Interim Results

RNS Number : 3968J

Clarke(T.) PLC

07 August 2012

 



TCLARKE PLC

Interim results for the six months ended 30th June 2012 

TClarke plc, the Building Services Group, has announced its interim results for the six months to 30th June 2012.

Highlights:

Group revenue                                                             £90.7m (30th June 2011: £92.6m)

Profit before taxation                                                    £0.5m (30th June 2011: £1.4m)

Profit before tax margin                                                0.5% (30th June 2011: 1.5%)

Underlying operating profit                                            £1.6m (30th June 2011: £2.5m)

Underlying operating profit margin                                 1.7% (30th June 2011: 2.7%)

Earnings per share - basic                                            0.79p (30th June 2011: 2.38p)

Earnings per share - diluted                                          0.78p (30th June 2011: 2.38p)

Earnings per share - underlying                                     2.31p (30th June 2011: 3.90p)

Improved order book                                                    £230m (30th June 2011: £193m)

Net cash                                                                     £0.7m (31st December 2011: £0.6m)

Interim dividend per share                                            1.0p (2011: 1.0p)

New contracts secured include:

·      240 Blackfriars, for Great Portland Estates.

·      3 Quays Residential Development, London.

·      BAE / Detica, Guildford.

·      Brunel University, Uxbridge.

·      Credit Suisse UPS Upgrade, London.

·      Data Centres in Buckinghamshire, Newcastle upon Tyne and Northamptonshire.

·      DeVere Gardens, Kensington.

·      Dixons Allerton Academy, Bradford.

·      LOCOG Event Maintenance.

·      Swansea Metropolitan University.

·      University of Bath.

·      Waitrose Stores, Alton, Bedford and Stratford Upon Avon.

·      West Linton Primary School.

 Mark Lawrence, Chief Executive commented:

"I am pleased to report that TClarke has remained profitable and cash generative in the face of extremely challenging market conditions.

We are delighted that our forward order book has strengthened to an impressive £230m.  Whilst our core markets face prolonged margin pressures, we continue to have a proven track record for delivery on the UK's most iconic projects, none more so than can be seen across the London skyline, The Emirates Cable Car, The Shard, Westfield Stratford City and the London 2012 Olympic Stadium.

In these uncertain times clients, principal contractors and our supply chain continue to be reassured by the stability and strength of TClarke and the diversity and resilience of our business."

-ends-

Date 7^th August 2012

For further information contact:

T. Clarke plc
Mark Lawrence                             Martin Walton

Group Chief Executive                   Finance Director
Tel: [phone]                      Tel: [phone]

www.tclarke.co.uk    

N+1 Brewin (Financial Adviser and Broker)

Sandy Fraser

Tel: [phone]

City Profile

Simon Courtenay/ Abigail Genis

Tel: [phone]

Chairman's statement

As reported by most of our peers the first half of 2012 has been marked by a lack of confidence across the sector. Against this backdrop it is unsurprising that the period has been slower than we had hoped with the highly competitive market environment also resulting in pressure on our margins. Underlying operating profits for the period were £1.6m (30^th June 2011 £2.5m).

As evidenced by our recent completions and project awards we continue to secure some of the most significant projects that have come to market. Our long standing reputation, financial strength, and the quality and commitment of our people across the UK continues to differentiate TClarke from its competitors. We will continue to target high quality projects supported by respected clients and principal contractors. 

We continue to take action to mitigate the impact of market conditions and have made further progress with our strategy to adopt a more regionalised approach to our operations. Moving away from individual stand-alone businesses has enabled the group to reduce annual operating costs by £0.6m without impacting our future growth potential.

A consistent focus on cash management throughout the period has seen net cash improve, remaining positive at £0.7m (31st December 2011: £0.6m).

With a number of projects due to begin shortly we are confident of significant revenue progress in the second half. The Board is extremely pleased to note that the group has one of the strongest forward order books in its history, up 20% to £230m as at 30^th June 2012 compared to £193m as at 30^th June 2011. We see this as strong validation of our strategy to focus on key sectors. Our growing order book provides us with visibility although the margin pressures we face mean that underlying profits will remain subdued and it is highly likely that full year profits will be significantly lower than originally expected.

Despite the uncertain environment the Board is proposing a maintained interim dividend of 1.0p (2011: 1.0p) and, in the absence of unforeseen circumstances, expects to maintain total dividends for the year.This reflects both the financial health of TClarke and our confidence in the medium term prospects for the group.

Russell Race

Chairman

7^th August 2012

Business review

Operational review

The group is managed in three operational areas, South, North and Scotland. We operate from 16 locations across the UK, the majority of which trade under the TClarke brand.

Our strategy is to focus on eight key sectors in building services:

·      Facilities Management

·      Intelligent Buildings

·      Green Technologies

·      Rail

·      Utilities and Technologies

·      Manufacturing

·      Residential

·      M&E Contracting

Helping to build the business and further progress the delivery of our strategy we believe these eight sectors offer good growth potential and will also enable us to develop a stream of recurring revenues as part of our business model.

Frustratingly opportunities are taking longer to convert into firm orders, often as a result of a "value engineering" process. We are however encouraged with the opportunities in data centres, rail and new London commercial office schemes. In addition we are pursuing opportunities to grow the facilities management (FM) and green technologies businesses within the group.

TClarke - South

The South Division is the largest of our three operating divisions and includes our two London businesses.

Recently secured schemes include:

·      3 Quays Residential Development, London.

·      240 Blackfriars commercial office scheme for Great Portland Estates.

·      BAE / Detica London and Guildford.

·      Brunel University, Uxbridge.

·      Credit Suisse UPS Upgrade, London.

·      Data Centres in Buckinghamshire, and Northamptonshire.

·      DeVere Apartments, Kensington.

·      LOCOG Event Maintenance for the London 2012 Olympic Stadium.

·      Swansea Metropolitan University.

·      University of Bath.

Schemes in progress include:

·      20 Fenchurch Street, London.

·      Bluewater Shopping Centre, Kent.

·      Dungeness Power Station, Kent.

·      London Bridge - The Place, London.

·      Nazareth House, Plymouth.

·      Regents Place - NEQ, London.

·      Tate 2 - Transforming Tate Modern, London.

·      The Eye, Bristol.

·      Turner Broadcasting, London.

·      University of Cambridge Sports Hall.

·      Victoria Underground Station, London.

Completions for the first half of the year included The Emirates Airline, the UK's first urban cable car and The Shard, London Bridge.

Recognising our capabilities we have been awarded data centre projects in Buckinghamshire, and Northamptonshire and there are a number of other schemes that will be coming to market in the next 18 months for us to pursue.

Our order book and tendering opportunities remain strong across the division and in the London market there are several large schemes that are now progressing to a construction stage that will be available for bidding later this year or early 2013.

TClarke - North

TClarke North West (formerly D&S Engineering Facilities) based in Accrington, specialises in FM (Facilities Management). Since becoming part of the TClarke group in March 2010 it has seen revenues grow over 70% with expected revenues of £28m for 2012. This growth has primarily been driven by securing larger contracts and work volumes with its existing clients reassured by the stability that a larger organisation brings.

In Redcar, as part of the area's regeneration, we are nearing completion of the Vertical Pier project and have recently secured the Redcar Leisure and Community Heart, a new development with a sports and leisure centre, swimming pools, business centre and community spaces.

Reaffirming our UK data centre capabilities we have secured a data centre in the North East that will be undertaken by our engineers and operatives from Newcastle and Leeds.

In the education sector we have completed Campsmount Technology College and are currently on site at the De Warenne Academy, both in Doncaster. INTO University in Newcastle will be completed later this year and we have recently secured Dixons Allerton Academy in Bradford.

TClarke - Scotland

The contracting scene in Scotland remains fiercely competitive and we have continued to streamline our business to achieve the lowest possible cost base, whilst retaining the ability to successfully secure and deliver projects in key sectors. The forward order book remains healthy with targeted revenues for this year secured and £6m of work for 2013 and beyond. Whilst the market remains very challenging the diversity of services offered is attractive to our core clients and new clients alike.

From its base in Scotland, TClarke Intelligent Buildings has strengthened its reputation for IT led projects; clients range from the international security market, retail, and rail and sports arenas. Residential and engineering markets are proving to be relatively robust and continue to be targeted for growth.

A key objective for the next 18 months is to develop a "whole life care" solution to end user clients after their NHBC warranty expires, offering security in their domestic household services, which has been met very enthusiastically by our partners in house building. With an average of 1,000residential units being completed every year we believe this could be a significant area of growth in the residential sector over the next 5 years.

Summary and Outlook

Given the challenging conditions it is pleasing to report that the group remains both profitable and cash generative with no debt. The increase in our forward order book is impressive but, as evidenced by government statistics, UK construction activity continues to contract. This indicates that trading will remain challenging and our core markets will continue to face material margin pressure. We believe that economic recovery and a rebound in confidence is key to the return of improved margins.

Despite these challenges the Board is focused on delivering value for our customers and shareholders. The actions to reduce our cost base and the strategy of broadening our sector coverage in specific markets have resulted in the group securing some of the most significant projects that have come to the market. We have stated previously that it is a reflection of the strength and confidence of the business that TClarke is selected to work on many prestigious projects. In these continuing uncertain times clients are reassured by our financial strength, service levels and operational stability and we will continue to build upon these client relationships and partnerships as part of our wider plans to grow the business.

Mark Lawrence

Group Chief Executive

7^th August 2012

Financial review                   

Summary of financial performance

Revenue decreased by £1.9m (2%) to £90.7m (2011: £92.6m), and gross profit reduced by £0.9m from £12.8m (13.9%) to £11.7m (12.9%). 

Underlying operating profit fell by £0.9m to £1.6m (2011: £2.5m). Underlying operating profit consists of operating profit before amortisation of intangible assets, profit on disposal of land and buildings, share based payment expense and non-recurring costs totaling £0.9m (2011: £0.9m).

Profit before tax decreased by £0.9m to £0.5m (2011: £1.4m).  Taxation was £0.1m (2011: £0.4m), and the effective tax rate was 27.8% (2011: 28.3%).

Basic earnings per share were 0.79p (2011: 2.38p) and diluted earnings per share were 0.78p (2011: 2.38p).  Underlying earnings per share were 2.33p (2011: 3.90p).

The results by division are considered below.  2011 comparatives have been restated to include the results of our Huntingdon and Kings Lynn operations in the South division in accordance with the revised operating structure.  Huntingdon and Kings Lynn were previously reported as part of the North division. 

TClarke - South

Revenue in the South was £60.7m (2011: £67.1m) and operating profit was £0.2m (2010: £3.4m), reflecting the tough market conditions in the London commercial sector. 

Underlying operating profit was £0.7m (2011: £0.6m), after adjusting for £0.2m restructuring costs (2011: £0.3m), £0.2m long term employee benefit charges from the acquisition of DG Robson in 2010 (2011: £0.2m) and £0.1m share based payment expenses (2011: £nil). 

TClarke - North

Revenue in the North increased by £7.3m to £23.2m (2011: £15.9m).  Operating profit decreased by £0.5m to £0.6m (2011: £1.1m).

Underlying operating profit was £0.9m (2010: £1.3m), after adjusting for £0.2m intangibles amortisation (2011: £0.2m) and £0.1m restructuring charges (2011: £nil).

TClarke - Scotland

Revenue in Scotland decreased by £2.9m to £6.8m (2011: £9.7m), reflecting the impact of the restructuring of the business in 2011 to focus on profitable contract opportunities in its core residential, engineering and IT sectors. 

Underlying operating losses improved to £0.1 million (2011: £0.2m) before restructuring costs of £0.1m (2011: £0.1m). 

Cash flow and dividend

Our net cash position improved to £0.7m at 30 June 2012, up £0.1m since the year end.  Net cash inflow in the period was £0.1m (2011: £3.8m outflow), after dividend payments of £0.8m (2011: £1.8m).

Net cash inflow from operating activities was £1.1m (2011: £1.9m outflow), with an improved working capital position.  We are continuing to monitor and manage our cash and working capital position closely.

Dividend

The interim dividend has been maintained at 1.0p (2011: 1.0p) and will be will be paid on 12th October 2012 to shareholders on the register at 14^th September 2012 as detailed in note 6.

Pension obligations

The continuing turmoil in the financial markets has again impacted our pension scheme liability, with the deficit increasing by £2.1m in the six months to 30^th June 2012 due to the low yield on government bonds.  We continue to meet our ongoing funding obligations to the pension scheme, with employers' contributions amounting to £0.4m in the first half of the year.

Martin Walton

Finance Director

7^th August 2012

Condensed consolidated income statement
							Unaudited		Unaudited		Audited
							6 Months to		6 Months to		12 Months to
							30 06 2012		30 06 2011		31 12 2011
							£000		£000		£000
Revenue							90,725		92,619		183,805
Cost of sales							(79,026)		(79,784)		(157,718)
Gross profit							11,699		12,835		26,087
Other operating income							62		47		144
Administrative expenses:
Amortisation of intangible assets							(170)		(245)		(491)
Non-recurring costs							(638)		(630)		(1,026)
Share based payment expense							(57)		-		(31)
Other administrative expenses							(10,185)		(10,419)		(21,475)
Total administrative expenses							(11,050)		(11,294)		(23,023)
Net profit on sale of land and buildings							-		-		2,156
Profit from operations							711		1,588		5,364
Finance income							8		11		17
Finance costs							(269)		(227)		(481)
Profit before taxation							450		1,372		4,900
Taxation							(125)		(388)		(891)
Profit for the period							325		984		4,009
Earnings per share:
Attributable to equity holders of T.Clarke plc:
Basic							0.79p		2.38p		9.69p
Diluted							0.78p		2.38p		9.64p
Condensed consolidated statement of comprehensive income
							£000		£000		£000
Profit for the period							325		984		4,009
Other comprehensive (expense)/ income:
Revaluation of land and buildings							-		-		768
Actuarial loss on defined benefit pension scheme							(1,586)		(4)		(944)
Other comprehensive expense for the period, net of tax							(1,586)		(4)		(176)
Total comprehensive (expense)/ income for the period							(1,261)		980		3,833

Condensed consolidated statement of financial position
	Unaudited		Unaudited		Audited
	30 06 2012		30 06 2011		31 12 2011
	£000		£000		£000
Non-current assets
Intangible assets	23,872		24,288		24,042
Property, plant and equipment	6,267		6,502		6,406
Deferred taxation	2,344		1,746		1,798
	32,483		32,536		32,246
Current assets
Inventories	514		402		441
Amounts due from customers under construction contracts	19,583		17,387		19,210
Trade and other receivables	24,763		23,745		26,429
Cash and cash equivalents	702		4,827		624
	45,562		46,361		46,704
Total assets	78,045		78,897		78,950
Current liabilities
Bank overdraft and loans	-		1,426		64
Amounts due to customers under construction contracts	3,086		1,433		5,354
Trade and other payables	38,203		42,840		37,127
Current tax liabilities	520		409		322
Obligations under finance leases	136		156		85
	41,945		46,264		42,952
Net current assets	3,617		97		3,752
Non-current liabilities
Retirement benefit obligation	12,113		8,853		9,963
Obligations under finance leases	88		128		104
Other payables	-		191		-
	12,201		9,172		10,067
Total liabilities	54,146		55,436		53,019
Net assets	23,899		23,461		25,931
Equity attributable to owners of the parent
Share capital	4,140		4,140		4,140
Share premium	3,049		3,049		3,049
Revaluation reserve	758		-		768
Retained earnings	15,952		16,272		17,974
Total equity	23,899		23,461		25,931

Condensed consolidated statement of cash flows
	Unaudited	Unaudited			Audited
	6 Months to	6 Months to			12 Months to
	30 06 2012	30 06 2011			31 12 2011
	£000		£000		£000
Net cash used in operating activities (see note 7)	1,090		(1,899)		(6,804)
Investing activities
Interest received	8		11		17
Purchase of property, plant and equipment	(197)		(100)		(699)
Receipts on disposal of property, plant and equipment	96		70		3,540
Net cash outflow on acquisition of subsidiaries	-		-		(349)
Net cash (used in) /  from investing activities	(93)		(19)		2,509
Financing activities
Equity dividends paid	(828)		(1,759)		(2,174)
Repayments of obligations under finance leases	(27)		(127)		(176)
Net cash used in financing activities	(855)		(1,886)		(2,350)
Net increase / (decrease) in cash and cash equivalents	142		(3,804)		(6,645)
Cash and cash equivalents at beginning of period	560		7,205		7,205
Cash and cash equivalents at end of period (see note 7)	702		3,401		560

Condensed consolidated statement of changes in equity
For the six  months ended 30th June 2012
		Share capital	Share premium	Revaluation reserve	Retained earnings	Total
		£000	£000	£000	£000	£000
At 1st January 2012		4,140	3,049	768	17,974	25,931
Comprehensive income
Profit for period		-	-	-	325	325
Other comprehensive income:
	Actuarial loss on retirement  benefit obligation	-	-	-	(2,114)	(2,114)
	Deferred income tax credit on actuarial loss on retirement benefit obligation	-	-	-	528	528
Total other comprehensive income		-	-	-	(1,586)	(1,586)
Total comprehensive expense		-	-	-	(1,261)	(1,261)
Transfers		-	-	(10)	10	-
Transactions with owners
Share based payment credit		-	-	-	57	57
Dividends paid		-	-	-	(828)	(828)
Total transactions with owners		-	-	-	(771)	(771)
At 30th June 2012		4,140	3,049	758	15,952	23,899

Condensed consolidated statement of changes in equity
For the six  months ended 30th June 2011
		Share capital	Share premium	Revaluation reserve	Retained earnings	Total
		£000	£000	£000	£000	£000
At 1st January 2011		4,140	3,049	-	17,051	24,240
Comprehensive income
Profit for period		-	-	-	984	984
Other comprehensive income:
	Actuarial gain on retirement  benefit obligation	-	-	-	146	146
	Deferred income tax credit on actuarial gain on retirement benefit obligation	-	-	-	(150)	(150)
Total other comprehensive expense		-	-	-	(4)	(4)
Total comprehensive income		-	-	-	980	980
Transactions with owners
Dividends paid		-	-	-	(1,759)	(1,759)
Total transactions with owners		-	-	-	(1,759)	(1,759)
At 30th June 2011		4,140	3,049	-	16,272	23,461

Condensed consolidated statement of changes in equity
For the year ended 31st  December 2011
		Share capital	Share premium	Revaluation reserve	Retained earnings	Total
		£000	£000	£000	£000	£000
At 1st January 2011		4,140	3,049	-	17,051	24,240
Comprehensive income
Profit for period		-	-	-	4,009	4,009
Other comprehensive income:
	Revaluation of land and buildings			1,023	-	1,023
	Deferred income tax charge on revaluation of land and buildings			(270)	-	(270)
	Actuarial loss on retirement  benefit obligation	-	-	-	(1,017)	(1,017)
	Deferred income tax credit on actuarial loss on retirement benefit obligation	-	-	-	254	254
	Effect of change in rate of tax			15	(181)	(166)
Total other comprehensive expense		-	-	-	(944)	(176)
Total comprehensive income		-	-	768	3,065	3,833
Transactions with owners
Share based payment credit		-	-	-	31	31
Dividends paid		-	-	-	(2,173)	(2,173)
Total transactions with owners		-	-	-	(2,142)	(2,142)
At 31st December 2011		4,140	3,049	768	17,974	25,931

Notes to the condensed consolidated financial statements for the six months to 30th June 2012

Note 1 - Basis of preparation

T.Clarke plc (the 'company') is a company incorporated and domiciled in the United Kingdom.  The consolidated interim financial statements comprise the condensed financial statements of the company and its subsidiaries (together the 'group'). 

These interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34) as adopted by the European Union, and the Disclosure and Transparency Rules ('DTR') of the Financial Services Authority. They do not include all the information required for the full annual financial statements, and should be read in conjunction with the financial statements of the group as at and for the year ended 31st December 2011.

The figures for the year ended 31^st December 2011 do not constitute statutory accounts but have been extracted from the group's statutory accounts for that year. The statutory accounts for the year ended 31st December 2011 have been delivered to the Registrar of Companies House and a copy has been made available on the company's website at www.tclarke.co.uk. The auditors' report on those accounts was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The interim financial statements have not been audited or reviewed by the company's auditors.

Note 2 - Accounting policies

Except as described below, the financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31st December 2011.

Taxes on income in the interim periods are accrued using the estimated effective tax rate that would be applicable to expected total annual earnings.

Note 3 - Segmental information

The group provides electrical and mechanical contracting and related services to the construction industry and end users.

For management and internal reporting purposes the group is organised geographically into three regional divisions; the South, the North and Scotland, and an internal property division, reporting to the Chief Executive, who is the chief operating decision maker.  All assets and liabilities of the group have been allocated to segments, apart from the retirement benefit obligation and tax assets and liabilities.

With effect from 1st January 2012 the management of the Huntingdon and Kings Lynn offices has been transferred to the South division.  Previously these operations were reported as part of the North division.  Comparative information has been restated.

30th June 2012	South £000	North £000	Scotland £000	Property £000	Unallocated & elimination £000	Total £000
Total revenue	67,281	23,276	7,273	-	-	97,830
Inter segment revenue	(6,615)	-	(490)	-	-	(7,105)
Revenue from external operations	60,666	23,276	6,783	-	-	90,725
Underlying profit from operations	674	893	(108)	118	-	1,577
Amortisation of intangibles	-	(170)	-	-	-	(170)
Share based payment expense	(57)	-	-	-	-	(57)
Non-recurring costs:
Restructuring charges	(202)	(96)	(129)	-	-	(427)
Long-term employee benefits arising from previous acquisitions	(212)	-	-	-	-	(212)
Profit from operations	203	627	(237)	118	-	711
Investment income	15	23	-	-	(30)	8
Finance costs	(295)	-	(4)	-	30	(269)
Profit before tax	(77)	650	(241)	118	-	450
Taxation expense						(125)
Profit for the period from continuing operations						325
Assets	47,690	21,801	6,074	4,780	(2,300)	78,045
Liabilities	(32,664)	(8,395)	(3,135)	(1,968)	(7,984)	(54,146)
Net assets	15,026	13,406	2,939	2,812	(10,284)	23,899

30th June 2011 (restated)	South £000	North £000	Scotland £000	Property £000	Unallocated & elimination £000	Total £000
Total revenue	67,171	15,872	9,836	-	-	92,879
Inter segment revenue	(69)	(12)	(179)	-	-	(260)
Revenue from external operations	67,102	15,860	9,657	-	-	92,619
Underlying profit from operations	1,190	1,290	(202)	185	-	2,463
Amortisation of intangibles	(75)	(170)	-	-	-	(245)
Non-recurring costs:
Restructuring charges	(312)	-	(106)	-	-	(418)
Long-term employee benefits arising from previous acquisitions	(212)	-	-	-	-	(212)
Profit from operations	591	1,120	(308)	185	-	1,588
Investment income	2	25	-	-	(16)	11
Finance costs	(234)	(5)	(4)	-	16	(227)
Profit before tax	359	1,140	(312)	185	-	1,372
Taxation expense						(388)
Profit for the period from continuing operations						984
Assets	48,622	22,099	8,591	5,080	(5,495)	78,897
Liabilities	(38,519)	(5,985)	(5,525)	(3,330)	(2,077)	(55,436)
Net assets	10,111	16,114	3,066	1,750	(7,572)	23,461

31st December 2011 (restated)	South £000	North £000	Scotland £000	Property £000	Unallocated & elimination £000	Total £000
Total revenue	132,980	34,547	17,074	-	-	184,601
Inter segment revenue	(671)	(52)	(73)	-	-	(796)
Revenue from external operations	132,309	34,495	17,001	-	-	183,805
Underlying profit from operations	2,700	2,263	(568)	361	-	4,756
Net profit on disposal of land and buildings	-	-	-	2,156	-	2,156
Amortisation of intangibles	(150)	(341)	-	-	-	(491)
Share based payment expense	(31)	-	-	-	-	(31)
Non-recurring costs:
Restructuring charges	(421)	(35)	(147)	-	-	(603)
Long-term employee benefits arising from previous acquisitions	(423)	-	-	-	-	(423)
Profit from operations	1,675	1,887	(715)	2,517	-	5,364
Investment income	25	44	3	-	(55)	17
Finance costs	(528)	(8)	-	-	55	(481)
Profit before tax	1,172	1,923	(712)	2,517	-	4,900
Taxation expense						(891)
Profit for the period from continuing operations						4,009
Assets	54,572	21,122	7,141	4,809	(8,694)	78,950
Liabilities	(34,030)	(12,495)	(4,578)	(2,116)	200	(53,019)
Net assets	20,542	8,627	2,563	2,693	(8,494)	25,931

Note 4 - Taxation expense

The effective income tax rate applied for the period is 27.8% (30^th June 2011: 28.3%; 31^st December 2011: 18.4%)

Note 5 - Earnings per share

A.      Basic earnings per share

The earnings per share represent the profit for the period divided by the weighted average number of ordinary shares in issue. 

	Unaudited 30 06 2012 £000	Unaudited 30 06 2011 £000	Audited 31 12 2011 £000
Profit attributable to equity holders of the parent	325	984	4,009
Weighted average number of ordinary shares (000s)	41,400	41,400	41,400

B.       Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.  The company has three categories of dilutive potential ordinary shares: share options granted under the Savings Related Option Scheme, and share options and conditional share awards granted under the Equity Incentive Plan.  Further details of these schemes are given in note 20 of the 2011 annual report and financial statements.

	Unaudited 30 06 2012 £000	Unaudited 30 06 2011 £000	Audited 31 12 2011 £000
Profit attributable to equity holders of the parent	325	984	4,009
Weighted average number of ordinary shares in issue	41,400	41,400	41,400
Adjustments
Savings Related Share Options	74	-	-
Equity Incentive Plan	370	11	140
Weighted average number of ordinary shares for diluted earnings per share (000s)	41,844	41,411	41,540

C.       Underlying earnings per share

Underlying earnings per share represents the profit for the period from continuing operations adjusted for goodwill impairment, amortisation of intangible assets, acquisition expenses, other long-term employee benefit costs and restructuring costs, divided by the weighted average number of ordinary shares in issue.  The number of ordinary shares for the purpose of this calculation is 41,399,795 (30th June 2011: 41,399,795; 31st December 2011: 41,399,795). The underlying profit for the period is calculated as follows:

	Unaudited 30 06 2012 £000	Unaudited 30 06 2011 £000	Audited 31 12 2011 £000
Profit from continuing operations attributable to equity holders of the parent	325	984	4,009
Adjustments:
Amortisation of intangible assets	170	245	491
Long term employee benefits arising from previous acquisitions	212	212	423
Restructuring costs	427	418	603
Equity settled share based payment expense	57	-	31
Net profit on disposal of property assets	-	-	(2,156)
Tax effect of adjustments	(226)	(245)	(353)
Underlying profit from continuing operations	965	1,614	3,048
Weighted average number of ordinary shares in issue	41,400	41,400	41,400
Adjustments
Savings Related Share Options	74	-	-
Equity Incentive Plan	370	11	140
Weighted average number of ordinary shares for diluted earnings per share (000s)	41,844	41,411	41,540
Underlying earnings per share	2.33p	3.90p	7.34p
Diluted underlying earnings per share	2.31p	3.90p	7.33p

Note 6 - Interim dividend

An interim dividend of 1.0p per share (2011: 1.0p) was approved by the board on 6th August 2012 and has not been included as a liability as at 30th June 2012.  The shares will go ex-dividend on 12th September 2012 and the dividend will be paid on 12^th October to shareholders on the register as at 14^th September 2012.  A dividend reinvestment plan is available for shareholders.  Those shareholders who have not elected to participate in this plan, and who would like to participate with respect to the 2012 interim dividend, may do so by contacting Capita Registrars on 0870 162 3131. The last day for election for the interim dividend reinvestment is 17th September 2012 and any requests should be made in good time ahead of that date.

Dividends paid in period	Unaudited 30 06 2012 £000	Unaudited 30 06 2011 £000	Audited 31 12 2011 £000
Final dividends in respect of previous year	828	1,760	1,760
Interim dividend in respect of the current year	-	-	414
Dividends recognised in the period	828	1,760	2,174

Note 7 - Notes to the consolidated statement of cash flows

a - Reconciliation of operating profit to net cash from operating activities	Unaudited 30 06 2012 £000	Unaudited 30 06 2011 £000	Audited 31 12 2011 £000
Profit from continuing operations	711	1,588	5,364
Depreciation charges	356	307	631
Equity settled share based payment expense	57	-	31
Amortisation of intangible assets	170	245	491
Defined benefit pension scheme (credit) / charge	(175)	(306)	(549)
Profit on sale of fixed assets	(54)	(5)	(2,128)
Operating cash flows before movements in working capital	1,065	1,829	3,840
(Decrease) / increase in inventories	(73)	49	10
Increase in contract balances	(2,640)	(6,209)	(4,111)
Decrease / (increase) in debtors	1,666	(335)	(3,019)
Increase / (decrease) in creditors	1,066	3,900	(1,661)
Cash generated by /used in operations	1,084	(766)	(4,941)
Corporation tax paid	55	(1,101)	(1,781)
Interest paid	(49)	(32)	(82)
Net cash generated by  / (used in) operating activities	1,090	(1,899)	(6,804)

b. Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that are readily convertible into cash, less bank overdrafts, and are analysed as follows:

	Unaudited 30 06 2012 £000	Unaudited 30 06 2011 £000	Audited 31 12 2011 £000
Cash and cash equivalents	702	4,827	624
Bank overdrafts	-	(1,426)	(64)
	702	3,401	560

Note 8 - Pension commitments

The present value of the defined benefit pension scheme and the related past and current service costs were measured using the projected unit method. The amount included in the balance sheet arising from the group's obligations in respect of its defined benefit retirement scheme is as follows:

	Unaudited 30 06 2012 £000	Unaudited 30 06 2011 £000	Audited 31 12 2011 £000
Present value of defined benefit obligations	36,464	32,135	33,590
Fair values of scheme assets	(24,351)	(23,282)	(23,627)
Deficit in scheme recognised in the statement of financial position	12,113	8,853	9,963
Key assumptions used:
Rate of increase in salaries	3.10%	4.50%	3.40%
Rate of increase of pensions in payment	2.25%	3.10%	2.55%
Discount rate	4.35%	5.50%	4.80%
Inflation assumption	2.60%	3.50%	2.90%
Expected return on scheme assets	5.00%	6.10%	5.00%
Mortality assumptions (years):	Unaudited 30 06 2012	Unaudited 30 06 2011	Audited 31 12 2011
Life expectancy at age 65 for current pensioners:
Men	23.7	24.0	23.7
Women	26.1	26.4	26.1
Life expectancy at age 65 for future pensioners (current age 45)
Men	25.1	26.0	25.1
Women	27.3	28.3	27.3

Note 9 - Related party transactions

Transactions between the company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Full disclosure of the group's other related party transactions is given in Note 23 to the group's financial statements for the year ended 31st December 2011. There have been no material changes in these relationships in the six months ended 30th June 2012 that have materially affected the financial position or performance of the group during that period.

Note 10 - Risks and uncertainties

Details of the key risks facing the group are included on pages 11 to 13 of the group's annual report and financial statements for the year ended 31st December 2011. Details of further potential risks and uncertainties arising for the six months ended 30th June 2012 are included within the Chairman's statement and the Business and Financial Reviews as appropriate. The directors consider that the main areas of risk and uncertainty with respect to the remainder of 2012 remain market conditions, operational risk, cost inflation, people, health and safety, credit and liquidity risk, cash flow interest rate risk and risk from pension obligations.

Statement of directors' responsibilities

The directors confirm that the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year) and DTR 4.2.8 (disclosure of related party transactions and changes therein). The directors also confirm that the interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and present a true and fair view of the assets, liabilities, financial position and profit of the group.

On behalf of the Board

Russell Race - Chairman

Mark Lawrence - Chief Executive

Martin Walton - Finance Director

7^th August 2012

 

END

 

 

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