Interim Results

Mavinwood PLC 12 August 2005 Under embargo until 07.00am, 12 August 2005 Mavinwood Plc ('Mavinwood' or 'the Company') Maiden interim results for the six months ended 30th June 2005 • Transformation from cash shell to a business valued at £30m • Successful acquisition of two businesses: - Restore for £6.1m on 11th May - ANSA for £25m on 30th June • Restore contributed £121,000 profit for the seven weeks ended 30th June • Platform in place for further growth Kevin Mahoney, Chief Executive, commented; 'I am delighted with the progress Mavinwood has made in the first half of the year. We have acquired two established businesses with continuity of management and grown to a market capitalisation of approximately £30m. We plan to add complementary businesses to these operations in the future, pursuant to our strategy of building a market-leading UK support services group.' Enquiries: Mavinwood plc Kevin Mahoney, Chief Executive 020 7661 9650 Michael Vincent, Finance Director 020 7661 9651 Weber Shandwick Square Mile John Moriarty 020 7067 0736 Seymour Pierce Limited Jonathan Wright 020 7107 8000 Background Mavinwood was admitted to trading on AIM on 5 November 2004 as a company established for the purpose of acquiring, or making investments in, companies or businesses involved in the support services sector, which are considered by the Directors to have the potential to create substantial shareholder value. The Company's first acquisition, of Restore Limited, a document storage and record management company, was completed on 11 May 2005. The acquisition of ANSA was completed in June 2005. Ansa was established in 1981 as a regional family business offering drainage services. It became a specialist in insurance claims handling in 2000 and has subsequently developed IT systems and processes to service insurance related drainage claims. Ansa identifies valid insurance claims, arranges for a survey of a site and recommends necessary repairs, which may be undertaken either by Ansa's in-house contractors or by one of its UK network of accredited sub-contractors. Ansa also provides health and safety training for its staff and for external corporate clients at two sites in the North West of England. The Directors believe that it represents a good opportunity to diversify the activities and improve the profitability and performance of the Mavinwood Group. CHIEF EXECUTIVE OFFICER'S REVIEW -------------------------------- Review of operations The first six months of 2005 were an important period in the development of the Mavinwood group. On 1 January 2005, the company was an AIM listed cash shell capitalised at £2m with a strategy of building a support services group. In the first half, Mavinwood completed two acquisitions which will provide the group with a platform for growth. On 11 May 2005, Mavinwood completed the acquisition of the Restore business. Restore archives, stores and retrieves documents on behalf of its clients, with a particular focus on the legal profession. Mavinwood paid £6.1m for the business and depending upon the level of increased operating profit in the twelve months ending 31 March 2006, the Restore vendors could earn additional consideration. Current levels of trading indicate an additional sum of £3m, half in cash and half in Mavinwood shares. The cash element will be funded by a bank facility so no further equity placing will be required to fund the additional consideration. Restore has contributed revenue of £511,000 and operating profit of £121,000 in the seven weeks ended 30 June. This is equivalent to an annual run rate of £900,000 which compares well with Restore's operating profit in calendar 2004 of £723,000. On 30 June 2005, Mavinwood completed the acquisition of the ANSA business. ANSA is a specialist in insurance claims handling with particular expertise in drainage claims. As the deal was completed on the last day of the half year, the interim results do not include any trading contribution from ANSA. Mavinwood paid £25m for the business including repayment of £7.6m of indebtedness in ANSA. Of the total consideration, directors of ANSA took £1.9m in shares of Mavinwood. The central costs of Mavinwood totalled £195,000 in the first half and are expected to grow in the second half, which reflects the growth of the group. Results Turning to the financial results for the half year, turnover was £511,000. The loss before tax, before the amortisation of goodwill, was £63,000. The loss before tax after goodwill amortisation was £122,000. The loss per ordinary share, before the amortisation of goodwill, was 0.18p while the loss per ordinary share after goodwill amortisation was 0.36p. As stated in the circulars to shareholders seeking approval to acquire Restore and ANSA, Mavinwood intends to re-invest profits in the business and the Board is not declaring an interim dividend. At 30 June 2005, net debt of the Group amounted to £4.9m, after the acquisition of ANSA. Approximately £0.6m of costs incurred on the acquisitions had not been paid as of 30 June. The Board believes this modest level of net debt gives the group capacity to consider and make further acquisitions. Board Philip Reid joined the Board as Chairman on 13 April 2005 and Kevin Mahoney became Chief Executive. Mike Vincent continued as finance director. John Minton, one of the co-founders of Restore, joined as an executive director on completion of the Restore acquisition. On 30 June Steve Watkins, previously Managing director of ANSA, joined the Board as a non-executive director. Outlook The group ended the half year with two established businesses and a market capitalisation of approximately £30m. Restore and ANSA are trading in line with expectations and Mavinwood plans to add complementary businesses to these operations. 12 August 2005 Kevin Mahoney Chief Executive Officer Unaudited consolidated profit and loss account for the six months ended 30 June 2005 Six months ended 2 July to 30 June 31 December 2005 2004 Note £'000 £'000 Turnover 2 Continuing operations - - Acquisition 511 - ---------- ---------- 511 - ---------- ---------- Operating loss Continuing operations (195) (94) Acquisition 121 - Acquisition - amortisation of goodwill (59) - ---------- ---------- Loss on ordinary activities before interest (133) (94) Net interest receivable 11 13 ---------- ---------- Loss on ordinary activities before taxation (122) (81) Taxation 3 - - ---------- ---------- Loss on ordinary activities after taxation (122) (81) Dividends - - ---------- ---------- Retained loss for the period (122) (81) ---------- ---------- There are no recognised gains or losses in the period other than the loss for the period. pence pence Basic loss per ordinary share 4 (0.36)p (1.07)p Diluted loss per ordinary share (0.36)p (1.07)p Unaudited consolidated balance sheet 30 June 31 December 2005 2004 £'000 £'000 Fixed assets Goodwill 32,676 - Tangible assets 2,105 - ---------- ---------- 34,781 - ---------- ---------- Current assets Stocks and work in progress 1,643 - Debtors 4,513 11 Cash at bank 1,261 1,969 ---------- ---------- 7,417 1,980 Creditors - amounts falling due within one year Bank loans and finance leases (46) - Deferred consideration (3,000) - Other creditors (6,181) (67) ---------- ---------- Net current (liabilities) / assets (1,810) 1,913 ---------- ---------- Total assets less current liabilities 32,971 1,913 Creditors-amounts falling due after more than one year Bank loans, loan notes and finance leases (6,154) - Other (193) - ---------- ---------- 26,624 1,913 ---------- ---------- Capital and reserves Called up share capital 383 74 Share premium account 26,444 1,920 Profit and loss account (203) (81) ---------- ---------- Total equity shareholders' funds 26,624 1,913 ---------- ---------- Unaudited consolidated cash flow statement Six months ended 2 July to 30 June 31 December 2005 2004 Note £'000 £'000 Net cash outflow from operating activities 5 (172) (38) Returns on investment and servicing of finance 11 13 Taxation - - Capital expenditure and financial investment (28) - Acquisitions (21,942) - Cash acquired with subsidiaries 1166 - ---------- ----------- Net cash flow before financing (20,965) (25) Issue of share capital 22,982 1,994 Repayment of bank loans and loan notes (2,725) - ---------- ----------- (Decrease)/increase in cash (708) 1,969 ---------- ----------- Unaudited reconciliation of movements in shareholders' funds Six months ended 2 July to 30 June 31 December 2005 2004 £'000 £'000 Total recognised losses for the period (122) (81) Issue of share capital (net) 24,833 1,994 ---------- ----------- Net increase in shareholders' funds 24,711 1,913 Opening shareholders' funds 1,913 - ---------- ----------- Closing shareholders' funds 26,624 1,913 ---------- ----------- Notes 1 Basis of preparation The interim financial statement has been prepared on a basis consistent with the accounting policies disclosed in the Annual Report and Accounts for the period ended 31 December 2004. Goodwill on acquisition is being amortised over 20 years. The consolidated results for the period ended 31 December 2004 have been extracted from the financial statements for that period and do not constitute full statutory accounts for the group. The group accounts for the period ended 31 December 2004 received an unqualified audit report and did not include a statement under section 237(2) or (3) of the Companies Act 1985 and have been filed with the Registrar of Companies. 2 Segmental information All turnover is derived from the UK. Turnover and operating profit by business segment is as follows : Six months ended 2 July to 30 June 31 December 2005 2004 £'000 £'000 Turnover Document storage and retrieval 511 - Operating loss before goodwill amortisation Document storage and retrieval 121 - Central costs (195) (94) --------- ---------- (74) (94) --------- ---------- 3 Taxation Given the availability of tax losses in the six months ended 30 June 2005 a tax charge is not expected to arise. 4 Loss per share Basic loss per share has been calculated on the loss after taxation for the period and the weighted average number of ordinary shares in issue during the period. Loss per share before amortisation of goodwill has been presented in addition to the basic loss per share as defined by FRS 22 since, in the opinion of the directors, this provides shareholders with a more appropriate representation of the earnings derived from the group's present businesses. Six months ended 2 July to 30 June 31 December 2005 2004 Loss after taxation £'000 (122) (81) Weighted average equity in issue 34.2m 7.6m Basic loss per ordinary share (0.36)p (1.07)p ========= ========== Amortisation of goodwill 0.18 p - --------- ---------- Loss per ordinary share before the amortisation of goodwill (0.18)p (1.07)p --------- ---------- The diluted loss per ordinary shareas defined by FRS 22 is equal to the basic loss per ordinary share for the six months ended 30 June 2005. 5 Reconciliation of operating loss to net cash outflow from operating activities Six months ended 2 July to 30 June 31 December 2005 2004 £'000 £'000 Operating loss (133) (94) Depreciation 24 - Amortisation of goodwill 59 - Decrease in stocks 3 - Increase in debtors (114) (11) (Decrease)/increase in creditors (11) 67 --------- ---------- Net cash outflow from operating activities (172) (38) --------- ---------- 6 Analysis of changes in net debt Other 31 December non-cash 30 June 2004 Cash flow Acquisition changes 2005 £'000 £'000 £'000 £'000 £'000 Cash at bank 1,969 (708) - - 1,261 Bank loans, loan notes and finance leases due within one year 7,588 (7,634) (46) Bank loans and loan notes due after one year (4,974) - (989) (5,963) Finance leases 113 (304) (191) -------- --------- --------- -------- -------- Net cash /(debt) 1,969 2,019 (7,938) (989) (4,939) -------- --------- --------- -------- -------- The other non-cash changes relates to the issue of loan notes on acquisition of ANSA. 7 Acquisitions On 11 May the company acquired Restore Group Holdings Limited and on 30 June acquired ANSA Holdings Limited. The resulting goodwill of £32.7m was capitalised. Costs allocated to share premium/ Restore Book value Fair value Consideration Costs financing costs Goodwill £'000 £'000 £'000 £'000 £'000 £'000 Fixed assets 600 600 Working capital 107 107 Cash 362 362 Loans - - Finance leases (113) (113) Initial consideration - - 6,140 Deferred consideration - - 3,000 ---------------------------------- 956 956 9,140 799 (199) 8,784 ----------------------------------------------------------------------- ANSA Goodwill 5,081 5,081 5,081 Fixed assets 1,523 1,523 Working capital 197 57 Cash 804 804 Loans (7,588) (7,588) Finance leases (237) (237) ---------------------- (220) (360) 17,387 2,061 (938) 18,870 ----------------------------------------------------------------------- 23,951 -------- Total goodwill 32,735 -------- The only adjustment between book and fair values was an accounting policy alignment of £140,000 at ANSA. The total consideration of £29.4m including gross costs was satisfied as follows: £'000 Placings of new shares 23,944 Issue of shares to vendors 1,851 Deferred consideration not yet due 3,000 Loan notes issued to vendors 989 Transfer to cash balances (397) --------- 29,387 --------- This information is provided by RNS The company news service from the London Stock Exchange

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