Half Yearly Report

RNS Number : 5699R

Severfield-Rowen PLC

25 August 2010

 



25 August 2010

Half Year Results

for 6 Months ended 30 June 2010

UK DEMAND IMPACT - MARKET SHARE GROWTH - INDIA LAUNCHED

Severfield-Rowen Plc, the market leading structural steel group, announces its half year results to 30 June 2010.

	2010	2009	Change
Revenue	£126.7m	£200.0m	- 36.7%
Underlying* Group Operating Profit	£8.5m	£25.4m	- 66.5%
Underlying Operating Margin	6.7%	12.7%	- 6.0%
Underlying Profit before Tax	£8.2m	£24.6m	- 66.7%
Underlying Net Margin	6.5%	12.3%	- 5.8%
Retained Profit after Tax	£4.3m	£17.4m	- 75.3%
Underlying Basic EPS	6.58p	19.51p	- 66.3%
Dividend per Share	5.00p	10.00p
Net Debt	£8.2m	£12.0m	- 31.7%
Order Book	£244m	£256m

Highlights

·      Underlying Profit before Tax of £8.2m (£24.6m: 2009) in line with management's expectations

·      Net margins 6.5% (12.3%: 2009)

·      Net borrowings at period end of £8.2m (£12.0m: 2009)

·      Order book £244m (£256m: 2009) reflecting growth in UK market share

·      Interim dividend of  5.00p per share (10.00p: 2009)

*           Underlying is before the amortisation of acquired intangible assets of £1.4m (2009: £3.2m), gain in the valuation of derivative financial instruments of £0.03m (2009: £3.3m) and pre-operating costs of JSW Severfield Structures Limited, the Indian joint venture, of £0.6m.

Commenting, Tom Haughey, Chief Executive Officer, said:

"The Company continues to perform relatively well from a position of financial strength in the prevailing difficult UK market environment.  It is outperforming its competition in terms of operational performance, cost and cash management and contract awards.  The pronounced falls in revenue and margins are as anticipated by the Company and reflect the significant fall in UK demand for structural steelwork.

The Company is pleased with its strong order book of £244 million, which includes the new Terminal 2 contract for BAA at Heathrow, won in competitive tender.  Severfield-Rowen has almost doubled its share of the domestic market, showing the intrinsic strengths of the business against a very difficult trading background.

The UK economy is recovering more slowly than forecast and some sectors in construction face a prolonged challenge.  The key market sectors of power, energy and waste, London commercial offices and infrastructure, present good opportunities in 2011 and beyond.  The Company will continue to take a cautious view of the wider UK recovery and its timing.

The UK structural steelwork sector is now likely to see substantial rationalisation in the next 12 months, leading ultimately to a more balanced supply/demand equation.

Some major international projects in the Middle East remain of interest to the Company beyond the current year, where scale, complexity and timing are distinctive features that are suited to our extensive capabilities.

In India, the joint venture, JSW Severfield Structures, has commenced production on time and the business is successfully winning orders to fulfil its operational plan through 2010.  The Company views the joint venture prospects for growth and success very positively.

The Company is continuously reviewing its UK operational cost base in light of key supply/demand balances and forecasts.  It is optimistic that its forward strategies for the UK and overseas will stimulate growth in shareholder value."

Enquiries
Severfield-Rowen Plc	Toby Hayward Chairman	01845 577896
	Tom Haughey Chief Executive Officer	01845 577896
	Alan Dunsmore Finance Director	01845 577896
RBS Hoare Govett Ltd	John MacGowan	020 7678 8000
	Stephen Bowler	020 7678 8000
Pelham Bell Pottinger	Francesca Tuckett	020 7861 3157
	Archie Berens	020 7861 3112

INTERIM STATEMENT 2010

INTRODUCTION

The Company has produced a relatively strong performance through a difficult period with anticipated lower revenues and margins materialising.  The Company is in a better position to navigate these poorer UK conditions, following its capacity and cost revisions of the second half of 2009.

UK demand recovery will be slower than forecast and it remains unclear whether a revival in private investment will be at sufficient pace to counteract the impact of the forthcoming public expenditure reductions.

The Company will maintain a cautious view of the UK recovery but has identified key opportunities, particularly in the power, commercial office and infrastructure sectors for 2011 and beyond.

New orders in 2010 include Terminal 2 Heathrow, Amex House Brighton, National Indoor Sports Arena and Velodrome Glasgow and Park House London.  These contract awards have contributed to a significant growth in the Company's domestic market share.  As a result, the Company has been able to compete strongly for new business, producing a long and significant order book of £244 million, which extends through 2010 and into the first quarter of 2011.

Over the coming 12 months, the UK structural steelwork sector is likely to experience extensive change, leading ultimately to an improved supply/demand balance and some margin recovery.

FINANCIALS

The Group's financial performance in the first six months of the year reflects the continuation of the difficult UK trading environment.  Revenue of £126.7 million (2009: £200.0 million) and underlying profit before tax of £8.2 million (2009: £24.6 million) were lower than the corresponding period in 2009 by 36.7% and 66.7% respectively.  However, this reduced level of performance was in line with management expectations.  The market for UK constructional steel remains subdued, reflected by the reduced level of turnover in the first six months.  In spite of this the Company has almost doubled its market share.

As expected, the difficult market has also impacted margins, with those achieved in the first half reducing to 6.7% at the underlying operating profit level (2009: 12.7%) and 6.5% at the underlying profit before tax level (2009: 12.3%).

The Group's underlying operating profit was £8.5 million, down 66.5% from the £25.4 million achieved in the first half of 2009.

Underlying profit is before the amortisation of acquired intangible assets of £1.4 million (2009: £3.2 million), a gain in the movement of the valuation of derivative financial instruments of £0.03 million (2009: £3.3 million) and the Group's share of pre-operating costs of the India Joint Venture of £0.6 million.

The tax charge of £2.0 million represents an effective tax rate of 29.0% on the applicable profit, which excludes the share of results of associates, (2009: 29.5%).

Underlying basic earnings per share is 6.58p (2009: 19.51p).  This calculation is based on the underlying profit after tax of £5.8 million and 88,829,502 shares, being the weighted average number of shares in issue during the period.  Basic earnings per share, based on profit after tax after non-underlying items, is 4.87p (2009: 19.65p).

There are no contingent shares outstanding under a share based payment scheme as the contingent shares noted in last year's report and the statutory accounts for the financial year ended 31 December 2009 vested during the period, as shown in the Condensed Consolidated Statement of Changes in Equity.  Consequently, there is no difference between basic and diluted earnings per share.

Retained profit after tax of £4.3 million (2009: £17.4 million) has been transferred to reserves.

During the first six months of the year capital expenditure amounted to £0.4 million (2009: £0.7 million).  A further £2.5 million was invested as equity in the Indian joint venture in the period (2009: £0.1 million).

There was a net cash outflow from operating activities in the first six months of £12.4 million (2009: £13.2 million cash inflow).  This reflects the lower level of profits generated in the period, Corporation Tax payments of £3.2 million, and an expected increase in working capital, following a particularly favourable working capital position achieved at the end of the last financial year.

The investment in capital, joint venture equity and the operating cash outflow, combined with dividend payments of £4.4 million, resulted in net borrowings of £8.2 million at the end of the period (31 December 2009: net cash of £11.5 million).

The Group has a revolving credit facility of £40 million with RBS and National Australia Bank as joint lenders until March 2013.

DIVIDEND

An interim dividend of 5.00p per share is declared today and will be paid on 22 October 2010 to shareholders on the register on 1 October 2010.

INDIA LAUNCHED

JSW Severfield Structures, as anticipated, commenced commercial production in August.  In the coming 2-3 months, all production activities will be commissioned and be engaged in the execution of existing and forward contracts.

The plant is being successfully commissioned in line with its planned timescale and capital expenditure budget.  The initial market reaction is very positive and Indian demand is robust and growing in all sectors.

A formal opening event for the new plant is planned to take place on 17 November 2010.  The Company views the joint venture's prospects for growth and success very positively.

BOARD AND EMPLOYEES

The Company is pleased to announce that John Dodds, formerly Chief Executive of Kier Group Plc, will join the Board as a non-executive director on 1 October 2010.  The Board looks forward to John joining them and to benefitting from his future contributions to the business.¹

Employees in the UK and India continue to provide outstanding support to the Company's policies and objectives, and remain key to the successful achievement of the challenging milestones already reached and those ahead.

OPERATIONS

Group Review

The main business of the Group is the design, fabrication and erection of structural steelwork for construction projects of varying types, including warehouses, commercial offices, retail centres, industrial buildings and power stations.

The Group's main subsidiary companies are all involved in the principal business of structural steelwork.   Activities across the Group are co-ordinated to optimise value. However, all of the individual companies retain their own market identity and specialist capabilities.

At the beginning of 2010, in the face of worsening demand and lower market prices, the Group implemented a reduction in overall capacity of around 20%, at the same time embarking upon a far reaching cost reduction programme.  As a consequence, the Company has been able to compete strongly for new business, resulting in a long and significant order book, extending through 2010 and into the first quarter of 2011.

The Company is pleased to have commenced production in its overseas target market - India.  This will complement operations in the UK, providing opportunity and growth at a time of subdued UK demand and growth prospects.

UK

All of the Group companies have contributed positively to the results.  During the first half of 2010 the companies were engaged in the successful supply of services to a large number of projects, including:

Severfield-Reeve Structures:
Heron Tower, London	Commercial Office
The Shard, London Bridge	Commercial Office
Stobhill Hospital, Glasgow	Health
Premier Inn, Stratford	Hotels
Sirius Academy, Hull	Education
Vestas, Isle of Wight	Industrial
Staythorpe Power Station, Notts	Power & Energy
West Burton Power Station, Notts	Power & Energy
Watson Steel:
2012 Olympic Stadium, Stratford	Stadiums & Leisure
Velodrome, Stratford	Stadiums & Leisure
A71 Irvine Bridge, Ayrshire	Bridges
Handball Arena, Stratford	Stadiums & Leisure
Basketball Arena, Stratford	Stadiums & Leisure
Aquatics Centre, Stratford	Stadiums & Leisure
Heathrow Terminal 2	Transport & Infrastructure
Atlas Ward Structures:
Hilton Hotel, Heathrow	Hotels
Tesco, Walkden, Greater Manchester	Retail
Melior College, Scunthorpe	Education
Waste Facility, Gilmoss, Merseyside	Power & Energy
Waste Facility, Southwark, London	Power & Energy
Airbus, Broughton, Chester	Industrial
Fisher Engineering:
Bombardier, Belfast	Industrial
York University	Education
LMB Cambridge	Education
Titanic Quarter, Belfast	Retail & Leisure
Rowen Structures:
One New Change, London	Commercial Office
Sackville Street, London	Commercial Office
Baker Street, London	Commercial Office

India

JSW Severfield Structures Ltd in India commenced commercial production in August 2010 as planned.  Production in all of the facilities will have commenced by the end of October 2010.

The Company is modelled on the UK blueprint, providing design, fabrication and erection services. 

The plant at Bellary consists of two main fabrication lines, a plated beam (Indisec/Fabsec) line, a fittings factory and a metal deck flooring production line via a second joint venture, JSW Structural Metal Decking Ltd.  Management and manning levels are being developed successfully and include key roles fulfilled from within the UK Company.

JSW Severfield Structures and our joint venture partner, JSW Steel, are delighted to be commissioning the plants on time and to budget.

Abu Dhabi

The Company opened its sales office, covering the Middle East region in January 2009.  The office is engaged in monitoring prospects in the area and is currently involved, with support from the UK, in bidding several complex infrastructure projects together with several oil and gas projects.

OUTLOOK

The Company has acted promptly and effectively to reposition its UK costs, capacities and sales focus in response to the UK market conditions.  It has developed forward plans for its UK and international businesses, geared to market recovery timetables and growth opportunities, particularly in India.

The Company is both financially and operationally strong.  This, combined with its other core competitive advantages, supports its ambitions to enhance its market leading position in the UK and grow its wider overseas interests.

TOM HAUGHEY

CHIEF EXECUTIVE OFFICER

25 August 2010

¹There are no further details to be disclosed under Sections 9.6.13 R(1) to (6) of the UKLA Listing Rules in respect of John's appointment.

Condensed Consolidated Income Statement

	Six months ended 30 June 2010 (unaudited)				Six months ended 30 June 2009 (unaudited)				Year ended 31 December 2009 (audited)
	Before Other Items £000	Other Items1 £000	Total £000		Before Other Items £000	Other Items1 £000	Total £000		Before Other Items £000	Other Items1 £000	Total £000
Revenue	126,662	-	126,662		200,033	-	200,033		349,417	-	349,417
Cost of sales	(116,643)	-	(116,643)		(172,123)	-	(172,123)		(288,658)	(2,283)	(290,941)
Gross profit	10,019	-	10,019		27,910	-	27,910		60,759	(2,283)	58,476
Other operating income	226	-	226		94	-	94		568	-	568
Distribution costs	(390)	-	(390)		(633)	-	(633)		(2,123)	-	(2,123)
Administrative expenses	(1,292)	(1,374)	(2,666)		(1,784)	(3,172)	(4,956)		(7,425)	(6,889)	(14,314)
Share of results of associates	(9)	(553)	(562)		(207)	-	(207)		(942)	-	(942)
Unrealised gains on  derivative financial instruments	-	34	34		-	3,338	3,338		-	3,440	3,440
Operating profit	8,554	(1,893)	6,661		25,380	166	25,546		50,837	(5,732)	45,105
Investment revenue - interest	34	-	34		70	-	70		131	-	131
Finance costs - interest	(370)	-	(370)		(836)	-	(836)		(1,145)	-	(1,145)
Profit before tax	8,218	(1,893)	6,325		24,614	166	24,780		49,823	(5,732)	44,091
Tax	(2,373)	375	(1,998)		(7,322)	(46)	(7,368)		(14,383)	1,605	(12,778)
Profit for the period	5,845	(1,518)	4,327		17,292	120	17,412		35,440	(4,127)	31,313
Earnings per share:
Basic	6.58p	(1.71p)	4.87p		19.51p	0.14p	19.65p		40.00p	(4.66p)	35.34p
Diluted	6.58p	(1.71p)	4.87p		19.49p	0.14p	19.63p		39.80p	(4.64p)	35.16p

¹    Other items relate to the amortisation of acquired intangibles, pre-operative costs of JSW Severfield Structures Limited, the Group's Indian Joint Venture company, movements in the valuation of derivative financial instruments and the associated tax impact of these items.  Other items have been disclosed separately in order to give an indication of the underlying earnings of the Group. 

Condensed Consolidated Statement of Comprehensive Income

	Six months ended 30 June 2010 (unaudited) £000	Six months ended 30 June 2009 (unaudited) £000	Year ended 31 December 2009 (audited) £000
Actuarial loss on defined benefit pension scheme	-	-	(2,091)
Tax on items taken directly to equity	-	-	586
Other comprehensive income for the period	-	-	(1,505)
Profit for the period from continuing operations	4,327	17,412	31,313
Total comprehensive income for the period attributable to equity shareholders	4,327	17,412	29,808

Condensed Consolidated Statement of Changes in Equity

	Share Capital £000	Share Premium £000	Other Reserves £000	Retained Earnings £000	Total Equity £000
At 1 January 2010	2,215	46,152	1,065	83,043	132,475
Profit for the period (attributable to equity holders of the parent)	-	-	-	4,327	4,327
Dividends paid	-	-	-	(4,430)	(4,430)
Equity settled share based payments	11	915	(926)	-	-
At 30 June 2010 (unaudited)	2,226	47,067	139	82,940	132,372

	Share Capital £000	Share Premium £000	Other Reserves £000	Retained Earnings £000	Total Equity £000
At 1 January 2009	2,215	46,152	439	70,957	119,763
Profit for the period (attributable to equity holders of the parent)	-	-	-	31,313	31,313
Dividends paid	-	-	-	(17,722)	(17,722)
Share based payments	-	-	626	-	626
Actuarial loss on defined benefit pension scheme	-	-	-	(2,091)	(2,091)
Deferred income taxes on defined pension benefit scheme	-	-	-	586	586
At 31 December 2009 (audited)	2,215	46,152	1,065	83,043	132,475

	Share Capital £000	Share Premium £000	Other Reserves £000	Retained Earnings £000	Total Equity £000
At 1 January 2009	2,215	46,152	439	70,957	119,763
Profit for the period (attributable to equity holders of the parent)	-	-	-	17,412	17,412
Dividends paid	-	-	-	(8,861)	(8,861)
At 30 June 2009 (unaudited)	2,215	46,152	439	79,508	128,314

Condensed Consolidated Balance Sheet

	At 30 June 2010 (unaudited) £000	At 30 June 2009 (unaudited) £000	At 31 December 2009 (audited) £000
ASSETS
Non-current assets
Goodwill	54,712	54,712	54,712
Other intangible assets	21,870	26,961	23,244
Property, plant and equipment	83,055	84,045	84,907
Investment property	6,104	6,197	6,135
Interests in associates	3,621	125	1,733
	169,362	172,040	170,731
Current assets
Inventories	7,145	9,414	9,810
Trade and other receivables	63,352	81,844	54,655
Cash and cash equivalents	1,141	7,248	11,548
	71,638	98,506	76,013
Total assets	241,000	270,546	246,744
LIABILITIES
Current liabilities
Trade and other payables	68,763	88,499	82,565
Financial liabilities - borrowings	9,383	19,253	-
Financial liabilities - derivative financial instruments	113	249	147
Tax liabilities	5,221	9,316	6,034
	83,480	117,317	88,746
Non-current liabilities
Retirement benefit obligations	8,407	6,651	8,407
Deferred tax liabilities	14,141	15,664	14,516
Provisions	2,600	2,600	2,600
	25,148	24,915	25,523
Total liabilities	108,628	142,232	114,269
NET ASSETS	132,372	128,314	132,475
EQUITY
Share capital	2,226	2,215	2,215
Share premium	47,067	46,152	46,152
Other reserves	139	439	1,065
Retained earnings	82,940	79,508	83,043
TOTAL EQUITY	132,372	128,314	132,475

Condensed Consolidated Cash Flow Statement

	Six months ended 30 June 2010 (unaudited) £000	Six months ended 30 June 2009 (unaudited) £000	Year ended 31 December 2009 (audited) £000
Net cash from operating activities	(12,377)	13,225	52,134
Investing activities
Interest received	42	91	144
Proceeds on disposal of property, plant and equipment	184	811	1,260
Purchases of property, plant and equipment	(445)	(687)	(4,847)
Purchases of shares of associates	(2,450)	(100)	(2,443)
Net cash (used in)/from investing activities	(2,669)	115	(5,886)
Financing activities
Interest paid	(314)	(729)	(1,223)
Dividends paid	(4,430)	(8,861)	(17,722)
Repayment of borrowings	0	(8,420)	(27,673)
Borrowings taken out	9,383	0	0
Net cash (used in)/from financing activities	4,639	(18,010)	(46,618)
Net decrease in cash and cash equivalents	(10,407)	(4,670)	(370)
Cash and cash equivalents at beginning of period	11,548	11,918	11,918
Cash and cash equivalents at end of period	1,141	7,248	11,548

Notes to the Condensed Consolidated Financial Statements

1)         General information

The interim financial information does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The interim results to 30 June 2010 and 2009 are neither audited nor reviewed in accordance with International Standard on Review Engagement 2410 issued by the Auditing Practices Board.  The financial information of the full preceding year is based on the statutory accounts for the financial year ended 31 December 2009.  Those accounts have been delivered to the Registrar of Companies.  The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2)         Basis of preparation

The interim financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") and in accordance with IAS 34 "Interim Financial Reporting" as adopted for use in the European Union and in accordance with the accounting policies included in the Company's Annual Report for the year ended 31 December 2009 which have been applied consistently throughout the current and preceding periods.

In the current financial year, the Group has adopted IFRS 3 "Business Combinations" (revised 2008) and IAS 27 "Consolidated and Separate Financial Statements" (revised 2008).

With the exception of IFRS3 "Business Combinations", the adoption of these standards in the current or future periods will have no material impact on the results included within the financial statements of the Group.  IFRS3 is expected to impact the treatment of any future business combinations.

3)         Going concern

The Group has access to a £40 million revolving credit facility to meet day-to-day working capital requirements.  The Group at 30 June 2010 had significant headroom on this facility and on the bank financial covenants in place and this position is forecast to continue for the foreseeable future.  The bank facility is available to March 2013. 

Through its various business activities the Group is exposed to a number of risks and uncertainties (see Note 4), which could affect the Group's ability to meet these forecasts and hence its ability to meet its banking covenants.  As part of the review of forecasts noted above the Directors have considered its order book, the challenging economic environment, the increasingly competitive environment, and its supplier and customer base, together with the potential mitigating actions that can be taken to protect operating profits and cash flows.  The Directors believe the Group is well placed to manage these business risks despite the current uncertain economic environment. 

Accordingly after making enquiries, the Directors have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report. For this reason, the going concern basis has been adopted in preparing this Interim Report.  

4)         Risks and uncertainties

The principal risks and uncertainties which could have a material impact upon the Group's performance over the remaining six months of the 2010 financial year have not changed significantly from those noted or referenced on page 32 of the Directors' Report included in the Annual Report 2009. These risks and uncertainties include, but are not limited to:

·     Competitive risk in the face of ongoing innovation and price pressure;

·     Commercial relationships with customers and suppliers;

·     Credit, interest rate, and foreign exchange risks; and

·     Health and Safety.

5)         Segmental analysis

Revenue, profit before tax, and net assets all relate to the design, fabrication, and erection of structural steelwork and related activities.  All of the Group's subsidiary businesses have similar products and services, production processes, types of customer, methods of distribution, regulatory environments, and economic characteristics.

Revenue, which relates wholly to construction contracts and related assets in both years originated from the United Kingdom.

There has been no change in the basis of segmentation or in the basis of measurement of segment profit or loss in the period.

6)         Seasonality

There are no particular seasonal variations which impact the split of turnover between the first and second half of the financial year.  Underlying movements in contract timing and phasing, which are an ongoing feature of the business, will continue to drive moderate fluctuations in half yearly revenues.

7)         Taxation

The income tax expense reflects the estimated effective rate on profit before taxation for the Group for the year ending 31 December 2010.

8)         Dividends payable to equity shareholders

	Six months ended 30 June 2010 £000	Six months ended 30 June 2009 £000	Year ended 31 December 2009 £000
Ordinary dividend paid	4,430 ______	8,861 ______	17,722 ______

In addition to the above, an interim dividend of 5.0p per ordinary share (2009: 10.0p) will be paid on 22 October 2010 to shareholders on the register on 1 October 2010.  The ex-dividend date will be 29 September 2010.

9)         Earnings per share

Earnings per share is calculated as follows:

	Six months ended 30 June 2010 £000	Six months ended 30 June 2009 £000	Year ended 31 December 2009 £000
Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent company	4,327 ______	17,412 ______	31,313 ______
Earnings for the purposes of underlying basic earnings per share being underlying net profit attributable to equity holders of the parent company	5,845 ______	17,292 ______	35,440 ______
Number of shares	Number	Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	88,829,502	88,607,876	88,607,876
Effect of dilutive potential ordinary shares:
Share-based payments scheme	-	110,204	440,816
	_________	_________	_________
Weighted average number of ordinary shares for the purposes of diluted earnings per share	88,829,502	88,718,080	89,048,692
	_________	_________	_________
Basic earnings per share	4.87p	19.65p	35.34p
Underlying basic earnings per share	6.58p	19.51p	40.00p
Diluted earnings per share	4.87p	19.63p	35.16p
Underlying diluted earnings per share	6.58p	19.49p	39.80p

10)        Property, plant and equipment

During the period, the Group spent approximately £445,000 on additions to fixed assets.  The Group also disposed of certain fixed assets with carrying amounts of £213,000 for proceeds of £184,000.

11)        Interests in associates

During the period, the Group invested £2,450,000 in its Indian Joint Venture, JSW Severfield Structures Limited.

12)        Reconciliation of group profit from operations to cash generated from operations

	Six months ended 30 June 2010 (unaudited) £000	Six months ended 30 June 2009 (unaudited) £000	Year ended 31 December 2009 (audited) £000
Operating profit for the period	6,661	25,546	45,105
Adjustments for:
Share of results of associated companies	562	207	942
Depreciation of property, plant and equipment	2,115	2,522	5,235
Amortisation of intangibles assets	1,374	3,172	4,408
Impairment in capitalised development costs	0	0	2,481
Loss on disposal of property, plant and equipment	29	22	220
Share based payment expense	0	0	626
Movements in pension scheme	0	0	(335)
Unrealised gains on derivative financial instruments	(34)	(3,338)	(3,440)
Operating cash flows before movement in working capital	10,707	28,131	55,242
Movements in working capital
Decrease/(increase) in inventories	2,665	(1,087)	(1,483)
(Increase)/decrease in receivables	(8,705)	(20,907)	6,290
(Decrease)/increase in payables	(13,858)	11,070	5,320
Cash generated from operations	(9,191)	17,207	65,369
Tax paid	(3,186)	(3,982)	(13,235)
Net cash from operating activities	(12,377)	13,225	52,134

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

13)        Related party transactions

Certain Related Party Transactions, as described in Note 32 on page 93 of the 2009 Annual Report, continued in the current period.  None of these transactions materially affected the financial position or performance of the Group during the period.

14)        Cautionary statement

The Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

            The IMR contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

15)        Responsibility statement

We confirm that to the best of our knowledge:

(a)        the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

(b)        the Interim Report includes a fair review of the information required by DTR4.2.7R (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

(c)        the Interim Report includes a fair review of the information required by DTR 4.2.8R (disclosure of the related party transactions and changes therein).

By order of the Board

Tom Haughey	Alan Dunsmore
Director	Director
25 August 2010	25 August 2010

 

END

 

 

IR PGUCPRUPUGAC