TIDMSID
RNS Number : 0153T
Silverdell PLC
30 November 2011
Silverdell Group PLC
("Silverdell" or the "Group")
Preliminary results for the year ended 30 September 2011
Silverdell plc (AIM: SID), the Specialist Environmental Support
Services group reports preliminary results for the full year ended
30 September 2011.
HIGHLIGHTS
-- Order book up 73% to GBP107m at 31 October 2011 (31 October 2010: GBP62m)
-- Magnox 10 year framework won in October 2011
-- National Grid 3 year framework won
-- Gross profit margin up 1.5 ppts at 27.4% (2010: 25.9%)
-- EBITDA* up 5% at GBP4.1m (2010: GBP3.9m)
-- Adjusted pre-tax profit** up 15% at GBP3.0m (2010: GBP2.6m)
-- Statutory profit before tax of GBP2.5m (2010: GBP1.8m)
-- Adjusted EPS** up 56% at 1.4p (2010: 0.9p)
-- Fully diluted EPS up 100% at 1.0p (2010: 0.5p)
-- Gearing slightly lower at 22% (2010: 23%)
-- A H Allen and RDS successfully acquired and integrating on track
* Earnings before interest, tax, depreciation and amortisation
and also before goodwill impairment, share-based payments and
non-recurring items. ** Before non-recurring items, impairments,
amortisation and share-based payments.
GROUP FINANCIAL HIGHLIGHTS
2011 2010
GBPm GBPm
Continuing operations:
Turnover 59.7 56.7
Operating profit 3.0 2.5
Adjusted operating profit* 3.6 3.2
Adjusted operating margin
* 6.0% 5.6%
Earnings per Share Pence pence
Adjusted basic** 1.4 0.9
Basic 1.1 0.5
Diluted 1.0 0.5
--------------------------- ----- -----
** Before non-recurring items, impairments, amortisation and share based payments
Commenting on the results, CEO Sean Nutley said:
"During the past two years Silverdell Plc has been successfully
refocused and stabilised; we are now standing on a strong platform
and are poised for future growth.
I am very encouraged by recent progress made, winning
significant new business, while making two successful acquisitions
and we look forward to the future with confidence."
30 November 2011
ENQUIRIES:
Silverdell Group PLC Tel: 020 7004 2741
Sean Nutley, Chief Executive
Ian Johnson, Finance Director
College Hill (Public Relations) Tel: 020 7457 2020
Helen Tarbet
Mark Garraway
finnCap (Broker & Nominated Advisor) Tel. 020 7523 8000
Marc Young
CHAIRMAN'S STATEMENT
Overview
I am pleased to report encouraging results for the year ended 30
September 2011, especially considering the adverse weather earlier
in the year and indeed the apprehension surrounding the
Government's expenditure programmes. The Group continues to prove
its resilience to fluctuating market conditions by maintaining its
focus in the regulated environment where legislation is a key
driver.
We have successfully achieved our objectives in the year in
terms of organic growth and in terms of acquisitions achieving
market expectations on margin and turnover. Both of the
acquisitions, A H Allen and RDS, are being successfully integrated
into the Consulting business and are already producing positive
results. The Group successfully raised GBP2.3m in a share placing
during the year, predominantly to fund these acquisitions.
Strategy
This is the second year of the 'Protecting Lives, Creating
Value' strategy which aims to deliver shareholder value by
broadening our service offer and sustaining high quality,
repeatable revenues from large, blue-chip customers in the
regulated and high-hazard service sectors. The Group's customer
base now consists predominantly of large private and public sector
organisations which place a high value on protecting the health of
their customers, staff and reputation. While conditions in the
wider economy are expected to remain difficult, your Board believes
that the increasingly stringent regulation surrounding hazardous
waste management will require customers to continue to prioritise
non-discretionary expenditure on facilities maintenance and
regulatory compliance.
Our ambition is to grow revenues to more than GBP100m per year
within two years. It is management's view that, whilst this could
possibly be achieved organically, it is most likely to come about
through acquisitions and the Board is actively exploring some
options. Silverdell will only consider acquisitions which meet
strict criteria: they will be limited to organisations providing
services which complement our Group's current service offer to
highly regulated industrial sectors such as nuclear, oil, gas and
energy, as well as niche bolt-on consulting businesses, and must be
earnings enhancing within the first year.
Silverdell has developed into a stable and resilient business.
In recognition of this fact, and as a mark of our confidence in the
future of the Group we carried out a capital reduction exercise
during the year, which enables a dividend to be paid for the first
time. The Board has determined that it will have a cautious but
progressive dividend policy and it is our intention to pay our
maiden dividend during 2012.
Results
Revenues for the year ended 30 September 2011 were GBP59.7m
(2010: GBP56.7m) with adjusted EBITDA* of GBP4.1m (2010: GBP3.9m)
and adjusted pre-tax profit** of GBP3.0m (2010: GBP2.5m). The order
book at 31 October 2011 remains strong at GBP107m (2010: GBP62m at
31 October 2010), with GBP36m secured for 2012. At the year end,
the Company's net debt was GBP5.3m (2010:GBP4.3m) as the Group
required additional capital to support its growth, particularly
during the second half of the year.
Board & People
We now have a dynamic, cohesive and committed management team,
led by our CEO Sean Nutley, who have worked extremely hard over the
last two years in revitalising the group and ensuring strong ties
across each of the three principal divisions, whilst maintaining
their individual accountability and strict control disciplines. I
believe we are now in a strong position to take the group forward
to its next stage of development.
In June Matt Griggs took over as MD of the Consulting business
Redhills and is successfully overseeing the integration of the two
new acquisitions. In November 2011, John Potts joined the Group
from Hertel to lead our industrial services division.
We remain a direct employer of our workforce such that their
inherent skills are maintained and developed in the business
providing an excellent basis for the training and development of
future management, coupled with the ease with which we maintain our
licences to operate.
On behalf of the Board, I would like to express our gratitude
and thank the management team and everyone in the Group for their
hard work, dedication and commitment to our strategy. During during
the past year, we have continued to deliver a good set of results
despite the challenging economic climate around us.
Summary
Silverdell performed robustly in the year ended 30 September
2011. The Group has delivered significant growth, both organically
and by acquisition during the year, and particularly during the
last six months. We believe that we now have a stable, dynamic and
flexible business which is very well positioned to deliver further
growth and value to our shareholders as well as giving us
confidence in our ability to pay a dividend during 2012.
Stuart Doughty
Non-Executive Chairman
*Earnings before interest, tax, depreciation and amortisation
and also before goodwill impairment, share-based payments and
non-recurring items
** Adjusted to exclude intangibles amortisation, impairment
charges, non-recurring items and share-based payments
CHIEF EXECUTIVE'S STATEMENT
Overview
A Strong Foundation For Profitable Growth
Silverdell operates in two distinct markets in the UK: the
general domestic refurbishment and construction related market and
the larger industrial support services market predominantly
involved in the petrochemical and nuclear sectors, both of which
require a high degree of regulatory control. The skills, processes
and, importantly, the culture that our operating teams have
developed in providing asbestos services lend themselves to the
handling and management of all hazardous materials in a safe and
compliant manner, where incidents could have dramatic repercussions
on the operating efficiency of clients' establishments and damage
to their reputations. To these customers we provide reassurance and
peace of mind.
The Group is the largest quoted specialist supplier of asbestos
support services in the UK but, despite that, has only a small
proportion of the wider industrial support services sector; this is
where we believe the next step in our growth strategy to
be.However, because of our proven and well-regarded track record of
delivering services in hazardous conditions, we are a trusted and
long-standing supplier to major companies in the nuclear, defence,
petrochemical and energy sectors. We are now actively building on
this position to create new opportunities for growth in these
sectors, both in the UK and abroad. We believe that the successful
implementation of this strategy will help fulfil our ambition to
increase the critical mass of the business and secure annual
turnover in excess of GBP100m.
Strategic review
Introduction
We are in the second year of the strategy, building the Group up
from the parlous financial state which existed in 2009. The change
in culture which has resulted from our pursuit of our "Protecting
Lives, Creating Value" strategy is providing improved cohesion,
better delivery of client services and positioning the Group well
for further growth.
Increasingly, our key customers are seeking to appoint partners
that are capable of offering a single source solution to their
service needs. In a highly regulated market, they are seeking to
achieve long-term certainty and peace of mind by appointing
reliable, proven supply chain partners, on a framework contract
basis. We operate in markets where there are very high barriers to
entry and which therefore favour long-established, reputable
companies such as Silverdell Plc.
Furthermore, we differentiate ourselves from our competitors by
striving to provide a premium service across a spectrum of
complementary services, from on-site Consulting through to
remediation, serving all sectors and public and private
customers.
'Protecting Lives, Creating Value' is a four-pronged strategy
that is designed to enable our Group to consolidate its position as
the UK's leading provider of specialist environmental support
services and take a larger share of the UK industrial support
services market but with the capacity to follow our customers
overseas or pursue opportunities in potentially attractive
territories worldwide, where similar legislation is in place.
Objectives
For the year ahead, we plan to further strengthen the Silverdell
Group and create shareholder value through:
-- Clearly demonstrating our position as a leading provider of
services in high-hazard regulated environments through our
competence and track record; to customers, suppliers, employees and
investors in order to differentiate ourselves from the competition
and make Silverdell their services partner of choice
-- Developing our product and geographic capability through new
service offerings through acquisition and by organic growth
-- Improving existing client relationships by offering bundled services with unmatched quality
-- Continuing to improve systems, cost efficiencies and cash management across the Group.
In order to achieve this we continue our strategic approach to
drive improving performance through:
-- Further development of our capabilities in regulated
environmental and compliance markets other than asbestos
management
-- Development of our position in the industrial and power
generation markets through securing longer-term framework
contracts
-- Development of our existing customer relationships to
generate new business in areas such as specialist scaffolding,
insulation and specialist coatings, training, consulting and
compliance.
-- Increasing our capability in hazardous materials consulting
Back in June 2010, our Board set the Group a number of
challenging targets for the medium-term:
-- To grow our order book ahead of organic revenue growth
-- To drive revenue growth year on year ahead of market growth
-- To grow the EBITDA margin to 10%
-- To maintain working capital at not more than one month's revenue
-- To grow the Consulting business to 15% of Group revenues
I am pleased to report that we are making considerable progress
in most of these areas. In particular, recent months have seen our
order book increase by over 70% against last year while revenues
are 6% higher year-on-year.EBITDA margins year on year continue to
improve, although the step to 10% will require a step change in our
volumes to reduce the dilutive effect of our fixed overhead.
What we said What we've done The future
---------------------------- ---------------------------- ----------------------------
Grow our order book ahead Achieved. Order book Continue focus on winning
of organic revenue growth has risen 73% to GBP107m high margin Consulting
(2010: GBP62m) and high value framework
contracts, increasing
our penetration of the
wider Industrial Support
Services market
---------------------------- ---------------------------- ----------------------------
Drive revenue growth Achieved. Group turnover Accelerate revenue growth
year on year ahead of increased by 5% to GBP59.7m to meet ambition of GBP100m
market growth (2010: GBP56.7m) within two years through
organic growth, acquisition
and international expansion
---------------------------- ---------------------------- ----------------------------
Grow the EBITDA margin Progress. While EBITDA Continue to focus on
to 10% increased 5% to GBP4.1m order book and revenue
(2010: GBP3.9m) the growth while bearing
margin remains at 7% down on costs and seeking
cost synergies throughout
the business
---------------------------- ---------------------------- ----------------------------
Maintain working capital This has been challenged We will strive to optimise
at not more than one by the growth that has cash through improving
month's revenue been experienced. As terms wherever possible.
a direct labour employer,
anything above modest
growth requires additional
working capital.
---------------------------- ---------------------------- ----------------------------
Grow the Consulting business Achieved. Consulting Continue the assimilation
to 15% of Group revenues now accounts for 18% of AH Allen and RDS into
of revenues on a running the business and pursuit
rate basis of framework opportunities
---------------------------- ---------------------------- ----------------------------
Most importantly, Silverdell is a very different Group today
than it was two years ago. Then, despite having excellent site
operations, the Group had considerable debt and profits were at an
all-time low. Despite extremely difficult market conditions, the
Group has been strengthened financially and operationally,
renegotiating its facilities and securing more funds from the
market, completely restructuring its senior management team and
driving cultural and financial disciplines into the three core
divisions whilst ensuring cooperation and cohesion with no loss of
accountability.
Two years on, the decisive management actions we have taken have
transformed Silverdell into a robust, growing business, with stable
and flexible financing.
We have done all this while maintaining our best-in-class
operational reputation. Our credibility is now such that we
increasingly find ourselves competing on a 'Tier 1' basis for
contracts, in which we contract directly with the end customer,
where before we might only have been considered as a
sub-contractor.
The successful GBP2.3m fundraising we undertook in August to
fund the acquisition of RDS is testimony to our transformation.
Acquisitions
During the year we completed two acquisitions to strengthen our
Environmental Consulting offering and, having completed the
acquisitions the key to success has been the smooth integration of
the businesses into the Group. In April we purchased A H Allen
Limited ("A H Allen"), based in the North East. The integration
plan is going well and is on plan. At the end of August 2011 we
purchased RDS Asbestos Management Consultants [UK] Limited ("RDS")
which will strengthen our presence in the retail sector. The
management teams are working together to ensure its smooth
integration.
Both AH Allen and RDS bring additional capacity and considerable
expertise to the Group's Consulting offering.
Our Consultingteam is now over 180 strong, compared to around
100 this time last year, and so we expect both acquisitions to be
earnings accretive with immediate effect.
Summary and Outlook
Our "Protecting Lives, Creating Value" strategy has effectively
prepared our Group for the next stage of growth. The Board is
currently developing the plan for the next phase of our Group's
development, which will be unveiled within the next six months.
The last two years has seen the Group recover from a low point
to build a stable foundation for growth and start to deliver that
growth through some significant business wins. The next phase of
growth will see the Group increase in reputation, revenues and
profits to become an established and high quality provider of
hazardous industrial services with a truly international
capability.
Operational Review
Remediation Consulting
2011 2010 2011 2010
Public Sector
Local Authorities &
Housing 12% 11% 14% 20%
Defence 21% 17% 9% 11%
Health & Education 11% 11% 15% 21%
---------- ---- ------- -------
44% 39% 38% 52%
Private Sector
Utilities, Power & Industrial 27% 28% 18% 10%
Construction 8% 15% 1% 5%
Retail, Commercial &
Rail 21% 18% 43% 33%
---------- ---- ------- -------
56% 61% 62% 48%
---------- ---- ------- -------
100% 100% 100% 100%
---------- ---- ------- -------
In 2011 external Remediation revenues rose by 2% to GBP51.5 m
(2010: GBP50.5m). The revenue base is now increasingly made up of
long-term framework contracts with resilient repeatable revenues.
In particular, in 2010 Remediation benefitted from a GBP3.5m fixed
price contract, the loss of which has been more than compensated
for by repeatable revenues in 2011. Operating margins in this
segment were 6.9% in 2011, up from 6.2% in 2010, driven by
operating cost efficiencies.
Consulting has had a strong year, boosted in the second half by
two acquisitions which have improved both our capability and
capacity. External Consulting revenues rose by 32% to GBP8.2m
(2010: GBP6.2m), nearly all of which is generated through framework
contracts. Profitability also improved as a result of better
overhead efficiency, with the operating profit* margin increasing
by 0.9 ppts to 15.3% (2010: 14.4%). The acquisitions will drive
further improvements in revenue and profitability in 2012.
* Excluding amortisation, share-based payments and non-recurring
items.
Public Sector
There is a substantial asbestos legacy across the whole range of
public sector property, including local government buildings and
social housing, schools, colleges and hospitals as well as defence
establishments. The public sector spend on maintenance and
refurbishment projects exceeds GBP20bn per year and this is driven
by regulatory requirements.
Notwithstanding the Coalition Government's Comprehensive
Spending Review in October 2010 and the associated freezes or
reductions in a number of capital projects, Silverdell has seen
public sector revenues rise by 13% during the year. The share of
total remediation revenues generated by public sector work
increased to 44% in 2011 (2010: 39%) whilst the share of consulting
revenues was 38% (2010: 52%).
Underlying public sector revenues in Consulting were flat year
on year, with the principal elements of organic and acquisition
growth in Consulting delivering revenues predominantly in the
private sectors.
Local Authority and Housing
2011 has been another year of success in winning local authority
and housing framework contracts with the share of total Remediation
revenues rising to 12% (2010:11%). Towards the end of the year we
won a contract to survey and remediate 30,000 homes over three
years working for a consortium of Registered Social Landlords.
We continued to win new contracts with social landlords, such as
Peabody, as well as several local housing authorities. However,
with more significant revenue growth in other areas, local
authority revenues fell to 14% of our total Consulting revenues
(2010: 21%).
Health and Education
Health and Education comprised 11% (2010: 11%) of our
Remediation revenues. Particular success has been achieved in
working with a major NHS Trust in South Wales. The strength of this
relationship, driven by our understanding of the customer's needs,
has opened the door to further opportunities with NHS Trusts
elsewhere in Wales. We are also the incumbent asbestos services
provider for a number of Russell Group universities which have
diverse property portfolios across a wide regional spread.
Health and Education work made up 15% of Consulting revenues
(2010: 21%), with notable work wins with a number of Russell Group
universities providing survey and management services across their
entire university estates.
Defence
The Defence share of revenues for Remediation was 21%
(2010:17%). During 2011 we developed excellent relationships with
the Atomic Weapons Establishment which has seen our work with this
customer increase threefold in less than two years. Our work with
AWE has developed well beyond our traditional asbestos offering and
we now offer a number of additional services. We have also extended
the Regional Prime Contracts relationship for a further six years,
which is a fantastic success for the Group.
Consulting defence revenues represented 9% (2010: 11%) of the
total, although this represents a slight increase in absolute
terms. A significant defence customer during the year has been AWE
with whom we have successfully developed new Consulting
opportunities out of the long-standing relationship with the
customer.
Private Sector
Power Generation, Utilities and Industrial
Power Generation, Utilities and Industrial customers totalled
27% of Remediation segment revenues in 2011 (2010: 29%). We have
leveraged our strong relationship with Magnox to win a share of a
GBP304m framework contract for asbestos removal, deplanting and
decommissioning at their first generation nuclear power stations,
which will serve to replace current work at the Chapelcross site as
it scales down in 2013.
In addition to the Magnox framework contract win, we have won a
nationwide scaffolding framework contract with National Grid which
will provide the basis for increased penetration in this attractive
sector. We have also completed thermal insulation works on a major
new-build power station in South Wales during the year and whilst
the final account is still under negotiation, management remains
confident of a successful outcome. In our Consulting business,
Power Generation, Utilities and Industrial customers rose to 18%
(2010:10%) of total revenues. We acquired A H Allen in April 2011
which has a long-standing framework contract with a large water
utility in the North East. More importantly, however, we have won a
significant amount of new business from Remediation customers in
this sector, such as National Grid and Magnox.
Construction
Construction's share of total Remediation revenues fell in 2011
to 7% (2010:15%). Hard hit by the economic downturn, there has been
an absence of property development opportunities, especially
outside London and the South East. The outlook for the Construction
sector remains poor, with industry forecasts anticipating no upturn
before 2014.
Consulting's construction share of total revenues also fell to
1% (2010: 5%).
Retail, Commercial and Rail
This segment comprised 21% (2010:18%) of Remediation revenues
and 43% of Consulting revenues (2010: 33%)
As anticipated, we have seen a number of retail refurbishment
projects being undertaken this year and we have worked for a number
of major high street brands as they have sought to refresh their
stores after a two-year period of underinvestment. During the year
we also won a national framework with Crawfords, a leading loss
adjuster, to provide insurance-related remediation works and this
relationship is responsible for the majority of the increase in
this work. We operate a nationwide network that offers a 24/7
emergency call-out to both residential and commercial properties
and combine this responsiveness with a high quality service under a
demanding service level agreement.
During the year we completed works under a Crossrail contract in
Central London, with this client also providing work for the
Consulting division.
The bulk of the Consulting work in this segment is the provision
of survey and management services to a nationwide broadcaster. We
continue to provide Consulting services to a number of major
insurance companies throughout the UK and trade strongly with many
national well established retailers including opticians, chemists,
supermarkets and banks. The acquisition of RDS will increase
activity in this segment in the future, thanks to its particular
focus on the retail high street, pubs and clubs.
During the past two years Silverdell Plc has been successfully
refocused and stabilised; we are now standing on a strong platform
and are poised for future growth.
I am very encouraged by recent progress made, winning
significant new business, while making two successful acquisitions
and we look forward to the future with confidence.
Sean Nutley
Chief Executive
FINANCIAL REVIEW
Group turnover increased by 5% to GBP59.7m (2010: GBP56.7m) on
the back of a particularly strong second half where we recorded
GBP31.8m of revenue (2010: GBP28.8m in H2) as we won a number of
new and significant framework contracts, particularly in
Consulting. The revenue from our acquisitions in the year was
GBP0.9m (2010: GBPnil). Gross profit was increased to GBP16.3m
(2010:GBP14.7m) and the gross margin percentage therefore increased
by 1.5 percentage points (ppts) to 27.4% (2010: 25.9%). The main
driver of this improvement was the business mix changing during the
year with Consulting revenues now comprising 14% of the Group
revenues (2010: 11%), where Consulting gross margins are more than
double the gross margins earned by the Remediation segment. Subject
to any further changes in the composition of the Group, this
accretive impact on margin will continue through 2012 as the full
year impact of the two acquisitions takes effect.
Administration costs increased to GBP13.0m (2010:GBP11.6m). At
the beginning of the year we introduced a number of employment
benefits to all our salaried staff, including a money purchase
pension scheme on an opt-out basis which has been introduced ahead
of the government's proposed deadline. This will help us to
continue to attract and retain the best people. We have also
invested in management training and development during the year and
this has delivered improvements in our business win ratio in each
of our brands. Operating profit* increased by GBP0.4m to GBP3.6m
(2010: GBP3.2m).
As a result of the two acquisitions, related integration costs
and the capital reduction exercise, we incurred an additional
GBP0.3m of non-recurring costs in the year (2010:GBPnil).
Finance charges were GBP0.5m (2010:GBP0.7m). Profit before tax*
improved by 15% to GBP3.0m (2010: GBP2.6m). Statutory profit before
tax improved by 39% to GBP2.5m (2010: GBP1.8m). The tax charge for
the year was GBP0.8m (2010: GBP1.1m). The effective corporation tax
rate is 32% (2010:60%). Profit after tax* was GBP2.1m (2010:
GBP1.5m) and adjusted earnings per share* was up 56% on last year
at 1.4 pence (2010: 0.9 pence). The Directors intend to pay a
maiden dividend in 2012.
Net debt at 30 September 2011 was up by GBP1.0m at GBP5.3m
(2010:GBP4.3m) with gearing at 22% (2010: 23%). Of this, the
working capital outflow amounted to GBP3.6m (2010: GBP2.0m
outflow). This arose as a result of the volume growth, particularly
during Q4 2011, which resulted in trade receivables being GBP2.6m
higher at 30 September 2011 than at the same point last year. We
also have, included in receivables, amounts recoverable under
contracts of more than GBP2m which we expect to recover during the
first half of 2012. After the year-end, the Group's revolving
credit facility was extended by GBP1m to GBP3.5m.
The order book is significantly higher than last year. The
addition of GBP20m to the order book in respect of the Magnox 10
year framework contract, as well as the impact of strong Q4 orders
and acquisitions, brings the order book total up to GBP107m
(2010:GBP62m) of which GBP36m (2010:GBP34m) relates to the new
financial year.
The Group uses derivatives designed to protect it from the
interest rate risk that arises in respect of its borrowings, for
the majority of which the group applied hedge accounting in
accordance with IAS 39. At 30 September 2011, a liability was held
on the balance sheet of GBP0.1m (2010:GBP0.1m) in respect of these
derivatives. All assets, liabilities (including borrowings) and
cash flows in the year were denominated in sterling and accordingly
the Group did not have an exposure to currency risk and has no
related hedging products. A full discussion of the financial risks
to which the Group is exposed, along with the definitions of its
Key Performance Indicators, is included in the statements on Key
Risks, Mitigations, Corporate Governance and Risk Management in the
Annual Report.
We completed two acquisitions during the year, both in the
second half. In April we purchased AH Allen Limited, a Consulting
business based in the North East for around GBP0.9m (assuming
achievement of stretch earn-out targets). At the end of August 2011
we raised GBP2.3m net of costs from a Share Placing of 23.5 million
shares the proceeds of which went towards the purchase of RDS
Asbestos Management Consultants [UK] Limited ("RDS") for a maximum
consideration of GBP2.3m (again, assuming achievement of stretch
earn-out targets). This acquisition also included issuing 5.55
million shares to the vendors of RDS as part of the total
consideration. As a result the number of issued, allotted and fully
paid up shares increased to end the year at 180.8m (2010:
151.7m).
Ian Johnson
Chief Financial Officer
* Adjusted to exclude intangibles amortisation, impairment
charges, non-recurring items and share-based payments.
Consolidated Income Statement
For the year ended 30 September 2011
Before
non-recurring Non-recurring
items and items and
amortisation amortisation
(see Note (see Note
10) 10)
--------------- -------------- --------
2011 2011 2011 2010
Notes GBP'000 GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 5 59,696 - 59,696 56,674
Cost of sales (43,364) - (43,364) (41,974)
Gross profit 16,332 - 16,332 14,700
Administrative expenses (13,028) - (13,028) (11,595)
----------------------------------------- ----- --------------- -------------- -------- --------
* amortisation of intangible assets - (30) (30) (601)
* non-recurring expenses - (298) (298) -
Operating profit 6 3,304 (328) 2,976 2,504
Finance costs 8 (514) - (514) (672)
Profit before tax 2,790 (328) 2,462 1,832
Income taxation charge 9 (868) 89 (779) (1,095)
Profit for the year 1,922 (239) 1,683 737
Earnings per share (Pence)
Basic earnings per ordinary
share 11 1.1 0.5
Diluted earnings per ordinary
share 11 1.0 0.5
Consolidated statement of comprehensive income
For the year ended 30 September 2011
2011 2010
GBP'000 GBP'000
Profit for the year 1,683 737
Other comprehensive income
Cash flow hedges:
* gain arising during the year 40 86
* related tax charge (10) (24)
30 62
Total comprehensive income for the year 1,713 799
Consolidated balance sheet
At 30 September 2011
Notes 2011 2010
GBP'000 GBP'000
Assets
Non-current assets
Goodwill 12 17,761 16,156
Other intangible assets 13 453 -
Property, plant and equipment 15 2,652 1,999
Trade and other receivables 18 1,001 1,001
21,867 19,156
--------
Current assets
Inventories and work in progress 16 3,064 998
Trade and other receivables 18 17,305 12,774
Cash and cash equivalents 2,567 3,626
-------- ---------
22,936 17,398
---------
Total assets 44,803 36,554
--------
Non-current liabilities 20 4,038 4,777
Borrowings 23 1,001 1,001
Trade and other payables 21 109 -
Contingent consideration 9 221 15
-------- ---------
Deferred tax liabilities 5,369 5,793
--------
Liabilities
Current liabilities
Borrowings 20 3,793 3,117
Trade and other payables 23 10,864 8,114
Other financial liabilities 17 31 71
Contingent consideration 21 326 -
Current tax liabilities 749 506
15,763 11,808
--------
Total liabilities 21,132 17,601
--------
Net assets 23,671 18,953
========
Equity
Share capital 24 1,808 1,516
Share premium account 2,456 17,813
Equity reserve 721 464
Hedging reserve (22) (52)
Capital reserve - 3,749
Other reserve 4,135 16,635
Retained earnings 14,573 (21,172)
--------
Total equity 23,671 18,953
======== =========
These financial statements were approved by the Board of
Directors on 30 November 2011.Signed on behalf of the Board of
Directors: Ian Johnson Director
Consolidated statement of changes in equity
At 30 September 2011
Share Share Other Equity Hedging Capital Retained Total
capital premium reserve reserve reserve reserve earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2009 5,265 17,813 16,635 334 (114) - (21,909) 18,024
----------------------- --------- --------- --------- --------- --------- --------- ---------- ---------
Net profit for
year - - - - - - 737 737
Other comprehensive - - - - 62 - - -
income
----------------------- --------- --------- --------- --------- --------- --------- ---------- ---------
Total comprehensive
income for the
year - - - - 62 - 737 799
Shares cancelled
* (3,749) - - - - 3,749 - -
Share based payment
charge including
tax - - - 130 - - - 130
________ ________ ________ ________ ________ ________ ________ ________
At 1 October
2010 1,516 17,813 16,635 464 (52) 3,749 (21,172) 18,953
----------------------- --------- --------- --------- --------- --------- --------- ---------- ---------
Net profit for
year - - - - - - 1,683 1,683
Other comprehensive
income - - - - 30 - - 30
----------------------- --------- --------- --------- --------- --------- --------- ---------- ---------
Total comprehensive
income for the
year - - - - 30 - 1,683 1,713
Shares issued 292 2,456 - - - - - 2,748
Capital cancellation* - (17,813) (12,500) - - (3,749) 34,062 -
Share based payment
charge - - - 257 - - - 257
________ ________ ________ ________ ________ ________ ________ ________
At 30 September
2011 1,808 2,456 4,135 721 (22) - 14,573 23,671
* Following special resolutions of the Company which were
confirmed by the High Court on 16 February 2011, the Company
cancelled the share premium account and capital reserve and also
cancelled GBP12.5m of deferred shares from the other reserve, which
increased retained earnings by a total of GBP34.1m.
The Other Reserve is non-distributable and represents the
remaining balance of the premiums arising on the issuance of
certain warrants and of shares issued in order to acquire group
companies. Further details are provided in Note 36
Consolidated statement of cash flows For the year ended 30
September 2011
Notes 2011 2010
GBP'000 GBP'000
Cash flows from operating activities
Profit for the year 1,683 737
Income taxation charge 779 1,095
Finance costs 514 672
Amortisation of intangibles 13 30 601
Depreciation on property, plant and equipment 15 525 701
Profit on disposal of property, plant and
equipment (2) (34)
Share based payments 26 257 130
Movements in working capital:
- (Increase) / decrease in inventories (2,066) 626
- Increase in trade and other receivables (3,599) -
- Increase / (decrease) in trade and other
payables 2,114 (2,591)
-------- --------
Cash generated from operations 235 1,937
Income tax paid (628) (269)
-------- --------
Net cash (outflow) / inflow from operating
activities (393) 1,668
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (656) (363)
Proceeds from sale of property, plant and
equipment 17 75
Acquisition of subsidiaries (net of cash acquired) (1,348) -
-------- --------
Net cash outflow from investing activities (1,987) (288)
-------- --------
Cash flows from financing activities
Interest paid (433) (744)
Interest paid on finance leases (6) (1)
Payments for hire purchase contracts principals (53) (124)
Proceeds from bank loans - 5,500
Repayments of bank loans (930) (6,450)
Proceeds from issue of equity shares (net) 2,198 -
-------- --------
Net cash inflow / (outflow) from financing
activities 776 (1,819)
-------- --------
Net decrease in cash and cash equivalents (1,604) (439)
======== ========
Cash and cash equivalents at the beginning
of the year 1,286 1,725
-------- --------
Cash and cash equivalents at the end of the
year (318) 1,286
======== ========
Cash and cash equivalents comprises: 2,567 3,626
Cash at bank and in hand 19
Bank overdrafts 19 (2,885) (2,340)
-------- --------
(318) 1,286
======== ========
Note to the financial statements
1. General information
Silverdell Plc is a company incorporated in Great Britain under
the Companies Act 2006. The address of the registered office is 14
Buckingham Street, London WC2N 6DF. The nature of the Group's
operations and its principal activities are set out in the
Directors' Report within the Annual Report.
2. Basis of preparation
The annual consolidated financial statements of the Group have
been prepared in accordance with International Reporting Standards
(IFRS) as adopted by the European Union (EU) (IFRS as adopted by
the EU).
Going Concern
Detailed cash flow forecasts are prepared and regularly reviewed
by the Board to assess the Group's financial position. The current
economic conditions do create some uncertainty and the Group's
borrowings do fluctuate, but the continued planned actions on
improving working capital management has enabled the repayment of
GBP0.8m of debt during the year ended 30 September 2011. Further,
the Group has a number of long term framework contracts with
customers and suppliers across industries. As a consequence the
Directors believe that the Group is well placed to manage its
business risks successfully despite the current economic outlook.
For further information on liquidity please refer to Note 22 and
the Directors' Report within the Annual Report.
After the balance sheet date, additional loan facilities were
agreed with the bank and certain covenants relaxed. The Directors
have a reasonable expectation that the Group has adequate resources
to continue operating for the foreseeable future. On these grounds
the Board have continued to adopt the going concern basis for the
preparation of the financial statements.
3. Standards not yet adopted
A number of new standards, amendments to standards and
interpretations are effective for accounting periods beginning on
or after 1 January 2013 and have not been applied in preparing
these consolidated financial statements. None of these is expected
to have a significant impact on the Group's financial statements,
with the exception of IFRS 9 Financial Instruments which could
change the presentation and classification of financial assets and
liabilities. The Group does not plan to adopt this standard early
and the extent of the impact has not yet been determined.
3.1 Accounting policies
Basis of accounting
The consolidated financial information has been prepared in
accordance with IFRSs adopted by the European Union and therefore
the Group financial statements comply with Article 4 of the EU IAS
Regulation.
The consolidated financial information has been prepared on the
historical cost basis except for the revaluation of certain
financial instruments measured at fair value. The principal
accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 30 September each year. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used in
line with those used by the Group.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the
purchase method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquire. The
acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
are recognised at their fair value at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable
assets, liabilities and contingent liabilities exceeds the cost of
the business combination, the excess is recognised immediately in
profit or loss.
Separately identifiable intangible assets are recognised on
acquisition where appropriate and amortised over their useful
economic life.
Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the Group's interest in the fair value of
the identifiable assets and liabilities of a subsidiary at the date
of acquisition. Goodwill is initially recognised as an asset at
cost and is subsequently measured at cost less any accumulated
impairment losses. Goodwill which is recognised as an asset is
reviewed for impairment at least annually. Any impairment is
recognised immediately in profit or loss.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units expected to benefit from
the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the
unit. An impairment loss recognised for goodwill is not reversed in
a subsequent period.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for
services provided in the normal course of business, net of
discounts, VAT and other sales-related taxes.
Profit is recognised on long-term contracts if the final outcome
can be assessed with reasonable certainty by including in the
income statement revenue and related costs as contract activity
progresses. Revenue is calculated by reference to the value of work
performed to date as a proportion of total contract value.
Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the
lease.
The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged
directly against income.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into
an operating lease are also spread on a straight-line basis over
the lease term.
Borrowing costs
Borrowing costs are recognised in profit or loss in the period
in which they are incurred.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
3.1 Accounting policies (continued)
Taxation
The tax expense represents the sum of the tax currently payable
and the movements in deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited to
other comprehensive income, in which case the deferred tax is also
dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation
of assets, other than land and assets under construction, over
their estimated useful lives, on the following bases:
Freehold property 4% on cost
Leasehold property 10% on cost
Plant and machinery 10% on cost
Office equipment 16.6%-25% on cost
Motor vehicles 25% on reducing balance
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in
income.
3.1 Accounting policies (continued)
Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs. Recoverable amount is the higher of fair
value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately. Where an impairment loss subsequently reverses, the
carrying amount of the asset (cash-generating unit) is increased to
the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately.
Inventories and work in progress
Inventories are stated at the lower of cost and net realisable
value. Cost comprises direct materials and, where applicable direct
labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition.
Cost is calculated using the weighted average method. Net
realisable value represents the estimated selling price less all
estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
Work in progress on service contracts is stated at cost plus,
where the outcome can be assessed with reasonable certainty,
estimated profits attributable to the stage of completion less
provision for any expected losses and progress payments received on
account. Amounts recoverable on long term service contracts, which
are included in trade and other receivables, are stated at the net
sales value of the work done less progress payments received on
account. Excess progress payments are included on trade and other
payables. Cumulative costs incurred, less amounts transferred to
cost of sales, less provision for contingencies and expected future
losses on service contracts, are included as long-term service
contract balances in inventories.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Financial instruments are classified into the following
categories: financial assets at fair value through profit and loss
"FVTPL" (held for trading), 'loans and receivables' at amortised
cost, financial liabilities - derivatives designated as cash flow
hedges, and financial liabilities at amortised cost.
The classification depends on the nature and purpose of the
financial instruments.
Trade receivables
Trade receivables are measured at initial recognition at fair
value. Appropriate allowances for estimated irrecoverable amounts
are recognised in profit or loss when there is objective evidence
that the asset is impaired.
3.1 Accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the
proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct
issue costs, are accounted for on an accrual basis in profit or
loss using the effective interest rate method and are added to the
carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.
Trade payables
Trade payables are initially measured at fair value.
Derivative financial instruments and hedge accounting
The Group's activities expose it primarily to the financial risk
of changes in interest rates. The Group uses interest rate swap
contracts to hedge this exposure. The Group does not use derivative
financial instruments for speculative purposes.
The use of financial derivatives is governed by the Group's
policies approved by the board of directors, which provide written
principles on the use of financial derivatives.
Changes in the fair value of derivative financial instruments
that are designated and effective as hedges of future cash flows
are recognised in other comprehensive income and the ineffective
portion is recognised immediately in the income statement. If the
cash flow hedge of a firm commitment or forecasted transaction
results in the recognition of an asset or a liability, then, at the
time the asset or liability is recognised, the associated gains or
losses on the derivative that had previously been recognised in
other comprehensive income are included in the initial measurement
of the asset or liability. For hedges that do not result in the
recognition of an asset or a liability, amounts deferred in other
comprehensive income are recognised in the income statement in the
same period in which the hedged item affects net profit or
loss.
Changes in the fair value of derivative financial instruments
that do not qualify for hedge accounting are classified as FVTPL
(held for trading), and the gains and losses are recognised in the
income statement as they arise. These are classified as held for
trading as they have not been hedge accounted, and have not been
"designated" as FVTPL.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated, or exercised, or no longer
qualifies for hedge accounting. At that time, any cumulative gain
or loss on the hedging instrument recognised in other comprehensive
income is retained there until the forecasted transaction occurs.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in other comprehensive income is
transferred to the income statement for the period.
Investments
Investments in subsidiaries are stated at cost, less provision
for any impairment.
Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are
measured at the Directors' best estimate of the expenditure
required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.
3.1 Accounting policies (continued) Share-based payments
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value (excluding the effect of non market-based vesting conditions)
at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period and is recognised as an
employee expense with a corresponding increase in equity, based on
the Group's estimate of shares that will eventually vest and
adjusted for the effect of non market-based vesting conditions.
Fair value is measured by use of the Black-Scholes model or the
binomial method as appropriate. The expected life used in the model
has been adjusted, based on management's best estimate, for the
effects of non-transferability, exercise restrictions, and
behavioural considerations.
Intangible assets
Customer relationships
Customer relationships are measured as the present value of cash
flows attributable to the relationship after deduction of
appropriate contributory assets charged. The relationship is
amortised over its expected useful life, typically three years.
Order book
Order book is the value of confirmed orders on the date of
acquisition after appropriate costs have been deducted. The order
book is amortised over the period in which it is expected to
unwind.
4. Critical accounting judgements and key sources of estimation uncertainty
The preparation of consolidated financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions about the carrying amount of assets and
liabilities and the amount of income and revenue recognised in the
period. Actual results may differ from these estimates.
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Revenue and profit/margin recognition
The Group's revenue recognition, turnover and long term
contracts policies are set out in the notes above. Management
exercises judgement to estimate the total expected contract costs
and determine the percentage of completion in order to recognise
the appropriate revenue and profit in the period. The assessment of
profitability and recognition is assessed on an ongoing basis,
which ensures adequate controls are in place that appropriate
amounts are calculated.
Recognition and measurement of intangible assets under IFRS 3
'Business Combinations'
In order to determine the value of the separately identifiable
intangible assets on the acquisition of a business combination,
management are required to make estimates on secured customer
contracts, other contracts and customer relationships and goodwill.
The Group engaged outside independent parties to perform these
calculations and determine the fair value and estimated useful
lives of these assets.
4. Critical accounting judgements and key sources of estimation uncertainty (continued)
Impairment of goodwill and other intangible assets
There are a number of assumptions management have considered in
performing impairment reviews of goodwill and intangible assets.
Determining whether goodwill is impaired requires an estimation of
the value in use of the cash-generating units to which goodwill has
been allocated. The value in use calculation requires the Directors
to estimate the future cash flows expected to arise from the
cash-generating unit and a suitable discount rate in order to
calculate present value. Note 12 details the assumptions that have
been applied for goodwill.
5. Segmental Information
The Group has two reportable segments, as described below, which
are the Group's strategic divisions. The strategic divisions offer
different services and are managed separately because they have
some differences in their risks and operating models. For each of
the strategic divisions, the Group's CEO (the chief operating
decision maker) reviews internal management reports on at least a
monthly basis. The following summary describes the operations in
each of the Group's reportable segments;
Remediation - provides services related to the direct
remediation and removal of environmental risks, the principal two
group companies in this segment being Silverdell UK and
Kitsons.
Consulting - provides environmental survey, monitoring and
project management services, the principal company in this segment
being Redhill Analysts and its subsidiaries RDS and A H Allen.
Information regarding the results of each reportable segment is
included below. Performance is measured based on segment profit
before tax as included in the internal management reports that are
reviewed by the Group's CEO. Segment profit is used to measure
performance as management believes such information is the most
relevant in evaluating the results of certain segments relative to
other entities that operate within these industries.
Remediation Consulting Unallocated Group
2011 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 30 September
2011
Revenue
Total revenue 53,889 8,805 - 62,694
Less: between segments (2,399) (599) - (2,998)
External revenue 51,490 8,206 - 59,696
5. Segmental Information (continued)
Sales between segments are charged at prevailing market
prices.
Remediation Consulting Unallocated Group
2011 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 30 September
2011
Result
Operating profit before amortisation
and non-recurring items 3,554 1,252 (1,502) 3,304
Intangible assets amortisation - (30) - (30)
Non-recurring expenses (24) (50) (224) (298)
Finance costs (17) (5) (492) (514)
Profit / (loss) before tax 3,513 1,167 (2,218) 2,462
Taxation (1,111) (369) 701 (779)
Profit / (loss)for the year 2,402 798 (1,517) 1,683
At 30 September 2011
Balance sheet
Total assets 32,206 12,446 151 44,803
Total liabilities (13,605) (2,643) (4,884) (21,132)
Other information
Capital expenditure 656 197 28 881
Depreciation 440 68 17 525
As the Group's activities are almost entirely based in the UK,
no geographic segmental analysis is required.
Remediation Consulting Unallocated Group
2010 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 30 September
2010
Revenue 50,673 6,293 - 56,966
Total revenue (221) (71) - (292)
Less: between segments
------------ ---------- ----------- --------
External revenue 50,452 6,222 - 56,674
5. Segmental Information (continued)
Sales between segments are charged at prevailing market
prices.
Remediation Consulting Unallocated Group
2010 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 30 September
2010
Result
Operating profit before amortisation
and non-recurring items 3,643 897 (1,435) 3,105
Intangible assets amortisation (515) (86) - (601)
Finance costs 10 (13) (669) (672)
Profit / (loss) before tax 3,138 798 (2,104) 1,832
Taxation (1,329) (262) 496 (1,095)
Profit / (loss) for the year 1,809 536 (1,608) 737
At 30 September 2010
Balance sheet
Total assets 28,040 8,129 385 36,554
Total liabilities (9,551) (850) (7,200) (17,601)
Other information
Capital expenditure 293 52 52 397
Depreciation 573 111 17 701
As the Group's activities are almost entirely based in the UK,
no geographic segmental analysis is required.
6. Operating Profit
2011 2010
GBP'000 GBP'000
Operating profit is stated after charging/ (crediting):
Share based payment charge 257 130
Amortisation of intangible assets (see note 14) 30 601
Depreciation of:
- owned assets 450 459
- assets held under finance leases 75 242
Auditors' remuneration (see below) 87 75
Hire of plant and machinery 1,422 988
Operating lease rentals - land and buildings 574 337
Profit on disposal of fixed assets (2) (34)
6. Operating Profit (continued)
2011 2010
Analysis of auditors' remuneration GBP'000 GBP'000
Audit services
- audit of Company's annual accounts 17 16
- audit of Company's subsidiaries, pursuant to
legislation 57 49
74 65
Other services
- other services relating to tax compliance 13 10
Auditors' remuneration 87 75
7. Staff Costs Including Directors' Remuneration
Directors' Remuneration and Transactions
Salary Benefits Performance Total Pension Total Total
and fees GBP'000 bonus emoluments contributions 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-executive
directors:
Stuart Doughty 75 - - 75 - 75 80
Mark Watts* 30 - - 30 - 30 30
Executive directors:
Sean Nutley 220 2 20 242 20 262 225
Ian Johnson 188 3 14 205 16 221 173
Total 513 5 34 552 36 588 508
The pension contributions disclosed above were all in respect of
money purchase arrangements.
7. Staff costs including directors' remuneration (continued)
Directors' remuneration and transactions (continued)
Options over ordinary shares
The directors' interests in share options are disclosed in the
directors' report within the Annual Report.
Staff costs
2011 2010
Employees Number Number
Average number of persons (including directors) employed
by the Group in the year:
Operational, sales and other 693 632
Administrative 167 142
860 774
The payroll costs in respect of the employees included in the
table above were:
2011 2010
GBP'000 GBP'000
Salaries and wages 29,944 26,354
Social security costs 3,167 2,715
Pension costs 284 119
Share based payment charge (Note
26) 257 130
33,652 29,318
======== ========
Certain subsidiary undertakings of the Group operate defined
contribution pension schemes. The assets of the schemes are held
separately from those of the Group by independently administered
funds.
Remuneration of key management personnel
In accordance with IAS 24 Related Party Disclosures, key
management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any
director (executive and non executive) of the Group.
2011 2010
GBP'000 GBP'000
Short-term employee benefits 917 899
Post-employment benefits 77 56
========= ========
Key management personnel include members of the Board and the
Managing Directors of the principal subsidiaries.
8. Finance costs
2011 2010
GBP'000 GBP'000
Interest on bank overdrafts and loans 502 662
Interest on obligation under finance leases 6 1
Change in fair value of derivative financial instrument - 9
Finance charge on contingent consideration 6 -
--------- --------
Total finance costs 514 672
========= ========
9. Tax on profit on ordinary activities
Income tax recognised in profit or loss
2011 2010
GBP'000 GBP'000
Tax charge comprises:
United Kingdom corporation tax based on
the profit for the year 795 915
Adjustment in respect of previous years (89) 226
Total current tax expense 706 1,141
Deferred tax income relating to the origination
and reversal of temporary differences (24) (239)
Adjustment in respect of previous years 97 193
Total deferred tax expense / (credit) 73 (46)
Total tax expense 779 1,095
The charge for the year can be reconciled to the profit per the
income statement as follows:
2011 2011 2010 2010
GBP'000 % GBP'000 %
Profit before tax 2,462 1,832
-------- --------
Income tax expense calculated at
the standard rate of 27% (2010:
28%) 665 27 513 28
Share based payment charge 25 1 36 2
Effect of expenses that are not
deductible in determining taxable
profit 81 4 127 7
Prior year adjustment (8) - 419 23
-------- ---- -------- ----
Income tax charge recognised in
profit or loss 779 32 1,095 60
======== ==== ======== ====
The Finance (No 2) Act 2010, which was substantively enacted on
20 July 2010, included legislation reducing the main rate of
corporation tax from 28% to 27% from 1 April 2011. An additional 1%
reduction reducing the rate to 26%, also effective from 1 April
2011, was announced by the UK Government in the Budget on 23 March
2011 and substantively enacted on 29 March 2011. These changes to
tax rates are not expected to have a material effect on the
Group.
The Group's planned level of capital investment is expected to
remain at similar levels. Therefore, it expects to be able to claim
allowances in excess of depreciation in future years, at a similar
level to the current year.
9. Tax on profit on ordinary activities (continued)
There were no unrecognised deferred tax assets.
The movement in deferred tax was as follows: Asset Liability
GBP'000 GBP'000
At 1 October 2009 (120) -
Credited to income statement 111 -
Charged to hedging reserve 24 -
Reclassified as liability (15) 15
-------- ---------
At 30 September 2010 - 15
Charged to income statement - 73
Charged to hedging reserve - 10
Acquired with subsidiary undertakings - 123
-------- ---------
At 30 September 2011 - 221
======== =========
2011 2010
The deferred tax liability comprises: GBP'000 GBP'000
Accelerated tax depreciation 132 34
Intangible assets 123 -
Share based payments (44) -
Other 10 (19)
-------- ---------
221 15
======== =========
10. Non-recurring expenses and amortisation
Non-recurring items, impairments and amortisation are shown
separately on the face of the income statement in order to reflect
the Group's underlying financial performance. The items comprise
the following:
2011 2010
GBP'000 GBP'000
Amortisation of intangible assets (see Note
13) 30 601
Non-recurring expenses (see below) 298 -
-------- --------
328 601
Related income tax credit (89) (157)
-------- --------
239 444
======== ========
The non-recurring expenses of GBP298,000 (2010: GBPNil) can be
analysed further as follows.
Business acquisition costs of GBP70,000 (2010: GBPNil) comprise
costs of the acquisition and subsequent integration of subsidiary
undertakings acquired in 2011. Overseas business development of
GBP68,000 (2010: GBPNil) represent fees and expenses incurred in
developing potential business ventures overseas. Corporate
rebranding fees were incurred of GBP57,000 (2010: GBPNil), while
the Group also incurred costs of GBP52,000 (2010: GBPNil) on
internal business restructuring and fees of GBP51,000 (2010:
GBPNil) in connection with the capital restructuring during the
year.
11. Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares during the year, determined in accordance
with the provisions of IAS 33 "Earnings per share".
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue on the
assumption of conversion of all dilutive potential ordinary
shares.
Adjusted basic earnings per share is calculated by dividing the
earnings attributed to ordinary shareholders, before intangible
assets amortisation, share-based payment charges, non-recurring
expenses and finance charges on deferred consideration, by the
weighted average number of ordinary shares during the year.
2011 2010
earnings Earnings
per share per share
basic diluted basic diluted
-------- ----------- ------- -------- ---------- -------
Earnings GBP'000 pence pence GBP'000 pence pence
Profit attributable to
ordinary shareholders 1,683 1.1 1.0 737 0.5 0.5
Non-recurring items,
impairments, amortisation
and share based payments 453 0.3 0.3 574 0.4 0.3
Profit for adjusted earnings
per share 2,136 1.4 1.3 1,311 0.9 0.8
The adjusted numbers have been reported in order that the impact
of the above charges against reported profit can be fully
appreciated.
Number of shares
2010
2011 No.
No. (Restated*)
Weighted average number of ordinary shares
used in calculation of basic earnings per
share 155,663,646 151,654,717
Effect of dilutive potential ordinary shares:
Share options 2,087,492 353,309
Warrants 11,374,179 11,374,179
Weighted average number of ordinary shares
used in calculation of diluted earnings
per share 169,125,317 163,382,205
The prior year comparative has been restated to be consistent
with the inclusion this year of warrants held by Barclays Bank Plc
from the prior year calculation of diluted earnings per share.
Other warrants are anti-dilutive. Details of all warrants over the
shares of the Company are disclosed in note 24
12. Goodwill
GBP'000
Cost
At 30 September 2009 and 30 September 2010 35,611
Acquisition of Allens (Note 14) 478
Acquisition of RDS (Note 14) 1,127
At 30 September 2011 37,216
GBP'000
Accumulated impairment losses
At 30 September 2009 , 30 September 2010 and 30
September 2011 (19,455)
Carrying amount
At 30 September 2011 17,761
At 30 September 2010 16,156
The carrying amount of goodwill relates to the Group's two
business segments as follows:
2011 2010
GBP'000 GBP'000
Remediation 10,869 10,869
Consulting 6,892 5,287
-------- --------
17,761 16,156
======== ========
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired. Goodwill is allocated for impairment testing to cash
generating units (CGU) which reflects how it is monitored for
internal management purposes. The recoverable amounts of the CGUs
are determined from value in use calculations. Value in use is
calculated using pre-tax cashflow projections based on the
financial budgets and business plans covering a three year period,
which take into account historical trends and market conditions,
which have been approved by the Board. The key assumptions for the
value in use calculations are those regarding the discount rates
and growth rates for the period. Management estimates discount
rates using pre-tax rates that reflect current market assessments
of the time value of money and the risks specific to the CGUs,
equivalent to a real pre tax discount rate which average 12% (2010:
12%). The growth rates are based on industry growth forecasts and
long-term growth in gross domestic product.
The Group prepares cash flow forecasts derived from the most
recent financial budgets approved by management for the next three
years and extrapolates cash flows for the following years based on
an estimated annual growth rate of 1%. The rates do not exceed the
average long-term growth rate for the relevant markets. The rates
used to discount the cash flows in both 2011 and 2010 for all CGUs
have been based on the Group's weighted average cost of capital,
because the CGUs do not have significantly differing risk
profiles.
The Group's impairment review is sensitive to changes in the key
assumptions used. The major assumptions that result in significant
sensitivities are the revenue growth and the discount rate. Given
the Group's sensitivity analysis, a reasonably possible change in a
single assumption will not result in further impairments.
At 30 September 2011, goodwill was allocated to the Kitsons
Environmental Europe Limited ("Kitsons"), Silverdell (UK) Limited
("Silverdell UK") and Redhill Analysts Limited ("Redhills") CGUs.
The goodwill arising on the acquisitions of Allens and RDS during
the year (see Note 14) has been allocated to the Redhills CGU
because these businesses are being integrated within the Redhills
business.
As a result of impairment reviews in previous years, the
goodwill relating to these CGUs was reduced to its recoverable
amount by recognising accumulated impairment losses as follows:
GBP'000
Silverdell UK 9,990
Kitsons 8,366
Redhills 1,099
19,455
13. Other intangible assets
Order Customer
Backlog Contracts Total
Cost
At 1 October 2009 and 30 September
2010 1,480 5,434 6,914
Acquisition of Allens (Note 14) - 122 122
Acquisition of RDS (Note 14) - 361 361
At 30 September 2011 1,480 5,917 7,397
======== ========== =====
Accumulated amortisation
At 1 October 2009 1,480 4,833 6,313
Amortisation charge - 601 601
At 30 September 2010 1,480 5,434 6,914
Amortisation charge - 30 30
At 30 September 2011 1,480 5,464 6,944
Carrying amount
At 30 September 2011 - 453 453
======== ========== =====
At 30 September 2010 - - -
======== ========== =====
All amortisation charges in the year have been included in
administrative expenses.
14. Acquisitions
The Group acquired 100% of the issued share capital of two new
subsidiary undertakings during the year, both of which were
acquired by Redhill Analysts Limited. A.H. Allen Limited ("Allens")
was acquired on 1 April 2011 and RDS Asbestos Management
Consultants [UK] Limited ("RDS") was acquired on 30 August 2011.
Both Allens and RDS operate environmental consulting businesses in
the UK and both businesses are being integrated into the Group's
Consulting division.
The fair values of the assets and liabilities acquired are set
out in the tables below.
Allens
Fair value
Book value adjustments Fair value
GBP'000 GBP'000 GBP'000
Intangible assets - 122 122
Property, plant and equipment 241 - 241
Trade and other receivables 261 (14) 247
Cash and cash equivalents 91 - 91
Trade and other payables (91) (7) (98)
Bank borrowings (130) - (130)
Current tax liability (63) - (63)
Deferred tax liability - (32) (32)
Net assets acquired 309 69 378
========== ============ ==========
Consideration paid:
Cash payable 626
Contingent consideration 230
---------- ------------ ----------
Total 856
---------- ------------ ----------
Goodwill arising 478
========== ============ ==========
RDS
Fair value
Book value adjustments Fair value
GBP'000 GBP'000 GBP'000
Intangible assets - 361 361
Property, plant and equipment 71 - 71
Trade and other receivables 879 (116) 763
Cash and cash equivalents 82 - 82
Trade and other payables (344) (10) (354)
Finance lease obligations (20) - (20)
Current tax liability (52) (13) (65)
Deferred tax liability - (91) (91)
Net assets acquired 616 131 747
========== ============ ==========
Consideration paid:
Cash payable 1,120
Shares in Silverdell Plc 555
Contingent consideration 199
Total 1,874
---------- ------------ ----------
Goodwill arising 1,127
========== ============ ==========
The fair value adjustments for both companies related to the
adjustment of revenue recognition to be consistent with Group
policy, provision for doubtful trade receivables, recognition of
intangible assets on acquisition and adjustments to tax
balances.
Allens contributed revenue of GBP590,000 and operating profit of
GBP72,000 to the Group results in the year ended 30 September 2011.
RDS contributed revenue of GBP362,000 and operating profit of
GBP127,000. These results are included within the results of the
Consulting division in the segmental analysis in Note 2.
15. Property, plant and equipment
Freehold and
leasehold Plant and
property Motor vehicles Office equipment machinery Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 October 2009 648 1,176 860 2,774 5,458
Additions 41 59 72 225 397
Disposals - (451) - (10) (461)
------------ -------------- ---------------- ---------- --------
At 1 October 2010 689 784 932 2,989 5,394
Additions 19 156 107 599 881
Acquisitions 219 18 - 77 314
Disposals - (281) - - (281)
At 30 September 2011 927 677 1,039 3,665 6,308
Accumulated depreciation
At 1 October 2009 108 775 624 1,608 3,115
Depreciation charge for
the year 38 258 122 283 701
Disposals - (418) - (3) (421)
------------ -------------- ---------------- ---------- --------
At 30 September 2010 146 615 746 1,888 3,395
Depreciation charge for
the year 21 99 56 349 525
Disposals - (264) - - (264)
At 30 September 2011 167 450 802 2,237 3,656
------------ -------------- ---------------- ---------- --------
Carrying amount
At 30 September 2011 760 227 237 1,428 2,652
============ ============== ================ ========== ========
At 30 September 2010 543 169 186 1,101 1,999
============ ============== ================ ========== ========
The net book value of assets held under finance leases is
GBP372,000 (2010: GBP332,000).
The book value of freehold land not depreciated is GBP269,000
(2010: GBP219,000)
16. Inventories
2011 2010
GBP'000 GBP'000
Raw materials and consumables 220 266
Work in progress 2,844 732
--------- --------
3,064 998
========= ========
The cost of inventories recognised as an expense and included in
'cost of sales' amounted to GBP4,300,000 (2010: GBP2,566,000). The
Directors consider that the carrying amount of inventories
approximates to their fair value.
17. Derivative financial liabilities
2011 2010
GBP'000 GBP'000
Interest rate cap - -
Interest rate swaps (31) (71)
========= ========
The notional principal amount of the outstanding interest rate
cap contract was GBP1,477,500 (2010: GBP1,247,500). The interest
cap was at LIBOR at 3.5% and the contract expires on 31 December
2011. This derivative is treated as at FVTPL - (held for
trading)
The notional principal amount of the outstanding interest rate
swap contracts at 30 September 2011 was GBP2,250,000 (2010:
GBP1,750,000). At 30 September 2011, GBP1,500,000 was subject to a
fixed interest rate of 2.1% and GBP750,000 was subject to a fixed
interest rate of 5.8%. The main floating rates were GBP LIBOR.
18. Trade and other receivables
2011 2010
GBP'000 GBP'000
Non-current
Other receivables (see Note 23) 1,001 1,001
Total Non-Current 1,001 1,001
Current
Trade receivables 13,401 10,797
Less: provision for impairment (226) (243)
Trade receivables net 13,175 10,554
Prepayments and accrued income 1,482 1,150
Due from customers for contract
work 2,648 1,070
Total Current 17,305 12,774
Total 18,306 13,775
The average credit period taken on sales is 67 days (2010: 58
days). The Group has different provision policies for its various
divisions which have been determined by reference to past default
experience and specific provisions are raised after taking an
individual view to the debtor's recoverability.
Due to the nature of the Group's operations, it is common
practice for customers to hold retentions in respect of contracts
completed. Retentions held by customers as at 30 September 2011
were GBP646,000 (2010: GBP1,086,000).
The Group's exposure to credit risk and impairment losses
related to trade and other receivables are disclosed in Note
22.
Under the normal course of the business, the Group does not
charge interest on its overdue receivables.
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
Included in trade and other receivables are costs incurred in
respect of a significant customer contract totalling GBP2.9m. The
Group is in the process of validating and negotiating its final
account with the main contractor. The opinion of the Directors is
that as negotiations are at an advanced stage no provision is
required against this debtor.
19. Analysis of net debt position
2010 Cash flow Other non-cash changes 2011
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 3,626 (1,059) - 2,567
Bank loans (5,513) 930 (130) (4,713)
Bank overdraft (2,340) (545) - (2,885)
Finance lease obligations (41) 53 (245) (233)
(4,268) (621) (375) (5,264)
The Group's exposure to interest rate risks and a sensitivity
analysis for financial assets and liabilities is disclosed in Note
22.
20. Borrowings
2011 2010
GBP'000 GBP'000
Non-current
Bank loans 3,913 4,754
Obligations under finance lease
contracts 125 23
--------- --------
4,038 4,777
--------- --------
Current
Bank loans and overdrafts 3,685 3,099
Obligations under finance lease
contracts 108 18
--------- --------
3,793 3,117
Total 7,831 7,894
========= ========
Further information on the principal features of the Group's
borrowings is set out in Note 22.
The Group's bank overdraft and loan facilities are secured by
debentures over the assets of the Group. The debenture agreement
includes a fixed and floating charge over the assets of the Group.
Finance lease liabilities are secured on the assets to which the
contracts relate.
The bank loan is at both fixed and variable rates of interest.
GBP750,000 (2020: GBP1,750,000) is subject to an interest rate
swap; the amount amortises by GBP250,000 per quarter and the rate
on the amortised amount is fixed at 5.8%. A further GBP1,477,500
(2010: GBP1,247,500) was subject to an interest rate cap agreement
at 30 September 2011, placing a 3.5% cap on 3-month LIBOR. The
amount of notional borrowings covered by the cap agreement is
scheduled to vary each quarter in order to achieve the Group's
objective of 55% of certain elements of its banking facilities
being covered by the combined hedge. The remaining elements of the
Group's facilities are subject to interest at variable rates over
LIBOR. The finance leases are at variable rates of interest. The
weighted average interest rate on the fixed rate facilities is 5.8%
for a weighted average period of 1.5 years.
As at 30 September 2011, the Group had an undrawn committed
revolving credit facility of GBPNil (2010: GBPNil). The net
overdraft facility available as at 30 September 2011 was
GBP2,750,000 (2010: GBP2,750,000) and the headroom available at the
year-end was GBP2,432,000 (2010: GBP4,036,000).
The non -current obligations under finance leases are all
repayable within one and five years. The present value of future
minimum lease payments is not materially different from the
carrying amounts of the obligations under finance leases.
21. Contingent consideration
2011 2010
GBP'000 GBP'000
Non-current 109 -
Current 326 -
Total 435 -
The contingent consideration relates to the acquisitions of
Allens and RDS (see Note 14). These acquisitions provide for
contingent consideration to become payable based on the performance
of the businesses in the two years immediately following
acquisition by the Group, with Gross Profit and Earnings Before
Interest Tax Depreciation and Amortisation being the key target
measures. The amount has been discounted from the acquisition date.
Since the date of acquisition the discount has unwound and will
continue to unwind for the next 2 years.
22. Financial instruments
(a) Financial risk management
All companies are exposed to capital and market risk, but the
Board considers the Group's key elements of financial risk to
be:
-- Credit risk
-- Liquidity risk
-- Interest rate risk
This note presents information about the Group's exposure to
each of the above risks, the Group's management of capital, and the
Group's objectives, policies and procedures for measuring and
managing risk. Please refer also to the principal business risks in
the statement on Key Risks and Mitigations within the Annual
Report.
Capital risk management
The Board is responsible for overall Group strategy, acquisition
and divestment policy, approval of major capital expenditure
projects and consideration of significant financing matters. The
Board manages its capital to ensure that entities in the Group will
be able to continue as a going concern while maximising the return
to stakeholders as well as sustaining the future development of the
business. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to
reduce debt.
The capital structure of the Group consists of debt, which
includes the borrowings disclosed in Note 20, cash and cash
equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained earnings
as set out in the Statement of Changes in Equity.
Market risk
Market risk is the risk that changes in the market prices, such
as foreign exchange rates and interest rates, will affect the
Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising the return on risk.
The Group's activities expose it mainly to the financial risks
of changes in interest rates. The Board reviews and agrees the
policy for managing interest rate risk and foreign currency risk
and the potential impact of any significant economic changes are
discussed at monthly Board meetings.
The Group reviews its treasury position daily, placing any
surplus cash on short-term deposits.
22. Financial instruments (continued)
(b) Categories of financial instruments
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised in respect of each class of financial asset, financial
liability and equity instrument are disclosed in Note 3 to the
financial statements.
2011 2010
GBP'000 GBP'000
Financial assets(1)
At amortised cost:
Loans and receivables 13,175 10,554
Cash and cash equivalents 2,567 3,626
--------- --------
Total financial assets 15,742 14,180
--------- --------
(1) Financial assets exclude prepayments, amounts due under
long-term contracts, other receivables and other non-current
receivables.
2011 2010
GBP'000 GBP'000
Financial liabilities(2)
At amortised cost:
Trade and other payables 8,766 6,381
Obligations under finance leases 233 41
Other borrowings and overdrafts 7,598 7,853
Contingent consideration 435 -
Derivatives - designated as cash
flow hedges 31 71
Total financial liabilities 17,063 14,346
(2) Financial liabilities exclude tax and social security,
deferred income and other non-current payables.
(c) Credit risk
The Group's principal financial assets are cash and cash
equivalents and trade and other receivables, which represent the
Group's maximum exposure to credit risk in relation to financial
assets.
The Group's credit risk is primarily attributable to its trade
and other receivables. The amounts presented in the consolidated
balance sheet are net of allowances for doubtful receivables,
estimated by the Group's management based on prior experience and
their assessment of the current economic environment.
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with
creditworthy counterparties as a means of mitigating the risk of
financial loss from defaults.
The carrying amount of financial assets recorded in the
financial statements, which is net of impairment losses, represents
the Group's maximum exposure to credit risk.
The Group's exposure and the credit ratings of its
counterparties are continuously monitored and the aggregate value
of transactions concluded is spread amongst approved financial
institutions.
22. Financial instruments (continued)
(c) Credit risk (continued)
Trade receivables
Trade receivables consist of a large number of customers, spread
across diverse areas within the UK and the Group's exposure to
credit risk is influenced mainly by the individual characteristics
of each customer. The demographics of the Group's customer base,
including default risk of the industry and country, in which the
customers operate, has less of an influence on credit risk. The
Directors consider that the carrying amount of trade and other
receivables, which are non-interest bearing, approximates to their
fair value.
The Group does not have any significant credit risk exposure to
any single counterparty or any Group of counterparties having
similar characteristics. The Group defines counterparties as having
similar characteristics if they are related entities.
Before accepting any new customer, the Group runs credit checks
to assess the potential customer's credit quality. The Group
monitors exposure to individual clients and all customers are
subject to standard terms of payment for each division which are,
on average, 30 days.
The analysis of trade receivables in excess of 30 days old but
not impaired is as follows:
2011 2010
GBP'000 GBP'000
31 - 60 days 3,084 2,479
61 - 90 days 1,176 859
91-120 days 517 311
121 - 150 days 699 148
More than 151 days 501 715
5,977 4,512
22. Financial instruments (continued)
(c) Credit risk (continued)
The Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of trade and
other receivables and investments when there is objective evidence
that the asset is impaired. The main components of this allowance
are a specific loss component that relates to individually
significant exposures, and a collective loss component established
for Groups of similar assets in respect of losses that have been
incurred but not yet identified. The collective loss allowance is
determined by references to past default experience and historical
data of payment statistics for similar financial assets.
Movement in the provision for impairment:
2011 2010
GBP'000 GBP'000
Balance at beginning of the year 243 353
(Decrease) / increase in impairment
provision recognised (11) 167
Acquired with subsidiary undertakings (135) -
Receivables written off / (written
back) 129 (277)
-------- --------
226 243
======== ========
The creation and release of provisions for impaired receivables
has been included in 'administrative expenses' in the income
statement.
In determining the recoverability of a trade receivable, the
Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the
reporting date. The concentration of credit risk is limited due to
the customer base being large and unrelated. Accordingly, the
directors believe that there is no further credit provision
required in excess of the above amount.
(d) Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. Responsibility for
liquidity risk management rests with the Board of Directors. The
Group manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities, by
continuously monitoring bank covenant compliance, forecast and
actual cash flows and matching the maturity profiles of financial
assets and liabilities. Details of additional undrawn facilities
that the Group has at its disposal to further reduce liquidity risk
are disclosed in Note 20.
Liquidity and interest risk tables
The following tables detail the Group's expected maturity for
its financial assets and liabilities. The tables below have been
drawn up based on the undiscounted contractual maturities of the
financial assets and liabilities. No material interest is expected
to accrue on the interest bearing assets, which represent cash
deposits.
22. Financial instruments (continued)
(d) Liquidity risk (continued)
Book Undiscounted Cashflows
Value
--------- ----------------------------------------------------------------------
30 September 2011 Less 1 - 3 3 months 1-5 5 + Total
than monthsGBP'000 to 1 years years GBP'000
GBP'000 1 month year GBP'000 GBP'000
GBP'000 GBP'000
Financial assets
Non-interest bearing 13,175 13,175 - - - - 13,175
Variable interest
rate instruments 2,567 2,567 - - - - 2,567
15,742 15,742 - - - - 15,742
Financial liabilities
Non-interest bearing 9,232 8,797 - 326 109 - 9,232
Variable interest
rate instruments 7,831 2,894 227 672 4,038 - 7,831
17,063 11,691 227 998 4,147 - 17,063
Less 1 - 3 3 months 1 - 5 + Total
30 September 2010 than monthsGBP'000 to 1 5 years years GBP'000
1 month year GBP'000 GBP'000
GBP'000 GBP'000
Financial assets
Non-interest bearing 10,554 10,554 - - - - 10,554
Variable interest
rate instruments 3,626 3,626 - - - - 3,626
14,180 14,180 - - - - 14,180
Financial liabilities
Non-interest bearing 6,422 6,422 - - - - 6,422
Variable interest
rate instruments 7,924 2,344 290 853 5,253 - 8,740
14,346 8,766 290 853 5,253 - 15,162
22. Financial instruments (continued)
(e) Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument or cash flows associated with the instrument, will
fluctuate due to changes in market interest rates. As the Group has
no significant interest-bearing assets, the Group's income and
operating cash flows are substantially independent of changes in
market interest rates.
The Group is exposed to interest rate risk primarily though
borrowing funds at floating interest rates. Borrowings issued at
variable rates expose the Group to cash flow interest rate risk.
The Group manages interest rate risk on borrowings by ensuring
access to diverse funding and through monitoring interest rate
movements with weekly reports.
Interest rate risk is reviewed on a regular basis and if
considered necessary a strategy to minimise any potential risk
through interest rate swaps will be discussed and implemented.
Based on the various scenarios, the Group manages its cash flow
interest rate risk by using a combination of floating-to-fixed
interest rate swaps and an interest rate cap. The interest rate
swap has the economic effect of converting borrowings from floating
rates to fixed rates. Generally the Group raises long term
borrowings at floating rates and swaps them into fixed rates that
are lower than those available if the Group borrowed at fixed rates
directly. Under the interest rate swap, the Group agrees with other
parties to exchange, at specified intervals (primarily quarterly),
the difference between fixed contract rates and floating rate
instrument amounts calculated by reference to the agreed notional
amounts. The interest rate cap ensures that, for the specified
portion of borrowings, floating rate interest will apply only up to
a specified ceiling.
The Group's exposures to interest rates on financial assets and
financial liabilities are detailed below.
Interest rate sensitivity analysis
If interest rates had been 100 basis points higher or lower and
all other variables were held constant, the Group's profit for the
year would increase or decrease by GBP45,000 (2010: GBP61,000) in
respect to exposure to the Group's borrowings and cash and cash
equivalents. For floating rate liabilities the analysis is prepared
assuming the amount of the liability at the balance sheet date was
outstanding for the whole period.
(f) Fair value of financial instruments
The fair value of interest rate swaps is calculated at the
present value of the estimated future cash flows.
The Directors consider that the carrying amounts of financial
assets and financial liabilities recorded at amortised cost in the
financial statements approximate to their fair values due to the
short maturity of the instruments or because they bear interest at
rates approximate to the market.
23. Trade and other payables
2011 2010
GBP'000 GBP'000
Non-current
Other payables 1,001 1,001
In 2006, the Group recorded a provision of GBP1.0m in respect of
a contingent liability arising on the acquisition of Silverdell
(UK) Limited. The Group has a corresponding asset relating to the
indemnities from the vendors of Silverdell (UK) Limited in respect
of this provision.
2011 2010
GBP'000 GBP'000
Current
Trade payables 6,031 4,037
Other taxation and social security 2,098 1,733
Other payables 2,735 2,344
10,864 8,114
An analysis of the maturity of debt is given in Note 22(d).
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
The Group's policy is to fix payment terms when agreeing the
terms of each transaction. It is the Group's general policy to pay
suppliers according to the agreed terms and conditions, provided
that the supplier has complied with those terms.
Trade creditors and accruals principally comprise amounts
outstanding for trade purchases and ongoing cost and they include
retention amounts held over defect liability periods. The average
credit period taken for trade purchases is 56 days (2010: 54 days)
for the Group. The Group has financial risk management policies in
place to ensure that all payables are paid within the credit
timeframe.
There are no suppliers who represent more than 10% of the total
balance of trade creditors in either 2011 or 2010.
The Group has financial risk management policies in place to
ensure that all payables are paid within the credit timeframe.
Therefore, under the normal course of business, the Group is not
charged interest on overdue payables.
24. Share capital
2011 2010
No. GBP'000 No. GBP'000
Authorised:
Ordinary shares of 1p each 260,000,000 2,600 260,000,000 2,600
Allotted, called up and fully
paid
Ordinary shares of 1p each 180,839,717 1,808 151,654,717 1,516
Movement in issued share capital
At 1 October - 1p ordinary shares 151,654,717 1,516 526,547,188 5,265
Shares issued in the year 29,185,000 292 - -
1p deferred shares cancelled - - (374,892,471) (3,749)
At 30 September 180,839,717 1,808 151,654,717 1,516
The Company issued 23,635,000 shares at 10p per share in a
placing on 11 August 2011, generating net proceeds of GBP2,192,000
after expenses. The nominal value of the shares issued was
GBP237,000 and the premium arising after expenses was GBP2,001,000.
The purpose of the placing was to fund the acquisition of RDS (see
Note 14) and to provide additional resources for the Group to
grow.
The Company subsequently issued a further 5,550,000 shares at
10p per share to the vendors of RDS as part of the consideration
for that acquisition. The nominal value of the shares issued was
GBP55,000 and the premium arising was GBP500,000.
In March 2010 the Company cancelled all the 1p deferred shares
in issue.
Barclays Bank Plc holds 11,374,179 (2010: 11,374,179) warrants
valid until 2017 to subscribe for ordinary shares in the Company at
5p (2010: 5p) per ordinary share. Marwyn Neptune Fund LP holds
warrants valid until 2013 to acquire up to 3,220,105 (2010:
3,220,105) ordinary shares in the Company at 75p (2010: 75p) per
ordinary share. Details of options over the Company's share capital
are disclosed in Note 26.
25. Capital and other commitments
At 30 September 2011, the Group had no capital commitments (2010
- GBPNil).
Operating leases
The Group had outstanding total commitments under
non-cancellable operating leases at 30 September which fall due as
follows:
2011 2010
Land and Land and
buildings Other buildings Other
GBP'000 GBP'000 GBP'000 GBP'000
Operating leases which expire:
Within one year 331 715 432 546
Within two to five years 730 734 620 257
After five years 159 2 229 66
1,220 1,451 1,281 869
26. Employee share schemes
The Group has adopted share incentive arrangement plans as set
out below.
Equity-settled share option scheme
The Group has a share option scheme for certain employees of the
Group. Options are exercisable at a price equal to the average
quoted market price of the Company's shares on the date of grant.
The vesting period is three years. If the options remain
unexercised after a period of five years from the date of grant,
the options expire. Options are forfeited if the employee leaves
the Group before the options vest.
Details of the share options outstanding during the year are as
follows:
2011 2010
Weighted Weighted
average average
exercise exercise
Number of price Number of price
share options GBP share options* GBP
Outstanding at beginning of year 13,225,247 0.087 2,905,104 0.945
Granted during the year 2,190,190 0.115 13,956,046 0.087
Forfeited during the year (359,171) (0.090) (3,635,903) 0.773
Outstanding at the end of the
year 15,056,266 0.090 13,225,247 0.087
Exercisable at the end of the
year - - - -
*The number of options granted in in the prior year has been
reduced by 2,754,679 to correct an error in the prior year
disclosure.
The options outstanding at 30 September 2011 had a weighted
average remaining contractual life of 8 years (2010: 9 years). In
2011, options over 2,190,190 shares were granted in April 2011. The
aggregate of the estimated fair values of the options granted on
that date is GBP105,000.
Of the options outstanding at 30 September 2011, 4,800,000
awarded to the chairman and executive directors have a market-based
performance condition, dependent on the level of the company's
future share price. The remaining options are subject to
performance conditions relating to the company's future adjusted
earnings per share.
The options with market-based performance conditions were valued
using the binomial method, while other options were valued using
the Black Scholes option pricing model.
26. Employee share schemes (continued)
The inputs into the valuation models used for options granted
each year are as follows:
2011 2010
Weighted average share price GBP0.105 GBP0.090
Weighted average exercise price GBP0.115 GBP0.087
Expected volatility 77% 77%
Expected life 6.5 years 6.5 years
Risk-free rate 3.50% 3.35%
Expected dividend yield 0% 0%
Expected volatility was determined by calculating the historical
volatility of the Group's share price over the previous 1.5 years.
The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations. The risk
free rate of return is the yield on zero coupon UK government bonds
with a term similar to the expected life of the option.
The charge in the income statement relating to the above
share-based payments was GBP257,000 (2010: GBP130,000).
27. Contingent liabilities
There are Group cross guarantees from the Company for all monies
due to certain of the Group's banks and surety lenders. The total
potential exposure to the Group's banks under such guarantees was
GBP5,031,000 (2010: GBP4,227,000). No monies were outstanding at 30
September 2011 (2010: GBPnil). In the normal course of business
there are contingent liabilities including the provision of bonds
in respect of completed and uncompleted contracts.
28. Related party transactions
During the year to 30 September 2011, the Group paid GBP30,000
(2010: GBP30,000) to Marwyn Capital LLP for corporate finance
services and directors' fees and GBP90,000 (2010: GBP92,071) to
Marwyn Partners Limited for rent and other office services. At the
end of that year GBPnil (2010: GBPnil) remained outstanding.
Mark Watts is a partner in Marwyn Capital LLP and Marwyn
Investment Management LLP and a shareholder in Marwyn Investments
Group Limited, which owns 100% of Marwyn Partners Limited. Marwyn
Neptune Fund LP is managed by Marwyn Investment Management LLP and
beneficially owns shares and warrants in the Group.
During the year to 30 September 2011, Kalistar LLP, a
partnership of certain of the executive directors of Silverdell
(UK) Limited, charged GBP48,000 (2010: GBP48,000) for the provision
of cars used by some of the directors of Silverdell (UK) Limited.
At the end of that year GBP14,000 (2010: GBPnil) remained
outstanding.
One property occupied by Silverdell (UK) Limited is owned by the
pension fund in which Sean Nutley has an interest. The property is
subject to a market rent of GBP29,000 (2010: GBP29,000) per annum
and GBPnil (2010: GBPnil) remained outstanding at the year-end.
29. Post balance sheet events
After the balance sheet date, a GBP1m extension of the Revolving
Credit Facility was agreed with the bank and the cash flow covenant
was relaxed for 12 months.
2011 2010
Notes GBP'000 GBP'000
Fixed assets
Investments 32 24,121 23,943
Tangible assets 33 49 38
24,170 23,981
Current assets
Debtors: amounts falling due
within one year 34 6,087 6,371
Creditors: amounts falling due within
one year 35 (9,582) (10,129)
Net current liabilities (3,495) (3,758)
Total assets less current liabilities 20,675 20,223
Creditors: amounts falling due
after one year 35 (3,913) (4,755)
Total net assets 16,762 15,468
Capital and reserves
Called up share capital 24 1,808 1,516
Share premium account 36 2,456 17,813
Equity reserve 36 721 464
Other reserve 36 4,135 16,635
Capital reserve 36 - 3,749
Profit and loss account 36 7,642 (24,709)
Total shareholders' funds 16,762 15,468
Company balance sheet
At 30 September 2011
The financial statements were approved by the Board of directors
and authorised for issue on 30 November 2011. They were signed on
behalf of the Board of directors.
Ian Johnson
Director
Notes to the financial statements
At 30 September 2011
30. Significant accounting policies
The separate financial statements of the Company have been
prepared on the historical cost basis and under the going concern
assumption. The accounting policies are summarised below and have
been applied consistently throughout the year and the preceding
year. The separate financial statements are presented as required
by the Companies Act 2006. As permitted by that Act, the separate
financial statements have been prepared in accordance with United
Kingdom accounting standards.
Taxation
The tax currently payable is based on the taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income and expense se
that are taxable or deductible in other years and it further
excludes items which are never taxable or deductible. The Company's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted at the balance sheet
date.
Deferred taxation is provided in full on all timing differences
that result in an obligation at the balance sheet date to pay more
tax, or a right to pay less tax, at a future date, subject to the
recoverability of deferred tax assets. Deferred tax assets and
liabilities are not discounted.
Share-based payments
The Company has applied the requirements of FRS 20 Share-based
Payment. In accordance with the transitional provisions, FRS 20 has
been applied to all grants of equity instruments After 7 November
2002 that had not vested as at 1 January 2005.
The Company makes equity settled share-based payments to the
directors, which are measured at fair value at the date of grant.
The fair value of share options issued with non-market vesting
conditions has been calculated using the Black Scholes model. For
all other share awards, the fair value is determined by reference
to the market value of the share at the date of grant. For all
share schemes with non-market related vesting conditions, the
likelihood of vesting has been taken into account when determining
the associated charge. Vesting assumptions are reviewed during each
reporting period to ensure they reflect current expectations.
The Company also makes equity settled share-based payments to
certain employees of certain subsidiary undertakings. Equity
settled share-based payments that are made to employees of the
Company's subsidiaries are treated as increases in equity over the
vesting period of the award, with a corresponding increase in the
Company's investments in subsidiaries, based on an estimate of the
number of shares that will eventually vest.
Any payments received from subsidiaries are applied to reduce
the related increases in investments in subsidiaries.
Accounting for share-based payments is the same as under IFRS 2
and details on the schemes and option pricing models relevant to
the charge included in the Company financial statements are set out
in Note 25 to the consolidated financial statements of the Group
for the year ended 30 September 2010.
Investments
Investments represent equity holdings in subsidiaries, joint
ventures and associates and are held at cost less provision for
impairment.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at historic purchase cost net
of accumulated depreciation and any provision for impairment. Cost
comprises the original purchase price of the asset and the cost
attributable to bringing the asset to its working condition for its
intended use. Depreciation is provided on all tangible fixed
assets, at rates calculated to write off the cost or valuation,
less estimated residual value, of each asset on a straight-line
basis over its expected useful life, as follows:
Computer equipment 33% on cost
Impairments in the value of fixed assets are charged to the
profit and loss account.
31. Parent Company profit and loss account
The Company has taken advantage of the exemption afforded by the
Companies Act 2006 and has not presented its own profit and loss
account. The loss for the year dealt with in the financial
statements of the parent Company is GBP1,711,000
(2010:GBP1,606,000).
32. Investments
2011
GBP'000
Cost
At 1 October 2010 40,663
Capital contributions to subsidiaries arising
from share based payments 178
---------
At 30 September 2011 40,841
=========
Impairment
At 1 October 2010 and 30 September 2011 (16,720)
========
Carrying amount
At 30 September 2011 24,121
========
At 30 September 2010 23,943
========
Details of the principal subsidiary undertakings are as
follows:
Proportion
Country of of ordinary
Company incorporation shares held Principal activity
Silverdell (UK) Ltd England and Asbestos and environmental
Wales 100% services
Redhill Analysts Ltd England and
Wales 100% Consulting services
Kitsons Group Ltd England and Asbestos and environmental
Wales 100% services
A.H. Allen Ltd* England and
Wales 100% Consulting services
RDS Asbestos Management England and
Consultants [UK] Ltd* Wales 100% Consulting services
Kitsons Group Ltd England and Asbestos and environmental
Wales 100% services
* Held via Redhill Analysts Ltd
33. Tangible fixed assets
The Company acquired owned computer equipment with a cost of
GBP30,000 (2010: GBP55,000) during the year and incurred a
depreciation charge on these assets of GBP19,000 (2010: GBP17,000).
The closing net book value of tangible fixed assets was GBP49,000
(2010: GBP38,000).
34. Debtors
Amounts falling due within one year:
2011 2010
GBP'000 GBP'000
Other debtors and prepayments 169 265
Amounts due from group undertakings 5,917 5,106
Corporation tax recoverable - 985
Deferred tax asset 1 15
-------- --------
6,087 6,371
The deferred tax asset relates to timing differences on tangible
fixed assets and the amount charged to the profit and loss account
for the year was GBP14,000 (2010: credit of GBP15,000).
35. Creditors
Amounts falling due within one year
2011 2010
GBP'000 GBP'000
Bank overdraft 2,072 2,340
Bank loans 800 759
Other creditors and accruals 465 306
Amounts due to subsidiary undertakings 6,245 6,724
--------- --------
9,582 10,129
The carrying amount of trade payables approximates to their fair
value.
Amounts falling due after more than one year
2011 2010
GBP'000 GBP'000
Bank loan 3,913 4,755
========= ========
Full details of the Company's bank loans are disclosed in Notes
20 and 22 to the Group financial statements.
36. Share premium account and reserves
Share premium Equity Capital Profit
account reserve Other reserves reserve and loss
GBP'000 GBP'000 GBP'000 GBP'000 account Total
At At 1 October 2010 17,813 464 16,635 3,749 (24,709) 13,952
Share-based payment credit
in the year - 257 - - - 257
Retained loss for the year - - - - (1,711) (1,711)
Shares issued 2,456 - - - - 2,456
Capital restructuring (17,813) - (12,500) (3,749) 34,062 -
------------- -------- -------------- -------- --------- -------
At 30 September 2011 2,456 721 4,135 - 7,642 14,954
============= ======== ============== ======== ========= =======
Following special resolutions of the Company which were
confirmed by the High Court on 16 February 2011, the Company
cancelled the share premium account and capital reserve and also
cancelled GBP12.5m of deferred shares from the other reserve, which
increased retained earnings by a total of GBP34.1m.
The remaining balance in other reserves is not distributable and
relates to the premium arising on shares issued as consideration
for the acquisition of subsidiary companies and warrants issued to
Marwyn Neptune Fund LP in consideration for their participation in
placing of shares on 19 July 2006.
37. Related parties
The Company has taken advantage of the exemption available under
FRS8 Related Party Disclosures not to disclose details of
transactions between wholly owned Group companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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