Earnings Release • Nov 21, 2017
Earnings Release
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National Storage Mechanism | Additional information
RNS Number : 0212X
Renew Holdings PLC
21 November 2017
Renew Holdings plc
("Renew" or the "Group" or the "Company")
Final Results
Renew (AIM: RNWH), the Engineering Services Group supporting UK infrastructure, announces results for the year ended 30 September 2017 delivering an increase in operating margin alongside growth in both revenue and operating profit.
Financial Highlights
| 2017 | 2016 | ||
| Revenue | £560.8m | £525.7m | +6.7% |
| Adjusted operating profit* | £25.6m | £22.0m | +16.4% |
| Adjusted operating margin* | 4.6% | 4.2% | +9.5% |
| Adjusted profit before tax* | £25.2m | £22.3m | +13.1% |
| Adjusted earnings per share* | 33.4p | 27.4p | +21.6% |
| Basic earnings per share | 19.9p | 17.1p | +16.5% |
| Dividend per share | 9.0p | 8.0p | +12.5% |
*Adjusted results are shown prior to impairment, amortisation and exceptional items.
Operational Highlights
· Group adjusted profit before tax up 13.1% to £25.2m (2016: £22.3m)
§ Group adjusted operating margin now 4.6% (2016:4.2%)
· Engineering Services adjusted operating profit increased 16.7% to £25.1m (2016: £21.5m)
§ Engineering Services adjusted operating margin now 5.6% (2016: 4.9%)
· Engineering Services order book up 4% to £438m (2016: £421m)
§ Reflecting Renew's established position in long-term, non-discretionary programmes supporting the maintenance and renewal of key infrastructure assets
· Net cash position of £3.9m (2016: net cash £4.8m) after purchase of Giffen Holdings for £7.2m during year
§ The Board expects to have no bank debt by 31 March 2018
Board Changes
· Roy Harrison OBE, Chairman, will retire following the AGM on 31 January 2018. David Forbes, current NED, will assume position of Chairman
· Sean Wyndham-Quin assumes responsibility as Group Finance Director with effect from 29 November 2017 following his appointment to the Board on 8 November 2017
· David Brown appointed as NED in April 2017
R J Harrison OBE, Chairman said: "I am pleased to report another strong set of results positioning the Group well for the financial year ahead. The Board is confident that Renew will continue to grow its position in its target Engineering markets whilst delivering further strong financial results."
Enquiries:
| Renew Holdings plc | Tel: 0113 281 4200 | |||
| Paul Scott, Chief Executive | ||||
| Sean Wyndham-Quin, Executive Director | ||||
| Numis Securities Limited | Tel: 020 7260 1000 | |||
| Stuart Skinner/ Kevin Cruickshank (Nominated Adviser) | ||||
| Michael Burke (Corporate Broker) | ||||
| Walbrook PR | Tel: 020 7933 8780 or [email protected] | |||
| Paul McManus | Mob: 07980 541 893 | |||
| Nick Rome | Mob: 07748 325 236 | |||
| Lianne Cawthorne | Mob: 07584 391 303 | |||
Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.
About Renew Holdings plc
Engineering Services, which accounts for over 80% of Group revenue and 90% of operating profit, focuses on the key markets of Energy (including Nuclear), Environmental and Infrastructure, which are largely governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding.
Specialist Building focuses on the High Quality Residential market in London and the Home Counties.
For more information please visit the Renew Holdings plc website: www.renewholdings.com
Chairman's Statement
Results
The Board is pleased to announce strong results for the year ended 30 September 2017. These results reflect our position as a leading provider of engineering services to many of the UK's critical infrastructure assets and in particular our strength in the nuclear, rail and water markets.
Group revenue, including £2.2m from a joint venture, increased by 6.7% to £560.8m (2016: £525.7m) with operating profit prior to impairment, amortisation and exceptional items, increasing by 16.4% to £25.6m (2016: £22.0m), an operating margin of 4.6% (2016: 4.2%). After accounting for impairment, amortisation and exceptional items of £8.9m, operating profit was £16.6m (2016: £19.0m). After finance costs and tax, earnings per share prior to impairment, amortisation and exceptional items increased by 21.6% to 33.36p (2016: 27.43p). After accounting for impairment, amortisation and exceptional items, basic earnings per share on continuing activities was 19.88p (2016: 23.53p).
Exceptional Items
At the end of April 2017, the Group decided to withdraw from its loss-making low pressure, small diameter gas pipe replacement activities and as a result reviewed the carrying value of its investment in that business. The Board determined that a non-cash impairment charge of £5.8m should be made which is included within exceptional items. This was reported in the interim results. Our gas operations are now completely focused on medium pressure activities. This restructuring has resulted in £0.6m of exceptional charges relating to redundancy and other costs.
Dividend
The Board is proposing a final dividend of 6.0p per share, increasing the full year dividend by 12.5% to 9.0p (2016: 8.0p). The dividend will be paid on 13 March 2018 to shareholders on the register as at 2 February 2018.
Order Book
The Group's order book at 30 September 2017 was £511m (2016: £516m), with the Engineering Services order book up 4% to £438m (2016: £421m).
Cash
The Board is pleased to record a net cash position of £3.9m (2016: £4.8m). This is after expending £7.2m on the acquisition of Giffen Holdings Limited ("Giffen") in November 2016.
People
Safety remains a top priority and the commitment of our employees, and those who work with us, continues to improve safe working practices across the Group.
On behalf of the Board, I would like to thank all our employees for their hard work and commitment which has contributed to another successful year for the Group.
Board Changes
As previously reported, John Samuel, the Group Finance Director, will resign from that position on 29 November 2017 and will be succeeded by Sean Wyndham-Quin, who joined the Group and was appointed to the Board on 8 November 2017.
In April, the Board was pleased to welcome the appointment of David Brown as a non-executive Director.
Having served as a Director since November 2003, I have decided to retire at the next Annual General Meeting which will be held on 31 January 2018. David Forbes, who has served as a non-executive Director since June 2011, will assume the position of Chairman providing continuity of leadership and I wish David every success going forward.
Strategy
The Group's operations focus on delivering essential infrastructure maintenance tasks in targeted regulated markets within the UK. As a result, we have not experienced any adverse impact following the UK's announcement of its intention to withdraw from the European Union nor do we expect to. We deliver our services through our clients' non-discretionary operational expenditure programmes which provide good visibility of future opportunities and sustainable earnings streams.
We continue to seek out appropriate, earnings enhancing acquisitions in our Engineering Services markets. In November 2016, we acquired Giffen, a specialist mechanical, electrical and power services provider in the rail market. Integration with our existing rail business has gone well and we believe that our enhanced rail offering strengthens our ability to address additional framework opportunities in Network Rail's next funding period, CP6.
In Specialist Building, the Group focuses on the High Quality Residential market in London and the Home Counties where we have particular skills in major engineering structural works to extend or reconfigure high value properties.
Outlook
The Group is well positioned for the 2017/18 financial year. Bank debt will have been completely repaid by 31 March 2018.
Following a year in which Specialist Building revenue has been particularly high, we expect that it will reduce, perhaps by as much as £35m, in the 2017/18 financial year. We remain confident that we will continue to deliver stable operating profits in that business.
In Engineering Services, the order book provides a solid foundation for continued growth.
The Board looks forward with confidence to the Group continuing to deliver further strong financial results.
R J Harrison OBE
Chairman
21 November 2017
Chief Executive's Review
These strong results demonstrate that our focus on delivering essential maintenance services in regulated markets continues to provide robust, long-term opportunities.
Operational Review
Engineering Services
Revenue has grown to £452.4m (2016: £436.2m), including £2.2m from a joint venture. During the year, activity levels in the Environmental market have been strong, particularly on the current AMP6 investment programme which has seen clients' programmes move from early planning and design phases into delivery. In Energy, revenue was lower than 2016 as we withdrew from the loss-making small diameter, low-pressure gas market and a major scheme we were involved with at Sellafield moved into the commissioning phase. In Infrastructure, revenue in both Rail and Wireless Telecoms increased.
Our integrated multidisciplinary services are essential to clients responsible for delivering maintenance and renewals programmes in regulated markets. Our selectivity and direct delivery model has resulted in an operating profit prior to impairment, amortisation and exceptional items, of £25.1m (2016: £21.5m), an increase of £3.6m (16.7%). The operating margin on this basis improved to 5.6% (2016: 4.9%). After accounting for impairment, amortisation and exceptional items of £8.9m (2016: £3.0m), operating profit was £16.2m (2016: £18.6m) resulting in an operating margin of 3.6% (2016: 4.3%).
Our Engineering Services order book grew 4% in the period to £438m (2016: £421m). The order book reflects our established position in markets which benefit from long-term, non-discretionary programmes supporting the maintenance and renewal of key infrastructure assets.
In the year, we extended our range of services in Rail with the acquisition of Giffen Holdings Ltd ("Giffen"). The acquisition broadened our offering as a major engineering services provider to Network Rail, as well as providing services to London Underground and Train Operating Companies.
Energy
We operate across the energy market for clients including Sellafield Ltd, SSE, Magnox, E.ON and Low Level Waste Repository Limited.
We are well positioned on key frameworks associated with high hazard risk reduction operations at the Sellafield nuclear site in Cumbria. We are strategically placed on all three lots of the ten-year Decommissioning Delivery Partnership Framework that has an estimated value of £500m with the headroom to increase to £1.5bn over the term to 2025. Our long-term engagement on high priority programmes provides good visibility and we remain strongly positioned for participation in future major project programmes at the site.
As previously reported, our Gas business is now focused on the medium pressure market that will benefit from significant investment in the coming years to meet regulatory requirements for cast iron gas mains replacement. Working for Southern Gas Networks, we operate as exclusive provider on a regional medium pressure framework that runs to 2021. Additionally, we continue to work on large diameter mains replacements for tRIIO, the vehicle used by National Grid for its mains replacement programmes in the South East. Whilst the performance of our gas business has continued to be disappointing, structural and commercial measures have been implemented to move the business back into growth and profitability in the second half of 2018.
Environmental
In Water, we have seen increased activity in the current AMP6 investment period. Major frameworks include the Sewerage Repairs and Maintenance Framework for Northumbrian Water and the Civils and EMI Capital Delivery Partners Framework for Wessex Water.
For Welsh Water, we have been reappointed to the Pressurised Pipelines Framework. This new seven-year framework, which has an advertised value of £329m, covers all Welsh regions and incorporates the current Emergency Reactive Framework. Additionally, we continue to operate on the Major Civils Framework and the Capital Delivery Alliance Civils contracts.
In the period we were appointed as sole supplier on the national seven-year MEICA Framework for Canal and River Trust which will see us support around 1,000 water assets for this new client. Work continues as sole provider for the Environment Agency on the Northern MEICA Framework and through four national Minor Works frameworks.
In Land Remediation, we operate on frameworks to remediate the sites of former gasworks for clients including National Grid and SGN. These positions are complemented by projects for repeat clients and 2017 has seen another major remediation contract successfully carried out for Glasgow City Council.
At the Palace of Westminster, the cast iron roof restoration is progressing well and puts us in a good position for future opportunities at this World Heritage site. During the year, the Courtyards Conservation Framework was extended to 2025.
Infrastructure
We work as a leading provider of infrastructure services to Network Rail on the current investment period (CP5) that runs to March 2019, delivering a high volume of asset maintenance and renewals tasks nationally. During the year we worked on over 5,000 individual remits with an average value of £11,000 as well as approximately 300 larger projects. We deliver planned and reactive works across the network as well as emergency support responding to some of the most challenging emergency events on the rail network. We continue to develop our position in Scotland as the major structures renewals contractor.
The Government recently announced an increase in funding to £48bn for CP6, the next period of Network Rail expenditure, which runs from 2019 to 2024. CP6 will focus on both maintenance and renewals on the rail network as key priorities. We believe that the Group is particularly strongly placed to benefit from this spending profile.
The acquisition of Giffen has increased our opportunities in the Rail market including London Underground. Already, schemes incorporating the joint skill sets of Giffen and Amco Rail have been secured and we expect this to represent an increasing proportion of our work in the Rail sector going forward.
In Wireless Telecoms, we continue to see profitability improve in a market driven by increasing demand for capacity and better geographical coverage, particularly on the 4G rollout programme.
Specialist Building
Revenue was £106.8m (2016: £90.5m) with an operating profit of £2.4m (2016: £2.3m). At the year end, the order book stood at £73m (2016: £95m). In Specialist Building, where we focus on the High Quality Residential market in London and the Home Counties, the forward order book can vary from period to period, dependent on the timing of client projects. Renew's focus remains on delivering stable operating profits, whilst reducing risk through contract selectivity and management of contract terms.
Summary
The Group remains committed to the growth of its Engineering Services business where appropriate margins can be delivered.
Our established strategy focuses on:
· Infrastructure markets with non-discretionary, long-term funding
· Operational expenditure budgets for renewal and maintenance operations
· Utilising our directly employed workforce to develop relationships built on responsiveness
The UK is committed to long-term investment in its critical infrastructure networks. The Group has extensive framework positions to deliver infrastructure maintenance and renewals across a range of regulated market sectors which provide good levels of opportunities.
The Board remains confident that our direct delivery model and ability to respond in markets where demand will continue to provide the opportunities for sustainable growth.
Paul Scott
Chief Executive
21 November 2017
| Before | Exceptional | ||||||||||||
| exceptional items and | items and amortisation | ||||||||||||
| amortisation | of intangible | ||||||||||||
| of intangible | assets | ||||||||||||
| Note | assets | (see Note 4) | Total | Total | |||||||||
| 2017 | 2017 | 2017 | 2016 | ||||||||||
| £000 | £000 | £000 | £000 | ||||||||||
| Revenue: Group including share of joint venture | 3 | 560,838 | - | 560,838 | 525,737 | ||||||||
| Less share of joint venture's revenue | 3 | (2,239) | - | (2,239) | - | ||||||||
| Group revenue from continuing activities | 3 | 558,599 | - | 558,599 | 525,737 | ||||||||
| Cost of sales | (496,098) | - | (496,098) | (469,180) | |||||||||
| Gross profit | 62,501 | - | 62,501 | 56,557 | |||||||||
| Administrative expenses | (37,112) | (8,946) | (46,058) | (37,557) | |||||||||
| Share of post-tax result of joint venture | 166 | - | 166 | - | |||||||||
| Operating profit | 3 | 25,555 | (8,946) | 16,609 | 19,000* | ||||||||
| Finance income | 30 | - | 30 | 373 | |||||||||
| Finance costs | (534) | - | (534) | (624) | |||||||||
| Other finance income - defined benefit pension schemes | 197 | - | 197 | 625 | |||||||||
| Profit before income tax | 25,248 | (8,946) | 16,302 | 19,374 | |||||||||
| Income tax expense | 5 | (4,391) | 516 | (3,875) | (4,736) | ||||||||
| Profit for the year from continuing activities | 20,857 | (8,430) | 12,427 | 14,638 | |||||||||
| Loss for the year from discontinued operation | - | (4,026) | |||||||||||
| Profit for the year attributable to equity holders of the parent company | 12,427 | 10,612 | |||||||||||
| Basic earnings per share from continuing activities | 7 | 19.9p | 23.5p | ||||||||||
| Diluted earnings per share from continuing operations | 7 | 19.8p | 23.3p | ||||||||||
| Basic earnings per share | 7 | 19.9p | 17.1p | ||||||||||
| Diluted earnings per share | 7 | 19.8p | 16.9p | ||||||||||
| *Prior year operating profit of £19.0m is stated after charging £3.0m of amortisation (See Note 4). | |||||||||||||
| Group statement of comprehensive income | Restated* | |||||||||
| For the year ended 30 September 2017 | 2017 | 2016 | ||||||||
| £000 | £000 | |||||||||
| Profit for the year attributable to equity holders of the parent company | 12,427 | 10,612 | ||||||||
| Items that will not be reclassified to profit or loss: | ||||||||||
| Movement in actuarial valuation of the defined benefit pension schemes | (2,089) | (14,229) | ||||||||
| Movement on deferred tax relating to the defined benefit pension schemes | 806 | 4,661 | ||||||||
| Total items that will not be reclassified to profit or loss | (1,283) | (9,568) | ||||||||
| Items that are or may be reclassified subsequently to profit or loss: | ||||||||||
| Exchange movements in reserves | (42) | 291 | ||||||||
| Total items that are or may be reclassified subsequently to profit or loss | (42) | 291 | ||||||||
| Total comprehensive income for the year attributable to equity holders of the parent company | 11,102 | 1,335 | ||||||||
*See Note 2
| Group statement of changes in equity | ||||||||||
| Restated* | Restated* | |||||||||
| Called up | Share | Capital | Cumulative | Share based | Retained | Total | ||||
| share | premium | redemption | translation | payments | earnings | equity | ||||
| capital | account | reserve | adjustment | reserve | ||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | ||||
| At 1 October 2015 | 6,192 | 6,989 | 3,896 | 1,056 | 327 | 3,933 | 22,393 | |||
| Transfer from income statement for the year | 10,612 | 10,612 | ||||||||
| Dividends paid | (4,611) | (4,611) | ||||||||
| New shares issued | 40 | 1,492 | 1,532 | |||||||
| Recognition of share based payments | 244 | 244 | ||||||||
| Exchange differences | 291 | 291 | ||||||||
| Actuarial movement recognised in pension schemes | (14,229) | (14,229) | ||||||||
| Movement on deferred tax relating to the pension schemes* | 4,661 | 4,661 | ||||||||
| At 30 September 2016 | 6,232 | 8,481 | 3,896 | 1,347 | 571 | 366 | 20,893 | |||
| Transfer from income statement for the year | 12,427 | 12,427 | ||||||||
| Dividends paid | (5,226) | (5,226) | ||||||||
| New shares issued | 27 | 1,154 | 1,181 | |||||||
| Recognition of share based payments | 109 | 109 | ||||||||
| Exchange differences | (42) | (42) | ||||||||
| Actuarial movement recognised in pension schemes | (2,089) | (2,089) | ||||||||
| Movement on deferred tax relating to the pension schemes | 806 | 806 | ||||||||
| At 30 September 2017 | 6,259 | 9,635 | 3,896 | 1,305 | 680 | 6,284 | 28,059 | |||
*See Note 2
Group balance sheet
At 30 September 2017
| Restated* | |||
| 2017 | 2016 | ||
| £000 | £000 | ||
| Non-current assets | |||
| Intangible assets - goodwill | 57,982 | 56,259 | |
| - other | 2,679 | 1,280 | |
| Property, plant and equipment | 13,497 | 13,673 | |
| Investment in joint venture | 237 | - | |
| Retirement benefit assets | 9,692 | 7,704 | |
| Deferred tax assets | 2,057 | 1,581 | |
| 86,144 | 80,497 | ||
| Current assets | |||
| Inventories | 3,900 | 5,362 | |
| Assets held for resale | 1,500 | 1,500 | |
| Trade and other receivables | 115,598 | 93,520 | |
| Current tax assets | 220 | - | |
| Cash and cash equivalents | 6,967 | 14,084 | |
| 128,186 | 114,466 | ||
| Total assets | 214,329 | 194,963 | |
| Non-current liabilities | |||
| Borrowings | - | (3,100) | |
| Obligations under finance leases | (2,376) | (3,030) | |
| Retirement benefit obligations | (760) | (2,110) | |
| Deferred tax liabilities | (3,892) | (2,973) | |
| Provisions | (314) | (312) | |
| (7,342) | (11,525) | ||
| Current liabilities | |||
| Borrowings | (3,100) | (6,200) | |
| Trade and other payables | (173,245) | (153,472) | |
| Obligations under finance leases | (2,547) | (2,623) | |
| Current tax liabilities | - | (30) | |
| Provisions | (36) | (220) | |
| (178,928) | (162,545) | ||
| Total liabilities | (186,270) | (174,070) | |
| Net assets | 28,059 | 20,893 | |
| Share capital | 6,259 | 6,232 | |
| Share premium account | 9,635 | 8,481 | |
| Capital redemption reserve | 3,896 | 3,896 | |
| Cumulative translation reserve | 1,305 | 1,347 | |
| Share based payments reserve | 680 | 571 | |
| Retained earnings | 6,284 | 366 | |
| Total equity | 28,059 | 20,893 |
*See Note 2
Group cash flow statement
For the year ended 30 September
| 2017 | 2016 | |||||||||||
| £000 | £000 | |||||||||||
| Profit for the year from continuing operating activities | 12,427 | 14,638 | ||||||||||
| Share of post-tax trading result of joint venture | (166) | - | ||||||||||
| Impairment and amortisation of intangible assets | 8,080 | 2,954 | ||||||||||
| Depreciation | 4,092 | 4,036 | ||||||||||
| Profit on sale of property, plant and equipment | (666) | (569) | ||||||||||
| Expense in respect of share option exercise | 1,181 | 1,532 | ||||||||||
| Decrease in inventories | 1,324 | 60 | ||||||||||
| Increase in receivables | (19,358) | (63) | ||||||||||
| Increase in payables | 13,859 | 2,609 | ||||||||||
| Current and past service cost in respect of defined benefit pension scheme | 60 | 47 | ||||||||||
| Cash contribution to defined benefit pension schemes | (5,291) | (4,701) | ||||||||||
| Expense in respect of share options | 109 | 244 | ||||||||||
| Finance income | (30) | (373) | ||||||||||
| Finance expense/(other income) | 337 | (1) | ||||||||||
| Interest paid | (534) | (624) | ||||||||||
| Income taxes paid | (2,145) | (863) | ||||||||||
| Income tax expense | 3,875 | 4,736 | ||||||||||
| Net cash inflow from continuing operating activities | 17,154 | 23,662 | ||||||||||
| Net cash outflow from discontinued operating activities | (2,116) | (6,109) | ||||||||||
| Net cash inflow from operating activities | 15,038 | 17,553 | ||||||||||
| Investing activities | ||||||||||||
| Interest received | 30 | 373 | ||||||||||
| Proceeds on disposal of property, plant and equipment | 973 | 1,020 | ||||||||||
| Purchases of property, plant and equipment | (2,150) | (1,304) | ||||||||||
| Acquisition of subsidiaries net of cash acquired | (7,024) | (208) | ||||||||||
| Net cash outflow from investing activities | (8,171) | (119) | ||||||||||
| Financing activities | ||||||||||||
| Dividends paid | (5,226) | (4,611) | ||||||||||
| Loan repayments | (6,200) | (6,200) | ||||||||||
| Repayments of obligations under finance leases | (2,542) | (3,225) | ||||||||||
| Net cash outflow from financing activities | (13,968) | (14,036) | ||||||||||
| Net (decrease)/increase in continuing cash and cash equivalents | (4,985) | 9,507 | ||||||||||
| Net decrease in discontinued cash and cash equivalents | (2,116) | (6,109) | ||||||||||
| Net (decrease)/increase in cash and cash equivalents | (7,101) | 3,398 | ||||||||||
| Cash and cash equivalents at beginning of year | 14,084 | 10,662 | ||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (16) | 24 | ||||||||||
| Cash and cash equivalents at end of year | 6,967 | 14,084 | ||||||||||
| Bank balances and cash | 6,967 | 14,084 | ||||||||||
Notes
1 International Financial Reporting Standards
The consolidated financial statements for the year ended 30 September 2017 have been prepared in accordance with International Financial Reporting Standards ("IFRS"). These preliminary results are extracted from those financial statements.
2 Prior Year Adjustment
In previous years, the Group has provided for deferred tax on its pension scheme surplus at the rate of corporation tax expected to be prevailing in the future, provided that the relevant legislation had been enacted. In the year ended 30 September 2016, a rate of 18% was used.
It has now become clear to the Board that, in line with tax legislation which applies in the event of a refund of a surplus on the winding up of the pension scheme, that a tax rate of 35% should be applied.
Consequently, the Board has restated the opening Balance Sheet as at 1 October 2015 to reflect the above.
As at that date, the effect of the correction of this prior period error is to increase deferred tax liabilities associated with the Retirement Benefit Asset by £2,576,000 with a corresponding reduction in net assets of the Group.
As at 30 September 2016, for the same reason, the deferred tax liability has been increased by £1,309,000 compared to that previously reported. During the preparation of these financial statements, the Directors also became aware of inaccuracies in the corporation tax creditor at 30 September 2016. Correcting these resulted in an £833,000 reduction in the corporation tax creditor at that date. The net impact of these adjustments is to reduce net assets by £476,000 at 30 September 2016.
The amendments related to the pension scheme tax primarily relate to movements in Other Comprehensive Income. As such adjustments have been made to Other Comprehensive Income in 2016 and the total comprehensive income for that year is now £1,335,000 compared to the loss of £765,000 previously recorded.
3 Segmental analysis
The Group is organised into two operating business segments plus central activities which form the basis of the segment information reported below. These segments are:
Engineering Services, which comprises the Group's engineering activities which are characterised by the use of the Group's skilled engineering workforce, supplemented by specialist subcontractors where appropriate, in a range of civil, mechanical and electrical engineering applications and:
Specialist Building, which comprises the Group's building activities which are characterised by the use of a supply chain of subcontractors to carry out building works under the control of the Group as principal contractor and;
Central activities, which include the sale of land, the leasing and sub-leasing of some UK properties and the provision of central services to the operating subsidiaries.
| Group Revenue Including Share of Joint Venture |
Less Share of Joint Venture | Group Revenue From Continuing Activities |
Group Revenue From Continuing Activities |
||||||
| 2017 | 2017 | 2017 | 2016 | ||||||
| Revenue is analysed as follows: | £000 | £000 | £000 | £000 | |||||
| Engineering Services | 452,423 | (2,239) | 450,184 | 436,213 | |||||
| Specialist Building | 106,834 | - | 106,834 | 90,503 | |||||
| Inter segment revenue | (921) | - | (921) | (983) | |||||
| Segment revenue | 558,336 | (2,239) | 556,097 | 525,733 | |||||
| Central activities | 2,502 | - | 2,502 | 4 | |||||
| 560,838 | (2,239) | 558,599 | 525,737 | ||||||
| Before exceptional items and amortisation of intangible assets |
Exceptional items and amortisation of intangible assets | 2017 | 2016 | ||||||
| Analysis of operating profit | £000 | £000 | £000 | £000 | |||||
| from continuing activities | |||||||||
| Engineering Services | 25,142 | (8,946) | 16,196 | 18,587 | |||||
| Specialist Building | 2,418 | - | 2,418 | 2,334 | |||||
| Segment operating profit | 27,560 | (8,946) | 18,614 | 20,921 | |||||
| Central activities | (2,005) | - | (2,005) | (1,921) | |||||
| Operating profit | 25,555 | (8,946) | 16,609 | 19,000 | |||||
| Net financing (costs)/income | (307) | - | (307) | 374 | |||||
| Profit on ordinary activities before income tax | 25,248 | (8,946) | 16,302 | 19,374 | |||||
Engineering Services segment operating profit for the year ended 30 September 2016 is stated after charging amortisation of £2,954,000 (See note 4).
4 Exceptional items and amortisation of intangible assets
| 2017 | 2016 | |
| £000 | £000 | |
| Acquisition costs in respect of Giffen Holdings Ltd | 209 | - |
| Impairment of goodwill | 5,800 | - |
| Redundancy and restructuring costs | 657 | - |
| Total losses arising from exceptional items | 6,666 | - |
| Amortisation of intangible assets | 2,280 | 2,954 |
| 8,946 | 2,954 |
Following the decision in April 2017 to withdraw from the loss-making low pressure, small diameter gas pipe replacement activities of Forefront Utilities Ltd, the Board has carried out a review of the carrying value of goodwill attributable to that cash generating unit which has resulted in an impairment charge of £5,800,000.
The Board has also separately identified the charge of £2,280,000 (2016: £2,954,000) for the amortisation of the fair value ascribed to certain intangible assets other than goodwill arising from the acquisitions of Amco Group Holdings Ltd, Lewis Civil Engineering Ltd, Clarke Telecom Ltd and Forefront Group Ltd.
5 Income tax expense
| Restated* | ||||||||||
| (a) Analysis of expense in year | 2017 | 2016 | ||||||||
| £000 | £000 | |||||||||
| Current tax: | ||||||||||
| UK corporation tax on profits of the year | (2,719) | (2,909) | ||||||||
| Adjustments in respect of previous period | 825 | (171) | ||||||||
| Total current tax | (1,894) | (3,080) | ||||||||
| Deferred tax - defined benefit pension schemes | (1,753) | (1,782) | ||||||||
| Deferred tax - other timing differences | (228) | 126 | ||||||||
| Total deferred tax | (1,981) | (1,656) | ||||||||
| Income tax expense in respect of continuing activities | (3,875) | (4,736) | ||||||||
| Factors affecting income tax expense for the year | ||||||||||
| (b) Profit before income tax | 16,302 | 19,374 | ||||||||
| Profit multiplied by standard rate of corporation tax in the UK of 19.5% (2016: 20.0%) | (3,179) | (3,875) | ||||||||
| Effects of: Expenses not deductible for tax purposes |
(1,347) | (1,225) | ||||||||
| Timing differences not provided in deferred tax | 43 | 651 | ||||||||
| Change in tax rate | 48 | 58 | ||||||||
| Adjustment in respect of tax losses | (265) | (174) | ||||||||
| Adjustments in respect of previous period | 825 | (171) | ||||||||
| (3,875) | (4,736) | |||||||||
| *See note 2 | ||||||||||
| 6 Dividends | 2017 | 2016 | ||||||||
| Pence/share | Pence/share | |||||||||
| Interim (related to the year ended 30 September 2017) | 3.00 | 2.65 | ||||||||
| Final (related to the year ended 30 September 2016) | 5.35 | 4.75 | ||||||||
| Total dividend paid | 8.35 | 7.40 | ||||||||
| £000 | £000 | |||||||||
| Interim (related to the year ended 30 September 2017) | 1,877 | 1,651 | ||||||||
| Final (related to the year ended 30 September 2016) | 3,349 | 2,960 | ||||||||
| Total dividend paid | 5,226 | 4,611 | ||||||||
Dividends are recorded only when authorised and are shown as a movement in equity rather than as a charge in the income statement. The Directors are proposing that a final dividend of 6.00p per Ordinary Share be paid in respect of the year ended 30 September 2017. This will be accounted for in the 2017/18 financial year.
7 Earnings per share
| 2017 | 2016 | |||||||
| Earnings | EPS | DEPS | Earnings | EPS | DEPS | |||
| £000 | Pence | Pence | £000 | Pence | Pence | |||
| Earnings before amortisation | 20,857 | 33.36 | 33.15 | 17,060 | 27.43 | 27.19 | ||
| Amortisation | (8,430) | (13.48) | (13.40) | (2,422) | (3.90) | (3.86) | ||
| Basic earnings per share - continuing activities | 12,427 | 19.88 | 19.75 | 14,638 | 23.53 | 23.33 | ||
| Loss for the year from discontinued operation | - | - | - | (4,026) | (6.47) | (6.42) | ||
| Basic earnings per share | 12,427 | 19.88 | 19.75 | 10,612 | 17.06 | 16.91 | ||
| Weighted average number of shares | 62,514 | 62,917 | 62,201 | 62,739 |
The dilutive effect of share options is to increase the number of shares by 403,000 (2016: 538,000) and reduce basic earnings per share by 0.13p (2016: 0.15p).
8 Preliminary financial information
The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2017 or 2016. Statutory accounts for 2016 have been delivered to the registrar of companies. The auditor has reported on those accounts; his reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2017 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.
9 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the year ended 30 September 2017 will be posted to shareholders as soon as practicable and a copy will be made available on the Group's website:
This information is provided by RNS
The company news service from the London Stock Exchange
END
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