Interim Results
Ricardo PLC
27 February 2008
27th February 2008
Ricardo plc
Interim results for the six months ended 31 December 2007
Corporate Statement
Ricardo plc is a market leading engineering, management and automotive
consultancy, employing over 1700 people worldwide. The company has centres in
the UK, USA, Germany, Czech Republic, India, Japan and China and a global client
list including the world's major automotive OEMs, Tier 1 suppliers to OEMs,
energy companies and governments.
Highlights
• Revenue up 14% to £95.2m (H1 2006: £83.8m)
• Profit before tax up 22% to £5.6m (H1 2006: £4.6m)
• Order book up 26% to £98m (H1 2006: £78m)
• Net debt reduced to £8.2m (H1 2006: £18.7m)
• Interim dividend increased by 6.9% to 3.1p (H1 2006: 2.9p)
• Results underpinned by good performance in the UK business with strong
order intake from its Asian customers, successful restructuring in the
US, further development in Germany and growth in Ricardo Strategic
Consulting
• A good start to the second half with good order intake from the key
major markets of Europe, US and Asia
Commenting on the results, Dave Shemmans, Chief Executive said:
'We are pleased with the Group's performance in the first half, with profit
before tax up 22%. The strategy to expand the technical, sector and geographical
spread of Ricardo's business is gathering real momentum and delivering tangible
results in terms of revenue, profit, order book and increased client base. Our
CO2 reducing technologies and engineering expertise continue to be in strong
demand.
Trading in the second half has started well and order prospects continue to
build across the business. We are confident that the full year for 2007/8 will
be a year of continued progress.'
Further enquiries:
Ricardo plc
Dave Shemmans, Chief Executive Tel: 01273 455611
Paula Bell, Group Finance Director
Website: www.ricardo.com
Gavin Anderson & Company Tel: 020 7554 1400
Fergus Wylie
Michael Turner
Interim Management Report
SUMMARY OF RESULTS
The first half performance has delivered both business and profit growth with
revenue up 14% to £95.2m, profit before tax up 22% to £5.6m and operating margin
improving to 6.4% from 6.1% in the same period last year. The order book closed
at £98m compared to £78m twelve months ago and to £92m in June 2007.
Technical Consulting
Growth in the Technical Consulting business has been underpinned by the increase
in orders won from Asia, mostly delivered by our UK division and the
implementation of a restructuring programme in the US. Following the appointment
of a new President for the US business in 2007, we have reduced the base
business cost and reinvigorated business development activities. We have also
continued to increase margins for our engineering expertise and improve the
efficiency of delivery across the Group. Overall the Technical Consulting
business has demonstrated continued growth, both in terms of revenue and
operating profit compared to the first half last year.
Strategic Consulting
Strategic Consulting performed to plan in the first half and has successfully
continued to build a strong pipeline of work. This has led to increased revenue
compared to the first half last year as the client base develops globally.
Continued focus on cash management resulted in net debt (cash, cash equivalents
and bank loans) of £8.2m compared to £18.7m in the same period last year. In
particular, we have benefitted from advance payments from clients, increasing
the trade and other payables within working capital.
The net pension deficit at £17.4m compared to £22.7m in December 2006 and £16.7m
in June 2007. A cash contribution plan to substantially reduce the deficit over
a nine-year period commenced in 2005/6. In 2008 we are reviewing the investment
and funding strategy of the defined benefit pension scheme as part of the
triennial valuation.
Basic earnings per share for the first half increased to 9.3p (from 8.9p in the
same period last year). In the last financial year we enjoyed significant
benefit from retrospective R&D tax credits in both the UK and the USA, which
boosted the full year earnings per share and which we do not expect to repeat
this financial year.
We are declaring an interim dividend of 3.1p, an increase of 6.9% on the prior
year interim dividend of 2.9p. Our dividend policy is to maintain a 2x to 2.5x
cover ratio. The dividend will be paid on 18 April 2008 to all shareholders on
the register at close of business on 25 March 2008.
We are required to report on any seasonality or cyclicality affecting half year,
compared to full year performance. The second half of the financial year is
normally subject to less annual leave, both at clients and amongst the Ricardo
team, and is therefore normally more profitable. This financial year is expected
to show a similar pattern.
We are required to report on the principal risks and uncertainties for the
remaining six months of the financial year. Delivery of increased profits in the
second half depends principally on customers holding to their plans, the
conversion of a good pipeline of prospects into orders, and the effective
delivery of all our business to our customers.
STRATEGY UPDATE
The strategy of broadening the technical and strategic offering, together with
an expansion in client, sector and geographical base continues. Our focus on
solving global, industry and environmental issues through investment in and
deployment of cost effective environmentally responsible transport solutions is
delivering results for clients, Ricardo and society in general. Our CO2 reducing
technologies and deep engineering expertise continue to be in strong demand
world-wide, penetrating beyond our traditional automotive clients.
The technical drivers in our industry continue to be those of fuel economy
improvement, emissions reduction and automotive safety enhancement. The most
significant industry business issues remain OEM profit generation in competitive
markets, often disrupted by new entrants, and the exploitation of emerging
market development. These are driven by legislation, increasing in profile and
time critical. We continue to invest to develop technology and expertise to
provide solutions to these global drivers.
In terms of new market development, we were pleased to open our office in India
in response to demand from the expanding Indian automotive industry. We also
continued our focus on the Russian market, and as a result we were awarded new
contracts and additional opportunities. It is clear that these markets will
increase in importance on the automotive stage both domestically and
internationally.
The order book is increasing across the business, with growing order intake and
opportunities from new and traditional clients. The business is running with a
higher heart beat, with improved utilisation levels and a more aggressive
business development focus.
TECHNICAL CONSULTING
UK
The UK business had a good first half with increased order book, order intake,
revenue and operating profit compared to the same period in the prior year. The
new orders reflect our continued focus on Asian markets, with Japan delivering
particularly strong growth, together with an increased level of business from
European clients, including pass through work from our busy German business and
programmes from other parts of mainland Europe including Russia.
Recent project wins have provided a good technical spread and we are actively
recruiting in the areas of transmissions, engines and electronics to service the
demand. Our test beds continue to be well utilised.
The engines business has continued to be underpinned by diesel projects in both
the commercial vehicle and passenger car sectors. Emissions legislation,
competitive pressure on fuel economy and growth of demand for diesels in the US
market continue to be major drivers. Our diesel expertise is being deployed on
programmes for European, American, Chinese, Indian and Japanese clients. However
we have also seen a good increase in the level of gasoline engine business
covering sectors from small city cars to high profile super cars for European
and Asian clients.
The transmissions and driveline business continues to benefit from investment in
R&D, specifically in the areas of electronic dual clutch technology, electronic
automated manual transmission and torque vectoring, all of which are generating
new programmes with our global client base. New programmes are being won from
Asian customers, which are enhancing our penetration of this growing market. The
high performance transmissions business has had a strong period with solid order
intake, particularly from F1 teams as well as GT programmes in Europe and Japan.
Once again Ford were successful in winning the World Rally Car Championship with
the support of Ricardo driveline systems.
The vehicle business has been re-energised and increased its efforts in the
military sector through the establishment of a defence systems and technologies
business where the high value automotive technologies are being offered to the
defence sector. Sector contacts are increasing as are the opportunities we are
bidding for and winning, including a number of hybrid and clean technology
programmes. The vehicle business has also secured good levels of order intake
from commercial vehicle manufacturers in Asia for powertrain integration and
chassis engineering.
The electronics business continued its strong performance, with activity focused
in the areas of hybrids, on-board diagnostics, systems integration and emissions
control. We continue to recruit in this strategic area to support our
developments within the clean technology, safety and intelligent vehicle related
areas of automotive engineering. In the period we signed an agreement with the
global electronics manufacturer Delta Electronics Inc, whereby we can offer the
industry a new Tier 1 route while protecting intellectual property. Our role is
to design the electronic modules to automotive standard, which Delta Electronics
Inc will then manufacture from their global base.
Our Prague engineering facility continues to develop and expand with a team of
approximately 130 and growing towards a target of 160. The high quality eastern
European centre covers disciplines including software, design, simulation,
analysis and electronic design, supporting global customer programmes covering
transmissions, engines and hybrids for passenger car and commercial vehicle
sectors. Increasingly the Prague centre is being used for other office business
services as well.
USA
Following the change of leadership in May 2007, the US business has undertaken a
restructuring programme to improve its performance. After full absorption of the
restructuring costs it has demonstrated an increase in operating profit in the
first half and is running with more momentum and good levels of utilisation.
Order intake in the period was strong with commercially better terms obtained
from a more diverse customer base. With a strong pipeline of opportunities and a
more commercial focus, the business is well positioned to exploit the increasing
focus on, and governmental backing for, CO2 reduction and new technology. This
performance will enable additional investment into locally generated technology,
which will continue the positive trend of value added engineering and brand
enhancement.
Key programmes include US diesel engine developments, gasoline engine upgrades
for US and Asian clients, hybrid powertrains including plug-in hybrid
demonstrators, safety and intelligent-vehicle related electronics and total
vehicle fuel economy programmes. Clients range from US to Asia and from
passenger car OEMs, oil companies and Tier 1s to US Government and military. An
interesting addition to our US business is that of the energy sector where we
are supporting developments in the wind farm arena.
Our software product business stream, managed by the US division, continued to
perform strongly and had a solid first half. Business was generated by
increasing our global marketing and introducing new products, which improve the
robustness of powertrain design whilst also reducing time to market.
Germany
The German automotive industry is also driven by the challenges of meeting
exhaust legislation. This has created a large demand for engineering and
development support within Germany, with engineers being in short supply. Our
strategy and actions to invest in high quality, locally based, native language
speaking staff with the necessary engineering talent, tools and facilities is
resulting in an increase in brand awareness, client base, order book and
prospects.
Our client base now includes the major automotive passenger car OEMs in Germany,
together with Tier 1s and premium players in other sectors such as motorcycle,
off highway, marine and power generation. In the period we completed a number of
programmes and have received repeat business from customers who are amongst the
most demanding in the world, both technically and for quality. We are working in
partnership with these clients and are increasingly being seen as part of their
strategic solution to meet their product development needs.
We and our customers are in competition for the best engineers, and recruitment,
while successful, has not allowed us to keep up with the increasing demand,
thereby limiting our growth potential. We are building links with universities
for the long term, looking at acquisition solutions and continue to pass
business to other divisions. However the real focus is on seeking out and
attracting the best of talent wherever we can to serve the needs of today. The
increasing client profile and brand strength in Germany, the portfolio of
leading edge programmes and the new leadership are all helping us to achieve
this aim and we are now finding that we can compete for talent with the very
best of the premium automotive companies in Germany.
Our niche high performance exhaust business has become a USP with the increasing
focus on aftertreatment solutions for passenger car and commercial vehicles. The
business has performed better than planned with good demand for prototype
systems and the continued delivery of a low volume production programme for a
premium automotive manufacturer. We are in the process of bringing on stream low
cost suppliers to improve the performance of the business.
STRATEGIC CONSULTING
The strategic consulting business has returned to high levels of utilisation and
is actively recruiting to support further demand. It has secured a strong
position on a number of large programmes, which for the client are strategic in
nature and last for more than a year. The client base is well spread
geographically and by name, with the order book increasing to strong levels with
a good level of risk mitigation. In the first half we have improved the
robustness of the business in terms of recruitment, systems, business
development and retention of core staff. The business is building inherent
strength and a reputation in the market as a core player which delivers. This
naturally helps with recruitment of both new clients and talent, much of which
comes from other leading consulting companies with people who can see the
benefit of deep content management consulting. A number of the core programmes
are being delivered are in conjunction with technical consulting.
Business continues to be secured around new technology forecasting and
implementation, process improvements, organisational performance enhancements,
due diligence and corporate strategy, warranty improvement and cost down.
ASA
Ricardo's orders from Asia are primarily executed in the UK, and therefore
reflected in the results of the UK part of Technical Consulting. The following
paragraphs give further explanation by key country within Asia of where the
business has come from and the drivers in those territories.
Japan
In the period we have received record levels of order intake from Japanese
clients with a balance of repeat business and new client turnkey outsource
programmes. The Japanese automotive industry has continued to increase in
strength world-wide with stronger market positions, product portfolios and
engineering demands. The industry is adopting an outsource model for the first
time and is therefore selecting partners carefully. We are delighted to be
receiving repeat business from such high quality clients as we deliver our
existing commitments. 2006/7 was a record year for Ricardo in Japan, in terms of
engineering order intake, with 2007/8 doubling that pace in the first half from
a broader portfolio of customers and product sectors covering almost all of our
offerings. We continue to develop and deepen relationships with major Japanese
OEMs, and Japan is bringing strong opportunities into the pipeline from the
passenger car, commercial vehicle, marine and motorcycle sectors.
China
Ricardo's Chinese operation had a natural change of leadership in the period.
Our global head of transmissions took up the post and is leading the Chinese
operation through its transition to an engineering and business development
operation. The Chinese automotive market has also turned its attention to the
next challenge - transmissions.
The development of the engineering operation in China continues with successful
recruitment, training and deployment of local engineers. Utilisation is
increasing, serving both domestic clients as well as international clients. The
current facilities are being outgrown and a move into an engineering facility is
planned in the second half of the current year, which will better support our
growth aspirations over the coming years. Client activity, relationships and
engagement remain high with opportunities and programmes in the area of hybrids,
gasoline engines, transmissions and electronics for the passenger car and
commercial vehicle sectors.
India
The Indian automotive industry continues to grow, with the leading companies
developing both their domestic product portfolios whilst also focusing on
export. To compete on the world stage, Indian companies are seeking out
companies with technology, quality and engineering processes who can assist with
their strategic development. To develop closer relationships with these emerging
world players and to access the Indian market, Ricardo opened an office in Delhi
in the period and has continued to develop the pipeline of opportunities.
India is keen to demonstrate environmentally responsible industrial growth and
is taking the emissions legislation seriously. It was with great honour that our
launch event was attended by Nobel Laureate Dr Rajendra K Pachauri, who is the
Chairman of the United Nations Intergovernmental Panel on Climate Change, and
other leaders from the Indian automotive industry.
South Korea
The South Korean office was busy in the period with leads developed and secured
in the passenger car, commercial vehicle and military sectors. The work secured
from South Korea is delivered mainly from the UK. The leading South Korean
client is also very active itself in the US with a US based development centre,
with core decisions normally being referred back to their South Korean head
office.
RESEARCH
Ricardo continues to research new technologies and innovative solutions to
address its dominant technology drivers of energy security, the reduction of
carbon dioxide emissions and automotive safety enhancement. Our major technology
activities include a collaborative programme to deliver a commercially viable
diesel engine that can meet the most severe emission legislation in the United
States market, a unique premium gasoline engine that delivers dramatic
improvement through downsizing but with the torque of a diesel engine enabled
through seamless switching between 2 and 4 stroke operation, low cost and low
energy actuation systems for automatic transmissions and a new approach to
engine control using a complete model of the engine to predict parameter
settings, substantially reducing the time required for calibration. We also
continue to research advanced telematics systems that enhance vehicle fuel
economy and safety through information-enabled control.
In the last six months, all of these programmes have made remarkable progress.
Our diesel vehicle is now very close to the engine out emission requirements for
the US market. Our gasoline concept has achieved seamless switching between 2
stroke and 4 stroke operation. Our new actuation system has been demonstrated at
the key transmissions conference in Europe. We have successfully demonstrated
real time operation of our model-based engine control system. We are now also
active in a range of advanced safety and telematics programmes including the
integration of our highly successful torque vectoring vehicle with a
steer-by-wire system.
PEOPLE
The strength of the Group recruitment over the past nine months is being
demonstrated in the increased commercial acumen, results and talent management
rigour within Ricardo. In the period we have welcomed as Group HR Director Sarah
Murphy from Microsoft, we have appointed Dave Pickett to the newly created Group
Procurement Director position and we have appointed Dr Peter Heuser to the
Managing Director position in Germany. The divisions have continued to
strengthen their management teams with recruitment of notable and industry
respected non-executive appointments in Germany and the US.
OUTLOOK
We are pleased with the Group's performance in the first half, with profit
before tax up 22%. The strategy to expand the technical, sector and geographical
spread of Ricardo's business is gathering real momentum and delivering tangible
results in terms of revenue, profit, order book and increased client base. Our
CO2 reducing technologies and engineering expertise continue to be in strong
demand.
Trading in the second half has started well and order prospects continue to
build across the business. We are confident that the full year for 2007/8 will
be a year of continued progress.
Dave Shemmans
Chief Executive
27 February 2008
Notes:
(a) Related-party transactions are disclosed in Note 9.
(b) Forward-looking statements: Certain statements in this interim management
report are forward-looking. Although these forward-looking statements are
made in good faith based on the information available to the directors at
the time of their approval of the report, we can give no assurance that
these expectations will prove to have been correct. Because these statements
involve risks and uncertainties, actual results may differ materially from
those expressed or implied by these forward-looking statements. We undertake
no obligation to update any forward-looking statements whether as a result
of new information, future events or otherwise.
Consolidated Income Statement
for the six months ended 31 December 2007 (unaudited)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Notes £m £m £m
---------------------------------------------------------------------------------
Revenue 4 95.2 83.8 171.5
Cost of sales (63.9) (57.6) (114.0)
---------------------------------------------------------------------------------
Gross profit 31.3 26.2 57.5
Administration expenses (25.2) (21.1) (44.3)
---------------------------------------------------------------------------------
Operating profit 4 6.1 5.1 13.2
Finance income 0.8 0.9 2.0
Finance costs (1.3) (1.4) (3.0)
---------------------------------------------------------------------------------
Profit before taxation 5.6 4.6 12.2
Taxation 6 (0.9) (0.1) 2.9
---------------------------------------------------------------------------------
Profit for the period 4.7 4.5 15.1
---------------------------------------------------------------------------------
Profit attributable to minority
interest - - 0.1
Profit attributable to equity
shareholders 4.7 4.5 15.0
---------------------------------------------------------------------------------
Earnings per share 7
Basic 9.3p 8.9p 29.6p
Diluted 9.2p 8.9p 29.5p
---------------------------------------------------------------------------------
Consolidated Statement of Recognised Income and Expense
for the six months ended 31 December 2007 (unaudited)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
£m £m £m
Currency translation differences on net
investment in foreign operations 2.1 (1.0) (1.5)
Fair value gain/(loss) on net investment hedge (1.1) 0.4 0.4
- Cash flow hedges: (0.3) - -
- net fair value losses 0.1 - -
- recycled and reported in net profit
Actuarial gains/(losses) on the defined
benefit pension scheme (2.1) (0.4) 4.2
Tax on items recognised directly in equity 0.9 - (1.7)
---------------------------------------------------------------------------------
Net income and expense recognised
directly in equity (0.4) (1.0) 1.4
Profit for the period 4.7 4.5 15.1
---------------------------------------------------------------------------------
Total recognised income and expense for
the period 4.3 3.5 16.5
---------------------------------------------------------------------------------
Attributable to minority interest - - 0.1
Attributable to equity shareholders 4.3 3.5 16.4
---------------------------------------------------------------------------------
Consolidated Balance Sheet
as at 31 December 2007 (unaudited)
31 December 31 December 30 June
2007 2006 2007
£m £m £m
---------------------------------------------------------------------------------
Assets
Non current assets
Goodwill 16.8 15.6 15.6
Other intangible assets 2.0 1.7 1.9
Property, plant and equipment 45.8 44.0 44.5
Deferred tax assets 10.4 9.3 9.9
---------------------------------------------------------------------------------
75.0 70.6 71.9
---------------------------------------------------------------------------------
Current assets
Inventories 9.5 8.3 7.5
Trade and other receivables 63.8 53.6 55.6
Current tax assets 0.9 0.3 0.5
Deferred tax assets 1.8 0.6 1.7
Cash and cash equivalents 16.2 18.0 15.4
Assets classified as held for sale - 6.7 -
---------------------------------------------------------------------------------
92.2 87.5 80.7
---------------------------------------------------------------------------------
Total assets 167.2 158.1 152.6
---------------------------------------------------------------------------------
Liabilities
Current liabilities
Bank loans and overdrafts (12.1) (25.1) (9.1)
Trade and other payables (55.4) (33.8) (43.9)
Current tax liabilities (1.9) (2.2) (2.1)
Deferred tax liabilities (0.4) (0.6) (0.4)
Provisions (0.6) (0.4) (0.5)
---------------------------------------------------------------------------------
Liabilities directly associated with
assets classified as held for sale - (6.7) -
---------------------------------------------------------------------------------
(70.4) (68.8) (56.0)
---------------------------------------------------------------------------------
Net current assets 21.8 18.7 24.7
---------------------------------------------------------------------------------
Non current liabilities
Bank loans (12.3) (11.6) (13.5)
Retirement benefit obligations (17.4) (22.7) (16.7)
Deferred tax liabilities (4.8) (4.6) (4.7)
---------------------------------------------------------------------------------
(34.5) (38.9) (34.9)
---------------------------------------------------------------------------------
Total liabilities (104.9) (107.7) (90.9)
---------------------------------------------------------------------------------
Net assets 62.3 50.4 61.7
---------------------------------------------------------------------------------
Shareholders' equity
Share capital 12.7 12.7 12.7
Share premium 13.5 13.3 13.3
Other reserves 0.6 - (0.5)
Retained earnings 35.1 23.8 35.7
---------------------------------------------------------------------------------
Total shareholders' equity 61.9 49.8 61.2
Minority interest in equity 0.4 0.6 0.5
---------------------------------------------------------------------------------
Total equity 62.3 50.4 61.7
---------------------------------------------------------------------------------
Consolidated Cash Flow Statement
for the six months ended 31 December 2007 (unaudited)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
£m £m £m
---------------------------------------------------------------------------------
Cash flows from operating activities
Cash generated/(used) by operations (note 8) 11.0 (4.4) 15.6
Interest received 0.8 0.9 2.0
Interest paid (1.3) (1.4) (3.0)
Tax paid (1.0) (0.8) (1.6)
---------------------------------------------------------------------------------
Net cash generated/(used) by operating
activities 9.5 (5.7) 13.0
---------------------------------------------------------------------------------
Cash flows from investing activities
Purchases of intangible assets (0.5) (0.4) (1.0)
Purchases of property, plant and
equipment (4.3) (3.7) (8.5)
---------------------------------------------------------------------------------
Net cash used by investing activities (4.8) (4.1) (9.5)
---------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds from issue of new share
capital 0.2 - -
Net proceeds from issue of new bank
loan 0.8 9.0 3.9
Repayment of borrowings (2.1) (2.8) (2.1)
Dividends paid to shareholders (3.6) (3.4) (4.9)
Dividends paid to minority interests (0.1) - (0.1)
---------------------------------------------------------------------------------
Net cash (used)/generated by financing
activities (4.8) 2.8 (3.2)
---------------------------------------------------------------------------------
Effect of exchange rate changes (0.4) (0.1) (0.3)
---------------------------------------------------------------------------------
Net decrease in cash and cash
equivalents (0.5) (7.1) -
Cash and cash equivalents at beginning
of period 12.7 12.7 12.7
---------------------------------------------------------------------------------
Cash and cash equivalents at end of period 12.2 5.6 12.7
---------------------------------------------------------------------------------
Notes to the Interim Financial Statements
for the six months ended 31 December 2007 (unaudited)
1. General information
Ricardo plc is a limited liability company incorporated in the UK with a primary
listing on the London Stock Exchange. The company's registered office is at the
Ricardo Shoreham Technical Centre, Shoreham-by-Sea, West Sussex, BN43 5FG, and
its registered number is 222915.
This interim report was approved for issue on 27 February 2008.
This interim report does not comprise statutory accounts within the meaning of
Section 240 of the Companies Act 1985. The figures for the year to 30 June 2007
have been extracted from the 2007 Annual Report and Accounts, which was approved
by the Board of directors on 17 September 2007 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any statement under
Section 237 of the Companies Act 1985.
2. Basis of preparation
This interim report for the six months ended 31 December 2007 has been prepared
in accordance with the Disclosure and Transparency Rules of the Financial
Services Authority and IAS 34, 'Interim Financial Reporting' as adopted by the
European Union. This interim report should be read in conjunction with the
Annual Report and Accounts for the year ended 30 June 2007, which has been
prepared in accordance with IFRSs as adopted by the European Union.
3. Accounting policies
The accounting policies adopted are consistent with those of the financial
statements for the year ended 30 June 2007, as described in those financial
statements.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the financial year ending 30 June 2008.
•IFRIC 10, 'Interim Financial Reporting and Impairment', effective for annual
periods beginning on or after 1 November 2006. This interpretation has not had
any impact on the timing or recognition of impairment losses.
•IFRIC 11, 'IFRS 2 - Group and Treasury Share Transactions', effective for
annual periods beginning on or after 1 March 2007. This interpretation is not
expected to be relevant for the group.
•IFRS 7, 'Financial Instruments: Disclosures', effective for annual periods
beginning on or after 1 January 2007; 'Amendments to IAS 1 Presentation of
Financial Statements Capital Disclosures', effective for annual periods
beginning on or after 1 January 2007; and IFRS 4, 'Insurance contracts', revised
implementation guidance, effective when an entity adopts IFRS 7: as this interim
report contains only condensed financial statements, and as there are no
material financial instrument related transactions in the period, full IFRS 7
disclosures are not required at this stage. Disclosures required for compliance
with these standards will be given in the annual financial statements.
4. Segmental reporting
(a) by business segment, with revenue reflecting sales to external customers
Revenue Operating profit
--------------------------------------------------------------------------------------------------
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
31 December 31 December 30 June 31 December 31 December 30 June
2007 2006 2007 2007 2006 2007
£m £m £m £m £m £m
--------------------------------------------------------------------------------------------------
Technical Consulting 88.7 80.0 163.0 5.5 4.6 11.9
StrategicConsulting 6.5 3.8 8.5 0.6 0.5 1.3
--------------------------------------------------------------------------------------------------
95.2 83.8 171.5 6.1 5.1 13.2
--------------------------------------------------------------------------------------------------
(b) reflecting the revenue and profit generated by the staff in the business units
(non-GAAP measure)
Revenue Operating profit
--------------------------------------------------------------------------------------------------
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
31 December 31 December 30 June 31 December 31 December 30 June
2007 2006 2007 2007 2006 2007
£m £m £m £m £m £m
--------------------------------------------------------------------------------------------------
Technical Consulting
UK 54.3 49.3 102.0 4.4 3.7 9.8
North America 20.5 18.1 37.4 0.7 0.5 1.2
Germany 15.3 12.8 24.2 0.4 0.4 0.9
--------------------------------------------------------------------------------------------------
90.1 80.2 163.6 5.5 4.6 11.9
Strategic Consulting 5.1 3.6 7.9 0.6 0.5 1.3
--------------------------------------------------------------------------------------------------
95.2 83.8 171.5 6.1 5.1 13.2
--------------------------------------------------------------------------------------------------
For this non-GAAP measure, the part of the work invoiced to third parties by
Strategic Consulting that is sub-contracted to Technical Consulting is included
within Technical Consulting revenue.
5. Ordinary dividends
Six months Six months Six months Six months
ended ended ended ended
31 December 31 December 31 December 31 December
2007 2006 2007 2006
pence/share pence/share £m £m
------------------------------------------------------------------------------
Amounts distributed in
the period 7.1p 6.7p 3.6 3.4
Proposed interim
dividend 3.1p 2.9p 1.6 1.5
------------------------------------------------------------------------------
6. Taxation
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
£m £m £m
--------------------------------------------------------------------------------
UK 0.1 (0.5) 3.9
Overseas 0.8 0.6 (1.0)
---------------------------------------------------------------------------------
Tax charge/(credit) on profit 0.9 0.1 (2.9)
--------------------------------------------------------------------------------
7. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity shareholders of £4.7m (31 December 2006: £4.5m; 30 June 2007: £15.0m) by
the weighted average number of shares in issue of 50,766,297 (31 December 2006:
50,694,167; 30 June 2007: 50,694,534), after deducting the shares held by the
Long Term Incentive Plan ('LTIP') Trustee. For diluted earnings per share, the
weighted average number of shares in issue is adjusted for the effects of
dilutive options and LTIP awards, and is accordingly 51,023,688 (31 December
2006: 50,795,901; 30 June 2007: 50,833,331).
8. Cash generated by operations
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
£m £m £m
--------------------------------------------------------------------------------
Continuing operations
Profit from operations 6.1 5.1 13.2
Adjustments for:
Share-based payments (0.2) 0.1 0.2
Depreciation and amortisation 4.3 4.4 8.8
--------------------------------------------------------------------------------
Operating cash flows before movements in
working capital 10.2 9.6 22.2
Increase in inventory (1.7) (1.4) (0.5)
Increase in trade and other receivables (7.1) (6.9) (9.3)
Increase/(decrease) in payables 10.9 (4.3) 5.9
Increase/(decrease) in provisions 0.1 (0.1) -
Pension payments in excess of pension
costs (1.4) (1.3) (2.7)
---------------------------------------------------------------------------------
Cash generated/(used) by operations 11.0 (4.4) 15.6
--------------------------------------------------------------------------------
9. Related-party transactions
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
£m £m £m
------------------------------------------------------------------------------
Compensation for key management personnel
Salaries and other short-term
employee benefits 1.3 1.1 2.3
Post-employment benefits 0.2 0.3 0.5
Termination benefits - - 0.3
Share based payments 0.2 0.2 0.4
--------------------------------------------------------------------------------
1.7 1.6 3.5
--------------------------------------------------------------------------------
The key management personnel are the board of directors, the Managing Directors
of the UK, US and German businesses and the Global Product and Engineering
Director.
This information is provided by RNS
The company news service from the London Stock Exchange
Thursday, 26th September 2024
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