Final Results

Allen PLC 27 June 2001 Allen Plc PRESS RELEASE PRESS RELEASE PRESS RELEASE PRESS FOR RELEASE 7.00 A.M. 27 JUNE 2001 Allen Plc ('Allen') (Hire Services and Utility Services) PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 1 APRIL 2001 2001 2000 52 weeks 53 weeks Turnover £321.48m £347.95m Pre-exceptional pre-tax (loss)/ profit (£4.51m) £20.63m Pre-exceptional (loss)/earnings per share (6.28p) 35.19p Dividends per share 13.90p 13.90p Background * A year of significant change * New Chairman, Chief Executive Officer and Chief Operating Officer * Disposals: - Speedy Scaffolding - Sheet Piling (UK) - Housebuilding Division - G Pearce Civil Engineering - Building Contracting Division. * Planning to sell Utility Services * Change of name to Speedy Hire Plc Speedy Hire * Another record year * Turnover passed the £100 million landmark * Like-for-like sales up 15% * Operating margin of 17.1% * Operating profit up 14% to £17.2 million. (adjusted for 53 weeks last year) * Confident of further growth in the year ahead For further information: John Brown (Chief Executive) Wednesday only: 020 7786 9600 Neil O'Brien (Group Finance Director) Thursday onwards: 01942 720000 Brian Coleman-Smith / Philip Hewitt-Brown / 020 7786 9600 Bruce Croxford Binns & Co Public Relations Allen Plc PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 1 APRIL 2001 CHAIRMAN'S STATEMENT AND REVIEW OF THE YEAR Summary. The financial year 2000/01 was one of significant change for the Group. It resulted in the disposals of major divisions and produced a totally unacceptable financial performance for shareholders and a traumatic period for our people. Group turnover was £321 million (1999/00: £348 million), Group pre-tax losses post exceptional charges were £13.9 million (1999/00: £27.5 million profit) and Group shareholders' funds declined by £17.8 million. Losses per share were 28.88p (1999/00: earnings per share of 46.87p). In contrast to the performance of the whole Group, strong progress was recorded by the Hire division, which we have stated will be the future focus of the business. Turnover increased to £101 million (1999/00: £83 million) and operating profit to £17.2 million (1999/00: £15.4 million). Shareholders should note the move from a reducing balance to a straight line depreciation policy to comply with best industry standards. We have also taken the opportunity for the early adoption of FRS 19 affecting Deferred Taxation. In addition the Group has provided £0.8 million following the failure of Independent Insurance Group Plc, to write off the cost of premiums relating to 2001/02 committed to at the year-end. After many years of uninterrupted growth for the Allen Group, a natural reaction would be to ask what went wrong? Within this review, I explain what brought about such an unacceptable performance, the actions that have been taken, and demonstrate that your company now is in good shape with the ability to take advantage of the growth opportunities which lie ahead. Review of the Year. A justifiable criticism of Allen was that it had become too diversified. It was regarded as a conglomerate and with the exception of Speedy Hire, no single division had a leading position in its chosen market. This resulted in a lack of focus. Management had begun to address these issues during 2000. May 2000 saw the disposal of the Scaffolding business to its management for a consideration of £2.1 million. Sheet Piling followed in June, again being sold to its management for £1.2 million. In August, the Housebuilding division was sold to Morris Homes for a net £22 million. £10.5m of this consideration was deferred and will become payable in two instalments in August 2001 and August 2002. In November, it was announced that Pearce, a non-specialist civil engineering contractor would be sold or closed. This was sold for a nominal sum in March 2001, but losses of £4.6 million were incurred in trading and exiting the business. At this point, the Group was starting to take on a different shape, consisting as it did of Building Contracting, Utility Services and Speedy Hire. In terms of operating profit, Speedy Hire had become the largest division by far, having expanded significantly over the last five years. The Board therefore began to look at demerging Speedy Hire and floating it off as a separate public company. In October 2000, the newly appointed Managing Director of Building Contracting, Nick Davies, started a review of his division. This culminated in mid February when it became apparent that several large contracts undertaken by P S Turner, a company acquired in 1997, were flawed and had been incorrectly priced. Board controls and procedures had not been followed. It was estimated that losses of £13 million would be incurred in completing contracts in this division. Simultaneously, Mike Rowan, who had recently been appointed to the position of Managing Director at Ryan Utility Services, carried out a similar review. Ryan provides pipeline rehabilitation and replacement services for the main utility companies, as well as multi-utility installations to new properties and has a 'blue chip' customer base. It emerged that volume and mix of work on one of the recently signed contracts was not meeting expectations and that if the situation persisted, the contract would be loss making. Donald Greenhalgh, the Chairman and Ken Fox, the Chief Executive resigned on 13th February 2001. Having joined the board as a non-executive director in June 2000, I was appointed as Chairman and John Brown, the Managing Director of Speedy Hire was appointed as Group Chief Executive. Simultaneously, KPMG Audit Plc were appointed as auditors and undertook a thorough review of the Group. The Building Contracting division was immediately put up for sale. A number of interested parties were approached and on the 8th June 2001 the division was sold to Montpellier plc for £1 million, after the group injected a net £ 5.6 million into the company. The Group also issued a promissory note to Montpellier to pay £3.3 million for the tax losses in the Building Contracting division, which the Group expects to recover in full by offsetting the losses against its trading profits in other divisions. Shareholders should note that Montpellier accepted responsibility for all parent company guarantees and £19 million worth of bonds. The sale thus provided the Group with a clean and immediate exit from the Building Contracting division. As painful as this process has been, a major area of risk has been removed from the business. The remaining non-core company is Ryan Utility Services. A contractual issue with a major customer is currently being resolved through a process of mediation. Once this is completed, we will be in a position to establish Ryan's value and will be looking to dispose of it. I wish to stress that the Board will only recommend this course of action provided it realises an acceptable level of value for shareholders. We also have disposed of the majority of the investment property portfolio, built up over several years. This is not our core business and the properties were sold since the year end at close to book value of £2.5 million. The future focus, therefore, will be on Speedy Hire. A resolution proposing a change of name of the company to Speedy Hire Plc, to reflect this position, will be put to the AGM. Board Changes. As the Group has changed shape over the past months, so has the Board. As previously stated, Don Greenhalgh and Ken Fox resigned in February 2001. Notwithstanding the difficulties of the past year, we should be mindful of the fact that they built Allen from a small, locally based building contractor into a sizeable publicly quoted company with national coverage. This was a major achievement and we wish them both well for the future. Nick Davies joined the Board in September last year and resigned following the sale of the Building Contracting division to Montpellier plc. In an immensely difficult situation, Nick provided outstanding leadership and helped conduct the disposal process with exemplary professionalism. We wish him every success in his new position. Mike Morgan will be retiring from the Board following the AGM, having completed 30 years' service. Mike has done an excellent job in building Speedy Space to its current position in the marketplace and we wish him well in his retirement. Finally, I would like to thank Jeremy Weston who will be retiring as a non-executive director following the AGM, having served for five years. We wish him well for the future. Turning now to the new Board, it is important that it is properly constituted, well balanced and provides effective leadership. I believe that this has been achieved. John Brown was appointed as Chief Executive in February 2001. John has been responsible for the outstanding success of Speedy Hire, building it from one outlet in 1977 to the national coverage which it now has, with over 200 outlets. He will be responsible for managing the growth of Speedy Hire into the future. Steve Corcoran was appointed as Chief Operating Officer in April 2001. Steve has been with the group for 11 years, the last 6 of which as Managing Director of Speedy Southern, growing it to become the largest and most profitable division of the company. He now has responsibility for managing the operations of the whole of Speedy Hire. Neil O' Brien, who joined Allen in 1999, remains as Finance Director. Two new non-executive directors have joined the Board: David Galloway was until recently Group Managing Director of Lex Service Group plc and has considerable experience in the hire and services sector; Frank Dee was Chairman of Day and Nite stores, until its recent sale to T & S Stores plc and has significant operations experience in multi-site, customer focused businesses in both the publicly quoted and private company sectors. This new board has made an excellent start and I am looking forward to working with and helping such an enthusiastic, well-motivated executive management team. It is essential we continue to motivate our senior management and to this end, we are proposing the introduction of a Long Term Incentive Plan for the senior executives. We believe that this proposal aligns the interests of the participants and shareholders alike. This year calls for a special thank you to all our people, some of whom have had to work through extremely difficult situations, surrounded by uncertainty. They concentrated on the task in hand and worked through the challenges. We are all extremely grateful. Dividend. At the time of the announcement of 14 February, we indicated that, subject to unforeseen circumstances, the Board would be proposing an unchanged final dividend of 8.3p. We are recommending that this dividend is paid and, if approved at the AGM, will be paid on 28th August to all shareholders on the register on 27th July. Total dividend for the year will be 13.90p. However, shareholders should note that a different company has emerged from the old and that companies within the hire sector require significant sums of capital investment in order to maintain and improve their rate of growth. Speedy Hire is no exception. The Board intends that future dividend payments should be covered not less than 3 times by earnings per share. This will be implemented in the current financial year. Outlook. The macro-economic climate remains favourable, with the Government committed to significant infrastructure projects. This should not harm our prospects as it impacts favourably on our customers. At the micro-economic level, the outlook is good. Growth continues in both long established branches and recently opened greenfield sites. Management is currently implementing a series of improvements in controls appropriate to the current size of the business and to accommodate future growth. The Group operates in a highly fragmented market which is beginning to consolidate and I anticipate that this process will accelerate. Additionally, we estimate that we are the second largest player in our sector, albeit with only 11% market share. We therefore continue to seek acquisitions which will add value for shareholders and in addition expect to open around 20 new outlets this year, with 10 already opened or at a contractual stage. Achieving scale and further national coverage offer business advantages. Investment in new outlets or acquisitions will only be made against demanding financial and operating criteria. Many of the problems and uncertainties now have been removed from the business. Gearing and interest cover are at acceptable levels and cashflow remains strong. I am greatly encouraged by the enthusiasm and commitment of the staff and senior management team. The business is now firmly back on track. Current trading remains good and I look forward to reporting a vastly improved situation for the current financial year. D. W. Wallis 27 June 2001 CHIEF EXECUTIVE'S REVIEW Another Record Year for Speedy The changes in the Group have been covered in the Chairman's statement so I will limit my comments to the ongoing business of Speedy. Following the decision to focus on our hire activities, I was delighted to have been appointed Chief Executive in February 2001, having been involved with Speedy since the opening of the first depot in 1977. In the last 5 years sales have grown by an annual compound growth rate of 29%, operating profits by 31% and EBITDA by 34%. Speedy achieved another excellent result from what is now our core business. Turnover has passed the £100 million landmark and was up by 24% with operating profit up 14% to £17.2 million (after adjusting for the 53 week period last year). The operating margin of 17.1%, although slightly reduced on last year's was achieved after writing off in full all start up costs for Speedy Western, Speedy Power and Speedy Survey. All 8 companies in the division were profitable. EBITDA in the year increased to £32.5 million from last year's £ 27.7m, an increase of 20% (after adjusting for the 53 week period last year). Our like for like turnover growth in the year was 15%. We achieved this by offering the best products at competitive prices, but with total emphasis on service. Our modern fleet of vehicles, mainly replaced on a two-year cycle, enables us to meet our customers' demands when timing is crucial. This, combined with our industry leading bonus scheme and a hire fleet averaging not much more than two years old has enabled us to stay ahead of the competition. During the year we invested a further £34 million (1999/00: £30 million) to update and expand our hire assets. We believe that the market remains buoyant, and with such a fragmented industry are confident of continuing to increase our share. It is our intention to move from our present number two position to become the UK market leader in our sector of the market. Our leading position in data processing continues and our web-site has won further awards in the year. It is worth recalling that we believe that this was the first interactive tool hire web-site in Europe. We were also leaders in EDI invoicing. When the market place needs such technology we are amongst the first to respond. The year saw the opening of 22 greenfield sites and we acquired 11 branches during the year including 9 Tool Hire depots from Tilbury Douglas Plc (now Interserve). This latest acquisition has been particularly pleasing with the setting up of a long term hire agreement with them. Speedy Space had another record year and continues to expand successfully and now has over 10,000 units with utilisation rates remaining above 90%. The continued expansion of Speedy Lifting, together with our newly opened Speedy Safety, Speedy Interiors and Speedy Engineering depots highlight the tremendous opportunity for expansion that awaits us. These new initiatives all help to create added value to our core business. Health and Safety The never ending demands for improvements in Health & Safety performance will continue to encourage our customers to increase their reliance on hire. We are proud to have been the only national hire company to obtain the Hire Association Europe's 'Safe-Hire' Award when they were introduced earlier this year. The Future With industry continuing to increasingly outsource we are well placed to take advantage of this trend. After opening more than 40 greenfield sites in the past two years and a further 20 new depots planned for the current year we are set to continue our expansion. With our proven business model, I am confident that we will see further growth in the year ahead. John Brown 27 June 2001 ALLEN PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE 52 WEEKS ENDED 1 APRIL 2001 Restated Note Year to Year to 1 April 2 April 2001 2000 (52 (53 weeks) weeks) £'000 £'000 £'000 £'000 Turnover 1 Continuing operations 125,578 152,928 Discontinued operations 168,550 222,372 --------- ---------- 321,478 347,950 Cost of sales (253,506) (263,083) ------------ ------------ Gross profit 67,972 84,867 Distribution costs (21,993) (15,594) Administration expenses - ongoing (40,627) (40,739) Administration expenses - exceptional (800) - Other operating charges (8,456) (9,230) Other operating income - Exceptional - 7,034 Other operating income - Ongoing 1,664 4,273 ----------- ----------- Operating profit/(loss) 2 - Continuing operations 14,464 16,783 - Discontinued operations (16,704) 13,828 ----------- ------- (2,240) 30,611 Loss on disposal of discontinued (5,623) - operations Provision against loss on disposal of a discontinued operation (2,962) (197) Interest payable (3,074) (2,948) ----------- --------- (Loss)/profit before taxation 2 (13,899) 27,466 Taxation 1,913 (7,973) ----------- --------- (Loss)/profit after taxation (11,986) 19,493 Minority interests (9) (24) ----------- --------- (Loss)/profit attributable to the (11,995) 19,469 group Dividends (5,773) (5,773) ----------- --------- (Retained/loss) profit for the financial year (17,768) 13,696 ====== ===== (Loss)/profit before taxation per share - basic (33.46p) 66.13p - underlying (10.87p) 49.67p - diluted (33.46p) 66.12p (Loss)/Earnings per share 4 - basic (28.88p) 46.87p - underlying (6.28p) 35.19p - diluted (28.88p) 46.87p ALLEN PLC CONSOLIDATED BALANCE SHEET AS AT 1 APRIL 2001 Restated As at As at 1 April 2 April 2001 2000 £'000 £'000 £'000 £'000 Fixed assets Intangible assets 1,566 696 Tangible assets 106,801 89,198 ---------- -------- 108,367 89,894 Current assets Stocks and work in progress 11,785 38,438 Debtors: amounts falling due within 83,622 83,997 one year Cash at bank and in hand - 2,476 ---------- --------- 95,407 124,911 Creditors due within one year (118,876) (112,372) ---------- --------- Net current (liabilities)/assets (23,469) 12,539 Debtors: Amounts falling due after more than one year 4,513 - --------- --------- Total assets less current liabilities 89,411 102,433 Creditors due after one year (21,249) (16,230) Provisions for liabilities and charges (8,087) (8,229) ---------- --------- 60,075 77,974 ===== ===== Capital and reserves Called-up share capital 2,077 2,077 Share premium 30,119 30,119 Merger reserve 3,660 3,660 Revaluation reserve 390 390 Investment property revaluation 665 675 reserve Capital redemption reserve 26 26 Profit and loss account 23,138 40,879 Minority interests - 148 --------- --------- 60,075 77,974 ===== ===== ALLEN PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE 52 WEEKS ENDED 1 APRIL 2001 Year to Year to 1 April 2 April 2001 2000 £'000 £'000 (52 weeks) (53 weeks) Cash flow from operating activities 15,706 33,629 ---------- --------- Returns on investments and servicing of finance Interest received 14 19 Interest paid (836) (405) Interest element of HP and finance lease payments (2,252) (2,562) ---------- ---------- (3,074) (2,948) ---------- --------- Tax paid (2,695) (4,364) ---------- --------- Purchase of tangible fixed assets (11,551) (20,197) Sale of tangible fixed assets 9,746 8,423 --------- --------- (1,805) (11,774) --------- ---------- Purchase of businesses (5,535) (1,994) Disposal of subsidiary undertakings 12,164 - Overdrafts disposed of with subsidiary undertakings 6,853 - Professional fees in connection with group restructuring (2,317) - --------- --------- 11,165 (1,994) --------- --------- Dividends paid (5,773) (5,234) ---------- --------- Debt repaid (8,057) 5,155 Capital element of HP and finance lease payments (19,209) (17,515) ---------- ---------- (27,266) (12,360) --------- --------- Decrease in cash/increase in borrowings (13,742) (5,045) --------- --------- Analysis of net debt At Other At 3 April Cash non-cash 1 April 2000 flow changes 2001 £'000 £'000 £'000 £'000 Cash at bank and in hand 2,476 (2,476) - - Overdrafts - (11,266) - (11,266) -------- -------- -------- -------- 2,476 (13,742) - (11,266) -------- -------- -------- -------- Debt due within one year (8,044) 8,057 (29) (16) Debt due after one year (31) - 29 (2) Hire-purchase and finance lease (32,315) 19,209 (26,151) (39,257) contacts -------- -------- -------- -------- (40,390) 27,266 (26,151) (39,275) -------- -------- -------- -------- (37,914) 13,524 (26,151) (50,541) -------- -------- -------- -------- Notes to the Financial Statements 1. Turnover 2001 2000 (52 % (53 % weeks) weeks) £'000 £'000 Turnover Hire Services 100,634 31.3 82,566 23.7 Housebuilding 10,878 3.4 41,893 12.0 Utility Services and Civil Engineering 60,217 18.7 63,088 18.1 Building 149,749 46.6 160,403 46.2 ---------- -------- ------- ------- 321,478 100.0 347,950 100.0 --------- -------- ------- -------- 2. Operating (loss)/profit on ordinary activities Hire Services 17,233 15,366 Housebuilding 300 4,215 Utility Services and Civil Engineering (5,249) 2,575 Building (12,684) 2,246 ---------- ---------- (400) 24,402 House Building - Exceptional item - 7,034 Central overheads (1,040) (825) Central overheads - Exceptional item (800) - ---------- ---------- Operating (loss)/profit before exceptional items and central overheads (2,240) 31,436 Loss and provision against loss on disposal of (8,585) (197) discontinued operations ---------- --------- Operating (loss)/profit before interest payable (10,825) 30,414 Net interest payable (3,074) (2,948) ---------- --------- (Loss)/profit on ordinary activities before taxation (13,899) 27,466 ======= ======= 3. Turnover, Cost of Sales and Net Operating Costs 2001 2000 Discontinued Discontinued Continuing Total Continuing Total £'000 £'000 £'000 £'000 £'000 £'000 Turnover 152,928 168,550 321,478 125,578 222,372 347,950 -------- -------- -------- -------- ------- -------- Cost of Sales 83,188 170,318 253,506 63,546 199,537 263,083 -------- -------- -------- -------- ------ ------- Net Operating Costs Distribution 20,828 1,165 21,993 14,003 1,591 15,594 costs Administrative 27,550 13,877 41,427 23,315 17,424 40,739 expenses Other 8,456 - 8,456 9,230 - 9,230 operating charges Other (1,558) (106)(1,664) (1,299) (10,008) (11,307) operating income -------- -------- -------- -------- -------- ------ 55,276 14,936 70,212 45,249 9,007 54,256 14,464 (16,704)(2,240) 16,783 13,828 30,611 -------- -------- -------- -------- -------- ------ 4. (Loss)/Earnings per Share Basic (loss)/earnings per share have been calculated based on the (loss)/ profit after taxation and minority interests of £11,995,000 (2000 restated: £ 19,469,000) and the weighted average number of shares in issue of 41,535,835 (2000: 41,535,835). Diluted earnings per share has been calculated based on the same (loss)/profit after taxation and minority interests, and on the diluted weighted average number of shares of 41,539,943 (2000 restated: 41,539,943). 5. Operating Cash Flow 2001 2000 (52 weeks) (53 weeks) £'000 £'000 Operating (loss)/ profit (2,240) 30,611 Depreciation and amortisation 16,351 12,916 Profit on sale of fixed assets (3,674) (1,853) Increase in stocks (8,424) (516) Increase in debtors (3) (17,003) Increase in creditors 13,696 9,474 --------- --------- 15,706 33,629 ===== ===== 6. The Group has adopted FRS 19 'Deferred Taxation' for the first time in these accounts. In accordance with FRS 3, a prior year adjustment has been made to restate the amounts included in the consolidated balance sheets of previous years for deferred taxation. The deferred taxation liability in the 2000 accounts has been increased by £2,665,000 and the deferred tax charge for that year has been reduced by £292,000. There is no material effect on the results for the current year as a result of adopting this Accounting Standard. 7. The Board has proposed a final dividend of 8.30 pence per share to be paid on 28 August 2001 to shareholders on the register at 27 July 2001. This, together with an interim dividend of 5.60 pence per share paid on 26 January 2001, makes a total dividend for the year of 13.90 pence per share. 8. The financial information set out above does not comprise full accounts within the meaning of Section 240 of the Companies Act 1985. The financial information contained in this announcement in respect of the year ended 1 April 2001 has been extracted from the financial statements which have been audited and reported upon without qualification by KPMG Audit Plc and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 9. The Annual Report and Accounts for the year ended 1 April 2001 will be posted to shareholders on or about 31 July 2001.

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