOUNTING TREATMENTS
In accordance with Financial Reporting Standard 19, the accounting policy for UK
Deferred tax has changed. The effect of the change in policy has been to
increase profit for the financial year by £39,000 (2001: £82,000) and increase
shareholders' funds by £121,000 (2001: £82,000).
During the year the Group reviewed and reassessed the provisional fair values
established on the acquisitions of Allenbuild and VHE and this resulted in an
increase in goodwill of £5.5m. In addition, the directors have revised the term
of the amortisation of goodwill arising on subsidiary acquisitions from five
years to twenty years. This is considered to be more reflective of the
businesses acquired and current industry practice. This change in treatment
increased reported profits by £1.2m.
Investments in associates are recorded using the equity method of accounting
with goodwill arising being amortised over five years, which is considered an
appropriate period given the underlying assets of the associates.
7. PRELIMINARY STATEMENT
This preliminary statement, which has been agreed with the auditors, was
approved by the Board on 17 December 2002. It is not the Group's statutory
accounts. The statutory accounts for the year ended 30 September 2001 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 2002 have not yet
been approved, audited or filed.
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