Interim Results
Scott Wilson Group plc
16 January 2007
Tuesday, 16 January 2007
SCOTT WILSON GROUP PLC
Interim Results for the 26 week period ended 29 October 2006
Scott Wilson Group plc, ("Scott Wilson" or "the Group"), the international
consultancy offering integrated professional services in the transportation,
property, environmental and natural resources sectors, today reports its interim
results for the 26 week period ended 29 October 2006.
Financial highlights
• Revenues including share of joint ventures rose by 22.8% to £113.2m
(2005: £92.1m)
• Underlying* operating profit increased by 23.9% to £7.1m (2005: £5.8m)
• Profit before tax increased to £8.0m (2005: £3.6m)
• Basic earnings per share of 7.60p
• Diluted earnings per share of 7.42p
• Interim dividend of 1.0p per share, the first as a listed company
Operating highlights
• Recent key contract wins include the East London Line, London Crossrail,
Edinburgh Airport Rail Link, Greece Ionia Odos Motorway, Bahrain Islands
Developments and Bath: Combe Down Mine Stabilisation
• Significant acquisitions during and after the period have enhanced
expertise and coverage in target sectors
Prospects
• Record order book of £250m following major contract wins
• Trading remains strong in buoyant market conditions
• Upgraded medium term targets including organic turnover growth of at
least 10% per annum and operating margins of 8%. Substantial progress has
been made towards achieving these objectives
* The Directors believe that the presentation of underlying operating profit and
underlying earnings per share, being these line items within the Group results
adjusted for the impact in the comparative periods of restructuring costs, the
non-recurring loss relating to Basing View Investments Ltd, the gain arising on
retirement benefit plan changes and costs relating to Admission, assists with
the understanding of the underlying results of the Group. A reconciliation of
these measures to Group operating profit and basic and diluted earnings per
share is included in notes 6 and 14 to this interim announcement.
Geoff French, Chairman of Scott Wilson commented:
"The strength of our markets combined with our record order book allows us to
look forward to the future with confidence. We now expect results for this
financial year to exceed current market expectations. Our recent acquisitions
have broadened the Group's presence in strategically key market sectors in line
with our stated strategy. The integration of these acquisitions is now well
under way and it is expected that they will help us realise significant
operating synergies."
For further information please contact:
Scott Wilson Group plc www.scottwilson.com
Geoff French, Chairman 01256 310 200
Stephen Kimmett, Finance Director
Smithfield Consultants 020 7360 4900
Reg Hoare/George Hudson/Will Henderson
Print resolution images are available for the media to view and download from
www.vismedia.co.uk
Notes to editors:
Scott Wilson is an international consultancy group providing expert,
sustainable, integrated solutions to meet the planning, engineering, management
and environmental needs of four principal market sectors: transportation,
property, environment and natural resources. It was ranked as the ninth largest
UK-owned engineering consultant by fee income for the calendar year 2005 in the
New Civil Engineer 2006 annual survey.
Scott Wilson has demonstrated strong and sustained growth and now has a global
network of offices in 78 locations, of which 39 are in the UK, employing a total
of 5,215 members of staff with 3,659 based in the UK. The remainder are mainly
located at Scott Wilson regional centres in China/Hong Kong, Dubai, India,
Poland, South Africa and Thailand.
On 15 March 2006 Scott Wilson Group plc was admitted to the Official List and to
trading on the London Stock Exchange.
Post flotation, the Group has made considerable progress with several high
profile contract wins - the most recent being the East London Line with fees of
£14m, as well as the Edinburgh Airport Rail Link with fees of £18m, London
Crossrail with fees of £12m, Greece Ionia Odos Motorway with fees of £12m and
Bahrain Islands Developments with fees of £10m.
Scott Wilson has strong relationships with national governments,
non-governmental agencies, multinational companies and supranational funding
bodies. In the financial year ended 30 April 2006, 30 of the Company's clients
were billed over £1 million and the top 50 of the Group's clients accounted for
aggregate fees of some £100 million.
www.scottwilson.com
CHAIRMAN'S STATEMENT
Introduction
At the time of our flotation the Board set out a clear strategy for achieving
sustained growth in revenue, margins and shareholder returns, both organically
and by acquisition. We were also seeking a better balance across our market
sectors to avoid over-dependence on any single sector.
These interim results give a clear indication of the good progress we have made
in delivering this strategy.
Results
Revenue, including our share of joint ventures, increased by 22.8% to £113.2m
(2005: £92.1m).
Group operating profit increased from £4.9m to £7.1m with the underlying*
operating margin remaining at 6.3% and underlying* operating profit increasing
by 23.9% to £7.1m (2005: £5.8m). This result was achieved in spite of trading
losses and restructuring costs of £0.8m incurred in the period in respect of the
Group's businesses in Southern Africa.
Profit before tax was £8.0m (2005: £3.6m) giving basic earnings and diluted
earnings per share of 7.60p and 7.42p respectively.
On 29 October 2006, net cash and cash equivalents stood at £17.3m, down from
£33.1m at 30 April 2006. This reduction is principally the result of special
pension contributions of £16.6m and the funding of continuing growth, partly
offset by the timing of payroll costs.
Dividend
The Board has declared an interim dividend of 1.0p per share to be paid on 23
February 2007 to ordinary shareholders on the register on 26 January 2007.
Pensions
The Group has completed all the actions disclosed in the Prospectus, with the
exception of a final payment of £0.7m to the Railways Pension Scheme to be made
in early May 2007. The gross deficit reduced in the period from £33.6m to
£24.4m. This was less than anticipated as external factors (inflation and
discount rates) moved unfavourably, partially offsetting the special pension
payment of £16.6m.
Acquisitions
In May 2006, we acquired the 30% minority interest in Scott Wilson Pavement
Engineering Ltd, a leading UK consultancy in the evaluation of highways, runway
pavements and rail track beds.
In June 2006, the acquisition of Roscoe Postle Associates Inc of Canada
significantly enhanced our position, client base and geographical coverage in
the mining sub-sector of natural resources.
Since the period end we have acquired the following three businesses, at a
maximum expected consideration of £41.0m:
• Ferguson Mcllveen LLP, a leading Northern Ireland consultancy providing
design consultancy services for the property, environment and transport
sectors;
• Cameron Taylor Group Limited, which has significantly enhanced the
Group's presence in the UK property sector; and
• DGP International Limited, which has brought new skills within the
nuclear, petrochemical and pharmaceuticals sectors.
Employees
We now have over 5,200 staff in total, up from 3,800 over the last 12 months. My
thanks go to all members of staff for their continuing efforts on behalf of
Scott Wilson. They remain critical to the Group's reputation, its continuing
innovation and to the delivery of these record results.
Outlook
The strength of our markets combined with our record order book means we look
forward to the year with confidence. We now expect results for this financial
year to exceed current market expectations.
Our recent acquisitions have broadened the Group's presence in strategically
important market segments in keeping with our stated strategy. The integration
of these acquisitions is now well under way and it is expected that they will
help us realise significant operating synergies as with previous acquisitions.
The Group has renegotiated and increased its existing banking facilities and
thus has significant capacity to finance both continued organic growth and
further selective acquisitions.
REVIEW OF OPERATIONS
United Kingdom & Ireland
Performance of the UK businesses in the period has been strong, with all
Divisions exceeding expectations. Revenues including share of joint ventures are
21.2% up on last year with significant growth in UK Central, Scotland & Ireland
and UK Railways. Underlying* operating profit was up 21.7% with underlying*
margins across the Divisions converging towards the upgraded Group benchmark of
8%. Of particular note was the underlying* margin improvement in UK South from
4.8% to 7.0%.
The markets across the four principal sectors continue to be buoyant and this is
particularly evident in Transportation and Property, both public and private
sector.
The Divisions have been successful in securing several major projects including
London Crossrail, Edinburgh Airport Rail Link, Highways Agency National
Framework, Bath: Combe Down Stabilisation and the East London Line upgrade.
Within UK Railways, this has had the effect of boosting revenue by 40% above
last year and means that the Division will be sharply focussed on project
delivery during the second half.
The outlook for the remainder of the year is for continued progress, with a
focus on delivering added value from acquisitions and ensuring integration is
achieved efficiently and smoothly whilst maintaining and sustaining improvements
to performance across the Divisions.
International
Revenues including share of joint ventures were up 27.4% on last year at £30.7m.
A new integrated network of six regional businesses is being established which
allows a unified global strategy, improved financial control and the sharing of
knowledge, resources and clients.
Underlying* operating profit increased by 79.4% to £0.4m, a particularly
pleasing result as it includes trading losses and the cost of restructuring in
Southern Africa. Resident businesses have been closed in Zimbabwe, Malawi,
Botswana and Mozambique and re-focused on a single regional business in
Johannesburg. All other regional businesses demonstrated a gradual improvement
in performance. The new business model is expected to result in improved
margins.
Major new commissions were awarded including PPP toll road projects in Greece,
master planning and infrastructure projects in the Middle East and power
projects in Africa and South East Asia. Port work continues to expand in India
and the UAE and mining advisory projects have been secured in Chile, Colombia,
Australia and Mongolia.
The RPA acquisition has given the Group access to over 80 global clients for due
diligence and investment advisory services with prospects for downstream
cross-selling of engineering.
The China business continues to expand with improved margins and is benefiting
from a recent upsurge in activity in Hong Kong. A particular feature is the
increasing workload in supporting Chinese clients with international
infrastructure investment programmes outside China, particularly in Africa and
South America.
Overall, the first half of the year has been positive for the International
Division despite having to absorb trading losses and restructuring costs in
Southern Africa. The underlying improvement in performance is encouraging.
CONSOLIDATED INCOME STATEMENT
26 weeks ended 29 October 2006 26 weeks ended 30 October 2005 52 weeks ended 30 April 2006
Unaudited unaudited audited
Before Before Before
Non-re Non-re Non-re Non-re Non-re Non-re
curring curring curring curring curring curring
items items items items items items
and and and and and and
restruct- restruct- restruct- restruct- restruct- restruct-
uring uring uring uring uring uring
costs costs Total Costs costs Total costs costs Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
---------- ---- ------ ---- ------ ------ ----- ------ ------- ------ -------
CONTINUING
OPERATIONS:
---------- ---- ------ ---- ------ ------ ----- ------ ------- ------ -------
REVENUE
INCLUDING
SHARE OF JOINT
VENTURES
REVENUES 113,194 - 113,194 92,148 - 92,148 197,765 - 197,765
Less: share of
joint venture
revenues (4,611) - (4,611) (5,772) - (5,772) (11,841) - (11,841)
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
GROUP REVENUE 108,583 - 108,583 86,376 - 86,376 185,924 - 185,924
Cost of sales (69,205) - (69,205) (54,938) - (54,938) (117,964) - (117,964)
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
GROSS PROFIT 39,378 - 39,378 31,438 - 31,438 67,960 - 67,960
Administrative
expenses 3 (32,491) - (32,491) (26,332) (908) (27,240) (58,843) 10,977 (47,866)
Share of
result of
joint ventures 254 - 254 657 - 657 1,289 - 1,289
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
OPERATING
PROFIT 7,141 - 7,141 5,763 (908) 4,855 10,406 10,977 21,383
Finance income 4 5,948 3,972 8,283
Finance costs 5 (5,068) (5,237) (10,400)
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
PROFIT BEFORE
TAXATION 8,021 3,590 19,266
Taxation (2,671) (1,685) (6,325)
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
PROFIT FOT THE
PERIOD 5,350 1,905 12,941
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
ATTRIBUTABLE TO:
Equity holders
of the Company 5,351 1,748 12,527
Minority
interests (1) 157 414
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
5,350 1,905 12,941
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
EARNINGS PER
SHARE:
Basic 6 7.60p 6.55p 38.90p
Diluted 6 7.42p 6.55p 37.70p
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
DIVIDENDS
DECLARED:
Amount per
share - 2.50p 5.00p
Total amount
absorbed
(£'000) - 667 1,334
-------- ---- ------ -------- ------ ------ -------- ------ ------- -------- -------
There were no discontinued operations in any period.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
--------------------------- --------- --------- ---------
Currency translation differences on
translation of foreign operations (342) (314) (381)
Actuarial gains and losses on defined
benefit pension schemes (9,105) (11,346) (4,376)
Tax on items recognised directly in
equity 2,834 3,498 1,427
--------------------------- --------- --------- ---------
EXPENSE RECOGNISED DIRECTLY IN EQUITY (6,613) (8,162) (3,330)
Profit for the period 5,350 1,905 12,941
--------------------------- --------- --------- ---------
TOTAL RECOGNISED (EXPENSE)/INCOME FOR
THE PERIOD (1,263) (6,257) 9,611
--------------------------- --------- --------- ---------
ATTRIBUTABLE TO:
Equity holders of the Company (1,262) (6,368) 9,221
Minority interests (1) 111 390
--------------------------- --------- --------- ---------
(1,263) (6,257) 9,611
--------------------------- --------- --------- ---------
CONSOLIDATED BALANCE SHEET
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
Notes £'000 £'000 £'000
----------------------- ------ --------- --------- ---------
ASSETS
NON-CURRENT ASSETS
Tangible fixed assets 14,192 9,246 13,847
Goodwill 8,820 5,839 6,864
Other intangible assets 1,546 1,022 1,333
Investments in joint ventures 204 457 680
Deferred tax assets 12,260 17,901 11,897
----------------------- ------ --------- --------- ---------
37,022 34,465 34,621
----------------------- ------ --------- --------- ---------
CURRENT ASSETS
Trade and other receivables 76,818 61,486 65,483
Current tax assets 938 - 1,089
Cash and cash equivalents 17,366 5,043 33,067
----------------------- ------ --------- --------- ---------
95,122 66,529 99,639
----------------------- ------ --------- --------- ---------
TOTAL ASSETS 132,144 100,994 134,260
----------------------- ------ --------- --------- ---------
EQUITY AND LIABILITIES
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE COMPANY
Issued capital 7 86,291 21,950 86,277
Shares to be issued 7 481 - -
Other reserves 7 (6,313) (6,479) (6,074)
Retained earnings 7 (29,138) (43,136) (28,426)
----------------------- ------ --------- --------- ---------
51,321 (27,665) 51,777
Minority interests 130 725 971
----------------------- ------ --------- --------- ---------
TOTAL EQUITY/(DEFICIT) 51,451 (26,940) 52,748
----------------------- ------ --------- --------- ---------
NON-CURRENT LIABILITIES
Borrowings 2,429 12,863 2,304
Provisions 570 - -
Retirement benefit obligations 24,459 60,333 33,577
----------------------- ------ --------- --------- ---------
27,458 73,196 35,881
----------------------- ------ --------- --------- ---------
CURRENT LIABILITIES
Trade and other payables 47,499 35,907 40,531
Current tax liabilities 161 543 474
Borrowings 3,867 18,288 3,813
Provisions 1,708 - 813
----------------------- ------ --------- --------- ---------
53,235 54,738 45,631
----------------------- ------ --------- --------- ---------
TOTAL LIABILITIES 80,693 127,934 81,512
----------------------- ------ --------- --------- ---------
TOTAL EQUITY AND LIABILITIES 132,144 100,994 134,260
----------------------- ------ --------- --------- ---------
CONSOLIDATED CASH FLOW STATEMENT
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
Notes £'000 £'000 £'000
----------------------- ------ --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 8 7,503 5,488 12,629
Defined benefit pension plan
contributions (20,143) (3,375) (12,069)
Dividends received from joint ventures 694 1,164 1,575
Tax paid (197) (908) (2,510)
----------------------- ------ --------- --------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES (12,143) 2,369 (375)
----------------------- ------ --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of tangible fixed assets (1,646) (1,264) (6,946)
Purchase of intangible assets (641) (352) (995)
Proceeds from sale of tangible fixed
assets - 1 6
Acquisition of subsidiaries, net of
cash and cash equivalents acquired (1,621) - (606)
----------------------- ------ --------- --------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES (3,908) (1,615) (8,541)
----------------------- ------ --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest received 513 389 154
Interest and finance charges paid (281) (703) (1,780)
Proceeds from issue of Ordinary
Shares, net of issue costs of £nil
(October 2005: £nil, April 2006:
£5.9m) 14 - 62,122
Receipt of new loans and finance lease
advances 2,005 1,606 5,831
Repayment of loans and finance leases (1,833) (1,140) (18,871)
Dividends paid to equity shareholders - - (1,334)
----------------------- ------ --------- --------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES 418 152 46,122
----------------------- ------ --------- --------- ---------
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS (15,633) 906 37,206
Cash and cash equivalents at start of
period 33,067 (4,154) (4,154)
Foreign exchange (87) (82) 15
----------------------- ------ --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 9 17,347 (3,330) 33,067
----------------------- ------ --------- --------- ---------
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1 GENERAL INFORMATION
The basis of preparation, methods of computation and accounting policies used in
the interim financial statements are consistent with International Financial
Reporting Standards (IFRS) and those followed in the preparation of the Group's
financial statements for the year ended 30 April 2006.
With effect from 1 May 2006, the Group's annual financial statements will be
prepared for 52 or 53 week periods, in order to align them with the operating
periods for management reporting purposes. Accordingly, the Interim Report
covers the 26 weeks ended 29 October 2006, with comparative information for the
26 weeks ended 30 October 2005 and for the 52 weeks ended 30 April 2006.
The financial information in the Interim Report relating to the 52 weeks ended
30 April 2006 does not constitute statutory accounts within the meaning of s240
of the Companies Act 1985. The statutory accounts of the Group for the year
ended 30 April 2006 have been delivered to the Registrar of Companies. The
auditors' opinion on those accounts was unqualified and did not contain a
statement made under s237(2) or s237(3) of the Companies Act 1985.
2 SEGMENT ANALYSIS
The trading activities and performance of the Group continue to be managed
through five geographical divisions: UK Central, UK South, Scotland & Ireland,
UK Railways and International.
Segment revenue and results for the 26 weeks ended 29 October 2006 (unaudited):
UK UK Scotland UK
Central South & Ireland Railways International Core Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
----------------- ------ ------ ------ ------ ------- ------ ------
Revenue
including
share of joint
venture
revenues 32,593 21,576 8,047 20,260 30,718 - 113,194
----------------- ------ ------ ------ ------ ------- ------ ------
Group revenue 28,469 21,576 8,047 20,260 30,231 - 108,583
----------------- ------ ------ ------ ------ ------- ------ ------
Operating
profit before
restructuring
and
non-recurring
items 2,920 1,520 675 1,626 400 - 7,141
----------------- ------ ------ ------ ------ ------- ------ ------
Operating
profit -
segment result 2,920 1,520 675 1,626 400 - 7,141
----------------- ------ ------ ------ ------ ------- ------ ------
Segment revenue and results for the 26 weeks ended 30 October 2005 (unaudited):
UK UK Scotland UK
Central South & Ireland Railways International Core Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
---------------- ------- ------ ------- -------- --------- ------ ------
Revenue
including
share of joint
venture
revenues 27,308 19,781 6,507 14,449 24,103 - 92,148
-------------- ------- ------ ------- -------- --------- ------ ------
Group revenue 22,502 19,781 6,507 14,449 23,137 - 86,376
------------ ------- ------- ------- -------- --------- ------ -------
Operating
profit before
restructuring
and
non-recurring
items 2,336 952 731 1,521 223 - 5,763
------------ ------- ------- ------- -------- --------- ------ -------
Operating
profit -
segment result 2,336 739 731 1,521 220 (692) 4,855
------------ ------- ------- ------- -------- --------- ------ -------
2 SEGMENT ANALYSIS (continued)
Segment revenue and results for the 52 weeks ended 30 April 2006 (audited,
restated):
UK UK Scotland UK
Central South & Ireland Railways International Core Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
-------------- ------- ------ ------- -------- --------- ------ -------
Revenue
including
share of joint
venture
revenues 56,679 40,029 13,342 35,144 52,571 - 197,765
-------------- ------- ------ ------- -------- --------- ------ -------
Group revenue 46,709 40,029 13,342 35,144 50,700 - 185,924
------------ ------- ------- ------- -------- --------- ------ --------
Operating
profit before
restructuring
and
non-recurring
items 4,354 1,382 1,112 2,831 727 - 10,406
------------ ------- ------- ------- -------- --------- ------ --------
Operating
profit -
segment result 4,354 911 1,112 2,831 507 11,668 21,383
------------ ------- ------- ------- -------- --------- ------ --------
The segment revenue and results for the 52 weeks ended 30 April 2006 have been
restated to reflect the transfer of certain operations between segments with
effect from 1 May 2006. The transfers were made in order to better align those
operations with the Group's geographical divisions. The restatements are as
follows:
Revenue of £5,325,000 and operating profit of £508,000 have been transferred
from UK South to UK Central; and
Revenue of £1,179,000 and operating profit of £160,000 have been transferred
from UK South to International.
3 Non-recurring items and restructuring costs
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
--------------------------- --------- --------- ---------
Restructuring costs - (216) (691)
Operating loss relating to Basing View
Investments Ltd - (692) (780)
Gain arising on retirement benefit plan
changes - - 13,546
Costs relating to Admission - - (1,098)
--------------------------- --------- --------- ---------
Total - (908) 10,977
--------------------------- --------- --------- ---------
RESTRUCTURING COSTS
In the 52 weeks ended 30 April 2006, the Group incurred £0.7m of redundancy
costs resulting from restructuring in the UK South (£0.5m) and International
(£0.2m) divisions.
OPERATING LOSS RELATING TO BASING VIEW INVESTMENTS LTD
On 15 March 2006, the Company acquired Basing View Investments Ltd (BVI), which
held the 34.34% interest in Scott Wilson Holdings Ltd not then held by the
Company and liabilities under various loan and redeemable share instruments. The
Company immediately purchased, or funded the settlement of, all those
liabilities. The interim financial statements of the Group consolidate the
revenues, costs, assets, liabilities and cash flows of BVI and its subsidiaries
throughout both the period for which they are prepared and the comparative prior
periods.
3 NON-RECURRING ITEMS AND RESTRUCTURING COSTS (continued)
GAIN ARISING ON RETIREMENT BENEFIT PLAN CHANGES
In March 2006, the trustees and substantially all of the members of the Scott
Wilson Pension Scheme (SWPS), a defined benefit arrangement, agreed, conditional
on the Company's Admission to the Official List and the payment of a minimum
£16.0m special cash contribution into SWPS, to break the link from 1 October
2006 between accrued pensionable service up to that date and future salary
increases. Additionally, they agreed that from 1 October 2006 active members
would either pay increased contributions, accrue pension benefit at a reduced
rate or switch into the Group's money purchase (defined contribution) section.
Also in March 2006, the trustees and substantially all of the members of the
Scott Wilson Shared Cost Section of the industry-wide Railways Pension Scheme
(SWRPS), a defined benefit arrangement, agreed, conditional on the Company's
Admission to the Official List and the payment of a £2.0m special cash
contribution into SWRPS, to break the link from 1 October 2006 between accrued
pensionable service up to that date and future salary increases.
The impact of these changes was to reduce the overall gross deficit on these
schemes by £13.5m.
COSTS RELATING TO ADMISSION
During the 52 weeks ended 30 April 2006, costs of £1.1m were incurred in
relation to the Admission of the Company to the Official List. Additionally,
costs of £4.8m were incurred in relation to the issue of additional Ordinary
Shares at the time of Admission, which were charged against the share premium.
4 FINANCE INCOME
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
--------------------------- --------- --------- ---------
Interest income on bank deposits 471 64 345
Expected return on pension plan assets 5,477 3,908 7,938
--------------------------- --------- --------- ---------
5,948 3,972 8,283
--------------------------- --------- --------- ---------
5 FINANCE COSTS
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
--------------------------- --------- --------- ---------
Interest on bank loans and overdrafts 93 436 723
Interest on other loans 59 121 489
Finance lease charges 198 110 264
Preference shares redemption premium - 316 304
Unwind of discount on deferred
consideration 22 - -
Interest on retirement benefit
obligations 4,696 4,254 8,620
--------------------------- --------- --------- ---------
5,068 5,237 10,400
--------------------------- --------- --------- ---------
6 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of Ordinary Shares
in issue during the period, excluding Ordinary Shares held by the Scott Wilson
Holdings Ltd Employee Share Ownership Trust.
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
--------------------------- --------- --------- ---------
Profit attributable to equity holders of
the Company 5,351 1,748 12,527
--------------------------- --------- --------- ---------
Weighted average number of Ordinary
Shares in issue (thousands) 70,448 26,689 32,203
--------------------------- --------- --------- ---------
Basic earnings per share (p) 7.60p 6.55p 38.90p
--------------------------- --------- --------- ---------
Weighted average number of Ordinary
Shares in issue (thousands) 70,448 26,689 32,203
Dilutive effect of share options
(thousands) 1,694 - 1,025
--------------------------- --------- --------- ---------
Diluted weighted average number of
Ordinary Shares in issue (thousands) 72,142 26,689 33,228
--------------------------- --------- --------- ---------
Diluted earnings per share (p) 7.42p 6.55p 37.70p
--------------------------- --------- --------- ---------
6 EARNINGS PER SHARE (continued)
UNDERLYING* EARNINGS PER SHARE
Underlying* earnings per share is calculated by dividing the profit attributable
to equity holders of the Company, after adding back non-recurring items and
restructuring costs, by the weighted average number of Ordinary Shares in issue
during the period, excluding Ordinary Shares held by the Scott Wilson Holdings
Ltd Employee Share Ownership Trust.
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
--------------------------- --------- --------- ---------
Profit attributable to equity holders of
the Company 5,351 1,748 12,527
Restructuring costs - 216 691
Operating loss relating to Basing View
Investments Ltd - 692 780
Gain arising on retirement benefit plan
changes - - (13,546)
Costs relating to Admission - - 1,098
Tax relating to non-recurring items and
restructuring costs - (147) 3,623
--------------------------- --------- --------- ---------
Underlying* profit attributable to equity
holders of the Company 5,351 2,509 5,173
--------------------------- --------- --------- ---------
Weighted average number of Ordinary
Shares in issue (thousands) 70,448 26,689 32,203
--------------------------- --------- --------- ---------
Underlying* basic earnings per share (p) 7.60p 9.40p 16.06p
--------------------------- --------- --------- ---------
Weighted average number of Ordinary
Shares in issue (thousands) 70,448 26,689 32,203
--------------------------- --------- --------- ---------
Dilutive effect of share options
(thousands) 1,694 - 1,025
--------------------------- --------- --------- ---------
Diluted weighted average number of
Ordinary Shares in issue (thousands) 72,142 26,689 33,228
--------------------------- --------- --------- ---------
Underlying* diluted earnings per share(p) 7.42p 9.40p 15.57p
--------------------------- --------- --------- ---------
No options over Ordinary Shares have been awarded since 29 October 2006.
7 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Issued Shares to Retained Other
capital be issued Earnings reserves Total
£'000 £'000 £'000 £'000 £'000
--------------------- ------- ------- ------- ------- -------
At 1 May 2006 86,277 - (28,426) (6,074) 51,777
Shares issued under share
option schemes 14 - - - 14
Contingently issuable
shares relating to
business acquisitions - 481 - - 481
Expense recognised
directly in equity - - (6,374) - (6,374)
Profit for the period - - 5,351 - 5,351
Equity-settled share-based
compensation expense - - 217 - 217
Fair value adjustments on
acquisition of minority
interests - - 94 - 94
Translation differences
(net of tax) - - - (239) (239)
--------------------- ------- ------- ------- ------- -------
At 29 October 2006 86,291 481 (29,138) (6,313) 51,321
--------------------- ------- ------- ------- ------- -------
8 CASH GENERATED FROM OPERATIONS
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
--------------------------- --------- --------- ---------
Operating profit 7,141 4,855 21,383
Gain arising on retirement benefit plan
changes - - (13,546)
Costs of Admission recognised in the
Income Statement - - 1,098
Share of result of joint ventures (254) (657) (1,289)
Movement on acquisition of minority
interests (117) - -
Defined benefit pension plan current
service cost 2,700 2,641 4,757
Depreciation and amortisation 1,655 1,271 2,832
Share-based compensation expense 230 - 51
Increase in receivables and prepayments (10,788) (14,240) (14,722)
Increase in payables and accruals 6,378 11,618 11,433
Increase in provisions 558 - 632
--------------------------- --------- --------- ---------
Cash generated from operations 7,503 5,488 12,629
--------------------------- --------- --------- ---------
9 Analysis of net cash/(debt)
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
--------------------------- --------- --------- ---------
Cash and cash equivalents 17,366 5,043 33,067
Bank overdrafts (19) (8,373) -
--------------------------- --------- --------- ---------
Net cash and cash equivalents 17,347 (3,330) 33,067
Bank loans (7) (3,764) (232)
Other loans (1,631) (7,135) (1,849)
Obligations under finance leases (4,329) (3,160) (3,726)
Preference shares (310) (8,719) (310)
--------------------------- --------- --------- ---------
Net cash/(debt) 11,070 (26,108) 26,950
--------------------------- --------- --------- ---------
10 CONTINGENT LIABILITIES
The Group has issued guarantees in the normal course of business to secure
advance payments on contracts and to meet contractual bid and performance bond
obligations. The amount of all such guarantees at 29 October 2006 was £6.7m (30
October 2005: £9.5m, 30 April 2006: £10.9m).
11 BUSINESS COMBINATIONS
On 1 June 2006, the Group acquired the entire share capital of Roscoe Postle
Associates Inc (RPA), a Toronto-based mining consultancy business, for a total
potential consideration of C$5.2m (inclusive of net asset adjustment of C$0.2m).
The provisional goodwill arising on the acquisition is £2.1m. RPA contributed
revenue of £1.4m and profit before taxation of £0.3m to the Group's results for
the 26 weeks ended 29 October 2006.
12 INTERIM DIVIDEND
The Directors have declared an interim dividend for the 52 week period ending 29
April 2007 of 1.0p per Ordinary Share to be paid on 23 February 2007 to
shareholders on the register at 26 January 2007. In accordance with IAS 10, this
interim dividend has not been recognised in the Interim Report.
13 POST BALANCE SHEET EVENTS
ACQUISITION OF FERGUSON MCILVEEN
On 1 November 2006, the Group acquired the business and assets of Ferguson
McIlveen LLP, a Northern Ireland based consultancy business providing design
services for the property, environment and infrastructure sectors, for a total
consideration of £10.8m. The consideration comprises an initial cash payment of
£3.7m and Ordinary Shares in Scott Wilson Group plc to the value of £1.85m,
together with deferred cash consideration of £4.05m payable over two years and
deferred consideration to be settled by Ordinary Shares in Scott Wilson Group
plc one year after completion to the value of £1.2m. Scott Wilson Ltd became the
principal employer of the Ferguson McIlveen final salary pension scheme, which
as at October 2006 had an estimated deficit (net of related deferred tax) of
£1.8m. The estimated goodwill/intangibles arising on the acquisition is £10.0m.
ACQUISITION OF CAMERON TAYLOR
On 7 December 2006, the Group acquired the entire share capital of Cameron
Taylor Group Limited (Cameron Taylor), a London-based consultancy business with
particular expertise in the property sector, for a total consideration of
£15.6m. The consideration comprises an initial cash payment of £9.9m, the issue
of loan notes of £1.0m and Ordinary Shares in Scott Wilson Group plc to the
value of £3.5m, together with deferred consideration to be settled one year from
completion by further Ordinary Shares in Scott Wilson Group plc to the value of
£1.2m. The estimated goodwill/intangibles arising on the acquisition is £10.1m.
ACQUISITION OF DGP
On 7 December 2006, the Group acquired the entire share capital of DGP
International Limited (DGP), a Manchester-based consultancy business with
particular expertise in the nuclear, petrochemical, pharmaceutical, water and
waste management sectors, for a maximum expected consideration of £14.6m. The
consideration comprises an initial cash payment of £8.6m and Ordinary Shares in
Scott Wilson Group plc to the value of £3.5m, together with deferred cash
consideration of up to £2.5m, contingent upon DGP's financial performance in the
year ended 31 December 2006. The estimated goodwill/intangibles arising on the
acquisition is £12.9m.
14 RECONCILIATION OF UNDERLYING GROUP RESULTS
The Directors believe that the presentation of underlying operating profit,
underlying operating margin and underlying earnings per share for the
comparative periods, assists with the understanding of the results of the
Group. A reconciliation of underlying operating profit to Group operating
profit is given below. A reconciliation of underlying basic and diluted earnings
per share is set out in note 6. Underlying operating margin is calculated as a
percentage of Group revenue including share of joint venture revenues.
UNDERLYING* OPERATING PROFIT
26 weeks 26 weeks 52 weeks
ended ended ended
29 October 30 October 30 April
2006 2005 2006
unaudited unaudited audited
£'000 £'000 £'000
------------------------ ---------- ---------- ----------
Operating profit per Income Statement 7,141 4,855 21,383
Restructuring costs - 216 691
Non-recurring loss relating to BVI - 692 780
Gain arising on retirement benefit plan
changes - - (13,546)
Costs relating to Admission - - 1,098
------------------------ ---------- ---------- ----------
Underlying* operating profit 7,141 5,763 10,406
------------------------ ---------- ---------- ----------
Underlying* operating margin 6.3% 6.3% 5.3%
------------------------ ---------- ---------- ----------
INDEPENDENT REVIEW REPORT
TO SCOTT WILSON GROUP PLC
Introduction
We have been instructed by the company to review the financial information for
the 26 weeks ended 29 October 2006 which comprise the consolidated income
statement, the consolidated statement of recognised income and expense, the
consolidated balance sheet, the consolidated cash flow statement and related
notes 1 to 14. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 26 weeks ended
29 October 2006.
Deloitte & Touche LLP
Chartered Accountants
London
15 January 2007
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