Interim Results

Ricardo PLC 05 March 2007 5th March 2007 Ricardo plc Interim results for the six months ended 31 December 2006 Ricardo plc is the leading UK independent automotive consultancy, employing over 1,800 people worldwide. The company has centres in the UK, USA, Germany, Czech Republic and Asia, and has a client list that includes the world's leading automotive OEMs. HIGHLIGHTS •Revenue up 3% to £83.8m (H1 2005: £81.1m) •Profit before tax up 10% to £4.6m (H1 2005: £4.2m) •Order book up 15% to £77.7m (H1 2005: £67.4m) •Basic earnings per share up 20% to 8.9p (H1 2005: 7.4p) •Interim dividend increased by 7% to 2.9p (H1 2005: 2.7p) •Profit turnaround in Germany; growth in Asia underpins the increase in UK profits but has driven increases in working capital •A good start to the second half with good order intake from the key major markets of Europe, USA and Asia across all divisions of the company •Pipeline of prospects remains healthy (£371m at end of January) Commenting on the results, Dave Shemmans, Chief Executive said: 'I am pleased with the solid improvement in performance in the first half, yet again demonstrating the importance of our strategy to be diversified across geographical and technical sectors. The UK's good first half performance coupled with the German business returning to profit balanced the anticipated slow start of Strategic Consulting, coming off a very strong prior year, and the disappointing result from the US business. Our investments in technology and geographical expansion have resulted in increased business from advanced transmissions, electronics and fuel economic engines, in particular from Asia and Germany. The business level for USA diesel activity is particularly pleasing and points towards an emerging market segment. 'The second half has started well and order prospects continue to build with greater forward visibility. Although we have not changed our outlook for the full year, our confidence continues to grow.' Further enquiries: Ricardo plc Dave Shemmans, Chief Executive 01273 455611 Paula Bell, Group Finance Director 01273 455611 Website: www.ricardo.com Gavin Anderson & Company Fergus Wylie 020 7554 1400 Daniel Hunter 07917 218 453 INTERIM RESULTS AND DIVIDEND Overall the 2006-7 financial year has started satisfactorily, again showing the benefit of being more geographically, sectorally and technically diversified. Germany has experienced a profit turnaround, and the UK has had a good first half, handling the majority of the increased Asian work. These two markets have provided a good balance to the anticipated slow start for Strategic Consulting and the disappointing trading levels in the US. The first half group profit before tax was 10% ahead of prior year and with the order book up by 15% we continue to anticipate that the full year 2006-7 will be one of steady progress. The strategy of providing value added, investment led technology and strategic consulting to a global client base is providing a good platform for further growth and risk mitigation. Turnover for the six months to 31 December 2006 was £83.8m (2005: £81.1m). Group profit before tax in the period was £4.6m (2005: £4.2m). Basic earnings per share increased to 8.9p (2005: 7.4p). The order book at 31 December 2006 stood at £77.7m (2005: £67.4m). Net borrowings increased from prior year to £18.7m due to increased working capital requirements driven largely by the growing Asian business. This was accentuated as trade creditors closed at a particularly high balance in December 2005 as a result of amounts received in advance on several contracts. By the end of December 2006 these contracts had been delivered and trade creditors reduced accordingly. The pension deficit has reduced by £0.9m to £22.7m since June 2006 and £11.5m in the last 12 months. We have capped increases in pensionable salaries to inflation and we plan to eliminate the deficit over a nine-year period, commencing from 2005, by making additional cash payments to the scheme. The calculation of the interim tax charge is based on a forecast of the full year effective tax rate. Our underlying tax rate, assuming ongoing R&D taxation credits, is 15% - 20%. However, further retrospective claims for R&D taxation credits are now envisaged which will reduce this and next year's effective tax rate to a single figure percentage. We are increasing the interim dividend to 2.9p (2005: 2.7p) now that our cover is restored and we have decided to align ourselves more closely with the market place by setting our interim dividend around 30% of the full year amount. The dividend will be paid on 20 April 2007 to shareholders on the register at close of business on 23 March 2007. STRATEGIC OVERVIEW Overall the strategy of broadening the technical and strategic offering, together with an expansion in client, sector and geographic base continues as planned and is delivering the expected benefits. Through our continuing R&D, we have delivered new capabilities in core areas such as diesel emissions, dual clutch transmissions and control and electronics. We have offered these capabilities to our customers and won additional work. Strategic Consulting has strengthened its presence in Asia, and we have seen strong growth in the engineering business in India and Japan. In China we have appointed an engineering director to expand our ability to support our Chinese customers. As the automotive landscape changes in terms of technology, geography and motor manufacturers, we will continue to invest in appropriate areas to reduce overall business volatility and provide a platform for sustainable growth. The Group order book is increasing with all areas of the business contributing to growing order intake and lists of opportunities. Orders from Asia, specifically India, Japan and China, have been strong in the period together with a solid improvement of orders from the German market place. UK Our UK business increased its turnover and profits on the prior year, with a substantially increased order book over the last six months following a number of significant contract wins. The new orders reflect our continued success from Asian markets, with India, China and Japan all winning increased level of work. We have also seen 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. The project wins have also been spread technically with contracts for dual clutch transmission system development, new diesel and gasoline engines, military contracts for both vehicle and transmissions together with a variety of new control & electronics projects. We are actively recruiting in the areas of transmissions, engines and electronics to service the demand and 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 the introduction of new products to the US continue to be major drivers. Our diesel engine expertise is being deployed on programmes for European, American, Chinese, Indian and Japanese clients with the quality of delivery demonstrated by the world record breaking JCB DieselMax last summer. The level of gasoline engine business has been steady in the period with new business coming from the passenger car and motorcycle sectors for European and Chinese customers in particular. The transmissions and driveline business is strong as we start to see previous research into torque vectoring, next generation dual clutch technology, advanced hybrid systems and new control and electronic strategies for emerging transmission systems bearing fruit in terms of large programmes. On the motorsport side of the transmissions business we have secured new wins in both the F1 and GT racing markets, further growing our presence in the motor sport arena. The vehicle business continues to be underpinned by military and special vehicle contracts and continuing business from established European automotive customers. New opportunities in vehicle are appearing in Asia from the commercial vehicle markets. The control & electronics business continues to grow with programmes focused on advanced automotive applications, such as hybrids and sophisticated vehicle based control systems. Our Prague engineering facility, which is managed by the UK, continues to develop and expand with a team now in excess of 115, providing services to the whole group. This high quality eastern European centre covers disciplines including software, design, simulation, analysis and electronic design and serves global customers with programmes covering transmissions, engines and hybrids for passenger car and commercial vehicle sectors. The Prague technical centre is increasingly providing IT support services for the whole group. USA The domestic North American car industry remains in transition with a number of automotive manufacturers and their related suppliers under market and financial stress. However, such competitive market conditions can create good opportunities for Ricardo even though project volatility may be increased. Against this background and our active market diversification into the commercial vehicle and military sectors, the US business recorded its highest first half order intake for five years generating a healthy order book at the half year. However, as the order flow was second quarter weighted, it did not come quickly enough to mitigate poor order intake during the second half of the prior year. Trading in the first half this year was disappointing, particularly compared to last year where we benefited from a large military project, which was delivered in a short time period. With a healthy order book and well-utilised test beds we are expecting a significantly improved second half and will continue to drive for further growth during the traditionally strong third quarter order intake period. Our software product business, managed by the US division, has had a good first half of the year with increased sales and profits. The growth was generated from an expansion of our global marketing and the introduction of new products, which improve the quality and robustness of powertrain design while reducing time to market. GERMANY Whilst the prior financial year was a difficult one for our German business, exacerbated by the weakness in the German automotive industry, the first half of 2006-7 has continued the turnaround into profitability. Our strategy and actions to invest in high quality people, engineering talent, tools and facilities (increasing capacity and capability) are delivering to plan with increasing profits, client base, order book and prospects. Moreover, we are seeing initial signs of recovery in the German market place and our increased value added offerings, delivered from a local base in the native language, are being well recognised. We now have the major automotive passenger car OEMs in Germany as clients, together with Tier 1s and premium players in other sectors such as motorcycle, off highway, marine and power generation. We service highly respected customers in the German market place who are widely respected for their technology, quality, products and global brands. We are extremely pleased to be building relationships with these clients, as they are well matched to the Ricardo philosophy of delivering value through innovation. Our niche high performance exhaust business has also had a good first half with good demand for prototype systems and the ramp up of a low volume production programme for a premium automotive manufacturer. ASIA Our operation in Japan continues to grow as deepening relationships with major Japanese OEMs, bring increased order intake and regular senior level native tongue dialogue. Japan has a business culture heavily based around relationship, delivery and technical value. Therefore it is particularly pleasing to see our business from this region grow year on year, with projects of increasing value being delivered primarily from the UK but with an increasing local content. As our clients continue to experience significant success across the globe this demands new product development and technologies for different geographical markets. These demands are in many cases outstripping client in-house capacity and drives increasing requests for additional support. Our activities in Japan cover both diesel and gasoline engines, advanced transmissions and electronics. Japan is also a major market for our advanced software products. Moreover, we are increasingly being invited to participate with on-site strategic planning and delivery teams. We see this as a positive sign of trust and acceptance of our value. In the coming half year we will be relocating our Tokyo office close to our customer base to improve our support and response to the customer. Our focus on the Indian market increased in the period and we are pleased to have secured a number of significant wins to develop engines for the light commercial vehicle sector. India is a unique market with many unique products and thus served mainly by domestic automotive players, rather than global imports. It is important that we develop close relationships with the domestic Indian automotive industry and our efforts will increase in this region. Korea continues to be an active market for us with business and opportunities under discussion covering strategic consulting, electronics, hybrids, transmissions and engine development. Our development of a Shanghai based engineering centre, in response to strong client requests and the large market opportunity, continues with its relocation into larger premises and the introduction of an engineering office. The engineering office will focus, as in Prague, on desk based engineering covering a similar wide range of disciplines with the added function of local programme support and project management. The head of the engineering office has been seconded from the UK and we are recruiting Chinese national engineers from industry and Chinese universities. These engineers will spend a period of time in the UK to gain experience before returning to the Ricardo Shanghai centre or customer sites as part of our medium term development plan for the Chinese market. Relationships and business with our Chinese customers continue to develop well with repeat business from established customers. The Shanghai Automotive programme has successfully launched its first product in China under the brand name Roewe, with Ricardo's role being openly credited. The relationship with Shanghai Automotive is excellent and we continue to work together on a wide range of new product developments. RICARDO (2010) CONSULTANTS LTD ('Ricardo 2010') Following a highly successful twenty-month period of development by Ricardo 2010 (a Ricardo subsidiary set up solely for this purpose) of new products for SAIC Motor Company and of a world-class engineering organisation, SAIC exercised its option in January 2007 to take ownership of this venture as planned at a nominal sum of £1. The transfer of ownership of Ricardo 2010 will have no commercial impact for Ricardo plc in the financial year ending 30 June 2007. STRATEGIC CONSULTING Our Strategic Consulting practice has progressed according to plan during the period. Following an unusually high contribution last year underpinned by two large contracts, which concluded in the summer, the business focused on rebuilding the order book in the first quarter of this financial year. It has now returned to more normal levels of utilisation. In the second quarter, the business has received strong order intake from a diverse European, Asian and American customer base covering a broad portfolio of products. We are recruiting to serve demand and build critical mass to move to the next stage of the business' development. The market progress and client feedback further supports the strategy of offering technical and management consulting in unison, thus differentiating Ricardo's deep content management consulting from other industry players. Our activities continue to focus on generating additional profit to our customers through product cost down, warranty reduction, business improvement and restructuring. We are also seeing an increasing number of projects relating to product and technology strategy and acquisition activities. Our client base continues to be of premium quality with high levels of customer satisfaction and repeat business. RESEARCH & DEVELOPMENT Ricardo continues to apply its intellectual capital and investment in forecasting, validating and delivering technology and innovation to solve the automotive industry's key issues. The drivers of the business continue to surround global emissions reduction, fuel price and energy security, automotive safety and defence expenditure. Our major technical developments regarding fuel economy, emissions reduction and enhanced automotive safety include low emissions diesel engine technology for world application, fuel efficient gasoline engine technology, active dynamic transmissions, advanced hybrid powertrains and electronic architectures enabling drive by wire and safety related benefits such as 'Artificial horizon'. This technology takes many inputs such as driver commands, GPS, traffic statistics, car radar and vehicle to vehicle communications and through the sophisticated electronic architecture and safety critical software can apply active dynamics calibration to be ready for upcoming corners, hills, traffic, intersections. We are also developing technologies, tools and processes to improve the development cycles of customers' products taking significant time out of programmes and improving robustness and quality - all targeted at improving product profitability and rapid time to market introduction. Specific technical highlights in the period include our world record breaking JCB DieselMax programme over the summer, our continued hybrid research work on the Efficient-C programme which drives low CO2 emissions, the launch of our active torque vectoring transmission technology and the co-ordination of two large European government funded programmes evaluating intelligent information based transport systems and the generation of a road map for the exploitation of new energy sources. PEOPLE The Group has continued to strengthen its management team with recruitment of high calibre individuals. Paula Bell has joined as Group Finance Director from BAA and Karina Morley has joined Ricardo in the US from Visteon as Global Product Group Director for Control & Electronics. The Ricardo China office has grown with additional expatriate engineering resource and appointments for the opening of an Indian office are underway. We have also strengthened the global financial team with a number of new local senior appointments in Germany, UK and Asia. In addition a number of senior executives have taken on new roles in product group management, gasoline engineering, business development and project management as part of their development and strengthening of our organisational capability. OUTLOOK Overall, the 2006-7 financial year has started satisfactorily, again showing the benefit of being geographically and technically diversified. The solid performance in the UK and the profit recovery in Germany have provided good balance to the anticipated slow start for Strategic Consulting and the challenges in North America. The second half has started well and order prospects continue to build with greater forward visibility. Although we have not changed our outlook for the full year, our confidence continues to grow. Dave Shemmans Chief Executive 5 March 2007 Consolidated income statement for the six months ended 31 December 2006 (unaudited) Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 (restated) All from continuing activities Notes £m £m £m Revenue 2 83.8 81.1 173.1 Operating profit excluding pensions credit (underlying) 2 5.1 4.9 12.1 Pensions credit 1 - - 3.7 ------------------------------------------------------------------------------------------------ Operating profit 3 5.1 4.9 15.8 Finance income 0.9 0.9 1.4 Finance costs (1.4) (1.6) (2.7) ------------------------------------------------------------------------------------------------ Profit before taxation 4.6 4.2 14.5 ------------------------------------------------------------------------------------------------ Profit before tax excluding pensions credit (underlying) 4.6 4.2 10.8 Pensions credit 1 - - 3.7 ------------------------------------------------------------------------------------------------- Taxation 5 (0.1) (0.5) (2.3) ------------------------------------------------------------------------------------------------- Profit for the period 4.5 3.7 12.2 ------------------------------------------------------------------------------------------------- Profit for the period excluding pensions credit (underlying) 4.5 3.7 9.6 Pensions credit 1 - - 2.6 ------------------------------------------------------------------------------------------------- Profit attributable to minority interest - - 0.1 Profit attributable to equity shareholders 4.5 3.7 12.1 ------------------------------------------------------------------------------------------------- 4.5 3.7 12.2 ------------------------------------------------------------------------------------------------- Earnings per share 6 Basic 8.9p 7.4p 24.0p Diluted 8.9p 7.3p 23.9p ------------------------------------------------------------------------------------------------- Consolidated statement of recognised income and expense for the six months ended 31 December 2006 (unaudited) Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 £m £m £m Currency translation differences on (1.0) - (0.2) net investment in foreign operations Fair value gain/(loss) on net investment hedge 0.4 - (0.4) Actuarial (losses)/gains on the defined benefit pension scheme (0.4) 0.4 6.7 Tax on items recognised directly in equity - (0.1) (2.0) -------------------------------------------------------------------------------------------------- Net income and expense recognised directly in equity (1.0) 0.3 4.1 Profit for the period 4.5 3.7 12.2 ------------------------------------------------------------------------------------------------- Total recognised income and expense for the period 3.5 4.0 16.3 ------------------------------------------------------------------------------------------------- Attributable to minority interest - - 0.1 Attributable to equity shareholders 3.5 4.0 16.2 ------------------------------------------------------------------------------------------------- Consolidated balance sheet as at 31 December 2006 (unaudited) 31 December 31 December 30 June 2006 2005 2006 (restated) £m £m £m Assets Non current assets Goodwill 15.6 15.9 15.9 Other intangible assets 1.7 1.2 1.5 Property, plant and equipment 44.0 45.2 45.2 Deferred tax assets 9.3 10.6 8.7 ---------------------------------------------------------------------------------------------- 70.6 72.9 71.3 ---------------------------------------------------------------------------------------------- Current assets Inventories 8.3 7.7 7.0 Trade and other receivables 53.6 48.7 47.3 Current taxation 0.3 0.3 0.2 Deferred tax assets 0.6 - 0.6 Cash and cash equivalents 18.0 11.8 49.8 Assets classified as held for sale 6.7 1.9 7.5 ---------------------------------------------------------------------------------------------- 87.5 70.4 112.4 ---------------------------------------------------------------------------------------------- Total assets 158.1 143.3 183.7 ---------------------------------------------------------------------------------------------- Liabilities Current liabilities Bank overdrafts (12.4) (1.0) (37.1) Bank loans (12.7) (1.6) (7.9) Trade and other payables (33.8) (41.1) (38.9) Current tax liabilities (2.2) (3.5) (2.5) Deferred tax liabilities (0.6) - (0.6) Provisions (0.4) (0.8) (0.5) --------------------------------------------------------------------------------------------- Liabilities directly associated with (6.7) (1.9) (7.5) assets classified as held for sale --------------------------------------------------------------------------------------------- (68.8) (49.9) (95.0) --------------------------------------------------------------------------------------------- Net current assets 18.7 20.5 17.4 --------------------------------------------------------------------------------------------- Non current liabilities Bank loans (11.6) (17.6) (10.6) Retirement benefit obligations (22.7) (34.2) (23.6) Deferred tax liabilities (4.6) (2.5) (4.4) --------------------------------------------------------------------------------------------- (38.9) (54.3) (38.6) --------------------------------------------------------------------------------------------- Total liabilities (107.7) (104.2) (133.6) --------------------------------------------------------------------------------------------- Net assets 50.4 39.1 50.1 --------------------------------------------------------------------------------------------- Shareholders' equity Ordinary shares 12.7 12.6 12.7 Share premium 13.3 12.9 13.3 Other reserves - 2.0 0.6 Retained earnings 23.8 11.1 22.9 ---------------------------------------------------------------------------------------------- Total shareholders' equity 49.8 38.6 49.5 Minority interest in equity 0.6 0.5 0.6 ---------------------------------------------------------------------------------------------- Total equity 50.4 39.1 50.1 ---------------------------------------------------------------------------------------------- Consolidated cash flow statement for the six months ended 31 December 2006 (unaudited) Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 £m £m £m Cash flows from operating activities Cash generated from/(used by) operations (note 7) (4.4) 8.7 20.0 Interest received 0.9 0.9 1.4 Interest paid (1.4) (1.6) (2.7) Tax (paid)/refunded (0.8) (0.5) (1.4) ----------------------------------------------------------------------------------------- Net cash (used)/received in operating activities (5.7) 7.5 17.3 ---------------------------------------------------------------------------------------- Cash flows from investing activities Proceeds of sale of property, plant and equipment - 0.1 0.3 Purchases of intangible assets (0.4) (0.3) (1.1) Purchases of property, plant and equipment (3.7) (2.6) (7.3) ------------------------------------------------------------------------------------------ Net cash used in investing activities (4.1) (2.8) (8.1) ----------------------------------------------------------------------------------------- Cash flows from financing activities Net proceeds from issue of ordinary share capital - 0.9 1.3 Net proceeds from issue of new bank loan 9.0 - - Repayment of borrowings (2.8) - (0.5) Dividends paid to shareholders (3.4) (3.2) (4.6) ----------------------------------------------------------------------------------------- Net cash received/(used) in financing activities 2.8 (2.3) (3.8) ----------------------------------------------------------------------------------------- Effects of exchange rate changes (0.1) 0.6 (0.5) ----------------------------------------------------------------------------------------- Net (decrease)/increase in cash and cash equivalents (7.1) 3.0 4.9 Cash and cash equivalents at beginning of period 12.7 7.8 7.8 ----------------------------------------------------------------------------------------- Cash and cash equivalents at end of period 5.6 10.8 12.7 ----------------------------------------------------------------------------------------- Notes to the interim accounts for the six months ended 31 December 2006 (unaudited) 1. Basis of preparation As a UK Listed company Ricardo plc has been required to adopt International Financial Reporting Standards as adopted in the EU ('IFRS') with effect from 1 July 2005. The results for the six months ended 31 December 2006 represent the group's second interim financial statements prepared in accordance with its accounting policies under IFRS. The group's first IFRS Annual Report and Accounts was for the year ending 30 June 2006. These interim financial statements have been prepared by the group in accordance with the disclosure requirements of the Listing Rules of the Financial Services Authority, policies published in the financial statements for the year ended 30 June 2006 and using those reporting standards it expects to be endorsed and applicable when the accounts are prepared for the year ending 30 June 2007. There has been no change to the accounting policies as a result of new standards or amendments and interpretations to existing standards that have been published and are mandatory from 1 July 2006. The Group has chosen not to adopt early IAS 34 'Interim Financial Statements' in the preparation of these interim financial statements. The financial information herein does not amount to full statutory accounts within the meaning of Section 240 of the Companies Act 1985 (as amended). The figures for the year to 30 June 2006 have been extracted from the 2006 Annual Report and Accounts which has been filed with the Registrar of Companies and on which the auditors gave an unqualified audit report and did not include a statement under section 237(2) or (3) of the Companies Act 1985. The income statement for the year ended 30 June 2006 includes a pensions credit of £3.7m (£2.6m net of tax). This relates to the capping of pensionable salaries to future price inflation, which is regarded as an exceptional profit and is not part of the underlying results as defined in the Group's accounting policies. Ricardo 2010 is a wholly owned subsidiary created in May 2005 under an agreement with SAIC. Under that agreement SAIC has exercised its option to acquire Ricardo 2010 for £1 and this is expected to be completed within the current financial year. Accordingly Ricardo 2010 has been classified as an asset held for sale and a discontinued operation under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations'. No profit or loss on disposal is anticipated. In accordance with IFRS 5 the aggregate assets and liabilities of Ricardo 2010 are separately disclosed on the face of the balance sheet under assets classified as held for sale and liabilities directly associated with assets classified as held for sale. The figures for the six months to 31 December 2005 have been extracted from the 2005 Interim Report but adjusted for the treatment of Ricardo 2010 as an asset held for sale and a discontinued operation under IFRS 5, and have been restated for an immaterial reclassification of revenue and administration expenses and for other minor matters. 2. Segmental reporting (a) by business segment, with revenue reflecting sales to external customers Revenue Operating profit (1) ------------------------------------------------------------------------------------------------------------ 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 2006 2005 2006 2006 2005 2006 (restated) (restated) £m £m £m £m £m £m ---------------------------------------------------------------------------------------------------------- Technical Consulting 80.0 70.9 155.4 4.6 3.5 9.5 Strategic Consulting 3.8 10.2 17.7 0.5 1.4 2.6 ----------------------------------------------------------------------------------------------------------- 83.8 81.1 173.1 5.1 4.9 12.1 ----------------------------------------------------------------------------------------------------------- (b) by business unit reflecting the revenue and profit generated by the staff in those businesses Revenue Operating profit (1) ------------------------------------------------------------------------------------------------------------ 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 2006 2005 2006 2006 2005 2006 (restated) (restated) £m £m £m £m £m £m -------------------------------------------------------------------------------------------------------------- Technical Consulting UK 48.6 39.6 98.6 4.1 2.9 8.5 North America 18.1 20.5 35.4 0.5 1.2 2.2 Germany 12.8 12.4 24.1 0.4 (0.2) (0.5) Rest of the world 0.7 0.3 1.1 (0.4) (0.4) (0.7) -------------------------------------------------------------------------------------------------------------- 80.2 72.8 159.2 4.6 3.5 9.5 Strategic Consulting 3.6 8.3 13.9 0.5 1.4 2.6 ------------------------------------------------------------------------------------------------------------- 83.8 81.1 173.1 5.1 4.9 12.1 ------------------------------------------------------------------------------------------------------------- (1) Excluding a pensions credit of £3.7m in the year ended 30 June 2006 3. Operating profit Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 (restated) £m £m £m Revenue 83.8 81.1 173.1 Cost of Sales (57.6) (55.4) (117.7) ----------------------------------------------------------------------------------------- Gross profit 26.2 25.7 55.4 ---------------------------------------------------------------------------------------- Gross profit excluding pensions credit(underlying) 26.2 25.7 53.3 Pensions credit - - 2.1 ---------------------------------------------------------------------------------------- Administration expenses (21.1) (20.8) (39.6) ----------------------------------------------------------------------------------------- Operating profit 5.1 4.9 15.8 ---------------------------------------------------------------------------------------- Operating profit excluding pensions credit (underlying) 5.1 4.9 12.1 Pensions credit - - 3.7 ---------------------------------------------------------------------------------------- 4. Ordinary Dividends Six months Six months Six months Six months ended ended ended ended 31 December 31 December 31 December 31 December 2006 2005 2006 2005 pence/share pence/share £m £m --------------------------------------------------------------------------------------- Amounts distributed in the period 6.7p 6.3p 3.4 3.2 Proposed interim dividend 2.9p 2.7p 1.5 1.4 --------------------------------------------------------------------------------------- 5. Taxation Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 £m £m £m UK (0.5) - 0.8 Overseas 0.6 0.5 1.5 -------------------------------------------------------------------------------- Tax charge on profit 0.1 0.5 2.3 -------------------------------------------------------------------------------- 6. Earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity shareholders of £4.5m (31 December 2005: £3.7m; 30 June 2006: £12.1m) by the weighted average number of shares in issue of 50,694,907 (31 December 2005: 50,089,893; 30 June 2006: 50,357,997), 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 is accordingly 50,795,901 (31 December 2005: 50,483,695; 30 June 2006: 50,472,732). 7. Cash generated from operations Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 (restated) £m £m £m Continuing operations Profit from operations before pensions credit 5.1 4.9 12.1 Adjustments for: Share-based payments 0.1 0.1 0.3 Depreciation and amortisation 4.4 4.7 9.0 ---------------------------------------------------------------------------------------- Operating cash flows before movements in working capital 9.6 9.7 21.4 (Increase)/decrease in inventory (1.4) (0.7) - (Increase)/decrease in trade and other receivables (6.9) (5.6) (4.3) (Decrease)/increase in payables (4.3) 5.1 3.5 (Decrease)/increase in provisions (0.1) 0.3 0.1 Pension payments in excess of pension costs (1.3) (0.1) (0.7) ----------------------------------------------------------------------------------------- Cash (used)/generated by operations (4.4) 8.7 20.0 ----------------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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