Final Results

Spice Holdings PLC 10 July 2006 Press Announcement For immediate release 10 July 2006 Spice Holdings plc Final results 30 April 2006 Spice Holdings plc ('Spice' or 'the Group'), the provider of outsourced support services to the commercial and utility sectors, is pleased to announce its full year results for the year ended 30 April 2006. Financial highlights Profit before tax of £7.4 million (2005: £5.2 million) - 42% increase EBITA* of £9.8 million (2005: £6.2 million) - 58% increase EBITA* converted into operating cash flow - 100% (2005: 65%) Diluted earnings per share of 12.6 pence (2005: 10.8 pence) - 16% increase Adjusted diluted earnings per share of 16.1 pence (2005: 12.1 pence) - 33% increase Total dividend of 2.6 pence per share (2005: 2.2 pence) - 18% increase *EBITA comprises profit on ordinary activities before interest, tax, amortisation of intangible fixed assets. Operational highlights July 2005 Launch of Freedom Data Services September 2005 Placing of seven million shares raising net proceeds of £14.5 million September 2005 BAA letter of agreement January 2006 Freedom Technical Services exceeds £2 million turnover March 2006 Launch of water leakage repair service Simon Rigby, Chief Executive Officer commented: 'As the biggest installer of water meters in the UK, environmental and economic pressures thrown into sharp focus by water shortages in some parts of the country have helped our Water Services division become the fastest growing division in the Group producing a profit increase of 43%. Our new leakage repair service has been launched at an opportune time. We have started the financial year with high levels of earning visibility and we continue to be pleased with the overall Group performance and trading remains in line with expectations. There are considerable cross selling opportunities within the Group and we are focused on converting those opportunities into earnings. Consequently, Spice remains well placed to continue to grow organically within its expanding markets, and continues to pursue complementary acquisition opportunities. The Board continues to believe that the long term prospects for the Group remain strong and continues to look to the future with confidence.' ...Ends... For further information, please contact: Spice Holdings plc Tel: 0113 384 3838 Simon Rigby, Chief Executive Officer Oliver Lightowlers, Group Finance Director Carl Chambers, Corporate Development Director Financial Dynamics Tel: 020 7831 3113 Sally Lewis Billy Clegg Chairman's statement Introduction I am delighted to present our full year results for 2006, in what has been another record year for Spice. Turnover for the year was £132.9 million (2005: £85.5 million) and profit before tax was £7.4 million (2005: £5.2 million), increases of 55% and 42% respectively. At the same time our EBITA operating margins improved to 7.4% (2005: 7.2%). Diluted earnings per share, adjusted for the amortisation of intangible fixed assets, increased by 33% to 16.1 pence per share (2005: 12.1 pence per share). I am also pleased to report that the Board is recommending a final dividend of 1.9 pence per share, making a total dividend of 2.6 pence per share for the year (2005: 2.2 pence), an increase of 18%. Strategy Our strategy remains to grow the business organically and to enhance the business through complementary acquisitions. During the year, we have secured significant contract wins and renewals across each of our operating divisions which underpins our visibility of future revenues. At the same time, we have taken advantage of favourable sector conditions to enhance our Utility Services offering through the acquisitions of Lamva, Baineport, Maintech and Kemac. We have also expanded our support services offering through the formation of our Commercial Services Division following the acquisition of Circle Britannia and Serviceline and strengthened this further in the new financial year through the acquisitions of Breval and Inenco. Our people The success that we have achieved over the past year has been made possible by the hard work of our staff. I would like to extend thanks to all of our employees for their commitment and personal contribution to our achievements. We have a strong team at all levels within the Group and it is pleasing to see over 700 employees of Spice participating in our latest Sharesave scheme, which began in February of this year. Outlook We enter the new financial year with confidence and remain firmly focussed on delivering shareholder value. Sir Rodney Walker Chairman Chief Executive Officer's statement Spice operates in two sectors, Commercial Services and Utility Services: Commercial Services Facilities In September 2005, Spice acquired Circle Britannia and its sister company Serviceline, which together established our Commercial Services Division. Commercial Services has recorded a profit before interest and tax for the eight months since acquisition of £1.1 million. Against a backdrop of a competitive commercial market it is pleasing that we have been able to retain existing clients as well as grow the business organically by winning new business in the period including Debenhams, Claire's Accessories and The Body Shop. Circle Britannia provides outsourced facilities services, which include reactive and planned maintenance and technical services to the commercial sector, and reinstatement services for major insurers. Clients include DSG International (formerly Dixons) and Norwich Union. Serviceline provides comprehensive 'front end' facilities management incorporating an intelligent, proactive helpdesk service which can be delivered either as part of an integrated facilities management service, incorporating Circle Britannia's facilities service operation, or as a stand alone service managing clients' existing suppliers. Clients include Starbucks and Waterstones. Recently, Serviceline was selected by Kentucky Fried Chicken to provide integrated facilities management services across 300 managed UK stores over the next three years. The prospects for Commercial Services remain positive moving into the new financial year, with a number of interesting opportunities being developed. Further acquisition opportunities continue to be pursued to accelerate the development of Commercial Services. Indeed, following the year end we have completed the acquisition of Breval which specialises in the design, installation and maintenance of heating, ventilation and air-conditioning (HVAC) services. We have sought to gain a presence in this market for several years, without getting involved in construction, and Breval brings a high level of technical skills to our Commercial Services Division. We have also completed the acquisition of Inenco, which is one of the leading energy management businesses in the UK, specialising in cost control, consultancy and fuel cards. The drive to manage energy consumption has both a cost and compliance element - efficient use and procurement of energy will yield an economic benefit but the legal and moral need to be compliant with various regulations is equally strong. We see tremendous opportunities to sell Breval and Inenco's services to our existing client base and also to sell our services to Breval and Inenco's client base. We continue to seek bolt on acquisitions that are complementary to our existing business including mechanical and electrical maintenance. Utility Services Electricity Electricity Services has had another successful year, recording a profit before interest and tax of £3.9 million (2005: £2.8 million), an increase of 40%. The business has achieved strong growth in all areas of activity and the results include contributions for the first time of £0.9 million from acquisitions made during the year. Freedom Projects (formerly Lamva) has been successfully integrated into Electricity Services and the integration of Baineport and Maintech is progressing to plan. The combined Electricity Services business is now organised into five key service offerings which are: • Freedom Consultancy Services • Freedom Power Projects • Freedom Volume Asset Replacement • Freedom Asset Care and Maintenance • Freedom Network Solutions Freedom Consultancy Services specialises in design and planning for the electricity industry whilst also offering our customers the opportunity to outsource activities of a technical nature. Consultancy Services comprises Freedom Data Services, Freedom Professional Services which focuses on civil design and Freedom Wayleave Consents which manages solutions with Landowners, Planning Authorities and The Department of Trade and Industry for our clients to enable utility networks to be built across private land. Our professionalism in this area has been recognised by our appointment to work on the Olympic Village for EDF Energy. Freedom Data Services, formed in July 2005 and which manages utility drawings, plans and other databases, has achieved excellent results in its first year. We now have over 100 staff working in this Division and have secured significant framework contracts for customers including National Grid. Freedom Power Projects brings together all the major construction elements of Electricity Services including Freedom Technical Services. Freedom has been very successful at winning major projects across the UK, including the recent award of a three year framework contract with Scottish Power for substation design and build services. This has resulted in the opening of a Scottish office to service the Scottish Power contract at Bellshill near Glasgow. Freedom Volume Asset Replacement contains Freedom Electrical Services and Baineport. During the year, we have secured switchgear replacement contracts with CE Electric, Central Networks and EDF Energy. Volume asset replacement is anticipated to be a significant growth area within the UK due to ageing networks. Freedom Asset Care and Maintenance, which brings together Freedom Maintenance and Maintech, is our largest division in terms of revenue. Following the acquisition of Maintech we now have 750 private network customers where we maintain and service their high/low voltage networks. This includes customers like Chelsea Football Club and Anglian Water. Freedom Network Solutions specialises in building and connecting electricity networks focusing on wind farms and high industrial and commercial electricity users. We have recently won several wind farm connections including Red Tile Farm in Cambridgeshire which is worth £1.6 million to the Group. As the renewable energy sector gathers pace due to political and environmental drivers, we see this as a growth area for the business. Using our Freedom brand, we are continuing to develop a 'cradle to grave' approach to utility network projects. We also consider private networks to be a significant potential growth area, with an estimated 95% of the market still open to Freedom. With the opening of our office in Scotland we now have a ' springboard' to develop our brand and service offering in this important market place. We will continue to invest in our people while at the same time recruiting graduates and apprentices to ensure we have a workforce to enable us to meet the demands of the significant opportunities created by utilities investment strategies. Telecoms Telecoms Services reported a profit before interest and tax for the year of £2.1 million (2005: £2.4 million). Performance in the second half of the year was significantly improved compared to the first half, with profit before interest and tax 100% higher. With the improved second half, and project orders converted at the end of the year, we look forward to further improvement in the new financial year. AirRadio continues to deliver improved performance and expand its customer and product base. Revenues increased by 14% in the year. Additional radio network capacity has been added to both the Heathrow and Gatwick networks in order that we can take full advantage of the British Airports Authority (BAA) contract agreed in September 2005. We continue to look for new opportunities at UK airports to expand our operations with Southampton and Cardiff being added to the network during the year. Work for our biggest client British Airways (BA) continues to develop steadily as we provide consultancy services connected to Heathrow Terminal 5, together with other projects. Our biggest area of growth has been within non-BA revenues with cellular revenues rising at a very strong rate. Our Team Telecom business has benefited from an improvement in market conditions in the wireless communications market in the second half of the year, which together with strong relationships with its existing customers, has seen the financial performance of the business improve significantly. In September we acquired Hutchison, a specialised telecommunications maintenance business, which provides first line maintenance and support to internet protocol (IP) and telephony network operators. Hutchison operates on a pan European basis and is well placed to tap into the growth in this market. This business has now been integrated and merged with the business of Team Telecom in order to gain economies of scale in management, operations and administration, and now operates as Hutchison Team Telecom under one integrated management team. The combined business is currently bidding for a number of exciting longer term business opportunities and has already secured several next generation technology pilot projects which, if successful, will extend to major framework agreements for the forthcoming financial year and beyond. Team Simoco, our professional mobile radio business (PMR), has focused its energies this year on extending its product base and further developing its UK and overseas distribution channels. A series of new radio and trunking products have been developed including the Xfin infrastructure range. Xfin revolutionises the way that PMR technology is both priced and used. This has in turn seen Team Simoco win two sizeable project orders at the close of the year and has led to several other opportunities. Together with its TETRA digital products range, this has put Team Simoco at the forefront of the PMR industry and provides a strong base that we believe can be exploited over the coming months and years ahead. Standard product sales grew steadily and UK maintenance services continue to build, in line with our objective to increase the recurring revenue proportions of the business, and although the business did suffer from slower than anticipated international sales in the first half of the year, the business begins the new financial year with a significantly improved order book. Water I am pleased to report that Water Services has recorded profit before interest and tax of £4.2 million for the year (2005: £2.9 million), an increase of 43%. These results include a contribution for the first time of £0.1 million from Kemac. Significant organic growth has been achieved by each of the other businesses within the Division but particularly H2O Water Services (H2O) and Meter U. H20, which undertakes water meter installation and small works operations, made a significant profit contribution to the Division following completion during the year of the integration of Atlantic Water Services. Contract extensions with United Utilities, Yorkshire Water and Scottish Water, together with re-securing contracts with South East Water and contract awards with new clients including Brey Utilities and Northumbrian Water, provide a firm platform for growth next year. In the last quarter, work has been secured for our newly formed leakage repair service and this is expected to grow further next year. In November 2005, Water Services acquired Kemac which undertakes water meter installation, water regulation audit and rectification and call out plumbing services. The integration of Kemac into the wider Water Services business continues to progress to plan. Kemac has enhanced both our geographical coverage and client base, which now includes Thames Water and Three Valleys Water, and firmly reinforces our national presence. Metro Rod, which provides drain and environmental services, increased profits by over 10% and the business is well positioned for the new financial year. Meter U, our meter reading business, has performed strongly in the year with revenues and profits growing by greater than 80%. Meter U now has in excess of 500 meter readers and over the course of the year we have increased the number of reads taken per month by 0.4 million. Our relationship with our key client, Siemens, continues to develop and we are currently exploring a number of other opportunities to enhance our service offering. Cross selling Management across the Group takes particular interest in fostering cross selling. Each of our Divisions has activities that are complementary to those offered by other Divisions in the Group especially following the various acquisitions made during the course of the year. Opportunities completed so far have included the replacing of external suppliers with internal suppliers. However, the challenge during the next 12 months is to profit from the opportunities that are now being created. Already, several cross divisional introductions have been made resulting in joint working and bids. This is expected to gain momentum over the next twelve months. Head office Head office costs are mainly comprised of salaries, including the Group's HR and IT functions, and also professional costs. Head office costs for the year were slightly less than expectations at £3.0 million (2005: £2.2 million). After taking account of one off credits totalling £0.5 million to Head office costs in 2005, relating principally to the settlement of certain historic liabilities for amounts less than previously provided, the underlying increase in Head office costs for the year was £0.3 million. This increase is caused by the full year effect of costs related to maintaining Spice's public listing and also investment in infrastructure to support the enlarged Spice group following acquisitions made in the year. Acquisitions Six acquisitions have been made during the year, which are summarised below. Maximum Initial net potential cash Initial share contingent consideration consideration consideration £'m £'m £'m Lamva 5.2 0.5 - Circle Britannia and 15.2 - 0.1 Serviceline Hutchison 1.1 - 3.9 Contingent consideration based on earnings for the 12 months to February 2007 Kemac 2.0 - 4.2 Contingent consideration based on earnings for the 18 months to April 2007 Baineport 5.0 - 1.3 Contingent consideration based on the renewal of certain contracts Maintech 2.1 - 0.8 Contingent consideration based on earnings for the period to April 2007 30.6 0.5 10.3 Initial net cash consideration paid in respect of these acquisitions totals £30.6 million with £0.5 million also being paid as share consideration. Deferred contingent consideration of up to £10.3 million might also become payable depending on earnings and the renewal of certain contracts. Integration of these acquired businesses has either been completed or is progressing according to plan. During the year, the Group has also recognised within intangible fixed assets £2 million of contingent consideration relating to the acquisition of Air Radio, the likelihood of payment of which during the year ending April 2009 is now considered probable. Outlook We continue to be pleased with the overall Group performance and trading remains in line with expectations. Spice remains well placed to continue to grow organically (including by cross selling across operating divisions) within its expanding markets, and continues to pursue complementary acquisition opportunities. The Board continues to believe that the long term prospects for the Group remain strong and continues to look to the future with confidence. W S Rigby Chief Executive Officer Financial review The financial performance of the Group continues to be strong. The acquisitions made during the year have contributed significantly to the increased profits reported as has the performance of our Water business. Operating margins have improved during the year and cash generation has been particularly pleasing. Turnover During 2006, turnover increased by 55% to £132.9 million (2005: £85.5 million), of which acquisitions contributed £37.2 million. Organic turnover growth has been recorded within each of our Divisions apart from Telecoms which was impacted by slower than anticipated international sales in the first half of the year. Profit on ordinary activities before interest, tax and amortisation of intangible fixed assets (EBITA) EBITA increased by 58% to £9.8 million (2005: £6.2 million), of which acquisitions contributed £3.1 million in the year. Our Water Services Division has performed particularly strongly, with EBITA growth exceeding 41%. EBITA operating margins for the Group improved to 7.4% (2005: 7.2%). This is a pleasing result after taking account of the integration of acquisitions made during the course of the year. Interest Interest payable for the year was £0.8 million (2005: £0.6 million). The Group has benefited from cash raised at the placing in September 2005 together with the cash generation of our operations but offset by the cost of acquisitions made. We highlighted at the half year that the Group had also taken the opportunity to re-negotiate its banking facilities with HSBC Bank which has resulted in more favourable borrowing terms. Interest cover for the year was 10.3 times (2005: 10.2 times). Following the year end, the Group has extended its banking facilities from £30 million to £60 million. Profit on ordinary activities before tax Profit on ordinary activities before tax increased by 42% to £7.4 million (2005: £5.2 million). The charge relating to the amortisation of intangible fixed assets has significantly increased in the year to £1.6 million (2005: £0.4 million) reflecting the amortisation of goodwill arising on acquisitions made in the year. Tax The Group's effective rate of tax for the year was 23.5% (2005: 29.1%) which is lower than the standard rate of tax principally as a result of tax relief arising on the exercise of share options and the utilisation of prior year tax losses. Earnings per share Diluted earnings per share at 12.6 pence (2005: 10.8 pence) increased by 16% and adjusted diluted earnings per share (before amortisation of intangible fixed assets and non-operating exceptional costs) at 16.1 pence (2005: 12.1 pence) increased by 33%. In prior years, the Group's ESOP had adequate shares to satisfy all options vested and also options granted but not yet vested. As a result of options granted in the year, this is no longer the case and new shares will either be issued or bought on the market to make up this difference. Dividend The Board has recommended a final dividend of 1.9 pence (2005: 1.7 pence) per share payable on 19 September 2006 to shareholders on the register at 8 September 2006. An interim dividend of 0.7 pence per share (2005: 0.5 pence) was paid on 14 February 2006, making a total dividend of 2.6 pence per share (2005: 2.2 pence per share) for the year. The dividend is covered 4.9 times by earnings (2005: 4.7 times). Cash flow The Group has significantly improved cash generated in the year. Net cash inflows from operating activities increased by £5.8 million to £9.8 million (2005: £4.0 million). The Group converted 100% of EBITA into operating cash flow (2005: 65% conversion). During the year, working capital utilised increased by £2.0 million connected principally to investment made within acquisitions during the year. Capital expenditure was consistent with the prior year and the Group disposed of one freehold property for cash proceeds of £0.3 million. In September 2005, the Group placed 7,009,346 new shares at a price of 214 pence with institutional and other investors to raise net proceeds of approximately £14.5 million. Balance Sheet Net assets have increased to £39.6 million (2005 as restated: £18.1 million). This increase reflects the impact of the net placing proceeds together with retained profit for the year and cash generated from the exercise of employee share options. The placing proceeds were used to repay bank debt. Net bank debt at the year end was £13.4 million (2005: £4.5 million). During the year, the Group's freehold land and buildings were revalued by a firm of independent chartered surveyors, resulting in an uplift in the value of tangible fixed assets by £0.6 million. Changes in UK accounting standards On 1 May 2005, the Group adopted FRS 21 Events after the balance sheet date. The main impact of FRS 21, which is reflected within these financial statements, is that dividends payable are now accounted for when paid. The Group also adopted the presentational requirements of FRS 25 Financial Instruments: Disclosure and Presentation, on 1 May 2005, and considered FRS 25 in determining disclosures made within these financial statements. On 1 May 2006, the Group adopted FRS 20 Share based payments. FRS 20 seeks to reflect the cost of share based remuneration, including option schemes, within the profit and loss account. The effect of FRS 20 has not been reflected within these financial statements but will be within statements prepared for the year ending April 2007. International Financial Reporting Standards ('IFRS') The Group continues to prepare for the conversion from UK accounting standards to IFRS. The Group established a project team in 2005 to plan for and achieve a smooth transition to IFRS. The project team is looking at all implementation aspects of IFRS including accounting policies and system impacts. The Group has not yet determined the full effect of adopting IFRS and expects to adopt IFRS within its financial statements for the year ending April 2008. O J Lightowlers Group Finance Director Consolidated profit and loss account for the year ended 30 April 2006 2006 2005 Note £'000 £'000 as restated Turnover: - Continuing operations 95,695 85,508 - Acquisitions 37,235 - Group turnover 2,5 132,930 85,508 Cost of sales (93,360) (59,713) Gross profit 39,570 25,795 Administrative expenses (31,376) (19,943) EBITA 9,790 6,208 Amortisation of intangible fixed assets (1,596) (356) Operating profit: - Continuing operations 6,060 5,852 - Acquisitions 2,134 - Group operating profit 8,194 5,852 Losses arising on disposal of fixed assets - (77) Net interest payable (797) (567) Profit on ordinary activities before tax 5 7,397 5,208 Tax on profit on ordinary activities (1,739) (1,515) Profit on ordinary activities after tax 5,658 3,693 Equity minority interests - (5) Profit for the year attributable to equity shareholders 5,658 3,688 Dividends 3 (943) (177) Retained profit for the year 4,715 3,511 Earnings per share (pence per share) Basic 4 13.6 11.6 Diluted 4 12.6 10.8 EBITA comprises profit on ordinary activities before interest, tax, amortisation of intangible fixed assets and non-operating exceptional costs. Consolidated balance sheet as at 30 April 2006 2006 2005 Note £'000 £'000 as restated Fixed assets Development expenditure 825 712 Purchased goodwill 41,458 6,950 Negative goodwill - (174) Intangible fixed assets 42,283 7,488 Tangible fixed assets 13,623 11,876 Investments 212 212 56,118 19,576 Current assets Stock 4,264 1,773 Debtors 32,607 16,609 36,871 18,382 Creditors - amounts falling due within one year (33,294) (16,990) Net current assets 3,577 1,392 Total assets less current liabilities 59,695 20,968 Creditors - amounts falling due after more than one year (12,237) (1,437) Provisions for liabilities and charges (7,820) (1,389) Net assets 39,638 18,142 Capital and reserves Called up equity share capital 4,947 4,213 Share premium account 27,462 13,104 Revaluation reserve 2,103 1,555 Capital redemption reserve 100 100 Profit and loss account 5,026 (830) Equity shareholders' funds 6 39,638 18,142 Consolidated cash flow statement for the year ended 30 April 2006 2006 2005 Note £'000 £'000 Net cash inflow from operating activities 7a 9,780 4,024 Returns on investments and servicing of finance Net interest paid (789) (560) Interest element of finance lease payments (8) (7) (797) (567) Tax paid (785) (1,483) Capital expenditure and financial investment Purchase of tangible fixed assets (2,286) (2,308) Development expenditure (335) (329) Sale of tangible fixed assets 481 1,786 (2,140) (851) Acquisitions Purchase of trade and assets - (1,362) Purchase of subsidiary undertakings (33,028) - Net cash acquired with subsidiary undertakings 3,301 - (29,727) (1,362) Equity dividends paid (943) (177) Net cash outflow before financing (24,612) (416) Financing Principal repayment due under finance leases (79) (133) Sale of investments - own shares 1,102 1,141 Net proceeds from issue of shares 14,527 11,267 Bank loan repayments (16,516) (11,812) Bank loan advances 28,277 1,750 Net cash inflow from financing 27,311 2,213 Increase in cash in the year 7b, 7c 2,699 1,797 Notes to the preliminary announcement for the year ended 30 April 2006 1 Basis of accounting The audited consolidated financial information for the year ended 30 April 2006 has been prepared in accordance with applicable UK accounting standards and is consistent with accounting policies applied in the financial statements for the year ended 30 April 2005, with the exception of the adoption of FRS 21 Events After The Balance Sheet Date and FRS 22 Earnings per Share which were adopted on 1 May 2005. Comparative numbers have been restated to reflect the impact of the adoption of FRS 21. In addition, the parts of FRS 25 Financial Instruments: Disclosure and Presentation relating to presentation were adopted on 1 May 2005 and considered in determining disclosures made within the financial information. The financial information included in this announcement has been extracted from the audited financial statements for the years ended 30 April 2006 and 2005. The content of this announcement has been agreed with the Company's auditors. This preliminary announcement does not constitute the Group's financial statements. The Group's 2006 Annual report and financial statements, on which the Company's auditors, PricewaterhouseCoopers LLP, have given an unqualified opinion in accordance with Section 235 of the Companies Act 1985, are to be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Group's 2005 accounts, which contain an unqualified audit report, have been filed with the Registrar of Companies. 2 Turnover Turnover, which excludes value added tax, arises from several activities. Turnover is recognised in the profit and loss account at the point that a service is provided or products supplied for each of the following activities: • facilities management and maintenance services; • consultancy, infrastructure design and asset maintenance services; • private mobile radio products; • drain care, maintenance, repair and cleaning services; • services for the development and support of telecommunications networks; • property maintenance; and • information technology installation, commissioning and maintenance activities. Where the Group operates as principal to the transaction, turnover is recognised at gross values. Where the Group acts as agent in the transaction, with the franchisee being the principal, the Group recognises within turnover the net commission earned on the transaction. 3 Dividends 2006 2005 £'000 £'000 as restated Amounts recognised as a distribution from shareholders' funds during the year Final dividend paid of 1.7 pence per share for the year ended 30 April 2005 (2005: nil) 633 - Interim dividend paid of 0.7 pence per share for the year ended 30 April 2006 (2005: 0.5 pence) 310 177 943 177 Proposed final dividend of 1.9 pence for the year ended 30 April 2006 (2005: 1.7 pence) 847 614 Dividends amounting to £93,000 (2005: £136,000) have been waived by the ESOP and therefore deducted in arriving at the aggregate of dividends proposed. It is proposed that the final dividend per share amounting to £847,000 (2005: £633,000) will be paid on 19 September 2006 to those shareholders on the register at 8 September 2006. The adoption of FRS 21 has given rise to an increase in shareholders' funds of £614,000 at 30 April 2005. In accordance with FRS 21, the final dividend for the year ended 30 April 2006 will be accounted for, following payment of that dividend, in the first half of the year ending 30 April 2007. 4 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during each period. The weighted average number of shares, after adjusting for shares held by the ESOP, in issue during the year used in the calculation of basic earnings per share was as follows: 2006 2005 '000 '000 Weighted average shares for basic earnings per share 41,667 31,900 Diluted earnings per share is the basic earnings per share adjusted for the dilutive effect of the conversion into fully paid shares of the weighted average number of share options outstanding during the year. The weighted average number of shares in issue during the period used in the calculation of diluted earnings per share was as follows: 2006 2005 '000 '000 Weighted average shares for diluted earnings per share 45,051 34,043 Adjusted earnings per share have been calculated so as to exclude the effect of the amortisation of all intangible fixed assets and non-operating exceptional costs. Adjusted earnings per share have been presented in order that the effects on reported earnings of the amortisation of intangible fixed assets and non-operating exceptional costs can be fully appreciated. Adjusted earnings used in the calculation of basic and diluted earnings per share reconciles to basic earnings as follows: 2006 2005 £'000 £'000 Basic earnings 5,658 3,688 Non-operating exceptional costs - 77 Amortisation of intangible fixed assets 1,596 356 Adjusted earnings 7,254 4,121 No adjustment has been made for tax since the amortisation of intangible fixed assets is not expected to be allowable for tax purposes. Earnings per share (pence per share) Basic 13.6 11.6 Diluted 12.6 10.8 Adjusted earnings per share (pence per share) Basic 17.4 12.9 Diluted 16.1 12.1 5 Segmental analysis The turnover for the year was derived from the Group's principal activities and is attributable to the following markets: 2006 2005 By destination £'000 £'000 UK 130,439 83,830 Continental Europe 2,126 853 Rest of the World 365 825 132,930 85,508 All turnover originates in the United Kingdom. The Group's profit before tax substantially arises from UK operations and consequently the following analyses are presented by business segment only. 5. Segmental analysis (continued) Turnover for the year is derived from the Group's principal activities as follows: 2006 2005 £'000 £'000 Commercial Services Facilities 17,332 - Utility Services Electricity 58,875 36,742 Telecoms 13,954 13,493 Water 42,237 35,045 Head office 532 228 132,930 85,508 The Group's profit before tax was derived from its principal activities as follows: 2006 2005 £'000 £'000 Commercial Services Facilities 1,071 - Utility Services Electricity 3,917 2,780 Telecoms 2,058 2,373 Water 4,193 2,937 Head office (3,045) (2,238) 8,194 5,852 Non-operating exceptional costs - (77) Net interest payable (797) (567) 7,397 5,208 6 Reconciliation of movement in equity shareholders' funds 2006 2005 £'000 £'000 as restated Profit for the year 5,658 3,688 Dividends (943) (177) Retained profit for the year 4,715 3,511 Unrealised surplus on revaluation of properties 587 - Proceeds from sale of own shares 1,102 1,141 Net proceeds from issue of shares 15,092 11,267 Net addition to equity shareholders' funds 21,496 15,919 Opening equity shareholders' funds 18,142 2,223 Closing equity shareholders' funds 39,638 18,142 Opening equity shareholders' funds were originally stated as £17,528,000 at 1 May 2005 prior to the adoption of FRS 21, as described in note 1. 7 Notes to the cash flow statement 7a) Reconciliation of operating profit to net cash inflow 2006 2005 £'000 £'000 Operating profit 8,194 5,852 Depreciation of tangible fixed assets 2,072 1,720 Amortisation of negative goodwill (174) (220) Amortisation of intangible fixed assets 1,770 576 Profit on sale of fixed assets (41) - (Increase)/decrease in stock (1,367) 742 Increase in debtors (5,637) (2,271) Increase/(decrease) in creditors 4,963 (2,375) Net cash inflow from operating activities 9,780 4,024 7b) Analysis of net debt At At 1 May Non cash 30 April 2005 Cash flows movements 2006 £'000 £'000 £'000 £'000 Bank overdraft (2,713) 2,699 - (14) Increase in cash during the year (2,713) 2,699 - (14) Bank loans due within one year (243) (1,024) - (1,267) Bank loans due after one year (1,429) (10,737) - (12,166) Finance leases due within one year (55) 79 (83) (59) Finance leases due after one year (8) - (63) (71) Net debt (4,448) (8,983) (146) (13,577) 7c) Reconciliation of net cash inflow to movement in net debt 2006 2005 £'000 £'000 Increase in cash in the year 2,699 1,797 Net proceeds received from share issue 14,527 11,267 Sale of investments - own shares 1,102 1,141 Cash inflow from financing (27,311) (2,213) Change in net debt resulting from cash flows (8,983) 11,992 New and acquired finance leases (146) (36) Net debt at 1 May (4,448) (16,404) Net debt at 30 April (13,577) (4,448) 8 Annual General Meeting The Annual General Meeting of Spice Holdings plc will be held at Yorkshire Sculpture Park, Bretton Hall, West Bretton, Wakefield, WF4 4LG on Wednesday 6 September 2006 at 2.00pm. The notice of the Annual General Meeting contains items of special business, two of which are explained further below. Resolution 9 will be proposed as a special resolution to change the name of the Company to 'Spice plc'. The shorter name of 'Spice' is more striking and memorable and was unavailable at Companies House until recently. Resolution 10 will be proposed as an ordinary resolution to approve the Company entering into a contract to purchase Wellfield House for £1,650,000. Part of Wellfield House is currently leased by Spice and used as its head office. During the year, Spice paid £82,500 to Tree Tots Limited in consideration for which an option was granted by Tree Tots Limited to Spice which gives Spice the right to purchase Wellfield House for £1,650,000 subject to shareholder approval of the proposed contract. L Rigby, the wife of W S Rigby is a Director of Tree Tots Limited. Under section 320 of the Companies Act 1985, shareholder approval is required before Spice may enter into the contract to purchase Wellfield House since W S Rigby and Tree Tots Limited are connected parties. The agreed purchase price for Wellfield House was determined after obtaining two independent valuations from chartered surveyors. The option fee of £82,500 will be deducted from the agreed purchase price and is refundable in the event that shareholder approval is not obtained. It is considered that acquiring the freehold to Wellfield House would allow the Company maximum flexibility to adapt and use the whole of the premises to meet head office and other Group accommodation requirements 9 Availability of annual report The annual report and financial statements will be sent to all shareholders on 1 August 2006. Copies may be obtained from the Company Secretary at PO Box 111, Bradford Road, Morley, Leeds LS27 0YE for a period of one month from 1 August 2006. This information is provided by RNS The company news service from the London Stock Exchange

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