Final Results

Inspace Plc 27 March 2007 Press Release 27 March 2007 Inspace plc ('Inspace' or 'the Group') Results Announcement Inspace plc (AIM:INSP), one of the UK's leading specialist service providers to the social housing market, announces its audited results for the year ended 31 December 2006. Financial Highlights â€¢ Turnover up 19% to Â£175.1 million (2005: Â£147.5 million) â€¢ Operating profit up 42%* to Â£11.19 million (2005: Â£7.86 million) â€¢ Diluted earnings per share up 21%* to 10.23 pence (2005: 8.49 pence) â€¢ Dividend per share up 15%** to 3.25 pence â€¢ Secured orders and frameworks up 211% to Â£1.4 billion (2005: Â£450 million) â€¢ Operating cash conversion up to 100%* from 85% â€¢ Net debt of Â£31.5 million*** â€¢ Shareholders' funds up from Â£16.0 million to Â£32.6 million * Before goodwill amortisation and exceptional items ** Subject to shareholder approval of final dividend of 2.18 pence *** Net debt comprises borrowings and cash at bank and in hand Commenting on the results, Colin Enticknap, Executive Chairman, said: 'We are, in overall terms, pleased with what we have achieved during 2006. We have delivered higher growth than expected, and now have a business that is double our size just twelve months ago. We have a better structure and weighting to our business, with a much stronger and broader presence in the robust social housing market. And we have improved earnings visibility through a workload platform that has trebled in size. 'Everyone, throughout the business, has worked immensely hard to make this possible, and my sincere thanks go to all of them. Through their efforts, we have assembled all the ingredients we need to deliver continued growth, and we can look forward with enthusiasm and confidence to 2007.' - Ends - For further information: Inspace plc Colin Enticknap, Executive Chairman Tel: +44 (0) 1462 678 910 colin.enticknap@inspace.co.uk www.inspace.co.uk Inspace plc Andrew Telfer, Chief Financial Officer Tel: +44 (0) 1462 678 910 andrew.telfer@inspace.co.uk www.inspace.co.uk Seymour Pierce Mark Percy, Corporate Finance Tel: +44 (0) 20 7107 8000 markpercy@seymourpierce.com www.seymourpierce.com Media enquiries: Abchurch Henry Harrison-Topham Tel: +44 (0) 20 7398 7700 henry.ht@abchurch-group.com www.abchurch-group.com Executive Chairman's Statement Overview We shall look back at 2006 as a difficult but strategically important year in which the Group confronted a number of challenges, learned some important lessons and successfully implemented a significant acquisition. As a consequence, we delivered overall growth slightly ahead of expectation and across most key areas, leaving the year in a much stronger position than when we started. The background to the challenges, the need to realign our Social Housing activity to drive growth, and the fundamental importance of the Widacre acquisition as the catalyst for that realignment, formed the main thrust of my half year statement. I mentioned the access Widacre would afford to many of the UK's largest and highest spending registered social landlords ('RSLs') who are becoming increasingly important customers in the maintenance market. I touched on Widacre's inherent contracting and supply chain management skills that would be directly transferable to the substantial Decent Homes market. And, perhaps most importantly, I emphasised how it would align our service offering with unfolding Government policy where focus is clearly moving towards the delivery of mixed sustainable communities characterised by housing for rent alongside housing for sale and the building of new homes alongside the refurbishment of existing. I am now pleased to report that the acquisition has gone extremely well. Widacre has been fully integrated into Group operations with all Social Housing activity now combined and operating under the name of Inspace Partnerships, and Affordable Housing activity operating as Inspace Homes. Customer support has been excellent, acknowledging the strategic merit in assembling a combined maintenance, stock reinvestment and design and build service in response to their evolving needs. Like us, they see Government favouring holistic, sustainable and more sophisticated solutions to meet the growing demand for social housing. The recent announcement by the Rt Hon Ruth Kelly MP, Secretary of State for Communities and Local Government, that the Housing Corporation and English Partnerships are to be combined under the banner of the new Communities England agency is further evidence of a shift in this direction. Widacre's efficient integration and increasing contribution to Group results has allowed an accelerated and more radical approach towards reshaping pre-acquisition operations and developing the enlarged business. In Social Housing terms, the business has successfully mobilised two new repair and maintenance contracts, for the Borough of Hinckley and Bosworth and for Yorkshire Coast Homes. It has secured five further social housing frameworks with Aldwyck Housing Association, the Connected consortium, Cross Keys Homes, Hyde Housing Group and Thames Valley Housing Association, which are expected to contribute total combined sales of around Â£70 million over four years, starting in 2008. This brings the total number of secured frameworks to twenty-four, and the total value of secured orders and frameworks awarded since the summer is in excess of Â£170 million. Affordable Housing contributed towards Group activity for the first time, albeit at a low level due to the bulk of 2006 sales occurring during the pre-acquisition period. This should not disguise the potential for this new division, which is already well placed for 2007 with most of the forecast unit sales now reserved and the majority already exchanged. Despite the short term impact on sales, the Corporate Assets division has continued to implement a change programme aimed at increasing the quality and visibility of its workload and the efficiency of its operational delivery. The programme, which includes smaller, shorter term or lower margin accounts being exited to concentrate efforts upon those offering greater growth potential, is now entering what is expected to be the last and most radical phase. This will see operational teams realigned around customer accounts rather than regional centres and the roll out of the new service management and financial control systems, following the completion of software development. Financial Highlights In headline terms, Group turnover increased by 19% to reach Â£175.1 million (2005: Â£147.5 million), operating profit, before exceptional items, grew by 29% to reach Â£10.16 million (2005: Â£7.86 million), and cash conversion improved significantly to 100%. Social Housing represented 59.4% of Group turnover, contributing Â£104.1 million (2005: Â£61.2 million). The Widacre acquisition featured heavily, not only providing growth but also balancing the reduction in spend by a Decent Homes customer mentioned at the half year. Affordable Housing contributed Â£0.9 million in this first period, representing 0.5% of Group turnover. Corporate Assets represented the balance of 40.1% or Â£70.1 million (2005: Â£86.3 million), the reduction in volume influenced by both the realignment programme already mentioned and the expiry, as predicted, of the Job Centre Plus interiors programme at the end of the first quarter. Despite the expected turnover reduction in Corporate Assets and the potential distraction of the Widacre acquisition, Group operating margin improved to 5.8% (2005: 5.0%), demonstrating continued success in this area. Indeed, had it not been for goodwill amortisation of Â£1.03 million, which will not be replicated once we adopt IFRS rather than UK GAAP from 1 January 2007, operating profit would have increased to Â£11.19 million and operating margin to 6.4%. The greatest contributor to operating profit was Social Housing, delivering an operating margin, excluding goodwill amortisation, of 7.5% (2005: 7.4%). Given our new broader portfolio of activity, we should now expect to see this trend towards our target margin of 5% with increasing levels of Decent Homes, regeneration and new build activity. Affordable Housing also achieved an exceptional operating margin, excluding goodwill amortisation, with the low level of turnover and timing distortions associated with joint venture activity combining to deliver 44.0%. In this case, our sustainable target margin is 20%. With the high volume but lower margin Job Centre Plus programme having expired early in the year, operating margin in Corporate Assets improved to 4.1% (2005: 3.9%). Interest received predominantly during the pre-acquisition period amounted to Â£0.11 million (2005: Â£0.22 million). Of more importance was interest paid post acquisition which was better than expected at Â£0.79 million (2005: Â£0.22 million). Consequently, profit on ordinary activities before tax increased by 27.4% to reach Â£9.49 million (2005: Â£7.45 million). Adjusting for goodwill amortisation and exceptional items, this increase would have been 33.7%. Notwithstanding the consideration shares issued at the time of the Widacre acquisition, on a fully adjusted basis, diluted earnings per share still grew by 20.5% to 10.23 pence (2005: 8.49 pence), and basic earnings per share by 18.8% to 10.26 pence (2005: 8.64 pence). Group cash flow is now an even higher priority, not only in response to the higher levels of gearing in our balance sheet, but also as a key enabler for our future growth plans. We are therefore working hard to ensure that the need for effective cash management becomes even more engrained in our thinking. This was particularly evident in our year end balance sheet, with net debt of Â£31.5 million and cash conversion, before goodwill amortisation, improving to 100%. With cash efficiency in mind, the acquisition debt was structured with a Â£31.3 million term facility and a Â£20.0 million committed overdraft facility which includes full offset against cash at bank. Whilst the latter minimises cash at bank and in hand and therefore creates some distortion with net current assets, it does provide increased flexibility and reduced interest charges moving forward. Andrew Telfer has naturally expanded upon the financial position within his Chief Financial Officer's Report. Dividend The board is recommending the payment of a final dividend of 2.18 pence per share, which, subject to approval at the Annual General Meeting on 17 May 2007, will be paid on 25 May 2007. People I have already mentioned that we confronted a number of challenges during the year. As always, our people rose well to those challenges, demonstrating the commitment and enthusiasm that has become so characteristic of Inspace. The board is immensely grateful for those efforts and keen to create the opportunity for all our people to share in the value they help to create. We are therefore hopeful that many will now take up the opportunity to become shareholders under an all staff Share Incentive Plan currently being unveiled. Quality people are a scarce resource, and we are therefore delighted to have inherited a very strong Widacre team that brings additional quality and breadth to every level of the business. Chris Durkin has brought experienced leadership to the Social and Affordable Housing divisions and is already making a significant contribution to wider board discussion; the business stream managing directors, John Campion, Tim Carpenter and Fraser Wells, have been influential in ensuring a smooth and effective integration process; and their supporting teams have remained positive, supportive and very focused whilst continuing to deliver excellent results. Having now fully embraced our new Widacre colleagues into what was already a strong Inspace team, we are very well placed for the future. Future Prospects This time last year, I mentioned that our workload platform for 2006 was in line with target expectations. With the benefit of hindsight, those targets were clearly not high enough; had it not been for the acquisition turnover we would have fallen short. This year, I am pleased to say that we start from a much stronger position. As we closed our accounts for 2006, secured Social Housing orders stood at 85% of forecast (2005: 80%). More importantly, those schemes for which we have already received preconstruction orders (where we are currently going through the cost planning, design development or mobilisation stages) account for the remaining 15%. Our short term focus will be upon the early migration of those preconstruction orders, turning them into contracts on the ground, upon securing our first 'stand alone' Decent Homes contract, and upon building the remaining workload platform for 2008. We should have ample opportunity to do so; our sales pipeline remains at a healthy Â£2.1 billion with opportunities spread amongst the tracking, prequalification and tender stages. That said, we expect a repeat of the seasonal cycle experienced for the first time last year, when we saw a lull in social housing tenders during early spring coinciding with the end of the local authority financial calendar, and a surge of activity as we moved into summer. To us, quality of work is just as important as quantity, and we therefore seek to adopt performance based 'cost plus' invoicing arrangements, which provide the optimum framework to enhance service levels and foster long term partnering relationships, across all Social Housing's maintenance activity. We have an excellent track record in this respect, with most schemes now operating on this basis. The exceptions are at Basildon, Hinckley and Bosworth and Yorkshire Coast Homes; in relation to both new contracts, relationships have developed well and plans for conversion are in place. We need to persevere at Basildon where, despite lengthy negotiations, final agreement has yet to be reached. This will be an important step, both to improve customer service levels and to create the environment where the project margin can be lifted to our target level. In Affordable Housing, where our product is concentrated on first time buyers, reservation levels have remained strong despite the recent upward trend in interest rates; as a result, we can already view 2007 with a high degree of confidence. Longer term growth is dependent upon creating access to land for regeneration, preferably in joint venture with RSLs and with only modest capital outlay. Several schemes under discussion are expected to adopt this model but the London Wide Initiative, a Government sponsored scheme to develop integrated communities across London, with social and private housing alongside subsidised key-worker accommodation, will be particularly important and is expected to unlock over 300 private sale units during 2008 and 2009. In Corporate Assets, where a material proportion of turnover comes from discretionary spend on maintenance contracts and from projects with short incubation periods and fast turnaround times, we normally expect to carry forward much lower levels of 'secured' activity. Having said that, secured orders improved to 75% of forecast (2005: 50%), setting a new standard for the future. Whilst there is still some work to do to secure the balance, the market appears to be robust. We see sustained demand for maintenance services from the larger portfolio customers, a trend towards greater bundling of services, and an increasing preference for a 'planned' rather than 'reactive' approach. A prime example is Whitbread, a progressive customer with whom we enjoy an excellent relationship. The demand for our interiors service remains equally buoyant, reflecting continued customer confidence. The recent launching of our complementary furniture supply service now offers those customers a more comprehensive package and, importantly, creates additional growth potential. Looking further ahead, total secured orders and frameworks across all divisions now stand at Â£1.40 billion (2005: Â£0.45 billion) stretching as far as 2020. Summary As I said at the outset, we left 2006 much stronger than when we entered the year. We have grown our business substantially, to more than double its original size; we have created a better structure and weighting to our portfolio; we have established a stronger and broader presence in the robust social housing market, with a comprehensive service more closely aligned with unfolding Government policy and therefore customer need; we have improved earnings visibility through a workload platform that has trebled in size; and we have built an even stronger management team with greater experience, breadth and depth. Everyone, throughout the business, has worked immensely hard to make this possible, and my sincere thanks go to all of them. Through their efforts, we have assembled all the ingredients we need to deliver continued growth, and we can look forward with enthusiasm and confidence to 2007. Colin Enticknap Executive Chairman 26 March 2007 Chief Financial Officer's Report Spearheaded by the Widacre acquisition, the Group achieved record levels of turnover, profit, EPS and cash generation in 2006. At 31 December 2006, net assets had increased to Â£32.6 million (2005: Â£16.0 million). Widacre Acquisition On 31 August 2006, the Group acquired the entire issued share capital of Widacre Limited from Willmott Dixon Limited for a total consideration of Â£57.8 million, net of free cash, satisfied by cash of Â£44.5 million and the issue of shares for Â£13.3 million. The cash element was funded by increased bank facilities and surplus cash inherent within the acquired businesses. As at 31 December 2006, goodwill arising on the acquisition stood at Â£60.9 million after amortisation of Â£1.03 million. The integration of Widacre has progressed ahead of expectation. Principal Accounting Policies Our principal accounting policies now embrace policies adopted following the Widacre acquisition. Firstly, goodwill is recognised as an intangible fixed asset and amortised over 20 years on a straight line basis. Secondly, our Affordable Housing business typically operates through ring-fenced joint venture ('JV') development vehicles that are subject to equity accounting whereby the Group's share of JV turnover is excluded from Group turnover, the share of JV operating profit is shown separately and the JV investment is shown as share of JV assets and liabilities in the Group balance sheet. Thirdly, the profit arising from Affordable Housing activities is recognised following legal completion of units sold such that the risks and rewards of ownership have passed to the purchaser. Lastly, it is our policy to immediately expense research and development costs; our research and development activities are described in the Business Review. The Group also adopted FRS 20 (share based payments) which requires the fair value of share options to be measured at the date of grant and then expensed on a straight line basis over the vesting period. Turnover Group turnover grew by 19% in the year to reach Â£175.1 million (2005: Â£147.5 million) driven, once again, by Social Housing which grew by 70% to represent 59% of Group turnover (2005: 42%). Perhaps more importantly, if we included Widacre's 2006 pre-acquisition turnover, Social Housing represented 72% of the annualised enlarged Group. Whilst Affordable Housing's entire turnover was generated through its JV development vehicles, a proportion was repatriated by way of management charge which, under accounting rules, is not classified as JV turnover. Whilst the acquired activities contributed sales of Â£45.4 million, turnover from continuing operations reduced by Â£17.9 million largely owing to short term measures taken in Corporate Assets. First, the strong performance of the acquired businesses enabled a more radical approach to Maintain's change programme resulting in the exiting of some smaller, lower margin or shorter term contracts. Secondly, although Complete has now secured some significant contracts, these were not sufficient to replenish its major Job Centre Plus programme which concluded in the first quarter of 2006. Corporate Assets enters 2007 with a more robust platform for future growth. Operating Profit Group operating profit, before goodwill amortisation and exceptional items, increased to Â£11.19 million (2005: Â£7.86 million), slightly exceeding expectations. As well as achieving 42% growth in absolute terms, Group operating margins improved to 6.4% (2005: 5.3%). All parts of the Group remained profitable. The enlarged Social Housing business delivered 70% of total operating profits at Â£7.86 million (2005: Â£4.53 million) and an improved margin of 7.5% (2005: 7.4%). Our social housing maintenance contracts are expected to deliver margins of up to 8% in an open book 'cost plus' environment, mostly dependent upon performance against customer targets. Social housing contracting activities also rely on a 'cost plus' dedicated customer model with target margins around 4% but with a higher proportion of fixed profit. The acquired contracting activities, consolidated for only four months, delivered strong profits ahead of normal expectations due to timing differences. As the Group aims to drive the potential benefits of the acquisition, through maintenance and, equally importantly, stand alone decent homes contracts, the blended Social Housing margin is expected to be nearer 5% moving forward. Affordable Housing's development activities delivered overall operating profits of Â£0.45 million (2005: nil), equating to an operating margin of 44.1%. Target margins for this business are expected to be around 20% and were heavily distorted in 2006 due to the phasing of legal completions. Despite turnover falling by 19%, Corporate Assets improved operating margins to 4.1% (2005: 3.9%). The reduction in operating profits to Â£2.9 million (2005: Â£3.3 million) was restricted to 13%, largely due to good margin performance at Complete which offset some of the shortfall attributed to Maintain's change programme. Interest Net interest costs of Â£0.67 million (2005: income of Â£0.01 million) reflected the interest arising from new bank facilities used to fund the Widacre acquisition. Interest cover stood at 16.6x (2005: not applicable), excluding goodwill amortisation, albeit the interest cover ratio will inevitably reduce going forward to properly reflect a full interest charge for the period. Interest received is also expected to be minimal as the Group's committed overdraft facilities provide for any credit balances to be fully offset against the overdraft. Profit Before Tax Profit before tax, excluding goodwill amortisation and exceptional items, increased to Â£10.52 million (2005: Â£7.87 million) representing an increase of 34%. On the same basis, the overall pre-tax margin rose to 6.0% (2005: 5.3%). The short term timing distortions associated with the acquisition, together with the blend of margins across our business, is expected to translate into sustainable pre-tax margins closer to 4% moving forward. Taxation Tax on profit on ordinary activities increased to Â£2.92 million (2005: Â£2.31 million). The effective tax rate improved slightly to 30.8% (2005: 31.0%). Earnings Per Share Diluted earnings per share increased by 20.5% to 10.23 pence (2005: 8.49 pence) after adjustment for goodwill amortisation, tax relief on share based payments and exceptional items. This performance is particularly pleasing given the weighted average number of shares increased to 71.9 million (2005: 64.0 million) as a result of the issue of consideration shares on the Widacre acquisition excluding certain employee benefit trust shares. Adjusted basic earnings per share reached 10.26 pence (2005: 8.64 pence). Dividends The board has recommended a final dividend for the year of 2.18 pence to the shareholders on the register as at 10 April 2007. Subject to approval at the AGM on 17 May 2007, the final dividend will be paid to shareholders on 25 May 2007. This brings the total dividend for the year to 3.25 pence (2005: pro-forma of 2.82 pence based on annualised dividends paid to post-flotation shareholders), an increase of 15%. If approved, the total dividend payment arising for 2006 will be Â£2.46 million (2005: Â£1.90 million) giving rise to dividend cover of 2.7x (2005: 2.7x) on post-tax profits. The 2006 interim dividend of 1.07 pence was paid only to the pre-acquisition shareholders. The Directors expect to maintain the dividend policy of year-on-year dividend payments whilst retaining a significant proportion of Group earnings. Cash Flow The cash flow characteristics of our Group portfolio means that the strong cash flow associated with the contracting businesses is required to fund the growth potential offered by our Affordable Housing business; whilst typically generating relatively strong operating profit margins, our Affordable Housing JV operations typically repatriate cash towards the end of the project. Cash flow must also fund capital investments such as those required to continually improve our leading technology solutions. Equally, as our maintenance businesses typically absorb working capital, our focus is on improving the efficiency of cash cycles, process management and IT systems investment. Assisted by the acquired businesses, these principles helped the Group to deliver cash from operating activities of Â£11.0 million (2005: Â£6.7 million) representing an improved conversion rate of operating profit excluding goodwill and exceptional items of 100% (2005: 85%). As we expand our Affordable Housing operations it is likely that the conversion rate will reduce. Net Debt and Treasury The structure of acquisition finance was carefully considered to ensure the Group was exposed to sensible and appropriate levels of gearing. Our banking facilities comprise a Â£31.3 million senior term facility and a Â£20.0 million committed overdraft facility, both repayable by 30 September 2011. The first repayment of Â£2.3 million is due on 30 September 2007 and semi-annual repayments thereafter. In addition, a further annually renewable overdraft facility of Â£5.0 million means that our overall bank facilities total Â£56.3 million, all provided by the Royal Bank of Scotland. Strong cash collections around the year end, together with favourable timing of sub-contractor payments, gave rise to a net debt position as at 31 December 2006 of Â£31.5 million (2005: net cash of Â£6.1 million). The underlying average net debt position since the acquisition was Â£36.6 million. The Group entered into an interest rate cap of 6% in respect of Â£15.0 million of the senior facility for the full five year term. Adoption of International Financial Reporting Standards For all periods up to 31 December 2006, the Group prepared its financial statements in accordance with the UK's Generally Accepted Accounting Practice (GAAP). The Group adopted International Financial Reporting Standards (IFRS) with effect from 1 January 2007 for the consolidated Group financial statements. All other unlisted entities in the Group continue to be reported under UK GAAP. IFRS adoption is not material to the Group; the un-audited UK GAAP to IFRS reconciliations, together with our IFRS accounting policies, are included from page 61 of the report and accounts for the year ended 31 December 2006 to be sent to shareholders shortly. The principal reconciling items include the treatment of goodwill amortisation, which will no longer be written down on an annual basis unless impaired, and the requirement to assess the fair value of the interest rate hedge instrument. It is worth noting that IFRS requires the disclosure of the profit contribution from JV activities to be shown net of taxation. Andrew Telfer Chief Financial Officer 26 March 2007 Group Profit and Loss Account Year ended 31 December 2006 Year Ended 31 December 2006 2005 Â£000 Â£000 Â£000 Notes Turnover Group and share of joint ventures 1 175,222 147,527 Less share of joint ventures' turnover (170) - Continuing operations 2 129,610 147,527 Acquired operations 2 45,442 - Group turnover 175,052 175,052 147,527 Cost of sales (133,413) (113,802) Gross profit 41,639 33,725 Administrative expenses Excluding exceptional items (31,587) (25,865) Exceptional items 3 - (418) Operating profit Continuing operations excluding exceptional items 2 7,204 7,860 Exceptional items 3 - (418) 7,204 7,442 Acquired operations 2 2,848 - Group operating profit 4 10,052 7,442 Share of operating profit of joint 107 - ventures Group operating profit and share of joint ventures 10,159 7,442 Interest receivable 5 112 223 Interest payable and similar charges 6 (785) (218) Profit on ordinary activities before taxation 9,486 7,447 Tax on profit on ordinary activities 7 (2,924) (2,310) Profit for the financial year 6,562 5,137 Unadjusted earnings per ordinary share: (pence) Basic 10 9.15 8.17 Diluted 10 9.12 8.03 Adjusted earnings per ordinary share: (pence) Basic 10 10.26 8.64 Diluted 10 10.23 8.49 There were no recognised gains or losses other than the above profit for either financial year. Group Balance Sheet As at 31 December 2006 As at As at 31 December 2006 31 December 2005 Notes Â£000 Â£000 Fixed assets Goodwill 12 60,917 - Tangible assets 13 1,760 1,058 Investments in joint ventures Share of gross assets 14 6,071 - Share of gross liabilities 14 (5,853) - 62,895 1,058 Current assets Stocks 15 1,680 335 Debtors 16 53,163 30,350 Cash at bank and in hand 51 6,084 54,894 36,769 Creditors: amounts falling due within one year 17 (55,933) (21,873) Net current (liabilities)/assets (1,039) 14,896 Creditors: amounts falling due after more than one year 18 (29,274) - 32,582 15,954 Capital and reserves Called up share capital 20 1,620 1,343 Share premium 21 23,390 10,107 Other reserves 21 (1,511) 3 Profit and loss account 21 9,083 4,501 32,582 15,954 These financial statements were approved and authorised for issue by the Board on 26 March 2007 and were signed on its behalf by: Colin Enticknap Andrew Telfer Director Director Group Cash Flow Statement Year ended 31 December 2006 Year ended Year ended 31 December 2006 31 December 2005 Â£000 Â£000 Notes Cash flow from operating activities 22 11,033 6,707 Returns on investments and servicing of finance 22 (673) 5 Taxation paid 22 (2,655) (1,706) Capital expenditure and financial investment 22 (805) (861) Acquisitions 22 (42,820) - Equity dividends paid 9 (1,980) (4,923) Cash flow before use of liquid resources and financing (37,900) (778) Financing 22 31,867 6,825 (Decrease)/increase in cash (6,033) 6,047 The only significant non-cash transaction during the year was the issue of shares with a value of Â£13,267,327 in part consideration for the acquisition made in the year. In 2005 there were no significant non-cash transactions. Reconciliation of net cash flow to movement in net (debt)/funds (Decrease)/increase in cash in the year (6,033) 6,047 New loans (31,574) - Consolidation of balances due to Willmott Dixon Limited - 3,143 Change in net (debt)/ funds resulting from cash flows (37,607) 9,190 Repayment of Willmott Dixon Limited loan - (3,143) Movement in net (debt)/funds (37,607) 6,047 Net funds as at 1 January 2006 6,084 37 Net debt as at 31 December 2006 (31,523) 6,084 Reconciliation of Movement in Shareholders' Funds Year ended 31 December 2006 Year ended Year ended 31 December 2006 31 December 2005 Notes Â£000 Â£000 Profit for the financial year 6,562 5,137 Dividends paid 9 (1,980) (4,923) 4,582 214 Call on share capital - 530 Purchase of own shares - (3) Share options exercised 20 293 244 Issue of shares 20 13,267 10,054 Shares held in Employee Benefit Trust 21 (1,555) - Share based payments charge in the year 21 41 - Costs associated with issue of shares - (613) 12,046 10,212 Movement in shareholders' funds 16,628 10,426 Opening shareholders' funds 15,954 5,528 Closing shareholders' funds 32,582 15,954 Principal Accounting Policies Year Ended 31 December 2006 The following accounting policies have been consistently applied in dealing with items that are considered material in relation to the Group's financial statements, with the exception of the application of FRS 20 to share based payments. The application of FRS 20 has resulted in an additional charge to the profit and loss account for share based payments of Â£40,544 (2005: nil) but has had no impact on the net assets as at the balance sheet date (2005: nil). Basis of accounting The financial information has been prepared under the historical cost convention as modified by the revaluation of Parent Company investments in subsidiary undertakings and in accordance with applicable accounting standards in the United Kingdom. The Group will be reporting under International Financial Reporting Standards for accounting periods commencing on and after 1st January 2007. Basis of consolidation The consolidated financial information incorporates the financial information relating to the Company and its subsidiary undertakings, including the employee benefit trust. Inspace plc has taken advantage of the legal dispensation allowing it not to publish a separate profit and loss account. The Widacre group came under the control of the Company from legal completion on 31 August 2006 and the principles of acquisition accounting have been applied from that date. Tangible fixed assets Tangible fixed assets are stated at historical cost less depreciation. Depreciation is provided on all tangible fixed assets at the following rates, calculated to write each asset down to its estimated residual value evenly over its expected useful life: Short leasehold buildings - The earlier of 5 years or until the next break point in the lease Computer equipment - 20% to 50% per annum Plant and equipment - 25% per annum Furniture and fittings - 10% per annum Where fixed assets are impaired in value or use they are written down to their economic value. Goodwill Goodwill arising on acquisition is recognised as an intangible fixed asset and represents the excess of the consideration given and costs of acquisition over the fair value of the net assets acquired. Goodwill is amortised though the profit and loss account on a straight line basis over its useful economic life which the Directors have assessed to be a minimum of 20 years. Joint ventures The Group's financial statements incorporate joint ventures under the equity method of accounting. In the Group balance sheet the investments in joint ventures are stated as the Group's share of net assets and net liabilities. Stocks and work in progress Stocks and work in progress are valued at the lower of cost and net realisable value. In respect of work in progress, cost includes direct interest and is stated after deduction of amounts received and applications for payment receivable. On affordable housing developments costs are transferred from work in progress to the profit and loss account in line with turnover and the projected total cost of the development. Amounts recoverable on contracts Amounts recoverable on contracts are valued at cost with an appropriate addition or provision for estimated profits or losses and after deduction of amounts received and applications for payments receivable. All foreseeable losses are provided for in full. Turnover and profit is ascertained in a manner appropriate to the stage of completion of the contract, and credit taken for profit earned when the outcome of work under the contract can be assessed with reasonable certainty. Turnover Turnover is the aggregate of all invoiced external sales adjusted for amounts recoverable on contracts at the beginning and end of the year, stated net of value added tax. Turnover from the sale of affordable housing is recognised on legal completion or shortly thereafter and other turnover is recognised as described under amounts recoverable on contracts. Group turnover excludes the group share of sales to joint ventures in respect of the construction of affordable housing developments. Operating leases The total payments made under operating leases are charged to the profit and loss account on a straight line basis over the term of the lease. Research and development Research and development expenditure is expensed to the profit and loss account as it is incurred. Deferred taxation Full provision is made for deferred taxation arising from the difference between the treatment of items in the financial information and their treatment for taxation purposes. Deferred taxation is measured on a non-discounted basis. Dividends Dividends are recognised in the accounting period in which they are declared and approved in accordance with FRS 21. Share based payments (employee share options) The Group has applied the requirements of FRS 20 (share based payments). The Group issues equity-settled share based payments to certain employees. Share based payments are measured at fair value at the date of grant, using a Black-Scholes model. The fair value determined at the grant date is expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually be issued. This estimate is subject to revision at each reporting period end to reflect changes in the expected behaviour of employees and the impact of exercise restrictions. Retirement benefits For the duration of its contractual relationships with various local authorities the Group contributes to the appropriate local authority pension schemes in respect of employees working for the Group under TUPE arrangements. Annual assessments are required to be made of the proportion of the surpluses or deficits applicable to the Group in respect of these schemes and to compare the variance in the net surplus or deficit as measured under the detailed provisions of FRS 17 with the contributions payable. Where there is no material surplus or deficit or where there are no material differences between the contributions payable and the net charges under FRS 17, the schemes are accounted for as defined contribution schemes and the contributions are expensed as they fall due. Based on the assessment for the year, contributions have been expensed as they fall due and no other liability is required to be recognised. Financial instruments (held as hedges) Where financial instruments are acquired for the purposes of entering into hedging arrangements the cost of the instrument is expensed to the profit and loss account on a straight line basis over the term of the instrument. Receipts and payments from the instruments are included in the profit and loss account at the same time and in the same place as is the matched underlying income or cost. For interest rate instruments this will be within interest payable or receivable. The profit and loss on an instrument and any change in its fair value is deferred if the hedged transaction is expected to take place or would normally be accounted for in a future period. The group does not use derivative financial instruments for speculative purposes. Employee benefit trust The cost of own shares held by the employee benefit trust is shown as a deduction from shareholders' funds. Earnings per share are calculated on the net shares in issue. Notes to the Financial Information The figures for the year ended 31 December 2005 do not constitute the Company's statutory accounts for that period but have been extracted from the statutory accounts. The auditors' report on those accounts, which have been filed with the Registrar of Companies, was unqualified and did not contain any statement under section 237 (2) or (3) of the Companies Act 1985. The financial information in this announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2006 but has been extracted from the Group's 31 December 2006 audited financial statements. Statutory financial statements for this year will be filed following the Annual General Meeting. The auditors have reported on these financial statements; their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The full statutory accounts for the year ended 31 December 2006 will be posted to shareholders shortly. This announcement was approved by the board of directors on 26 March 2007. 1. Segmental analysis Year ended 31 December 2006 2005 Â£000 Â£000 Turnover Social Housing 104,099 61,201 Affordable Housing Group 852 - Share of joint ventures' turnover 170 - Corporate Assets 70,101 86,326 175,222 147,527 Operating profit Social Housing 7,859 4,529 Affordable Housing Group 343 - Share of operating profit of joint ventures 107 - Corporate Assets 2,882 3,331 11,191 7,860 Amortisation of goodwill (1,032) - Exceptional items - (418) 10,159 7,442 Net assets Social Housing 11,021 2,329 Affordable Housing 2,676 - Corporate Assets 5,621 2,336 Parent Company less items eliminated on consolidation 13,264 11,289 32,582 15,954 The Social Housing and Affordable Housing segmental analysis includes acquired and continuing operations. The effect of the acquired operations is shown in note 2. The Corporate Assets segmental analysis combines the corporate and public sector maintenance and interior design, installation and furnishing activities reported in the 2005 Report and Accounts. The Group's turnover, profit on ordinary activities and net assets are all derived in the United Kingdom. 2. Continuing and acquired operations Continuing activities Acquired Total Â£000 Â£000 Â£000 Operating profit on continuing and acquired operations comprises: Turnover 129,610 45,442 175,052 Cost of sales (95,215) (38,198) (133,413) Gross profit 34,395 7,244 41,639 Administrative expenses (27,191) (4,396) (31,587) Operating profit 7,204 2,848 10,052 Share of operating profit of joint ventures - 107 107 7,204 2,955 10,159 3. Exceptional items The exceptional items comprise: Year ended 31 December 2006 2005 Â£000 Â£000 Share based payments - 244 Compensation payments - 174 - 418 Corporation tax relief - (125) - 293 4. Operating profit Year ended 31 December 2006 2005 Â£000 Â£000 Operating profit is stated after charging: Amortisation of goodwill 1,032 - Depreciation on owned fixed assets 583 383 Operating lease rentals - plant and machinery 3,998 3,564 Operating lease rentals - other 1,203 831 Research and development costs 153 - Auditors' remuneration Statutory audit 118 65 Further assurance services 5 2 Tax compliance services 25 12 Tax advisory services 17 2 Corporate finance services 173 95 338 176 The auditors' remuneration for corporate finance services were in relation to the acquisition of Widacre Limited (2005: as reporting accountants for the Company's flotation on the London Stock Exchange AiM market). This amount forms part of the cost of the investment in the subsidiaries acquired (2005: charged against the share premium account). 5. Interest receivable Year ended 31 December 2006 2005 Â£000 Â£000 Income from short term deposits 112 223 6. Interest payable and similar charges Year ended 31 December 2006 2005 Â£000 Â£000 Interest payable on bank loans and overdrafts 783 - Interest payable on loan from Willmott Dixon Limited - 218 Costs of interest rate hedging arrangements 2 - 785 218 7. Taxation Year ended 31 December 2006 2005 Â£000 Â£000 a) Analysis of charge Current tax UK Corporation tax on Group profit for the year before exceptional items 3,054 2,411 UK Corporation tax attributable to joint venture profits 32 - UK Corporation tax relief on exceptional items - (125) Adjustment in respect of previous years (72) - 3,014 2,286 Deferred tax Origination and reversal of timing differences (28) 24 Adjustment in respect of previous years (62) - (90) 24 2,924 2,310 b) Factors affecting tax charge for the year The tax assessed for the year is higher than the standard rate of corporation tax in the UK (30%). The differences are explained below: Profit on ordinary activities before tax 9,486 7,447 Profit on ordinary activities multiplied by standard rate of corporation tax in the UK (30%) 2,846 2,235 Effects of: Expenses not deductible for tax purposes 140 75 Amortisation of goodwill 310 - Tax relief on share options (237) - Capital allowances in excess of depreciation (4) (24) Other timing differences 31 - Adjustment in respect of previous years (72) - 3,014 2,286 c) Factors that may affect future tax charges The Company expects to gain future tax relief in respect of shares to be issued under employee share incentive schemes on the difference between the market value of shares on exercise and the option price. In comparison, the charge to the profit and loss account is based on the fair value of the options granted to employees. The Group is not aware of any other significant factors that may affect future tax charges. 8. Employees Year ended 31 December 2006 2005 No. No. The average number of employees during the year was made up as follows: Office and contract support staff 473 411 Operational field staff 737 636 1,210 1,047 2006 2005 Staff costs during the year amounted to: Â£000 Â£000 Wages and salaries 38,197 29,322 Incentive payments 2,264 2,292 Social security costs 4,227 3,431 44,688 35,045 The total Directors' remuneration was Â£937,000 (2005: Â£1,114,000) and that of the highest paid Director was Â£266,000 (2005: Â£420,000). Full details of the remuneration of the Directors is disclosed in the Directors' Remuneration Report included in the annual report for the year ended 31 December 2006. 9. Dividends Year ended 31 December 2006 2005 On ordinary shares of 2p each: Â£000 Â£000 Interim 2004 paid of 7.634p per share - 4,275 Interim 2005 paid of 0.933p - 540 Interim 2005 paid of 0.161p - 108 Final 2005 paid of 1.85p 1,254 - Interim 2006 paid of 1.07p 726 - 1,980 4,923 An interim dividend of 1.07p per ordinary share was paid to the pre-acquisition shareholders on the register at 6 October 2006 on 2 November 2006. A proposed final dividend of 2.18p per ordinary share is proposed for payment on 25 May 2007 to the shareholders on the register at 10 April 2007. The Employee Benefit Trust has waived its right to receive dividends. In accordance with FRS 21 the proposed final dividend is not accrued in the financial statements. 10. Earnings per share Earnings per share are based upon the weighted average number of ordinary shares in issue during the year of 71,698,101 (2005: 62,872,928). The diluted earnings per share are based upon the weighted average number of 71,942,771 (2005: 63,975,884) ordinary shares having taken into account the dilutive effect of shares which have been made available to employees under existing incentive schemes. The earnings for the periods are set out in the table below. An adjusted earnings measure has been included to highlight the impact of goodwill, exceptional items and tax relief on share based payments. Earnings Earnings per share 2006 2005 2006 2005 Â£000 Â£000 pence pence Unadjusted earnings 6,562 5,137 - - Basic earnings per share - - 9.15 8.17 Diluted earnings per share - - 9.12 8.03 Goodwill 1,032 - - - Exceptional items - 418 - - Tax relief on exceptional items - (125) - - Tax relief on share based payments (237) - - - Adjusted earnings 7,357 5,430 - - Basic earnings per share - - 10.26 8.64 Diluted earnings per share - - 10.23 8.49 11. Purchase of a subsidiary undertaking As outlined in the Chairman's Statement, Chief Financial Officer's Report and Business Review (included in the annual report for the year ended 31 December 2006), on 31 August 2006 the company acquired the entire issued share capital of Widacre Limited, the owner of two complementary businesses: Willmott Dixon Housing, one of the largest new build social housing providers in the UK, and Widacre Homes, an affordable housing developer. The impact of the acquisition on the profit and loss account of the Group is shown in note 2 and on the cash flow statement in note 22. The fair value of the net assets and liabilities acquired were as follows: Net assets Fair value Fair value of net acquired adjustments assets acquired Â£000 Â£000 Â£000 Tangible fixed assets 670 (180) 490 Goodwill 13,195 (13,195) - Investments - 1,555 1,555 Share of assets in joint ventures 3,216 - 3,216 Share of liabilities in joint ventures (3,075) - (3,075) 14,006 (11,820) 2,186 Work in progress 362 - 362 Debtors 14,486 - 14,486 Cash at bank and in hand 10,382 - 10,382 25,230 - 25,230 Trade and other creditors 22,358 - 22,358 Corporation tax 576 (38) 538 Preference shares 15,000 (15,000) - 37,934 (15,038) 22,896 1,302 3,218 4,520 Goodwill arising on acquisition 61,949 66,469 Discharged by: Shares allotted 13,267 Cash consideration - shares 52,035 Cash consideration - costs 1,167 66,469 The average consideration paid for each ordinary share represented Â£5.09 in cash and 0.32 shares in Inspace plc. The fair value adjustments relate to the de-recognition of goodwill, elimination of preference share liabilities in respect of shares acquired by Inspace, the write off of certain improvements to leasehold premises and the addition of investments held in the employee benefit trust. The pre-acquisition results of the Widacre Group are outlined below: 1 January to 2005 31 August 2006 Â£000 Â£000 Turnover 86,656 128,967 Less share of joint ventures' turnover (7,154) - 79,502 128,967 Cost of sales (69,156) (117,050) Gross profit 10,346 11,917 Administrative expenses (7,230) (8,562) Operating profit 3,116 3,355 Share of operating profit of joint ventures 204 - 3,320 3,355 Interest receivable 113 213 Profit before tax 3,433 3,568 Taxation (1,062) (956) Profit for the period 2,371 2,612 The 2006 results are presented excluding goodwill amortisation. At the date of acquisition Colin Enticknap held 800,000 shares and Chris Durkin held 300,000 shares in the Widacre group. 12. Goodwill Â£000 Cost Goodwill arising on acquisition (note 11) and as at 31 December 61,949 2006 Accumulated amortisation Charge for the year and as at 31 December 2006 1,032 Net value As at 31 December 2005 - As at 31 December 2006 60,917 13. Tangible fixed assets Short leasehold Computer Plant and Furniture and Total land & buildings equipment equipment fittings Â£000 Â£000 Â£000 Â£000 Â£000 Cost As at 31 December 2005 559 1,074 181 591 2,405 On acquisition 288 460 256 180 1,184 Additions 118 418 44 238 818 Disposals - (119) (24) (50) (193) As at 31 December 2006 965 1,833 457 959 4,214 Depreciation As at 31 December 2005 250 726 117 254 1,347 On acquisition 117 362 135 80 694 Charge in year 137 279 60 107 583 Disposals - (119) (23) (28) (170) As at 31 December 2006 504 1,248 289 413 2,454 Net book value As at 31 December 2005 309 348 64 337 1,058 As at 31 December 2006 461 585 168 546 1,760 14. Investments Â£000 Share of joint venture net assets Share of current assets 6,071 Share of liabilities due in under one year (4,404) Share of liabilities due after more than one year (1,449) (5,853) 218 The Group investment in the share capital of joint ventures was Â£4 as at 31 December 2006 (2005: nil). The joint ventures had no goodwill, contingent assets or liabilities and no capital commitments. 15. Stocks Stocks As at 31 December 2006 2005 Â£000 Â£000 Work in progress 561 - Stock of raw materials 1,119 335 1,680 335 16. Debtors As at 31 December 2006 2005 Â£000 Â£000 Trade debtors 13,114 13,445 Amounts recoverable on contracts 35,262 15,980 Prepayments 3,047 925 Deferred tax 95 - Other taxes 1,645 - 53,163 30,350 17. Creditors (amounts falling due within one year) As at 31 December 2006 2005 Â£000 Â£000 Bank loan (secured) 2,300 - Trade creditors 38,731 11,522 Payments on account 5,109 1,656 Corporation tax 1,932 1,064 Other taxes and social security 1,890 1,908 Accruals 5,971 5,712 Deferred tax - 11 55,933 21,873 18. Creditors (amounts falling due after more than one year) As at 31 December Bank loans (secured): 2006 2005 Â£000 Â£000 Payable between one and two years 5,000 - Payable between two and five years 24,274 - 29,274 - The balance due on bank loans comprise a senior debt facility of Â£31,000,000 repayable in semi-annual instalments and Â£274,000 drawn against a committed floating facility of Â£20,000,000 repayable by 30 September 2011. In addition the Company has an annually renewable overdraft facility of Â£5,000,000. Details of the security and interest rates are given in note 24. 19. Deferred tax As at 31 December 2006 2005 Â£000 Â£000 Deferred tax (liability)/asset at 1 January 2006 (11) 13 Asset acquired in the year 16 - Transfer from/(to) profit and loss account 90 (24) Deferred tax asset/(liability) at 31 December 2006 95 (11) The deferred tax asset comprises wholly of accelerated capital allowances. 20. Share Capital As at 31 December 2006 2005 Authorised: Â£000 Â£000 100,000,000 (2005: 100,000,000) ordinary shares of 2p each 2,000 2,000 Allotted and called up: 81,001,690 (2005: 67,136,042) fully paid ordinary shares of 2p each 1,620 1,343 On 31 August 2006 an additional 13,201,321 shares were issued at 100.5p per share totalling Â£13,267,327 in partial consideration of the acquisition of the Widacre group. On acquisition 420,000 shares were held by the Widacre Limited employee benefit trust and were exchanged for 1,547,131 ordinary shares of Inspace plc. As shown in note 21 these shares have been deducted from shareholders' funds at the consideration value of Â£1,554,867. Further details of the employee benefit trust are included in the Directors' Remuneration Report. During the year 664,327 additional shares were exercised under Director and employee incentive schemes at 44.0p per share for total consideration of Â£292,303. The weighted average share price at the date of exercise of the options was 163.1p. The following options were in place at 31 December 2006 and yet to be exercised: Date granted Number of shares Strike price Date from which Expiry date exercisable 7 April 2005 87,775 44.0p 31 December 2005 6 April 2015 5 April 2006 693,062 169.0p 5 April 2009 5 April 2016 16 May 2006 18,665 170.0p 16 May 2009 16 May 2016 The FRS 20 charge in respect of share options of Â£40,544 (2005: nil) has been derived from the Black-Scholes model assuming a risk free rate of 4.5%. A volatility factor of 0.16 was used, based on comparable company share price data for three years and a vesting period of three years. Details of the share option schemes are outlined in the Directors' Remuneration Report included in the annual report for the year ended 31 December 2006. 21. Reserves Share premium Â£000 1 January 2006 10,107 Issue of shares 12,990 Share options exercised 293 31 December 2006 23,390 Other reserves Shares held in Capital Share options Total employee benefit redemption trust reserve Â£000 Â£000 Â£000 Â£000 1 January 2006 - 3 - 3 Share based payments charge in the year - - 41 41 Arising on acquisition (1,555) - - (1,555) 31 December 2006 (1,555) 3 41 (1,511) Profit and loss account Â£000 1 January 2006 4,501 Profit for the financial period 6,562 Dividends (1,980) 31 December 2006 9,083 22. Cash flows Year ended 31 December Reconciliation of operating profit to net cash 2006 2005 inflow from operating activities Â£000 Â£000 Group operating profit on ordinary activities before interest and taxation 10,052 7,442 Depreciation 583 383 Amortisation of goodwill 1,032 - Increase in stocks (983) (1,674) Increase in debtors (6,592) (3,988) Increase in payments on account 551 323 Increase in trade and other creditors 6,349 3,977 Non-cash cost of share based payments 41 244 Net cash inflow from operating activities 11,033 6,707 Analysis of change in net (debt)/funds As at As at 1 January Cash flows 31 December 2006 in the year 2006 Â£000 Â£000 Â£000 Cash at bank and in hand 6,084 (6,033) 51 Bank loans due within one year - (2,300) (2,300) Bank loans due after more than one year - (29,274) (29,274) 6,084 (37,607) (31,523) 2006 2005 Â£000 Â£000 Returns on investments and servicing of finance Interest receivable 112 223 Interest payable and similar charges (785) (218) (673) 5 Taxation paid (2,655) (1,706) Capital expenditure and financial investment Purchase of tangible fixed assets (818) (868) Sale of tangible fixed assets 13 7 (805) (861) Acquisitions Cash consideration (52,035) - Costs of acquisition (1,167) - Cash at bank and in hand acquired 10,382 - (42,820) - Financing Bank loan 31,574 - Call on share capital - 530 Issue of shares 293 10,054 Repayment of Willmott Dixon loan - (3,143) Costs associated with issue of shares - (613) Purchase of own shares - (3) 31,867 6,825 The subsidiary undertakings acquired during the year contributed Â£5,443,031 to the Group's net cash inflow from operating activities, paid Â£545,940 of taxation and utilised Â£186,388 of capital expenditure. 23. Leasing commitments Obligations under operating leases at 31 December 2006 were as follows: As at 31 December 2006 2006 Â£000 Â£000 Land buildings Commitments payable within one year under leases expiring: Within one year 122 31 Within two to five years 766 473 888 504 Other leases Commitments payable within one year under leases expiring: Within one year 434 200 Within two to five years 1,131 407 1,565 607 No future commitments exist under the terms of leases of vans used by operational field staff. 24. Financial instruments The Group's financial instruments principally comprise of long term borrowings, hedging instruments, cash at bank and various items such as trade debtors and creditors that arise directly from operations. The long term bank loans are provided by the Royal Bank of Scotland and comprise of senior debt facility of Â£31,300,000 and a committed floating facility of Â£20,000,000. These facilities expire on 30 September 2011. At 31 December 2006 Â£19,726,000 of the floating facility remained undrawn. In addition the Company has an annually renewable overdraft facility of Â£5,000,000. The secured loans are secured on a floating charge over the Company's assets. The Group has entered into a hedging arrangement in respect of interest rates for the life of its long term borrowings in order to provide protection from fluctuations in interest rates. The hedge provides an interest rate base rate cap at 6.0% on Â£15,000,000 of the senior debt facility until 30 June 2010 after which the amount hedged reduces to equate to the outstanding value of the loan. The balance of the loans are at floating interest rates at 1.1% above LIBOR. As at 31 December 2006 the fair value of the hedging instrument was Â£83,000 and Â£2,300 was expensed to the profit and loss account in the year. The cumulative deferred loss on the instrument was Â£49,700. All of the activities of the Group take place in the United Kingdom and consequently there is no exchange risk. It is the Group's policy not to enter into any foreign currency contracts. The Group has taken advantage of the exemption in respect of the disclosure of short-term debtors and creditors. The fair value of the Group's financial assets and liabilities are not considered to be materially different from their book values. Further details of the strategy, objectives and policies in respect of the financial instruments entered into during the year are outlined in the Chief Financial Officer's Report. 25. Contingent liabilities Inspace plc has guaranteed the performance bonds of its subsidiary companies of Â£935,802 (2005: Â£585,200). The Group and the Parent Company has given certain guarantees to customers, bankers, landlords and finance companies in respect of agreements entered into by companies within the Group in the normal course of business. 26. Principal subsidiary companies Name of subsidiary Nature of business Social Housing Creating and maintaining social housing Inspace Partnerships - Maintenance & Stock Maintenance and stock reinvestment Reinvestment Limited (formerly Inspace Partnerships Limited) Inspace Partnerships - Regeneration & New Homes Regeneration and new homes Limited (formerly Willmott Dixon Housing Limited) Affordable Housing Developing integrated communities Inspace Homes Limited (formerly Widacre Homes New homes for sale Limited) Corporate Assets Improving and maintaining corporate real estate Inspace Maintain Limited Repairs and maintenance Inspace Complete Limited Interiors and furnishing All of the above subsidiaries are incorporated in England and Wales and are classed as ordinary holdings, 100% owned by the Company. The above information relates to those subsidiary companies which principally affect the profit or assets of the Group. Joint Ventures Name Nature of business Holding Year end Tredegar Development New homes for sale 50% 31 December Company Limited T3B Development Company New homes for sale 50% 31 December Limited Widacre Lifespace New homes for sale 50% 31 March Limited Own Space Homes New homes for sale 50% 31 March Of the joint ventures listed above only Tredegar Development Company Limited and T3B Development Company Limited traded during the financial year. Details of the results are given in the Group profit and loss account. All of the above companies are incorporated in England and Wales. In the period from acquisition, the turnover with joint venture companies amounted to Â£5,487,835 (2005: nil) in respect of affordable housing developments. Of this amount, Â£2,211,331 had been invoiced and paid and Â£3,276,504 is included in amounts recoverable on contracts. - Ends - This information is provided by RNS The company news service from the London Stock Exchange

Companies

Inspirit Energy Holdings (INSP)

Full Archive

UK 100

Latest directors dealings

All directors dealings today