Interim Results

Spice PLC 13 December 2007 13 December 2007 Spice plc Interim results - period ended 28 October 2007 Spice plc ("Spice" or "the Group"), the provider of Total Utility Support Services, is pleased to announce its interim results for the period ended 28 October 2007. Financial highlights - Profit before tax of Â£8.3 million (2006 restated: Â£5.8 million) - 44% increase - Profit before tax and amortisation of Â£9.9 million (2006 restated: Â£6.1 million) - 62% increase - EBITA* of Â£12.0 million (2006 restated: Â£7.1 million) - 68% increase - 100% of operating profit converted into operating cash - Â£10.3 million (2006: Â£5.3 million) - 30% like for like organic growth from existing operations - Diluted earnings per share of 10.7 pence (2006 restated: 8.8 pence) - 22% increase - Adjusted diluted earnings per share of 13.6 pence (2006 restated: 9.5 pence) - 43% increase - Interim dividend of 1.5 pence per share (2006: 1.0 pence) - 50% increase * EBITA comprises profit on ordinary activities before interest, tax and amortisation of intangible fixed assets 2006 comparative numbers have been restated, where appropriate, to reflect the adoption of International Financial Reporting Standards (IFRS) Operational highlights May 2007 H20 renews Yorkshire Water contract May 2007 Team Simoco selected to provide replacement PMR to Western Power Distribution July 2007 H20 renews United Utilities contract December 2007 Billing Services agrees two year contract with Corona Energy Simon Rigby, Chief Executive Officer commented: "We have delivered a very strong performance in the first half of the financial year with a 68% increase in EBITA, 30% of which is pure organic growth. We expect industry drivers, within our core utilities market, to remain strong. We are keenly focused on organic growth, converting our profits into cash and delivering shareholder value from our acquisition of RAS and believe that Spice remains well placed to continue to grow organically (including by cross selling across operating divisions) whilst at the same time continuing to pursue complementary acquisition opportunities within our existing operations. We are confident that we have the right people and structure to make the most of these growth opportunities over the coming months." - Ends - Enquiries: Spice plc - Tel: 0113 201 2120 Simon Rigby, Chief Executive Officer Oliver Lightowlers, Group Finance Director Financial Dynamics - Tel: 020 7831 3113 Billy Clegg Caroline Stewart KBC Peel Hunt (Nominated Adviser and Broker) - Tel: 020 7418 8900 Julian Blunt Business and financial review Spice now provides Total Utility Support Services across seven businesses. Looking at each in turn: Billing Services Our Billing Services business was created in October 2007 through the acquisition of Revenue Assurance Services (RAS) which focused on three activities being billing consultancy, debt resolution and meter point services. The acquisition of RAS is particularly significant for Spice since billing consultancy enhances our capability to work on the supply side, thereby completing the portfolio of skills that enables us to move closer to becoming a full end to end utility outsourcer. The acquired RAS business has contributed Â£0.3 million to the Group result for the two week period since acquisition and trading since October has been in line with our expectations. Billing consultancy is the largest of the three acquired activities and this business has formed our Billing Services business. Post acquisition, debt resolution and meter point services are being integrated into our Water Services business. This is explained further within the report on Water Services. The approximate value of annual billings in UK energy markets is some Â£21 billion per annum with the electricity market estimated to be around three times the size of the gas market. The industrial and commercial element of this market is some Â£11 billion, generated by over 2.5 million industrial and commercial customers. The sheer scale and complexity of the energy markets, coupled with the effects of deregulation and acquisition activity have created a highly complex billing and management environment for our utility clients. The systems and processes of utility companies are capable of working to a high level of efficiency and delivering around 98% accuracy over the billing process. However, material imbalances and errors do arise throughout the entire management, billing and metering process. Billing Services helps the in-house client teams of utilities to identify and correct the errors and imbalances that arise in the energy billing supply chain and also to generate the appropriate cash recovery. This service is provided to utilities on a fully contingent fee basis. The projects undertaken vary widely from identifying over charges and under billing to root cause analysis, market data review, ad-hoc projects designed to audit the efficiency of the client's system and upon request, audit and consultancy on behalf of the industry's regulatory bodies. The entire operational management team of RAS has joined Spice and we have been able to work with the management team during the change of control process which has allowed us to "hit the floor running". The integration of the RAS business is progressing smoothly and as planned. Progress is already being made to cross sell Billing Services into Spice's existing clients in the gas and electricity sector and we have been able to engage with clients that have historically eluded RAS including Corona Energy, with whom we have recently agreed a two year contract. We also see international growth opportunities in the electricity and gas markets. The UK is the most deregulated energy market in the world and as most other major countries move towards deregulation then Billing Services is ideally placed to be first to market in those territories. This can be achieved without the need for substantial overseas investment as the fee earning work will be delivered through our operations at Borehamwood. In the longer term, we also believe that there are opportunities to develop services that address the errors and imbalances arising within the Water and Telecoms markets. Energy Services Inenco, which provides energy management and environmental consultancy services, continues to deliver strong results recording EBITA of Â£1.5 million (2006: Â£0.6 million) for the period ended 28 October 2007. This significant increase (after allowing for the part period in 2006) has been achieved through organic growth including the conversion of cross selling opportunities from our other divisions. Higher margin procurement services continue to be the dominant contributor to Inenco's result which is built upon solid long term customer relationships and increased product penetration. Energy prices continue to be volatile and the recent upward price movements act as a stark reminder that energy procurement is a specialist field and energy and related issues remain high on the boardroom agenda. Recently, Inenco became authorised by the Financial Services Authority. This authorisation differentiates Inenco from its competitors, which will help us to win new customers by providing increased confidence in our services whilst also allowing us to develop new services to assist clients in the management of the risks associated with energy procurement. Within the past six months, we have increased our European customer base. An increasing number of customers are seeking solutions that extend beyond the UK into Mainland Europe. Whilst our European expansion is cautious, as we seek to develop our capabilities in this area, we now have a basis to gain real experience in other European countries including Holland, Spain, Germany and others. The recent energy review and associated White Paper re-affirms the UK government's desire to achieve a low carbon economy with a number of proposals put forward which will maintain and increase the demand for our energy and environmental services. In particular the Carbon Reduction Commitment to be introduced in 2010 will expose up to 5,000 companies to the impact of their carbon emissions. We are seeing signs of "early adopters" responding to the message and engaging Inenco to assist with their action plans. An example is the installation of smart meter technology which is supported by the provision of ongoing management reporting, to turn the massive increase in data into useful information that can be easily understood and acted upon. Clarification surrounding renewable obligation certificates is expected to give impetus to distributed forms of renewable generation and we consider that we are in an excellent position to support our customers' desire to be "green". Subsequent to the end of the financial period, we completed the acquisition of Saturn Energy (Saturn) which is a commercial energy broker focused on the small and medium enterprise ("SME") sector. Saturn acts as agent for SMEs to procure gas and electricity from suppliers under medium and long term contracts. This acquisition fits well with Inenco and enables us to extend the range of our energy brokerage services into the SME sector, which has historically been very fragmented, and we believe that Saturn's services will be enhanced by its ability to utilise the wider resources of Inenco. Facilities Services Facilities Services, which provides facilities management solutions, reported EBITA of Â£2.1 million (2006: Â£1.9 million) for the period. Our Serviceline business has seen strong levels of client activity and demand through the period. This has included Debenhams taking our full integrated service across its entire retail estate and other contract wins including Smith News and Cancer Research UK. The number and range of tasks handled by Serviceline continues to grow to meet client demands and we continue to focus upon innovation around service delivery for our customers. Circle Britannia has benefited from the growth in Serviceline and their associated influence on the selection of supply chain partners that, where possible, result in the appointment of Circle Britannia to undertake the delivery of maintenance services. Maintenance contracts have been agreed with Travelodge and Wolseley during the period and we are hopeful that these relationships can be grown over coming months. As the geographic coverage of our Gas Services business has improved, we have also begun to offer commercial gas maintenance services and have seen good order levels from existing clients as well as strong enquiry levels from new clients. The integration of Atlanta, the acquisition of which was completed in March 2007, is ongoing and our focus continues to be on reducing delivery through Atlanta's sub-contractor network in favour of self delivery by Circle Britannia. In the latter part of the financial period, Circle Britannia finalised the transition from a direct service contract with Norwich Union to an indirect service contract via Asprea, who have been appointed to deliver repairs to domestic insurance policy holders on behalf of Norwich Union. Whilst Asprea's medium to long term forecasts show strong work volumes being maintained, we expect that these new supply arrangements will take some time to bed down during the second half of the financial year. Gas Services Our Gas Services division, which provides gas maintenance, installation and repair, meter operations and emergency response services, was created just over 12 months ago and has contributed EBITA of Â£1.8 million to the result for the period. The acquisitions of Homerton and GMT strengthen our geographic footprint in the South of England and extend our operational capability across South Yorkshire and the North Midlands. Subsequent to the end of the period, we have also completed the acquisition of Gas Call which extends our footprint into Scotland. We remain committed to our strategy of achieving national coverage in the UK market, using established regional businesses and brands, and to use this network to expand our presence in national gas meter operations and the commercial gas maintenance sector via our Facilities Services business. In September 2007, we also acquired MET, which provides training services to learners in the plumbing, gas and heating sectors. This acquisition will provide Spice with a ready supply of "best in class" gas, plumbing and heating engineers whilst offering a sustainable and growing entry into the training market. The underlying drivers within the gas sector remain strong as we benefit from increasing regulations and the requirement for gas safety compliance amongst housing associations, local authorities and private landlords. Apollo and ParGas have been better able to translate these opportunities into contracts as part of a larger group through enhanced systems and management infrastructure. We have secured new term contracts with customers including Wirral Housing Partnership, Hornby Homes, Stockport Council and Bowlees Park Housing Association. We now have access to over 440 CORGI registered engineers and maintain in excess of 145,000 properties. Over the next 12 months, we expect to be able to increase both the number of CORGI engineers in the Group and also the number of properties maintained. Electricity Services During the first half of the year, Electricity Services, which provides specialist utility engineering services to the electricity sector and to industry, increased EBITA by 41% to Â£4.2 million (2006: Â£3.0 million). This growth is underpinned by our Service Island structure, which allows us to deliver a comprehensive "cradle to grave" service, and also through last year's major long term contract wins within the EDF Energy footprint. All of our EDF Energy contracts have been mobilised successfully with particularly strong performance to date from Freedom Power Lines which has benefited from a doubling of volumes. Freedom Asset Care has also performed strongly benefiting from enhanced contractual terms. During the period, our Freedom Consultancy Service Island completed the acquisition of KMN which provides specialist professional civil and structural engineering design and management services. The acquisition reinforces Freedom's strength in these areas but also creates a number of cross selling opportunities for other Service Islands as well as the wider Spice business. The integration of Optimal, which was acquired towards the end of the last financial year, has now been successfully completed. In September 2007, Freedom was selected by AT&T to provide records and data management services in the USA. The contract is for an initial period of two years with an estimated turnover value per annum of Â£5 million. Freedom is working alongside client staff from AT&T in AT&T's offices across four US states (Mississippi, Florida, Tennessee and North Carolina), as part of an integrated project delivery team. Whilst the existing utilities market in the US is currently structured differently to the UK, we believe that in the longer term, the trend towards deregulation and outsourcing will accelerate in the same way as occurred in the UK market. The AT&T contract creates a platform for long term growth in the US market through allowing the Group to begin to develop its capabilities in the US ahead of expected deregulation and outsourcing trends. Whilst the AT&T contract creates a significant long term opportunity for us, our focus remains on the UK market which we still see as continuing to generate significant opportunities for the Freedom business. Telecoms Services Our Telecoms infrastructure support services business, which designs, installs, supports, maintains and operates infrastructure assets around the world, reported a 20% increase in EBITA to Â£2.1 million in the first half of the year (2006: Â£1.8 million). The order book for the business remains in line with our expectations and positions us well for the full year. AirRadio continues to win additional new business with British Airways as it prepares for the opening of Heathrow Terminal 5 in March 2008. This has included an expansion of the data terminal project (D74) which should help to underpin our full year performance. Additionally, new networks have been opened up at both Cardiff and City of London airports and we expect to add at least one other UK airport during the remainder of this financial year. In order to cope with the ever growing demands for radio capacity at Heathrow, AirRadio have deployed Xfin multi-site technology which has created 20% extra capacity from the same quantity of radio channels. Hutchison Team Telecom continues to win new first line maintenance support contracts from companies such as Med Cable, M Link and EU Networks and during the period we have renewed and extended our existing pan European contracts with Interoute for a further three years. We have seen slower than anticipated deployment of our Huawei BT21CN contract due to a number of issues outside of our control. We are hopeful that momentum can be recovered in the second half as start up issues are resolved. The business continues to roll out a number of IP fixed line networks for several of our other manufacturing partners, across both the UK and Europe. Subsequent to the end of the financial period, we completed the acquisition of Redbridge Management Services (RMS) which strengthens our Telecoms Services division and means that our operational capability is now extended to provide comprehensive, UK wide, first line maintenance services which compliments our existing UK and European footprint in Hutchison Team Telecom. The addition of around 58 qualified telecommunications engineers significantly enhances our capabilities. Team Simoco continues to see strong growth in all areas and in particular for sales of Xfin technology. We recently gained another industry innovation award for our Xfin Mutli-site Softswitch, the second of its type in the last two years. New orders have been secured for networks in Panama, China and Africa as well as the UK. During the first half of the year, we have been focused on the Western Power Distribution network roll out programme, which, at over 100 discrete sites, is the largest system of its type to be deployed in the UK in the last five years. This project will continue through the majority of this financial year, providing a significant expected benefit in the results for the year, and we remain on track for completion as planned. Additionally we were able to successfully renew significant maintenance contracts with the UK MOD which will now run until 2010 underpinning our stated aim of increasing maintenance revenues across the business going forward. Water Services Our Water Services business, which provides national clean and dirty water services and meter operations, has made a successful start to the financial year contributing EBITA of Â£3.2 million (2006: Â£2.8 million) an increase of 12%. During the period, H20 renewed both of its meter installation contracts with Yorkshire Water and United Utilities for three years with an option to extend for two years. We are now working under both of these new contracts. Within Yorkshire Water, we are working alongside client staff at Yorkshire Water's Head office. The scope of our work has also been extended to include repair and maintenance of Yorkshire Water's asset infrastructure. Within United Utilities, we are now the sole provider of meter installation services across the whole of United Utilities' network and will shortly be rolling out our bespoke works management system to replace United Utilities' existing systems so as to provide a fully mobile working solution. Elsewhere we have renewed our meter reading contract with Scottish Water as well as continuing to deliver our commercial meter installation contract. There continues to be significant environmental pressures on water conservation and leakage and our water efficiency and leakage management service continues to be in demand from both utility and commercial clients. We have won a two year framework contract with Thames Water to survey, provide and install pressure equipment in tall buildings and also a contract to provide water efficiency services. The current drivers for outsourcing by the utilities, together with the focus on water conservation and maintenance of assets, positions us well for continued growth in the future. Our Metro Rod and Meter U businesses continue to perform in line with expectations. Metro Rod has secured a number of new clients in the period including Nationwide, Budgens and Elyo. We have recently begun to develop our franchise brand in Northern Ireland and are looking to extend this into The Republic of Ireland. Following the acquisition of RAS, two of the acquired businesses (debt resolution and meter point services) are being operationally managed and integrated into our Meter U business. This broadens and extends our field service offering, whilst adding a skilled office based operation. Approximately 230 field agents provide nationwide coverage on utility-based debt collection including pre-disconnection visits, warrant applications, token meter installations and warrant visits. This work is controlled by a team of approximately 40 people based in Warrington. Debt resolution services are controlled from Borehamwood and Solihull. This team undertakes complex debt resolution services for utility clients including both live and final debt. Cross selling Cross selling continues to form an important part of our future growth strategy, particularly following the acquisition of RAS, where an important part of our strategy is to take the Billing Services offering into the electricity sector. We have also begun to leverage the enhanced geographic coverage of our Gas Services business in the development of our commercial gas maintenance services. The successes that we have enjoyed over the past twelve months are being turned into earnings as is demonstrated by the strong like for like organic growth that has been achieved in this period compared to last. We continue to believe that Spice enjoys an exceptionally strong platform from which to convert cross selling opportunities into earnings. Cross selling remains a priority for the management team. Head office Head office costs are mainly comprised of salaries, including the Group's IT and HR functions, and also professional costs. Costs have increased over the period as a result of our continued investment in IT infrastructure and resource. This investment has been made to support the migration to a common accounting platform for four of our businesses (Electricity, Facilities, Water and Billing Services). Connected to this, we have also invested in the further development of our in-house work management system (job track). The "next generation" of job track is expected to be live, initially within our Electricity business, by the end of the year. Acquisitions Five acquisitions have been made during the period, which are summarised below: Initial net Maximum additional consideration contingent consideration Â£'m Â£'m Homerton 1.5 2.5 Contingent consideration based on acquired working capital and performance to April 2008 KMN 0.8 0.1 Contingent consideration based on net assets in completion accounts GMT and MET 6.5 14.1 Contingent consideration based on acquired working capital and performance during 2008, 2009 and 2010 RAS 101.2 - 110.0 16.7 Initial net consideration in respect of these acquisitions totals Â£110.0 million. This includes the issue of 6.5 million new shares to shareholders of RAS. The Group expects to incur exceptional costs of up to Â£0.3 million in the second half of the financial year connected to the reorganisation and integration of RAS. At the start of the financial year, the Group had a provision totaling Â£5.2 million in relation to deferred contingent cash consideration payable on acquisitions made in previous years. This provision relates principally to the acquisitions of Air Radio, Hutchison and Kemac. During the period, a total of Â£2.6 million contingent consideration has been paid mainly in relation to Hutchison and Kemac. After taking account of earn out obligations made in the period ended October 2007, a provision of Â£16.8 million for deferred contingent cash consideration has been carried forward. It is expected that this provision will be utilised over the three year period ending April 2010, depending on the performance of acquired businesses. In November 2007, the Group completed the acquisition of RMS for initial net cash consideration of Â£3.1 million. In December 2007, the Group completed the acquisition of Saturn for initial net cash consideration of Â£3.5 million and also Gas Call for initial net cash consideration of Â£2.25 million. Group Board The Group announced in July 2007 that Sir Rodney Walker intended to stand down as Chairman within twelve months. We have started the search for a new Chairman and believe that it is important to take our time, in order to identify and appoint the best candidate as Chairman. Separately the Group announced today that Carl Chambers will leave the Group around the middle of next year. It is intended in due course, that Peter Burridge, who is currently Managing Director of our Telecoms business will be appointed as Group Corporate Finance Director. This position will cease to be as a Main Board Director of Spice although Peter will continue to be a member of the Group's Operating Board. Peter has extensive acquisitions and corporate finance experience and has worked for the Group for nearly six years. Mike Norfield, who has been Managing Director of Team Simoco for three years, will become Managing Director of our Telecoms business. The Group also announced today that Andy Catchpole has been appointed to the Main Board of Spice as Group Strategy and Development Director. Andy will combine this role with his existing role as Managing Director of our Electricity business. Prior to joining Spice in 2005, Andy held senior positions with 24/7, TXU Europe, Hanson and Eastern Electricity. Andy has made a huge contribution to the development of our Electricity Services business and we believe that Andy can help the wider Group achieve its ambitions to replicate our success in Electricity within our other markets. Financial review The Group has made a strong start to the new financial period. Organic growth and cash conversion continue to be main features of the Spice business. We have recorded 30% like for like organic EBITA growth in the business and have converted 100% of operating profits into operating cashflow. Turnover During 2007, turnover increased by 40% to Â£143.4 million (2006: Â£102.6 million), of which acquisitions contributed Â£2.5 million. Profit on ordinary activities before interest, tax and amortisation of intangible fixed assets (EBITA) EBITA increased by 68% to Â£12.0 million (2006 restated: Â£7.1 million). The table below identifies the driving factors behind this growth including separately identifying the part year effect of acquisitions made during 2006: 2007 2006 Â£'m Â£'m as restated EBITA Existing operations 10.4 8.0 2007 acquisitions 0.7 - Part year effect of 2006 acquisitions 1.9 - IFRS 2 Share based payment charge (1.0) (0.9) 12.0 7.1 The table shows that EBITA from existing operations, excluding the effect of IFRS 2, was Â£10.4 million (2006 restated: Â£8.0 million), representing organic growth of 30% for the period. Separately, acquisitions made during 2007 contributed Â£0.7 million to EBITA. Spice made various acquisitions during 2006, which contributed to EBITA for part of that year but which have contributed to EBITA for the whole of the period ended October 2007. For example, Inenco was acquired on 16 June 2006. Its results for the period between 16 June 2007 and October 2007 are shown within existing operations, as are the comparative numbers for the period from acquisition to October 2006. The results of Inenco for the period from 1 May 2007 to 16 June 2007 are shown within the part year effect of 2006 acquisitions. Other 2006 acquisitions, part of whose performance contributes to this line, are Breval, Apollo, Pargas, Atlanta and Optimal. EBITA operating margins for the Group improved to 8.4% (2006 restated: 6.9%). Underlying operating margins, excluding the effect of IFRS 2, were 9.0% (2006 restated: 7.8%). Finance expenses Finance expenses for the period were Â£2.1 million (2006 restated: Â£1.0 million). The higher finance expense arises due to interest payable on bank debt used to fund the various acquisitions made. In addition, following the adoption of IAS 37, the Group has incurred a non-cash interest charge on its outstanding liability for contingent consideration. This non-cash charge is excluded from the calculation for the purposes of determining compliance with the Group's banking covenants. The Group's banking covenants are based around earnings before interest, tax, depreciation, amortisation and share based payments (Adjusted EBITDA). Adjusted EBITDA interest cover for the period was 7 times (2006 restated: 11 times) which compares against a covenant of 3 times. Profit on ordinary activities before tax and amortisation of intangible fixed assets (PBTA) PBTA increased by 62% to Â£9.9 million (2006 restated: Â£6.1 million). Profit on ordinary activities before tax Profit on ordinary activities before tax increased by 44% to Â£8.3 million (2006 restated: Â£5.8 million). The Group's amortisation charge has increased from Â£0.4 million to Â£1.6 million during the period which is attributable to the amortisation of separately identifiable intangible fixed assets arising on acquisitions made in 2007 and 2006. Tax The Group's effective rate of tax for the period was 27.5% (2006 restated: 23.2%). Under IFRS, the benefit of tax relief on the exercise of share options is recognised entirely on the Group's balance sheet rather than the income statement, although the Group continues to receive the cash benefit of this tax relief under IFRS in the same way that it did under UK GAAP. The Group's effective rate of tax continues to be lower than the standard rate of tax principally as the result of the recognition and utilisation of prior year tax losses. Earnings per share Diluted earnings per share at 10.7 pence (2006 restated: 8.8 pence) increased by 22% and adjusted diluted earnings per share (before amortisation of intangible fixed assets) at 13.6 pence (2006 restated: 9.5 pence) increased by 43%. In prior years, the Group's ESOP has had adequate shares to satisfy all options vested and also options granted but not yet vested. As highlighted in 2006, this is no longer the case and new shares will either be issued or bought on the market to make up this difference. This has been taken account of in the calculation of diluted earnings per share. Dividend The Board is pleased to have recommended an interim dividend of 1.5 pence (2006: 1.0 pence) per share payable on 12 February 2008 to shareholders on the register at 25 January 2008. Cash flow Net cash inflows from operations increased by Â£5.0 million to Â£10.3 million (2006 restated: Â£5.3 million). The Group converted 100% of operating profit into operating cash flow (2006 restated: 79%). During the first half of the financial year, net working capital utilised increased by Â£4.4 million (2006 restated: Â£4.0 million). This utilisation principally arises due to investment in inventories in the period of which the largest movement is connected with ongoing contracts within our Telecoms business. Balance sheet Net assets have increased to Â£119.4 million (2006 restated: Â£47.3 million), reflecting retained profits, cash generated from the exercise of employee share options, the share placing undertaken in March 2007 and in relation to the acquisition of RAS and the adoption of IFRS. Net debt is Â£113.9 million (2006: Â£31.6 million). The increase is mainly attributable to consideration paid in respect of acquisitions and also payments made to settle contingent cash consideration connected with acquisitions. The Group's net debt number excludes certain costs of acquisition connected to RAS which totaled approximately Â£1.6 million and which have been settled in the second half of the financial year. In addition, approximately Â£5.0 million was owed to HMRC in connection with tax liabilities arising from the exercise of share options by option holders of RAS. Again these monies have been paid over to HMRC, subsequent to the end of the financial period. International Financial Reporting Standards (IFRS) The Group has adopted IFRS during the period with an effective date of transition of 1 May 2006 and these results are the first to be presented under IFRS. The tables below reconcile the principal changes to comparative numbers for EBITA, retained profit and net assets for the period ended October 2006 and the year ended April 2007. The adoption of IFRS does not materially affect the Group's turnover, EBITA or profits before tax and amortisation for either the year ended April 2007 or period ended October 2006. IFRS has no effect on the Group's strategy, cash flows or net debt position. The Group's detailed IFRS transition statement is set out on its website at www.spiceplc.com. Period ended Period ended Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'m Â£'m Â£'m EBITA under UK GAAP 7.2 16.3 Holiday pay IAS 19 (0.1) (0.1) EBITA under IFRS 12.0 7.1 16.2 Period ended Period ended Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'m Â£'m Â£'m Retained profit under UK GAAP 3.3 7.5 Non cash interest charge IAS 37 (0.1) (0.3) Amortisation of intangible fixed assets IAS 38 & IFRS 3 1.3 2.8 Holiday pay IAS 19 (0.1) (0.1) Deferred tax on share options IAS 12 - (0.9) Retained profit under IFRS 6.0 4.4 9.0 28 October 29 October 29 April 2007 2006 2007 Â£'m Â£'m Â£'m Net assets under UK GAAP 43.6 67.3 Non cash interest charge IAS 37 (0.1) (0.3) Amortisation of intangible fixed assets IAS 38 & IFRS 3 1.4 2.8 Holiday pay IAS 19 (0.4) (0.4) Deferred tax on share options IAS 12 2.8 5.8 Net assets under IFRS 119.4 47.3 75.2 Move to the Official List In July 2007, Spice announced its intention to move its quotation from AIM to the Official List over the 18 month period from July 2007. Over the course of the six months since that announcement, the Group has begun the various work processes connected with this move and expects to move to the Official List during 2008 (subject to market conditions). Outlook We are pleased with both the operating and financial performance for the first half of the financial year. We expect the industry drivers, within our core utilities market, to remain strong. We are keenly focused on strong organic growth and converting our profits in to cash and delivering shareholder value from our acquisition of RAS and believe that Spice remains well placed to continue to grow organically (including by cross selling across operating divisions) whilst at the same time continuing to pursue complementary acquisition opportunities within our existing operations. We are confident that we have the right people and structure to make the most of these growth opportunities over the coming months. WS Rigby Chief Executive Officer 13 December 2007 Consolidated income statement for the six months ended 28 October 2007 Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Note Â£'000 Â£'000 Â£'000 as restated as restated Revenue 5 143,437 102,633 228,560 Operating expenses (133,090) (95,888) (213,589) EBITA 5 11,977 7,109 16,196 Amortisation of intangible fixed assets (1,630) (364) (1,225) Operating profit 10,347 6,745 14,971 Finance expenses (2,051) (995) (2,727) Profit before tax and amortisation of 9,926 6,114 13,469 intangible fixed assets Amortisation of intangible fixed assets (1,630) (364) (1,225) Profit on ordinary activities before tax 5 8,296 5,750 12,244 Tax on profit on ordinary activities 2 (2,282) (1,333) (3,247) Profit for the period attributable to 6,014 4,417 8,997 equity shareholders Earnings per share (pence per share) Basic 4 12.0 9.8 19.7 Diluted 4 10.7 8.8 18.1 Consolidated balance sheet at 28 October 2007 Unaudited Unaudited Unaudited 28 October 29 October 29 April 2007 2006 2007 Note Â£'000 Â£'000 Â£'000 as restated as restated Assets Non-current assets Purchased goodwill 179,353 57,156 72,159 Intangible fixed assets 59,474 5,739 11,566 Property, plant and equipment 17,919 13,865 17,406 Investment in associates 212 212 212 Trade and other receivables 336 339 335 Deferred tax assets - 1,405 3,480 257,294 78,716 105,158 Current assets Inventories 11,740 6,649 6,688 Trade receivables and other receivables 62,227 43,229 55,323 Non current assets held for resale - 595 589 73,967 50,473 62,600 Liabilities Current liabilities Trade and other payables (63,065) (48,054) (48,184) Current tax payable (6,524) (4,677) (4,889) Financial liabilities (162) (3,327) (5,023) (69,751) (56,058) (58,096) Non-current liabilities Financial liabilities (113,783) (17,576) (29,238) Deferred tax laibilities (11,464) - - Provisions for other liabilities and charges (16,820) (8,280) (5,220) (142,067) (25,856) (34,458) Net assets 119,443 47,275 75,204 Shareholders equity Called up share capital 6,001 4,947 5,347 Share premium account 84,398 27,462 46,523 Other reserves 100 100 100 Retained earnings 28,944 14,766 23,234 Equity shareholders' funds 6 119,443 47,275 75,204 Consolidated cashflow statement for the six months ended 28 October 2007 Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Note Â£'000 Â£'000 Â£'000 Operating activities Net cash generated from operations 7a) 10,317 5,335 16,335 Interest paid (1,932) (874) (2,489) Tax paid (1,702) (1,235) (3,318) Net cash generated from operating activities 6,683 3,226 10,528 Investing activities Purchase of property, plant and equipment (1,960) (1,536) (6,030) Proceeds from sale of property, plant and 737 149 269 equipment Purchase of intangible fixed assets (12) (86) (246) Acquisition of subsidiary undertakings (74,720) (12,511) (46,112) (Debt)/cash acquired with subsidiary (10,749) 3,860 6,076 undertakings Interest receivable 38 27 45 Net cash used in investing activities (86,666) (10,097) (45,998) Financing activities Dividends paid (1,482) (854) (1,306) Repayment of obligations under finance leases (121) (52) (170) Sale of investments - own shares 325 438 1,087 Purchase of investments - own shares (1,368) - (1,305) Proceeds from issue of ordinary shares - - 19,461 Repayment of borrowings (37,676) (634) (73,601) Proceeds from borrowings 122,238 5,962 89,368 Net cash generated from financing activities 81,916 4,860 33,534 Net increase/(decrease) in cash and cash 7c) 1,933 (2,011) (1,936) equivalents Cash and cash equivalents at 30 April 2007 (1,950) (14) (14) Cash and cash equivalents at 28 October 2007 (17) (2,025) (1,950) Notes to the Interim Report for the six months ended 28 October 2007 1 Basis of accounting The interim financial statements have been prepared under the historical cost convention and in accordance with the accounting policies used in the Group's International Financial Reporting Standards (IFRS) transition statement. The comparative numbers for the year ended April 2007 and for the period ended October 2006 have been restated to reflect the adoption of IFRS where appropriate. Details of how the Group's financial results and financial position are impacted by the adoption of IFRS are set out in detail in the Group's IFRS transition statement which was issued on 15 October 2007 and is available on the Group's website at www.spiceplc.com. The accounting policies used in the in the interim financial statements are consistent with those that it is intended will be used in the annual financial statements for the year ending April 2008. Further IFRS standards or interpretations may be issued that could apply to the Group's financial statements for the year ending April 2008. If any such amendments, new standards or interpretations are issued then these may require the financial information provided in this report to be changed. The Group will continue to review its accounting policies in the light of emerging industry consensus on the practical application of IFRS. The interim financial statements for the six months ended 28 October 2007 and for the six months ended 29 October 2006 contained within the interim report do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985 and are unaudited. The comparative figures for the year ended 29 April 2007 have been extracted from the financial statements for 2007 (except for adjustments made for the adoption of IFRS described above). Those financial statements for the year ended 29 April 2007 were prepared under UK GAAP and received an unqualified auditors' report and have been delivered to the Registrar of Companies. 2 Taxation The taxation charge on the profit on ordinary activities has been based upon the estimated effective tax rate of 27.5% (2006 restated: 23.2%) for the current year. 3 Dividends Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'000 Â£'000 Â£'000 Amounts recognised as a distribution from shareholders' funds during the period Final dividend paid of 3.0 pence per share for the 1,482 854 854 year ended 29 April 2007 (2006: 1.9 pence) Interim dividend paid of 1.0 pence per share for the - - 452 year ended 29 April 2007 (2006: 0.7 pence) 1,482 854 1,306 Proposed interim dividend of 1.5 pence for the period 840 452 452 ended 28 October 2007 (2006: 1.0 pence) The interim dividend for the period ended 28 October 2007 will be accounted for, following payment of that dividend, in the second half of the financial year. It is proposed that the interim dividend amounting to Â£840,000 (2006: Â£452,000) will be paid on 12 February 2008 to those shareholders on the register at 25 January 2008. 4 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during each period. The weighted average number of shares, after adjusting for shares held by the ESOP, in issue during the period used in the calculation of basic earnings per share was as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 '000 '000 '000 Weighted average number of shares for basic earnings 50,304 44,871 45,566 per share Diluted earnings per share is the basic earnings per share adjusted for the effect of the conversion into fully paid shares of the weighted average number of share options outstanding during the year. The weighted average number of shares in issue during the period used in the calculation of diluted earnings per share was as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 '000 '000 '000 Weighted average number of shares for diluted earnings 56,159 50,202 49,799 per share Adjusted earnings per share has been calculated so as to exclude the effect of the amortisation of all intangible fixed assets. Adjusted earnings per share has been presented in order that the effects on reported earnings of the amortisation of intangible fixed assets can be fully appreciated. Adjusted earnings used in the calculation of basic and diluted earnings per share reconciles to basic earnings as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'000 Â£'000 Â£'000 as restated as restated Basic earnings 6,014 4,417 8,997 Amortisation of intangible fixed assets 1,630 364 1,225 Adjusted earnings 7,644 4,781 10,222 Earnings per share (pence per share) Basic 12.0 9.8 19.7 Diluted 10.7 8.8 18.1 Adjusted earnings per share (pence per share) Basic 15.2 10.6 22.4 Diluted 13.6 9.5 20.6 5 Segmental analysis The turnover for the period was derived from the Group's principal activities and is attributable to the following markets: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'000 Â£'000 Â£'000 By destination UK 140,608 100,776 224,661 Continental Europe 1,749 1,501 3,165 Rest of the World 1,080 356 734 143,437 102,633 228,560 Turnover for the period is derived from the Group's principal activities as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'000 Â£'000 Â£'000 Billing 917 - - Energy 7,356 5,057 12,161 Facilities 24,821 18,824 43,499 Gas 14,927 - 10,491 Electricity 50,319 43,088 89,839 Telecoms 10,789 8,524 18,357 Water 34,300 27,135 54,192 Head office 8 5 21 143,437 102,633 228,560 Profit before tax is derived from the Group's principal activities as follows: Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'000 Â£'000 Â£'000 as restated as restated Billing 317 - - Energy 1,525 621 1,711 Facilities 2,161 1,943 4,028 Gas 1,825 - 992 Electricity 4,214 2,990 6,761 Telecoms 2,115 1,757 3,541 Water 3,155 2,805 5,221 Head office (3,335) (3,007) (6,058) EBITA 11,977 7,109 16,196 Amortisation of intangible fixed assets (1,630) (364) (1,225) Finance costs (2,051) (995) (2,727) Profit before tax 8,296 5,750 12,244 The Group's IFRS 2 charge has been recorded within Head office for the purposes of this segmental analysis. 6 Statement of changes in equity shareholders' funds Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'000 Â£'000 Â£'000 as restated as restated Total recognised income attributable to 6,014 4,417 8,997 equity shareholders Dividends paid in the period (1,482) (854) (1,306) IFRS 2 Share based payments charge 1,002 900 2,000 Increase in IFRS Deferred tax asset 787 1,149 4,063 S23 tax relief on the exercise of share 472 - 982 options Net proceeds from sale of own shares 285 438 1,087 Payments to acquire own shares (1,368) - (1,305) Issue of shares 38,529 - 20,000 Costs of share issue - - (539) Net addition to equity shareholders' funds 44,239 6,050 33,979 Opening equity shareholders' funds 75,204 41,225 41,225 Closing equity shareholders' funds 119,443 47,275 75,204 Opening shareholders' funds at 1 May 2007 have been restated from Â£39,846,000 to Â£41,225,000 to reflect the adoption of IFRS. 7 Notes to the cash flow statement 7a) Cash generated from operations Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'000 Â£'000 Â£'000 as restated as restated Operating profit 10,347 6,745 14,971 Depreciation of tangible fixed assets 1,732 1,312 2,994 Amortisation of intangible fixed assets 1,630 364 1,225 IFRS 2 Share based payments charge 1,002 900 2,000 Loss on sale of fixed assets 35 - 11 (Increase)/decrease in inventories (4,960) (1,112) 70 Increase in receivables (2,144) (8,793) (15,943) Increase in payables 2,675 5,919 11,007 Net cash generated from operations 10,317 5,335 16,335 7b) Analysis of net debt At At 29 April Cash Non cash 28 October 2007 flows movements 2007 Â£'000 Â£'000 Â£'000 Â£'000 Bank overdraft (1,950) 1,933 - (17) Increase in cash during the period (1,950) 1,933 - (17) Bank loans due within one year (2,824) 2,824 - - Bank loans due after one year (29,200) (84,562) - (113,762) Finance leases due within one year (249) 121 (17) (145) Finance leases due after one year (38) - 17 (21) Net debt (34,261) (79,684) - (113,945) 7c) Reconciliation of net cash inflow to movement in net debt Unaudited Unaudited Unaudited 6 months to 6 months to Year ended 28 October 29 October 29 April 2007 2006 2007 Â£'000 Â£'000 Â£'000 Increase/(decrease) in cash in the period 1,933 (2,011) (1,936) Dividends paid (1,482) (854) (1,306) Net proceeds received from share issue - - 19,461 Sale of investments - own shares 325 438 1,087 Payments to acquire own shares (1,368) - (1,305) Loan notes redeemed 2,824 - 10,649 Cash inflow from financing (81,916) (4,860) (33,534) Change in net debt resulting from cash (79,684) (7,287) (6,884) flows Loan notes issued - (10,704) (13,473) New and acquired finance leases - (39) (327) Net debt at 30 April 2007 (34,261) (13,577) (13,577) Net debt at 28 October 2007 (113,945) (31,607) (34,261) 8 Availability of interim report The interim report will be sent to all shareholders on 4 January 2008. Copies may be obtained from the Company Secretary at Wellfield House, Victoria Road, Morley, Leeds, LS27 7PA or on Spice's website at www.spiceplc.com Corporate information Directors Sir Rodney Myerscough Walker Non-Executive Chairman William Simon Rigby Chief Executive Officer Carl James Chambers Corporate Development Director Oliver James Lightowlers Group Finance Director John Mitchell Taylor Non-Executive Deputy Chairman Michael St. John Shallow Non-Executive Director Tim Huddart Non-Executive Director Company secretary Lee Johnstone Company number 3250709 Registered office Wellfield House Victoria Road Morley Leeds LS27 7PA Tel: 0113 201 2120 Fax: 0113 201 2121 www.spiceplc.com Independent auditors PricewaterhouseCoopers LLP Benson House 33 Wellington Street Leeds LS1 4JP Solicitors Eversheds LLP Bridgewater Place Water Lane Leeds LS11 5DR Bankers HSBC Bank plc Yorkshire Corporate Bank Centre 4th Floor City Point 29 King Street Leeds LS1 2HL Barclays Bank plc PO Box 190 2nd Floor 1 Park Row Leeds LS1 5WU KBC Bank NV 111 Old Broad Street London EC2N 1BR Lloyds TSB Bank plc 31-32 Park Row Leeds LS1 5JD Nominated adviser and stockbroker KBC Peel Hunt Limited 111 Old Broad Street London EC2N 1PH Registrar Equiniti Limited Aspect House Spencer Road Lancing BN99 6DA This information is provided by RNS The company news service from the London Stock Exchange

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