RNS Number : 2306W
Hyder Consulting PLC
09 June 2008
Hyder Consulting PLC (HYC.L)
Results for the year ended 31 March 2008
Hyder Consulting PLC today announces its preliminary results for the year ended 31 March 2008.
Hyder Consulting is an international advisory and design consultancy with particular specialisation in the property, transport, water,
environment, energy, industry and resources sectors.
With over 150 years experience and 4,750 people across the UK, Europe, Middle East, Asia and Australia, we combine global expertise and
local knowledge to create exceptional solutions.
We believe that understanding and responding to what's important to our clients and their stakeholders is key. We apply this knowledge
to deliver sustainable and commercial advantage to our clients and the communities they serve.
Key points
* Revenue up 15% to �233.7m
* 49% of revenue generated from Asia Pacific and Middle East (2007: 46%)
* Adjusted operating profit* up 32% to �15.0m
* Adjusted operating margin* on net revenue up to 7.6% from 6.8%
* Adjusted profit before tax* up by 38% to �14.4m
* Order book up 29% to �314.0m
* Strengthened balance sheet with net assets up 92% to �49.7m
* Six acquisitions completed during the year, for a consideration of up to �30.8m
Key performance indicators
2008 2007 Movement
Revenue �233.7m �203.1m 15%
Net Revenue �196.9m �167.4m 18%
Operating profit �13.4m �14.3m (6%)
Adjusted operating profit �15.0m �11.4m 32%
Profit before tax �12.7m �13.3m (5%)
Adjusted profit before tax �14.4m �10.4m 38%
Earnings per share 30.91p 32.44p (5%)
Adjusted earnings per share 34.33p 27.21p 26%
Order book �314.0m �244.3m 29%
* Adjusted operating profit, operating margin, profit before tax and earnings per share are before amortisation of intangible assets
arising from business combinations and exceptional items.
Sir Alan Thomas, Chairman of Hyder Consulting PLC commented:
'I am pleased to report another year of strong growth for the Group with results well ahead of last year and ahead of market
expectations. The order book has grown to a record level of �314m, which gives us a solid foundation for the current year.'
Press contacts:
Hyder Consulting PLC
Tim Wade, Chief Executive Tel: +44 (0)20 7904 9011
Simon Hamilton-Eddy, Financial Director Tel: +44 (0)20 7904 9011
Biddicks
Shane Dolan Tel: +44 (0)20 7448 1000
Chairman's Statement
Results
Revenue grew by 15% to �233.7m (2007: �203.1m), with net revenue, after deduction of direct project costs, increasing by 18% to �196.9m
(2007: �167.4m). Adjusted operating profit increased by 32% to �15.0m (2007: �11.4m), including a contribution of �1.1m from acquisitions in
the year. Operating profit amounted to �13.4m: the 2007 figure was �14.3m including exceptional gains of �4.3m in the prior period.
At 31 March 2008, shareholders equity had increased by 93% to �49.7m. Net debt was �11.1m (2007: net funds �8.2m). This was mainly due
to the funding of acquisitions during the year and increases in working capital in line with revenue. There were also delayed contract
payments largely from public sector bodies in the Middle East, which have been substantially settled since the year end.
Dividend
The Directors propose a final dividend of 2.10p per share (2007: 1.40p) making a full year dividend of 3p per share (2007: 2p), an
increase of 50%.
Strategy
Our strategy to grow operating margins resulted in adjusted fee margins increasing to 7.6% in 2008; from 6.8% in 2007 and 6.0% in 2006.
We believe this progress towards our goal of 10% reflects the continuous improvement in the quality of service we provide to our clients and
to the brand loyalty which it engenders.
We completed six acquisitions during the year in the UK, Germany, Dubai and Australia, all of which are being effectively integrated
into the Group. These acquisitions have increased our staff numbers by 500, and are furthering growth and development in our target sectors
and territories.
We have further expanded our geographical revenues and have benefited from a growing presence in international high growth markets,
notably the Middle East. I am delighted to report that we won the Queen's Award for Enterprise (International Trade) earlier this year
reflecting the growth in our international sales over recent years.
Business Review Highlights
Strong financial performance, a record order book and the completion of six acquisitions have been the highlights of the year.
Our order book increased by 29% to a record level of �314m, with the largest expansion in our international markets, especially the
buoyant Middle East region.
In the UK and Europe we expanded our presence in existing sectors through contract wins in water, rail and highways, and developed new
opportunities in the nuclear and sustainability sectors. We are particularly pleased to have been named as a preferred supplier for a seven
year framework contract with Severn Trent Water ahead of AMP 5 and to be engaged in a number of projects related to the London 2012 Olympic
and Paralympic Games.
Acquisitions have played an important part in creating new business streams. Hyder Voigt and Hyder Seib in Germany are enhancing our
profile in the German transport and water sectors and have helped place us in the top six consultancies in Germany. In the UK, RPA Quantity
Surveyors is presenting us with new opportunities in the property sector.
The acquisition of Holford Associates has widened our service offering in the growing Middle East region. We have consolidated our
position as a trusted advisor on major projects such as the Burj Dubai, the world's tallest tower, and other pioneering developments.
The Asia Pacific region is also a growth area for Hyder. We have acquired a useful presence in the resources sector through Crescent PSS
which has expanded the proportion of private sector clients in Australia. In Hong Kong, we are working on the high profile Hong Kong
greening master plan and see an increasing demand for environmental consulting services in the region especially in China, Australia and
Vietnam.
People
We want to attract, retain and develop outstanding people. We have achieved our staff growth targets this year through both recruitment
and strategic acquisitions. We now employ over 4,750 people across our regions (the majority of whom are technical experts and
professionals), an increase of almost 800 over the previous year.
Board of Directors
Keith Reynolds, Regional Managing Director for Australasia, was appointed to the Board in February 2008 and I am delighted to welcome
him.
Having achieved another year of good progress and established a solid foundation for the future, the Group's Chief Executive, Tim Wade,
and Financial Director, Simon Hamilton-Eddy, have indicated their intention to retire and hand over to a new team. It is anticipated that
Tim will step down on 31 August and Simon in December. They have made a significant contribution to the success of the Group, leading a
management buy out in 2001 prior to Hyder's listing on the London Stock Exchange via a reverse takeover in 2002. The appointment of their
successors will be phased to enable an orderly transition, and plans to appoint a new Chief Executive are now at an advanced stage.
Outlook
As well as revenues and profits, the order book in all regions grew satisfactorily and the Board is confident of further progress this
year. We are well placed to grow our presence in expanding international markets, avoiding reliance on any one sector or regional market.
We will target our acquisitions carefully to strengthen our competitive position and consolidate our international presence. We believe
this policy will serve us well as the UK economy enters a more challenging phase.
The order book secured by the Group as a whole has grown to a record level of �314m, and we have already secured approximately 60% of
our 2008/9 revenue target which gives us a solid foundation for the current year.
Finally, on behalf of the Board, I would like to thank all our staff most warmly for their professionalism, commitment and contribution
to these excellent results.
Sir Alan Thomas
Chairman
9 June 2008
Business review
Strong financial performance, a record order book and the completion of six acquisitions have been the highlights of the year. Through
our involvement on the Burj Dubai, Hong Kong greening master plan and the Doha Tower and Convention Centre we have consolidated our
reputation as an advisor on the world's most iconic and innovative projects.
This performance has been significantly enhanced through our targeted acquisition strategy which has grown and complemented our service
offering in all regions. We are confident of the increased opportunities that this will bring.
Our strong international credentials received notable endorsement through the 2008 Queen's Award for Enterprise (International Trade).
This prestigious award recognises our outstanding growth in international sales.
The calendar year 2007 marked the company's 150th anniversary, and this longevity reflects our strong international client base, our
in-depth experience, and intimate local knowledge of regional markets developed over many years. As we move forward we are confident these
attributes will provide us with a strong platform from which to grow and realise opportunities.
UK/Europe - looking beyond traditional markets
Revenue increased to �118.2m (2007: �109.9m)
Adjusted operating profit up to �9.7m (2007: �8.2m)
Adjusted operating margin up to 8.2% (2007: 7.5%)
Order book up to �151.5m (2007: �128.3m)
Number of employees: 1,983 (2007: 1,739)
In exceeding last year's performance we have pursued three main elements to our strategy: nurturing our position in the established UK
market, seeking to identify new market opportunities, and completing acquisitions to create new business streams.
Our reputation in water and highways has been further enhanced by our preferred supplier status on a seven year framework contract with
Severn Trent Water ahead of AMP 5, and by our diversification into highways maintenance work as a support consultant on the work for the
Area 3 Managing Agent Contract. This covers all motorway and trunk road maintenance throughout Berkshire, Buckinghamshire, Dorset,
Hampshire, Surrey and Oxfordshire.
Other examples of our diversification into new markets include nuclear and environmentally sustainable design, and already our profile
is increasing through work with the Nuclear Decommissioning Authority. We attained Green Globe and Carbon Trust accreditation this year
which gives us a strong platform to develop more UK and international clients through sustainability services.
We are pursuing a strategy of supporting a successful 2012 London Olympics by assisting clients involved in providing services to the
games such as water, transport and environmental schemes, as well as the Olympic facilities themselves such as the Weymouth sailing
facility.
Three acquisitions are already contributing to our performance and brand in the region. In the UK, we acquired RPA Quantity Surveyors, a
provider of cost and project management services primarily to the property sector. This has opened up a new business stream, new clients and
higher margin work - all in line with our strategic aims.
In Germany the economic revival is presenting us with good opportunities. In November 2007 we acquired the Voigt Ingenieure group of
companies and in December 2007 Seib Ingenieur-Consult. Not only do these acquisitions provide us with significant scale and geographic
coverage, they also place us in the top six advisory and design consultancies in Germany. Moreover, we are now better placed to respond to
opportunities in the growing German and European markets, particularly in the water and transport sectors.
Significant project wins
Project Location Sector Role
Area 3 (Southern England) UK Transport Southern area highways
Managing Agent Contract maintenance subcontract
Phase 2 island wide sewerage Isle of Man, UK Water Procurement advisor
Dumfries and Galloway Schools Scotland, UK Property Civil and structural design
PPP for eight schools
Akropolis Development, Sofia Bulgaria Property Design of mixed use commercial
development
Nuremberg - Ingolstadt High Germany Transport Detailed design and site
Speed Railway supervision
A5 Vienna East region motorway Austria Transport Site supervision and
engineering advisory services
for the motorway concession
company
Middle East - consolidating growth
Revenue increased to �53.9m (2007: �44.6m)
Adjusted operating profit up to �4.6m (2007: �2.9m)
Adjusted operating margin up to 8.5% (2007: 6.5%)
Order book up to �116.5m (2007: �80.5m)
Number of employees: 1,497 (2007: 1,180)
Our position remains strong in this booming region and results have exceeded our expectations. We occupy a market leading position in
the region and lead world scale projects including the Burj Dubai and Al Reem Island in UAE, and Lussail City and Education City in Qatar.
New appointments in the second half of the year included the Bay Central and Jumeirah Hills developments in Dubai. We have also secured our
largest ever commission in Bahrain for the design of all primary infrastructure for the first 480 hectare phase of the Diyar Al Muharraq
development.
Our operations in the Region have been enhanced through the acquisition of Holford Associates, an architectural and interior design
practice which has operated primarily in Dubai for over 20 years. This is the largest acquisition we have made since we listed on the London
Stock Exchange in 2002, and brings employee numbers in the region to almost 1,500. The acquisition allows us to offer a full range of
services in the fast-growing regional property market, and provides us with the ability to grow an architectural and interior design
business throughout the region.
The economic outlook for the region gives us confidence in future opportunities. The high oil price is sustaining investment in major
projects particularly in the property sector. We are well placed to win this work through our position as a trusted advisor and designer of
some of the region's largest and most complex projects, which allows us to be more selective and develop relationships with a valued set of
influential clients.
We are expanding our reach by increasing the level of private sector work and servicing regional clients beyond our local office
locations by moving into other parts of the region such as Saudi Arabia and Oman and also further afield in North Africa, China and
Vietnam.
Significant project wins
Project Location Sector Role
Jumeirah Hills Dubai Property Design development and site
supervision
Bay Central Dubai Property Multi-discipline design and
supervision for residential and
leisure development
Lussail Development Qatar Property Contract extension to include bridge
design for a new community to the
north of Doha.
Al Quds Tower Qatar Property Multi-discipline design services for
100 storey tower
Diyar Al Muharraq Bahrain Property Multi-discipline design and
supervision
Escape Ajman, UAE Property Master planning for equestrian
themed development
Asia Pacific - opportunities in a growing region
Revenue increased to �61.6m (2007: �48.6m)
Adjusted operating profit up to �3.7m (2007: �2.9m)
Adjusted operating margin remained at 6.0% (2007: 6.0%)
Order book up to �46.0m (2007: �35.5m)
Number of employees: 1,276 (2007: 1,057)
This region is a core platform for growth and we are encouraged by local economies enjoying an upward trend.
After a slower than anticipated start in Australia, we have now secured four Alliance contracts in the transport sector. We also won a
design role on the Port Botany expansion project which is a major infrastructure programme for New South Wales.
The resources boom in Australia is opening up new opportunities which we are seeking to exploit. In February 2008, we acquired Crescent
PSS, an advisory and project management consultancy whose client portfolio includes mining giants Xstrata, Rio Tinto and BHP Billiton. The
nature of Crescent's expertise at the front-end of major projects and their client base gives us access to higher value clients and work in
the region and globally.
With drought having affected large parts of Australia so badly, we have been working with state and local authorities on how to plan for
and reduce the impact of future events. The newly elected Australian government's signing of the Kyoto Protocol pushes environmental
responsibility further up the agenda. One of our teams has recently prepared a report for the Commonwealth Government Department of
Environment, Water and Heritage and the Arts examining the implications of climate change for twenty protected areas around Australia.
In Asia, many of our markets are experiencing renewed growth. In Hong Kong this is creating available funding for social infrastructure
projects. We are consultants for improvements to the City and Polytechnic universities, and are involved in a number of transport system
upgrades. Since Vietnam joined the World Trade Organisation in 2007, foreign direct investment into the country has increased and provides
us with a wealth of exciting opportunities in advisory, master planning, environment and mechanical and electrical engineering consulting.
Environmental consulting is in demand across the region. We have won a number of landscape and environmental planning roles on leisure
and commercial projects in China's Hua Dong region, and we have a lead role on the Hong Kong greening master plan which covers 18,000
hectares of the city. In Vietnam we are working with two major Middle East clients on projects in coastal areas that require particular
environmental consideration.
Significant project wins
Project Location Sector Role
Hong Kong Greening master plan Hong Kong Water and Landscape and urban
Environment improvement master plan for
an area of 18,000 hectares
in urban Hong Kong
Window on China Beijing, China Property Concept master plan for
trade and commercial centre
Port Botany Expansion Project NSW, Australia Transport Infrastructure design for
port facilities and road
links
Victoria Road Upgrade NSW, Australia Transport Highway design to create
strategic bus corridor
Wentworth Falls East Alliance NSW, Australia Transport Design of upgrade to section
of Great Western Highway
Ha Long Star Resort Vietnam Property Multi-discipline planning
and design services
People and culture
Outstanding people are critical to our business. Through organic and acquisition growth we now have over 4,750 employees across our
regions and we are committed to providing them with the best career development opportunities.
We have reviewed our company culture and the attributes and skills our people need to achieve our strategic objective of delivering
exceptional client service and higher margins.
This culture change programme is underpinned by our new company vision which we launched in December 2007. We have engaged our people,
clients and other stakeholders with our vision through extensive communications to help each individual understand what the vision and
supporting goals and values mean to them and how they can contribute to achieving them.
Our vision: Trusted partners of valued clients - creating exceptional solutions worldwide
Our Goals
* To differentiate ourselves through the calibre of our people
* To deliver value to clients through our expertise and creativity
* To anticipate our clients' needs and support their aspirations
* To partner with clients who recognise the value and quality we deliver
* To achieve profitable and sustainable outcomes for clients
Our Values
* Collective responsibility for a safe and sustainable team
* Passionate people challenged to deliver both quality and value
* Proactive expertise and technical acumen to provide inspired solutions
* Relationships built on trust and a deep understanding of our partners
* Delivering commercial advantage for our clients
We recognise that the key variables driving our long-term sustainability and profitability are highly engaged and satisfied employees
and clients.
Training and development are critical to employee engagement and during the year we have invested heavily in our people. We have rolled
out our leadership course across all regions and run the third generation of development centres for our senior management team members.
This is developing a cadre of current and future leaders to deliver and build on our strategy and vision.
Our human resources and business leaders have identified the key competencies our people need to deliver our strategy and vision and
these now form an integral part of each employee's annual performance review.
For many years we have been promoting e-learning throughout our organisation and provide our people with access to an online university
via Harvard Business Review materials. In the UK, our well established graduate recruitment and development programme continues to attract
high calibre candidates and this scheme is being replicated in Australia.
Our company strategy is to ensure our people are valued by clients, by the company and by themselves. To achieve this we need to ensure
that our people are offered exciting career paths and we have developed three possible career paths: technical, operational and support.
The technical career path is a clear differentiator for our company as it demonstrates that pursuit of technical professional excellence
may lead to the most senior leadership roles in the Group. We have clarified what this route might look like from graduate level upwards
and have simplified the purpose, objectives and roles of the Professional Board, Hyder Leaders Group (HLG) and our global Professional
Excellence Groups to ensure this route is even more accessible and appealing.
Awards
Hyder has been recognised in 2008 with a number of prestigious awards. These awards not only showcase our talented people and innovative
client solutions but also highlight the strength of our market position.
We are particularly delighted to receive the 2008 Queen's Award for Enterprise (International Trade) in recognition of the growth in
international sales over the previous three years. Working internationally is in the DNA of our business and this is therefore a
particularly pleasing and prestigious award to win.
Other significant national and international awards earned in the year were:
* North South Rail Corridor study - Association of Consulting Engineers Australia Gold Award of Merit
* Work on the foundations of the Burj Dubai Tower 2007 - Ground Engineering Awards Commendation
* Design of Westpac Place, Sydney - Association of Consulting Engineers Australia Certificate of Recognition - Building
* Dubai Festival City Waterfront Centre - Association of Consulting Engineers Australia Certificate of Recognition - International
* Cardiff office - Wales Quality Awards 2007, Environmental Prize
* Hyder UK's sustained achievement in occupational health and safety performance - RoSPA Gold Medal
Financial Review
The Financial Review covers the actual results for the year ended 31 March 2008 with comparisons to prior year results. The Financial
Statements and comparative information have been prepared in accordance with International Financial Reporting Standards (IFRS), including
for the first time the adoption of IFRS 7 relating to the disclosure of Financial Instruments.
Revenue and profit
Revenue for the year increased by 15% to �233.7m (2007: �203.1m), including revenue from acquisitions of �6.5m. Organic revenue growth
was 12% for the year. Excluding sub-consultant costs, on which little or no margin is earned, net revenue increased by 18% to �196.9m (2007:
�167.4m).
Operating profit amounted to �13.4m: the 2007 figure was �14.3m including exceptional gains of �4.3m in the prior period.
In presenting the Group's adjusted operating profit below, amortisation of intangible assets arising on business combinations and
certain one off items have been excluded as the Directors believe that this assists with understanding the underlying performance of the
Group:
2008 2007
�'000 �'000
Group operating profit 13,415 14,332
Add back amortisation of intangible assets on business combinations 1,802 1,407
Less pension scheme settlements and curtailments (180) (5,095)
Add back UK / Europe property costs - 547
Add back Asia Pacific office closure costs - 210
Adjusted operating profit 15,037 11,401
Net finance costs (667) (983)
Adjusted profit before taxation 14,370 10,418
A gain of �0.2m (2007: �5.1m) has been recognised as a result of members transferring out of the Acer Group Pension Scheme (AGPS)
following an offer to members in the prior year.
Adjusted operating profit increased by 32% to �15.0m (2007: �11.4m).
Adjusted profit before taxation increased by 38% to �14.4m (2007: �10.4m).
Operating margins are measured for management purposes based on net revenue, as this measure excludes sub-consultants costs on which
little or no margin is earned. Adjusted operating margin on net revenue for the year increased by a further 12% to 7.6% (2007: 6.8%)
reflecting the continued success of the Group's strategy to increase operating margins.
Net Finance Costs
The net finance cost of the Group reduced to �0.7m (2007: �1.0m) and is covered 22.5 times by adjusted operating profit (2007: 11.6
times). The net charge includes �0.5m of income in relation to settlement of an overdue debt and �19,000 relating to notional interest
income on pension scheme assets and liabilities (2007: �0.4m charge).
Interest payable on bank borrowings increased to �1.0m (2007: �0.4m) reflecting the higher level of working capital on increased
revenues, debt taken on to fund the acquisition programme and special contributions into the UK defined benefit pension scheme.
Taxation
The total tax charge of �1.6m (2007: �2.0m) amounts to 12.4% of profit before tax (2007: 15.1%) The tax rate on adjusted profit before
tax amounts to 13.6% (2007: 8.4%). The current low rate reflects Research and Development tax credits in both the UK and Australia, and zero
tax rates in certain Middle East jurisdictions. We anticipate the tax charge will increase to a more normalised rate of 20% over the next
three to four years.
Earnings Per Share
Earnings per share are impacted by the amortisation of intangible assets arising on business combinations, and other one off items.
Basic earnings per share amount to 30.91p (2007: 32.44p); diluted earnings per share amount to 30.04p (2007: 31.59p) reflecting the
significant exceptional gains in the prior period. The weighted average number of ordinary shares in issue in the year was 36.1m (2007:
34.4m), the increase reflecting the effect of the placing in March 2008, shares issued for acquisitions and share options exercised.
Adjusted basic earnings per share increased by 26% to 34.33p (2007: 27.21p).
Dividends
A final dividend is proposed for the year to 31 March 2008 of 2.10p per share (2007: 1.40p) giving a 50% increase for the year to 3p
(2007: 2p). The full year dividend is covered 11.4 times by adjusted earnings per share (2007: 13.6 times). The dividend will be paid on 1
August 2008 to shareholders on the register at 4 July 2008.
It is the Board's objective to pursue a progressive dividend growth policy whilst ensuring appropriate dividend cover, meeting the
working capital demands of the business, and reducing the UK defined benefit pension deficit, as discussed below.
Capital Structure
During the year the Company issued 1,850,233 10p ordinary shares, and as at 31 March 2008 had issued 37,697,347 (2007: 35,847,114) fully
paid ordinary shares.
During the year to 31 March 2008 shareholders' equity increased by 93% to �49.7m (2007: �25.7m) reflecting retained earnings for the
year, new shares issued and pension gains. Cash balances amounted to �14.8m (2007: �18.7m) and debt balances increased to �25.9m (2007:
�10.4m) as a result of acquisitions, increases in working capital to fund growth, and contributions to defined benefit pension schemes.
Shareholder Return
Shareholders' equity has increased during the year to �49.7m (2006: �25.7m), equating to a net asset value of 132p per share (2007:
72p). The closing share price on 31 March 2008 was 410p per share (2007: 461.75p) representing a market capitalisation for the Group of
�154.6m (2007: �165.5m).
Pensions
The Group operates both defined benefit and defined contribution schemes.
Over recent years we have taken a number of steps to address the deficit existing in the AGPS which is closed to new members. During the
year further members transferred their liabilities out of the scheme, enhanced by an incentive payment from the Group, giving rise to
additional savings against the IAS 19 deficit of �0.4m. After deducting the costs of undertaking this exercise, including payments made
directly to the members by the Group, an exceptional pre-tax profit of �0.2m has been recognised in the year. Contributions paid to the
scheme in the year amounted to �5.6m (2007: �5.8m), including a special �2.0m contribution paid in during April 2007.
The deficit in the scheme at 31 March 2008 has reduced to �22.5m (2007: �32.7m). The decrease in the deficit reflects excess
contributions during the year, actuarial gains resulting from increases in the discount rate and better than expected asset returns,
partially offset by actuarial losses due to improving mortality. The Board acknowledges that valuations of defined benefit schemes under IAS
19 are inherently volatile, and will continue to take action where appropriate to reduce the deficit.
The key assumptions and the sensitivities of the AGPS scheme liabilities to changes in these assumptions are shown below.
Assumption Change in assumption Indicative effect on scheme liabilities
Discount rate Increase / decrease Decrease / increase by 10%
by 0.5%
Rate of inflation Increase / decrease Increase / decrease by 6%
by 0.5%
Longevity Increase by 1 year Increase by 3%
Cash Flow
Net debt amounted to �11.1m at 31 March 2008 (2007: net funds �8.2m).
Cash generated from operating activities was lower than anticipated at �1.9m (2007: �4.7m), reflecting increases in working capital in
line with revenue, pension contributions, and delayed payments on some significant public sector contracts, largely in the Middle East which
have been substantially settled since the year end. Trade receivables net of provisions and amounts recoverable on contracts net of
payments on account increased by �21.0m to �72.9m, including �8.7m relating to acquisitions undertaken during the year.
Acquisitions
During the financial year we completed six acquisitions, with a maximum potential consideration of �30.8m on an undiscounted basis. The
acquisitions were funded through �18.3m of cash, �3.3m through the issue of new shares, with the balance consisting of contingent cash
consideration.
As a result of the Group's acquisition programme the charge for amortisation of intangible assets from business combinations has
increased in the year to �1.8m (2007: �1.4m).
Treasury
The Group has unsecured committed borrowing facilities in the UK of �49.0m, and other overseas borrowing facilities totalling �3.8m. As
at 31 March 2008 unutilised borrowing facilities amounted to �30.6m.
Established procedures exist to monitor cash flow, currency and interest rate risks in accordance with the policy set by the Board.
Approximately 40% of the Group's revenue is generated in Sterling. The remaining balance is generated in the Middle East (mainly the
UAE), Germany, Hong Kong and Australia where revenue is normally denominated in the relevant local currency. The revenue and costs of our
international operations generally arise in the same currency and therefore the exposure to exchange fluctuations is usually not significant
and consequently not hedged. Where a mismatch does exist it is generally priced for in our customer contracts. Most of our overseas
operations maintain local currency overdraft and bonding facilities, which provide partial mitigation against balance sheet risk. In spite
of fluctuations in exchange rates which occur from time to time, it is not considered necessary to hedge the net investment in overseas
subsidiaries at this time.
Risk Management
The Group faces a number of risks, which are regularly monitored by the Board and include:
* Contractual disputes and claims
The Group employs a full time Risk Manager who continues to review and enhance our risk management procedures in order to minimise
claims. Where claims do arise established procedures exist to deal with these and minimise any exposure. It is the Group's policy to
mitigate its exposure to key contractual risks through insurance at commercially acceptable rates for appropriate limits of indemnity.
* Key markets, sectors and clients
The Group's workload is dependent on economic factors in the markets in which we operate and the relationships built up with our
clients. Our strategy of international growth, key client management and acquisition has resulted in a strongly diversified Group which is
not dependent on individual markets, sectors or clients. We continue to drive this strategy to further strengthen our resilience.
* Acquisitions
In order to mitigate against the potential risks of the Group's acquisition programme the Board reviews all potential acquisitions using
comprehensive evaluation techniques, and acquisitions are only approved after appropriate due diligence has been carried out. An integration
plan is developed for each acquisition which encompasses legal, contractual, financial, commercial, human resources, cultural and other
issues.
* Foreign exchange movements
Approximately 60% of the Group's revenues are earned in currencies other than sterling. The revenue and costs of our international
operations generally arise in the same currency and therefore the exposure to exchange fluctuations is usually not significant and
consequently not hedged. Established procedures exist to reduce exposure to currency fluctuations in accordance with the policy set by the
Board.
* Integrity and sustainability of IT networks and core business systems
The Group's IT networks and core business systems are maintained and supported to provide assurance on data integrity and minimise the
risk of data loss. An upgrade of our core business systems is being progressively implemented on a regional basis using an in house project
team and third party consultants as appropriate. This regional implementation programme is designed to minimise the potential for
disruption in the business.
* Competitors
The Group operates in a competitive business environment and whilst we are strongly diversified we recognise the impact that the actions
of competitors or potential competitors may have on our business. In order to mitigate the effects of competition we seek to differentiate
ourselves through strong client management and quality services through outstanding people.
* Resources
The ability to recruit and retain quality staff resources is critical to the Group's ability to win and execute projects. Our human
resources function plays a key role in assisting the business to develop recruitment and retention strategies, and with staff development
and succession planning.
Contingent liabilities
The Directors estimate that as at 31 March 2008 contingent liabilities, primarily in respect of the insurance excesses relating to
potential professional indemnity claims in excess of amounts provided for in the Financial Statements, amounted to �5.8m (2007: �8.3m). The
Directors do not consider any provision is necessary in respect of these amounts as they consider the likelihood of loss to be remote based
on legal and other advice received.
Tim Wade Simon Hamilton-Eddy
Chief Executive Financial Director
9 June 2008
Consolidated Income Statement for the year ended 31 March 2008
2008 2007
Note �'000 �'000
Revenue 1 233,672 203,145
Cost of sales
Direct project costs (36,765) (35,700)
Other operating costs (139,325) (116,460)
Gross profit 57,582 50,985
Administration expenses (44,167) (36,653)
Group operating profit 1 13,415 14,332
Analysed as:
EBITA (Pre-exceptional items) 16,041 12,262
Amortisation of intangible assets
- Software (1,004) (861)
- Business combinations (1,802) (1,407)
Pension scheme settlements and curtailments 180 5,095
UK / Europe property costs - (547)
Asia Pacific office closure costs - (210)
Group operating profit 1 13,415 14,332
Interest payable and similar charges (1,641) (1,341)
Interest receivable 974 358
Profit before taxation 12,748 13,349
Taxation (1,575) (2,011)
Profit for the financial year 11,173 11,338
Profit attributable to minority interests 3 192
Profit attributable to equity shareholders 11,170 11,146
Earnings per share (pence)
Basic 2 30.91 32.44
Diluted 2 30.04 31.59
Equity - Ordinary 10p shares
Dividends (�'000) - paid 823 511
Dividend per share (pence) 2.30 1.50
Dividends (�'000) - proposed 792 502
Dividend per share (pence) 2.10 1.40
All activities are continuing.
Consolidated Statement of Recognised Income and Expense
2008 2007
�'000 �'000
Profit for the financial year 11,173 11,338
Exchange adjustments 3,156 (1,572)
Cash flow hedges recognised (99) 69
Transfer from minority interest 16 (68)
Actuarial gain / (loss) on defined benefit 5,352 (43)
pension schemes
Deferred taxation on actuarial (gains) / (1,682) 34
losses
Effect of UK tax rate change (663) -
Net income / (expense) not recognised in 6,080 (1,580)
the Income Statement
Total recognised income for the year 17,253 9,758
Equity shareholders 17,250 9,566
Minority interests 3 192
17,253 9,758
Consolidated Balance Sheet
2008 2007
Note �'000 �'000
Non-current assets
Intangible assets 45,452 18,046
Property, plant and equipment 11,142 9,443
Deferred taxation assets 8,559 12,560
65,153 40,049
Current assets
Trade and other receivables 102,718 77,672
Corporation tax recoverable 1,866 336
Cash and cash equivalents 14,823 18,663
119,407 96,671
Current liabilities
Trade and other payables (64,461) (55,474)
Current taxation liabilities (1,694) (1,382)
Financial liabilities
- Borrowings (2,696) (3,707)
Provisions (2,930) (2,908)
(71,781) (63,471)
Net current assets 47,626 33,200
Non-current liabilities
Financial liabilities
- Borrowings (23,252) (6,735)
Post employment benefits (27,363) (35,711)
Provisions (367) (530)
Deferred taxation liabilities (4,111) (2,592)
Other non-current liabilities (7,952) (1,747)
(63,045) (47,315)
Net assets 1 49,734 25,934
Shareholders' equity
Called up ordinary share capital 3,770 3,585
Share premium account 28,667 21,262
Retained earnings 15,939 2,437
Other reserves 1,332 (1,592)
Total shareholders' equity 49,708 25,692
Minority interests in equity 26 242
Total equity 49,734 25,934
Consolidated Statement of Cash Flows
2008 2007
Note �'000 �'000
Cash flows from operating activities
Cash generated from operations 3(a) 4,195 7,067
Interest received 974 358
Interest paid (1,442) (722)
Taxation paid (1,805) (1,960)
Net cash generated from operating activities 1,922 4,743
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired) (17,523) (3,762)
Proceeds from sale of property, plant and equipment 40 43
Purchase of minority interests (159) (375)
Purchase of property, plant and equipment (4,067) (4,428)
Net cash used in investing activities (21,709) (8,522)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 4,020 7,558
Finance lease principal payments (1,665) (1,257)
Proceeds from issue of new borrowings 31,619 7,937
Repayment of borrowings (17,447) (4,131)
Dividends paid to shareholders (823) (511)
Net cash generated from financing activities 15,704 9,596
Effects of exchange rate fluctuations 243 (320)
Net (decrease) / increase in cash and cash (3,840) 5,497
equivalents
Cash and cash equivalents at 1 April 18,663 13,166
Cash and cash equivalents at 31 March 14,823 18,663
Notes to the Financial Statements
1. Segmental analysis by location of operations
Reflecting the Group's management and internal reporting structure, primary segmental information is presented within the Financial
Statements in respect of geographical segments. The Group manages its business on a global basis with operations in three main geographical
regions, UK / Europe, Asia Pacific and the Middle East. The UK is the home country of the parent. Inter-segment revenue relates to contracts
priced on an arm's length basis. The secondary reporting format is by business segment. The Directors consider that there is only one
secondary business segment, being engineering design, planning, environmental and management consultancy. Therefore, the disclosures for the
secondary segment have already been given in these Financial Statements.
(a) Segment revenue
Inter-segment revenue
Total Total
2008 2008 2008 2007
�'000 �'000 �'000 �'000
UK / Europe - Continuing 113,559 (508) 113,051 105,637
operations
- Acquisitions 5,191 - 5,191 4,268
Asia Pacific - Continuing 62,802 (1,838) 60,964 46,897
operations
- Acquisitions 605 - 605 1,704
Middle East - Continuing 66,832 (13,649) 53,183 44,639
operations
- Acquisitions 678 - 678 -
249,667 (15,995) 233,672 203,145
(b) Segment results
Total Total
2008 2007
�'000 �'000
Regional operating profit
UK / Europe - Continuing 8,799 7,364
operations
- Acquisitions 946 860
Asia Pacific - Continuing 3,543 2,659
operations
- Acquisitions 116 258
Middle East - Continuing 4,508 2,893
operations
- Acquisitions 56 -
Corporate overheads (2,931) (2,633)
15,037 11,401
Amortisation of intangible assets arising on business combinations
UK / Europe - Continuing (672) (385)
operations
- Acquisitions (389) (342)
Asia Pacific - Continuing (551) (368)
operations
- Acquisitions (59) (202)
Middle East - Continuing (79) (110)
operations
- Acquisitions (52) -
Exceptional items
UK Pension scheme curtailments - 4,000
UK Pension scheme settlements 350 2,587
UK Associated pension settlement costs (170) (1,492)
UK / Europe property costs - (547)
Asia Pacific office closure costs - (210)
Group operating profit 13,415 14,332
The gain on pension settlements arises from further members transferring out of the AGPS during the year.
(c) Segment assets and liabilities
UK / Europe Asia Pacific Middle East Total
�'000 �'000 �'000 �'000
2008
Segment assets 86,181 44,215 54,164 184,560
Segment liabilities (76,068) (21,121) (37,637) (134,826)
10,113 23,094 16,527 49,734
2007
Segment assets 76,937 29,899 29,884 136,720
Segment liabilities (70,346) (16,858) (23,582) (110,786)
6,591 13,041 6,302 25,934
(d) Other information
UK / Europe Asia Pacific Middle East Total
�'000 �'000 �'000 �'000
2008
Capital expenditure 1,236 1,426 777 3,439
Depreciation 1,279 616 551 2,446
Amortisation - Software 666 194 144 1,004
Amortisation - Business 1,061 610 131 1,802
combinations
2007
Capital expenditure 2,154 1,394 968 4,516
Depreciation 1,271 477 278 2,026
Amortisation - Software 610 164 87 861
Amortisation - Business 727 570 110 1,407
combinations
2. Earnings per share
(a) Number of shares
2008 2007
Weighted average number of shares in issue 36,132,838 34,355,485
Effect of dilution
Share options 1,051,573 933,110
Weighted average shares (diluted) 37,184,411 35,288,595
(b) Earnings used in the calculation of earnings per share
2008 2007
�'000 �'000
Profit attributable to equity shareholders 11,170 11,146
Less pension settlements and curtailment gain and (180) (5,095)
associated costs
Add back Asia Pacific office closure costs - 210
Add back UK / Europe property costs - 547
Add back amortisation of intangible assets on business 1,802 1,407
combinations
Add back tax on adjusted items (386) 1,133
Adjusted earnings 12,406 9,348
(c) Earnings per share
2008 2007
Pence Pence
Basic earnings per share 30.91 32.44
Less pension settlements and curtailment gain and associated (0.50) (14.83)
costs
Add back Asia Pacific office closure costs - 0.61
Add back UK / Europe property costs - 1.59
Add back amortisation of intangible assets on business 4.99 4.10
combinations
Add back tax on adjusted items (1.07) 3.30
Adjusted basic earnings per share 34.33 27.21
Diluted earnings per share 30.04 31.59
Less pension settlements and curtailment gain and associated (0.48) (14.44)
costs
Add back Asia Pacific office closure costs - 0.60
Add back UK / Europe property costs - 1.55
Add back amortisation of intangible assets on business 4.84 3.99
combinations
Add back tax on adjusted items (1.04) 3.20
Adjusted diluted earnings per share 33.36 26.49
3. Notes to the Consolidated Statement of Cash Flows
(a) Cash flows from operating activities
2008 2007
�'000 �'000
Profit for the financial year 11,173 11,338
Adjustments for:
Taxation 1,575 2,011
Depreciation 2,446 2,026
Loss on disposal of property, plant and equipment - 16
Amortisation of intangible assets - software 1,004 861
Amortisation of intangible assets - business combinations 1,802 1,407
Interest receivable (974) (358)
Interest payable and similar charges 1,641 1,341
Amendments to fair value of consideration - 1
Fair value gain on financial instruments (476) -
Share option costs 388 248
Impairment of fixed assets - 1,131
Release of vacant property provision - (584)
Decrease in provisions (306) (422)
Defined benefit pension scheme charges 2,598 3,378
Pension scheme settlements (350) (2,587)
Pension scheme curtailments - (4,000)
Changes in working capital (excluding effects of
acquisitions):
Increase in trade and other receivables (12,916) (9,839)
Increase in trade and other payables 2,602 7,674
Contributions to defined benefit schemes (6,012) (6,575)
Cash generated from operations 4,195 7,067
(b) Reconciliation of movement in net funds / (debt)
Acquisition
At 1 April 2007 (excluding cash and At 31 March 2008
overdrafts)
Non cash movement Exchange movement
Cash flow
�'000 �'000 �'000 �'000 �'000 �'000
Cash at bank 18,663 (4,083) - - 243 14,823
Debt due within 1 year (2,534) 3,000 (916) (537) (118) (1,105)
Debt due after 1 year (5,015) (17,062) (71) 537 (130) (21,741)
Finance leases due within 1 (1,173) 1,572 (11) (1,949) (30) (1,591)
year
Finance leases due after 1 (1,720) (17) (23) 366 (117) (1,511)
year
(10,442) (12,507) (1,021) (1,583) (395) (25,948)
8,221 (16,590) (1,021) (1,583) (152) (11,125)
4. Financial information
The financial information set out in this preliminary announcement has been prepared on the basis of the principal accounting policies
that are available on our website.
The financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory
accounts for the year ended 31 March 2008 will be despatched to shareholders during June 2008 for approval at the Annual General Meeting to
be held on 23 July 2008.
Non-Statutory information - summary of five year trading results
31 March 2008 31 March 2007 31 March 31 March 31 March
2006 2005 2004*
�'000 �'000 �'000 �'000 �'000
Consolidated Income Statement
Revenue 233,672 203,145 171,314 136,233 122,343
196,907 167,445 139,213 112,858 103,197
Net Revenue
Operating profit before amortisation and other 15,037 11,401 8,380 4,714 3,173
adjustments
Amortisation of goodwill and intangibles (1,802) (1,407) (671) 351 980
Other adjustments 180 4,338 2,057 (318) (1,203)
Profit before interest and 13,415 14,332 9,766 4,747 2,950
taxation
Net finance costs (667) (983) (1,427) (2,154) (729)
Profit before taxation 12,748 13,349 8,339 2,593 2,221
Consolidated Balance Sheet
Goodwill and other intangibles 45,452 18,046 12,332 6,275 894
Fixed assets 11,142 9,443 8,364 6,830 8,101
Deferred tax 8,559 12,560 15,171 10,730 1,945
Current assets 119,407 96,671 81,171 62,232 54,278
184,560 136,720 117,038 86,067 65,218
Current financial liabilities and trade payables (71,781) (63,471) (54,213) (34,005) (31,073)
Total assets less current 112,779 73,249 62,825 52,062 34,145
liabilities
Non-current liabilities and provisions (63,045) (47,315) (54,874) (45,249) (18,766)
Net assets 49,734 25,934 7,951 6,813 15,379
Called up share capital 3,770 3,585 3,266 3,233 2,445
Share premium account 28,667 21,262 12,515 11,701 -
Retained earnings 15,939 2,437 (8,232) (7,945) 12,773
Other reserves 1,332 (1,592) 72 (315) 80
Total shareholders' equity 49,708 25,692 7,621 6,674 15,298
Minority interests in equity 26 242 330 139 81
Total equity 49,734 25,934 7,951 6,813 15,379
Statistics
Adjusted net operating margin % 7.63 6.81 6.02 4.18 3.07
Adjusted basic earnings per p 34.33 27.21 19.28 8.01 9.95
share
Basic earnings per share p 30.91 32.44 21.44 8.14 9.02
Dividends per ordinary share p 3.00 2.00 1.25 0.75 0.40
Average number of employees Number 4,257 3,798 3,203 2,864 2,671
Net funds / (debt) �'000 (11,125) 8,221 6,214 4,451 (3,384)
* The figures for the year ending 31 March 2004 are presented under UK GAAP.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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