TIDMMRN
RNS Number : 0507P
Morson Group PLC
28 September 2011
For Immediate Release 28 September 2011
Morson Group PLC
("Morson" or the "Group")
Interim results for the six months ended 30 June 2011
Morson (AIM: MRN.L) the UK's leading provider of technical
contracting personnel to the aerospace and defence, nuclear and
power, rail and other technical industries, is pleased to announce
its interim results for the six months ended 30 June 2011.
Highlights
-- Solid trading performance across all sectors in line with
Directors' expectations:
o revenue up 11.0% to GBP246.3m (H1 2010: GBP221.8m);
o net fee income (gross profit) up 11.4% to GBP18.6m (H1 2010:
GBP16.7m);
o operating profit down 30.1% to GBP3.8m (H1 2010: GBP5.4m);
o profit before taxation down 40.8% to GBP3.1m (H1 2010:
GBP5.3m);
o adjusted profit before taxation* down 7.3% to GBP3.9m (H1
2010: GBP4.2m);
o basic EPS of 5.20p (H1 2010: 8.33p); and
o adjusted EPS of 6.55p (H1 2010: 7.05p).
-- Net debt marginally increased during the period to GBP24.4m,
up GBP1.2m from GBP23.2m at 31 December 2010, despite the
acquisition of Wynnwith.
-- All key contract renewals secured.
-- New contract wins achieved including URENCO UK Ltd in the
nuclear sector and others in the automotive sector.
-- Acquisition of the outstanding minority stake in Morson
Wynnwith in February 2011 for GBP4.0m with integration
completed.
-- Market conditions remain challenging but with positive longer
term prospects.
-- Interim dividend maintained at 2.0p per share (H1 2010: 2.0p
per share).
*Adjusted profit before taxation is profit before taxation of
GBP3.1m (H1 2010: GBP5.3m), excluding the fair value charge on the
derivative financial instrument of GBP0.3m (H1 2010: gain GBP0.5m),
amortisation of intangible fixed assets GBP0.4m (H1 2010: GBP0.2m)
and exceptional cost of GBP0.1m (H1 2010: income GBP0.7m).
Adjusted EPS is net profit attributable to equity holders
adjusted for exceptional items, amortisation of intangible fixed
assets and fair value movement on the derivative financial
instrument values as detailed in note5.
Gerry Mason, Non Executive Chairman, said:
"As is well documented underlying market conditions during the
year to date have remained poor, influenced by a lack of global
capital expenditure and worldwide attempts to kick start investment
activity. Despite this Morson produced a solid performance in line
with our expectations."
For further information please contact:
Morson Group plc 0161 707 1516
Ged Mason, CEO
Paul Gilmour, Financial Director
Brewin Dolphin Limited (Nomad) 0845 213 1000
Matt Davis, Alex Wright
Buchanan 0207 466 5000
Diane Stewart, James Strong, Carrie
Clement
Chairman's Statement
Introduction
As is well documented underlying wider market conditions during
the year to date have remained poor, influenced by a lack of global
capital expenditure and worldwide attempts to kick start investment
activity.
Despite this Morson produced a solid performance in line with
our expectations.
The Period in Review
For Morson of particular note has been the significant reduction
in activity caused by the UK Government's Strategic Defence Review
(SDR). This impacted towards the end of 2010 and resulted in a fall
in revenue of circa GBP15 million from our contract to supply
XPS/BAE Systems during this first half year period. We are pleased
to report that the levels of business in our Aerospace Division
have since stabilised.
The Board note that yesterday market announcements from BAE
Systems indicate some further potential redundancies within their
staff base. We would comment that the sites at which much of this
is to occur hold much reduced numbers of contractors already and
emphasis seems to be on production, where we have less revenues,
rather than maintenance areas.
Morson has shown resilience through ongoing existing organic
trade improvements, a solid client base and the contribution from
acquisitions in 2010, which are now fully integrated into the
Group. We have won all re-tenders during this period and no key
accounts are up for renewal until 2012.
The Board's view is that the UK economic environment will remain
uncertain with pressure on margins continuing for the foreseeable
future affecting Morson's trading despite the underlying
engineering sectors in which we currently operate remaining sound.
In response to these conditions the Board has invested in
broadening our offering making selective investments into certain
niche and emerging areas to develop income streams for the future
for example Oil and Gas, Telecommunications, Professional Services,
Overseas and IT. These disciplines sit alongside our key markets
and clients and allow us to develop potential revenues
Additionally, we have enhanced our permanent recruitment
capabilities.
We believe that we are well positioned and have the experience
and expertise required to maintain and grow our market share and
that this positions the Group well for improved performance in the
coming years.
Sector review
Morson International Temporary and Permanent Recruitment
Services
Aerospace and Defence
Despite the impact of the SDR performance in this sector, which
is the largest in the Group, has again been strong. It is pleasing
to report that there has been increased activity within the general
civil aviation market which has helped compensate for the SDR
reductions. Major projects are being undertaken by clients
providing opportunities requiring specialist skill sets both now
and for the future including the Queen Elizabeth and Prince of
Wales aircraft carriers and Airbus 350 and Bombardier Executive and
passenger Jet programmes. Several aircraft modification programmes
aimed at delivering efficiency savings on fuel and engine
maintenance are also contributing to demand. In addition we hold
ongoing maintenance and support programmes within the naval and
civil marine sub-sector industries and for fixed and rotary wing
military assets.
Looking to the future the more recent increases in activity
within defence include support for key customers Agusta Westland
and Xchanging in connection with maintenance support including
fixed wing platforms and Apache and EH101 Merlin Rotary products.
Furthermore design and development work on Royal Navy "Successor"
submarine at Barrow in Furness holds good potential for long term
resource demand. On non-military work our civil aerospace activity
has recently been complemented by an awarded contract with the
National Composites Centre (NCC) in Bristol which will help keep
Morson at the forefront of new technology and product
development.
Nuclear and Power
Whilst nuclear new build activity has marginally increased this
remains a real focus for coming years and we remain excited about
future opportunities to support this. Understandable delays to the
UK Government's proposed programme after the Fukushima incident
raised concerns and safety checks and reviews have been required.
We believe there is great potential for growth in this sector and
we are well positioned to play an important role in the
engineering, installation, build, support, maintenance and ongoing
commissioning and decommissioning of the UK's new and current
nuclear power infrastructure. Finally, as previously advised, we
note that the first half of 2010 benefited substantially from our
Magnox contract which expired in June 2010. The sector activity in
the period is thus below 1H 2010 levels but above those of 2H
2010.
Rail and Transport Infrastructure
This sector has been quiet with some reductions in activity
levels from the closing 2010 position. The Group benefits from
provision of supply to both the London Underground and the National
Overground Networks. Transport for London has consolidated
operations previously let under Metronet and Tubelines companies
and this has seen reduced workloads though we believe project
activity should increase in the coming periods. The substantial
Crossrail project is progressing and offers excellent long term and
increasing opportunity for Morson. Over ground activity with
Network Rail has been steady and here opportunity is provided by
station improvements and track upgrades and maintenance.
Other developing markets
Outside our core markets described above the Group provides
engineering talent and expertise to a wide variety of business
sectors. We continue to selectively invest in certain areas to
develop future income streams. We are pleased to report trading
improvements in IT and Telecoms are apparent. We expect permanent
recruitment revenue to be higher this year than last but this will
naturally take some time to deliver expected returns. We may make
further investments if market indicators become more positive. Our
overseas office network is increasing and developing and we now
have operations in seven countries. In the period the total
overseas recruitment office revenues were GBP6.9 million (2010:
GBP1.1 million).
Morson Projects: Provision of Engineering Design Consultancy and
Management Services
Morson Projects has seen a period of record revenues and whilst
this is encouraging and enhances our market position, the
challenging trading environment has meant that, particularly within
the Aerospace sector, margin pressure is very apparent. As a result
operating margins have reduced during the period. There are large
ongoing projects continuing through to early 2012 that will be
impacted by this. However we believe that the investment made to
achieve this revenue growth and the expertise and experience gained
will position the company well to gain future work. For example
work through the period has included a key contract for the
Bombardier Learjet programme which was largely undertaken in
"composite material" design, a leading edge technology that is now
being applied by all aircraft manufacturers.
Also the diversity across Nuclear, Energy and Power sectors
offers us scope for future growth. This area of design activity has
performed well, growing revenues and maintaining margins. We
continue to bid for and win substantial levels of design
engineering works for the Sellafield site where we have a
significant presence, these being transferable skills and knowledge
which we believe will also be needed for new build sites.
This design and consultancy capability is a market
differentiator for us. As a Group we are uniquely positioned to
take advantage of nuclear new build power generation and
infrastructure spend by promoting and gaining business via the
understanding, flexibility and expertise that we can provide.
Integration of acquisitions
Last year saw the acquisition of the business of Wynnwith Group
and in February 2011 we acquired the non-controlling minority
interest for a consideration of GBP4.0 million. I am pleased to
report that the business levels have been maintained and fully
integrated and we are seeing the expected move to
profitability.
Financial highlights
Net fee income for the first six months was GBP18.6 million, an
increase of 11.4% from 2010 levels of GBP16.7 million. Revenues
increased to GBP246.3 million, up 11.0% on the prior year
comparative of GBP221.8 million. Adjusted profit from operations
was GBP4.3 million which was in line with our expectations. The
comparatives to the prior half year and preceding six month period
are set out below:
Six Six Six
months months months
ended ended ended
30.06.11 31.12.10 30.06.10
--------------- --------- --------- --------- -------- -------- --------
Change Change Change
A B C A-B A-C B-C
--------------- --------- --------- --------- -------- -------- --------
GBPm GBPm GBPm % % %
--------------- --------- --------- --------- -------- -------- --------
Revenue 246.3 235.8 221.8 4.5 11.0 6.3
--------------- --------- --------- --------- -------- -------- --------
Net Fee Income 18.6 18.4 16.7 1.5 11.4 9.8
--------------- --------- --------- --------- -------- -------- --------
Overheads (14.3) (14.1) (11.8) 1.7 21.1 19.1
--------------- --------- --------- --------- -------- -------- --------
Amortisation (0.4) (0.4) (0.2) (2.9) 148.9 156.3
--------------- --------- --------- --------- -------- -------- --------
Exceptional
net gain on
acquisition
of
businesses 0.0 0.6 0.7 (16.6)
--------------- --------- --------- --------- -------- -------- --------
Exceptional
restructuring
costs (0.1) (0.4) 0.0 (72.8)
--------------- --------- --------- --------- -------- -------- --------
Operating
profit 3.8 4.0 5.4 (5.5) (30.1) (26.0)
--------------- --------- --------- --------- -------- -------- --------
Adjusted
operating
profit
(excluding
amortisation
of intangible
fixed assets
and
exceptional
items) 4.3 4.3 4.9 0.9 (11.8) (12.6)
--------------- --------- --------- --------- -------- -------- --------
Interest (0.4) (0.4) (0.7) (2.1) (39.7) (38.5)
--------------- --------- --------- --------- -------- -------- --------
Adjusted
profit before
taxation
(excluding
amortisation
of intangible
fixed assets,
exceptional
items and
fair value
adjustments) 3.9 3.9 4.2 1.3 (7.3) (8.5)
--------------- --------- --------- --------- -------- -------- --------
Overheads in the period were GBP2.5 million higher than the
comparative period in the prior year. The main reason for the
increase is the impact of the Wynnwith acquisition. Overheads
within the Wynnwith business prior to our acquisition were running
at over GBP7.0m per annum (2010: GBP0.5m Wynnwith overhead
recognised). Since acquisition we have achieved significant cost
savings through integration and some of these have been re-invested
in other areas. Operationally the acquired business is now fully
integrated and reports as part of the wider recruitment
activity.
Whilst we have continued to focus on controlling the overhead
base throughout the business we have invested in certain areas as
described above. In the period adjusted operating margins have
declined to 1.8% (H1 2010: 2.2%) reflecting these cost issues and
lost revenues from the SDR.
2011 exceptional costs of GBP0.1 million relate to the final
restructuring steps within the Morson Wynnwith business. The
exceptional income of GBP0.7 million in 2010 reflects the
acquisition of the business of Wynnwith Group Limited.
Across the Group net fee income split (and percentage of total
NFI) across temporary recruitment, permanent recruitment and
engineering design consultancy was GBP14.8 million (79.6%), GBP0.7
million (3.7%) and GBP3.1 million (16.7%) respectively (H1 2010:
GBP12.9 million (77.2%), GBP0.4 million (2.4%), GBP3.4 million
(20.4%)).
The maintenance of profitable returns and stability shown by
Morson is a reflection of the bias of the Group to the temporary
recruitment market and demonstrates the business model adopted and
differentiates us from companies that are focused primarily on
permanent recruitment. Whilst this remains firmly in place we hope
to increase permanent revenues slightly taking advantage of our
existing client base.
Adjusted profit before taxation was GBP3.9 million, down 7.3%
(H1 2010: GBP4.2 million). We consider that the measure of adjusted
profit before tax gives a meaningful and informative comparator
against the prior year's performance. Actual profit before tax
after these matters was GBP3.1 million, a fall of GBP2.1 million or
40.8%. The Group's conversion ratio, calculated as the ratio of
adjusted profit from operations to net fee income was 23.3% (H1
2010: 29.4%), which has reduced due to the more difficult trading
environment. However, given current market conditions the Board
feels this compares well with others in our sector.
Taxation in the period is at an effective rate of 23.4% (H1
2010: 24.5%; year ended 31 December 2010: 19.9%). This is a blended
rate and reflects the underlying UK rate of 26.5%, expenses not
allowable, tax on overseas income and research and development tax
credits.
Our financing requirements increased during the period in large
part due to the GBP4.0 million cash consideration paid for the
Wynnwith transaction. During the period average net debt levels
reflected this being GBP28.9 million (H1 2010: GBP19.4 million; H2
2010 GBP26.3 million). The Group's invoice discounting facility at
the period end was drawn to GBP24.4 million (H1 2010: GBP20.0
million; H2 2010: GBP24.9 million) against committed facilities of
GBP50.0 million. The Board believe this facility suits contract
recruitment well and is widely used by companies providing similar
services. It has proven to be efficient and cost effective finance
and the Group has used such a facility over the last nineteen
years. Our GBP5.0 million revolving credit facility was drawn to
GBP2.0 million (2010: GBPnil) and the overdraft was GBPnil (H1
2010: GBPnil; H2 2010: GBPnil). Cash was GBP2.1 million (H1 2010:
GBP1.2 million; H2 2010 GBP1.7 million).
As previously reported our existing core invoice discounting
facility runs to 31 March 2014 and our additional GBP5 million
revolving credit facility runs to 31 October 2013.
Net assets of the Group at 30 June 2011 were GBP58.7 million (H1
2010: GBP59.5 million; H2 2010 GBP62.0 million).
Going Concern
The Directors are satisfied that this condensed set of financial
statements should be prepared on a going concern basis and further
details are included in note 1 to this half yearly report.
Dividends
The Company is recommending an interim dividend of 2.0 pence per
share (H1 2010: 2.0 pence per share) which reflects the Board's
view of the solid future prospects of the business. This interim
dividend is proposed to be paid on 28 October 2011 to shareholders
on the register on 7 October 2011. The ex-dividend date will be 5
October 2011.
Current Trading and Outlook
The Board believes that against a backdrop of a difficult market
the results achieved are creditable. We recognise the challenges
and have selectively invested to position the Group for growth in
the future as demand for our services increases. There are large
infrastructure engineering needs within the UK and our growth
strategy remains unchanged. We will continue to seek long-term
embedded client relationships and the delivery of savings and
efficiencies with quality technical resource that Morson can
deliver to its clients. We will also continue to appraise
acquisition opportunities that can deliver the right prospects,
opportunities, business synergies and future income streams that
are in line with our core business activities.
The SDR was a rather unique and significant event that
significantly impacted our financial results for the period. We
have however remained resilient, benefiting from our long standing
client relationships, growing our business and enhancing our
service capability across our markets. Whilst further falls in some
areas of defence revenues might occur, the wide spread of skills
required by the industry and the strength of our civils business
will help mitigate this.
We have sought to position the Group well for the future and
believe that with our broad client base, our service offering
including Morson Projects' design and outsourcing capabilities and
selective strategic investments we will achieve growth when the
economic outlook improves.
The world economy is in uncharted territory but we believe that
the future will see demand for scarce engineering talent. Our team
of dedicated and entrepreneurial management and staff are well
equipped to enlarge our footprint and make measured decisions to
manage the many challenges this presents. Our philosophy is to
think innovatively and as a result we have consistently been
profitable over several economic cycles.
We are currently positioning the Group to take advantage of
future engineering programmes and activity and have confidence in
the prospects for the Group and its long term future growth.
Gerry Mason
Non-executive Chairman
28 September 2011
Condensed consolidated income statement
Six months ended 30 June 2011
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
Note GBP'000 GBP'000 GBP'000
--------------------------- ------ ----------- ----------- ------------
Continuing operations
Revenue 246,317 221,841 457,639
------------------------------------ ----------- ----------- ------------
Cost of sales (227,677) (205,110) (422,544)
------------------------------------ ----------- ----------- ------------
Gross profit 18,640 16,731 35,095
Administrative expenses:
- amortisation of intangible fixed
assets (433) (174) (620)
- exceptional items:
- net gain on acquisition
of businesses 2 - 681 1,249
- restructuring costs 3 (110) - (404)
- other administrative expenses (14,303) (11,813) (25,880)
------------------------------------ ----------- ----------- ------------
Operating profit 3,794 5,425 9,440
Finance costs: - fair value
movements on derivative financial
instrument (272) 512 1,063
- other finance costs (411) (682) (1,102)
------------------------------------ ----------- ----------- ------------
Profit before taxation 3,111 5,255 9,401
Taxation 4 (728) (1,285) (1,870)
---------------------------- ------ ----------- ----------- ------------
Net profit for the period/year 2,383 3,970 7,531
------------------------------------ ----------- ----------- ------------
Attributable to:
Equity holders of the parent 2,313 3,712 6,985
Non-controlling interests 70 258 546
------------------------------------ ----------- ----------- ------------
2,383 3,970 7,531
------------------------------------ ----------- ----------- ------------
Earnings per share
From continuing operations
Basic (pence) 5 5.20 8.33 15.69
Diluted (pence) 5 5.06 8.19 15.42
---------------------------- ------ ----------- ----------- ------------
All activity has arisen from continuing operations.
Condensed consolidated statement of comprehensive income
Six months ended 30 June 2011
Unaudited six Unaudited six Audited year
months ended months ended ended 31 December
30 June 2011 30 June 2010 2010
GBP'000 GBP'000 GBP'000
------------------------- -------------- -------------- -------------------
PROFIT FOR THE PERIOD/
YEAR 2,383 3,970 7,531
Exchange differences on
translation of foreign
operations (3) - 28
------------------------- -------------- -------------- -------------------
TOTAL COMPREHENSIVE
INCOME FOR THE PERIOD/
YEAR 2,380 3,970 7,559
------------------------- -------------- -------------- -------------------
Attributable to:
Equity holders of the
parent 2,310 3,712 7,013
Non-controlling
interests 70 258 546
------------------------- -------------- -------------- -------------------
TOTAL COMPREHENSIVE
INCOME FOR THE PERIOD/
YEAR 2,380 3,970 7,559
------------------------- -------------- -------------- -------------------
Condensed consolidated balance sheet
At 30 June 2011
Unaudited Unaudited Audited
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ---------- ------------
Non--current assets
Goodwill 33,513 32,945 33,513
Other intangible assets 2,217 565 2,650
Property, plant and equipment 3,978 3,790 3,753
Deferred tax asset - 106 -
--------------------------------------- ---------- ---------- ------------
39,708 37,406 39,916
--------------------------------------- ---------- ---------- ------------
Current assets
Trade and other receivables 96,223 90,781 85,939
Cash and cash equivalents 2,096 1,238 1,701
--------------------------------------- ---------- ---------- ------------
98,319 92,019 87,640
--------------------------------------- ---------- ---------- ------------
Total assets 138,027 129,425 127,556
--------------------------------------- ---------- ---------- ------------
Current liabilities
Trade and other payables (51,687) (47,968) (39,648)
Current tax liabilities (709) (1,373) (602)
Obligations under finance leases (55) (47) (37)
Bank overdrafts and loans (26,444) (19,991) (24,897)
Derivative financial instrument (272) (551) -
--------------------------------------- ---------- ---------- ------------
(79,167) (69,930) (65,184)
--------------------------------------- ---------- ---------- ------------
Net current assets 19,152 22,089 22,456
--------------------------------------- ---------- ---------- ------------
Non-current liabilities
Deferred tax liabilities (155) - (333)
--------------------------------------- ---------- ---------- ------------
(155) - (333)
--------------------------------------- ---------- ---------- ------------
Total liabilities (79,322) (69,930) (65,517)
--------------------------------------- ---------- ---------- ------------
Net assets 58,705 59,495 62,039
--------------------------------------- ---------- ---------- ------------
Equity
Issued capital 2,267 2,267 2,267
Share premium account 37,607 37,607 37,607
Retained earnings 19,527 20,074 22,443
Other reserves (894) (815) (928)
--------------------------------------- ---------- ---------- ------------
Equity attributable to equity holders
of the parent 58,507 59,133 61,389
Non-controlling interest 198 362 650
--------------------------------------- ---------- ---------- ------------
Total equity 58,705 59,495 62,039
--------------------------------------- ---------- ---------- ------------
Condensed consolidated cash flow statement
Six months ended 30 June 2011
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
Note GBP'000 GBP'000 GBP'000
------------------------------ ------ ----------- ----------- ------------
Net cash inflow from
operating activities 7 5,348 3,168 2,541
------------------------------ ------ ----------- ----------- ------------
Investing activities
Grant income received - - 479
Purchases of property, plant and
equipment (693) (1,350) (2,307)
Proceeds on disposal of property,
plant and equipment 35 30 68
Acquisition of businesses - (7,749) (10,104)
Acquisition of a non-controlling
interest (4,025) - -
-------------------------------------- ----------- ----------- ------------
Net cash used in investing activities (4,683) (9,069) (11,864)
-------------------------------------- ----------- ----------- ------------
Financing activities
Dividends paid (1,779) (1,783) (2,671)
Purchase of own shares - (121) (262)
New bank loans raised 2,000 - -
Repayments of obligations under
finance leases (37) (14) (24)
-------------------------------------- ----------- ----------- ------------
Net cash from/ (used in) financing
activities 184 (1,918) (2,957)
-------------------------------------- ----------- ----------- ------------
Net increase/(decrease) in cash and
cash equivalents 849 (7,819) (12,280)
Effects of foreign exchange rate
changes (1) - 18
-------------------------------------- ----------- ----------- ------------
Cash and cash equivalents
at beginning of period/year (23,196) (10,934) (10,934)
-------------------------------------- ----------- ----------- ------------
Cash and cash equivalents at
end of period/year (22,348) (18,753) (23,196)
-------------------------------------- ----------- ----------- ------------
Condensed consolidated statement of changes in equity
Six months ended 30 June 2011
Share
Share premium Retained Translation Own Non-controlling Total
capital account earnings Reserve shares interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- --------- ------------ -------- ---------------- --------
At 1 January
2010 (audited) 2,267 37,607 18,087 - (694) 104 57,371
Retained profit
for the period - - 3,712 - - 258 3,970
Dividends paid - - (1,783) - - - (1,783)
Share--based
payments - - 58 - - - 58
Purchase of own
shares - - - - (121) - (121)
----------------- -------- -------- --------- ------------ -------- ---------------- --------
At 1 July 2010
(unaudited) 2,267 37,607 20,074 - (815) 362 59,495
Retained profit
for the period - - 3,273 - - 288 3,561
Dividends paid - - (888) - - - (888)
Share--based
payments - - (16) - - - (16)
Purchase of own
shares - - - - (141) - (141)
Exchange
differences on
translating the
net assets of
foreign
operations - - - 28 - - 28
----------------- -------- -------- --------- ------------ -------- ---------------- --------
At 1 January
2011 (audited) 2,267 37,607 22,443 28 (956) 650 62,039
Retained profit
for the period - - 2,313 - - 70 2,383
Dividends paid - - (1,779) - - - (1,779)
Share--based
payments - - 90 - - - 90
Exercise of
share options - - (37) - 37 - -
Exchange
differences on
translating the
net assets of
foreign
operations - - - (3) - - (3)
Acquisition of a
non-controlling
interest - - (3,503) - - (522) (4,025)
----------------- -------- -------- --------- ------------ -------- ---------------- --------
At 30 June 2011
(unaudited) 2,267 37,607 19,527 25 (919) 198 58,705
----------------- -------- -------- --------- ------------ -------- ---------------- --------
Notes to the condensed set of financial statements
Six months ended 30 June 2011
1. Basis of preparation
This unaudited condensed set of financial statements has been
prepared using accounting policies consistent with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union. The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest annual audited
financial statements. Whilst the financial figures included in this
half-yearly report have been computed in accordance with IFRSs
applicable to interim periods, this half-yearly report does not
contain sufficient information to constitute an interim report as
that term is defined in IAS 34.
The comparative figures for the year ended 31 December 2010 are
an abridged version of the Group's full financial statements and,
together with other financial information contained in these
interim results, do not constitute statutory financial statements
of the Group as defined in Section 434 of the Companies Act
2006.
Those financial statements for the year ended 31 December 2010
have been delivered to the Registrar of Companies and include an
auditor's report which was not qualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and did not contain
statements under Section 498(2) or 498(3) of the Companies Act
2006.
Going Concern
The Directors are required to satisfy themselves as to whether
the condensed set of financial statements of the Group should be
prepared on a going concern basis. As part of the ongoing duties
and activities of the Board there is continual assessment of the
Group's financial and commercial performance. This review does
consider business risks and uncertainties that exist and takes
account of how wider economic circumstances can impact these. It
includes due consideration and assessment of potentially adverse
and testing situations. The Board looks forward and appropriate
forecasts of financial performance and assessment of future
business opportunities and challenges are regularly made. The
Directors have also considered the financial support required for
these anticipated income streams and note that the Group's current
financing arrangements run until 31 March 2014 for its invoice
discounting facility and until 31 October 2013 for its revolving
credit facility. Having properly considered the matter the
Directors conclude that they are satisfied that this condensed set
of financial statements should be prepared on a going concern
basis.
2. Acquisition of businesses
During the year ended 31 December 2010, the Group made two
acquisitions.
1) On 9 June 2010 the Group announced the formation of a 51%
subsidiary, Recruit Now Limited, since renamed to Morson Wynnwith
Limited. This subsidiary acquired the business and assets of
Wynnwith Group Limited ("Wynnwith") and the issued share capital of
Wynnwith SRL, its Italian trading subsidiary, out of
administration. Wynnwith provides technical and engineering
personnel to a range of blue-chip clients in the aerospace,
defence, marine, electronics and rail industries and had been a
well-established and respected competitor of the Group.
2) On 9 July 2010 the Group acquired the business, contracts and
fixed assets of Acetech Personnel Limited ("Acetech"). Acetech is a
wholly owned subsidiary of Babcock International Group PLC and
provides recruitment and workforce services, on a preferred
supplier basis, to Babcock's UK Marine and Rail businesses.
Contracts have been agreed with Babcock for a minimum five-year
term for the continuation of supply of contractors.
The values recognised in the audited financial statements for
the year ended 31 December 2010 were as follows:
Wynnwith Acetech Total
GBP'000 GBP'000 GBP'000
Recognised amounts of identifiable assets
acquired and liabilities assumed
Financial assets 9,659 - 9,659
Property, plant and equipment 27 16 43
Identifiable intangible assets 725 1,806 2,531
Deferred tax asset 25 488 513
Financial liabilities (987) (35) (1,022)
Deferred tax liability (196) (488) (684)
Total identifiable assets 9,253 1,787 11,040
Goodwill (1,504) 568 (936)
Total consideration 7,749 2,355 10,104
Satisfied by:
Cash 7,749 2,355 10,104
Total consideration transferred and net cash
outflow arising on acquisition 7,749 2,355 10,104
Acquisition-related costs 230 25 255
Release of negative goodwill from bargain
purchase (1,504) - (1,504)
Total exceptional (gain)/ cost on acquisition
of businesses (1,274) 25 (1,249)
At 30 June 2010 the initial assessment of the fair value of the
Wynnwith acquisition was considered to be provisional, at this time
exceptional costs relating to the acquisition were GBP217,000,
consisting largely of professional fees. These exceptional costs,
combined with the release of negative goodwill, resulted in a
reported net exceptional income of GBP681,000.
On 11 February 2011 Morson Group PLC acquired the remaining
issued shares in Morson Wynnwith Limited for a cash consideration
of GBP4,005,000 and stamp duty of GBP20,000, taking its
shareholding to 100%. The difference between the fair value of the
consideration and the carrying amount of the non-controlling
interests is shown as a negative movement in the equity of Morson
Group PLC
3. Exceptional restructuring costs
During the 6 months ended 30 June 2011 restructuring costs of
GBP110,000 have been incurred following the further integration of
the Wynnwith business. These redundancy costs were over and above
those provided at 31 December 2010 and were not committed at that
date.
During the year ended 31 December 2010 restructuring costs of
GBP404,000 were incurred following the acquisition and integration
of the Wynnwith and Acetech businesses (see note 2). This included
an accrual for redundancy costs committed to at the balance sheet
date.
4. Taxation
Tax for the six month period is charged at 26.5% (six months
ended 30 June 2010: 28%; year ended 31 December 2010: 28%). The
effective rate of tax for the six months ended 30 June 2011 is
23.4% (six months ended 30 June 2010: 24.5%; year ended 31 December
2010: 19.9%) after taking into consideration expenses not
deductible for tax purposes, income not taxable and the effect of
tax on overseas income. The effective tax rate is also impacted by
the recognition of research and development tax credits.
5. Earnings per share
The calculations of earnings per share are based on the
following profits and numbers of shares:
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- ------------
Profit for the financial period/year
used for the calculation
of basic earnings per share 2,313 3,712 6,985
Exceptional items:
- net gain on acquisition of
businesses (a) - (323) (625)
- restructuing costs (a) 110 - 244
Amortisation of intangible assets 433 174 569
Fair value movements on derivative
financial instruments 272 (512) (1,063)
Tax effect of adjustments (a) (216) 90 149
-------------------------------------- ----------- ----------- ------------
Earnings for the purposes of adjusted
earnings per share 2,912 3,141 6,259
-------------------------------------- ----------- ----------- ------------
(a) Adjustments have been
made to these values to
account for the share of
non-controlling interests
Weighted average number of
shares:
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
Number Number Number
-------------------------------------- ----------- ----------- ------------
Weighted average number of shares
for the purposes
of basic earnings per share 44,462,974 44,580,399 44,520,191
Effect of potentially dilutive
ordinary shares:
- share options 1,277,384 730,325 794,207
-------------------------------------- ----------- ----------- ------------
For diluted earnings per share 45,740,358 45,310,724 45,314,398
-------------------------------------- ----------- ----------- ------------
Earnings per share:
- basic (pence) 5.20 8.33 15.69
- diluted (pence) 5.06 8.19 15.42
Adjusted earnings per share:
- basic (pence) 6.55 7.05 14.06
- diluted (pence) 6.37 6.93 13.81
-------------------------------------- ----------- ----------- ------------
The adjusted earnings per share has been calculated on the basis
of continuing operations pre--amortisation, fair value movement on
derivative financial instrument and exceptional items (see notes 2
and 3) as shown above. The Directors consider that the adjusted
earnings per share calculation gives a better understanding of the
Group's underlying earnings per share.
6. Dividends on equity shares
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- ------------
Amounts recognised as distributions
to equity holders in the period:
- final dividend for the year ended
31 December 2010 of 4.0 pence per
ordinary share 1,779 - -
- interim dividend for the year ended
31 December 2010 of 2.0 pence per
ordinary share - - 888
-final dividend for the year ended
31 December 2009 of 4.0 pence per
ordinary share - 1,783 1,783
1,779 1,783 2,671
-------------------------------------- ----------- ----------- ------------
The Directors have proposed an interim dividend of 2.0 pence per
share in respect of the six months ended 30 June 2011.
7. Notes to the Group Cash Flow Statement
Reconciliation of profit from operations to net cash from
operations
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- ------------
Operating profit 3,794 5,425 9,440
Adjustments for:
Exceptional net gain on acquisition
of businesses - (681) (1,249)
Exceptional restructuring costs 110 - 404
Depreciation of property, plant and
equipment 441 381 829
Amortisation of intangible assets 433 174 620
Share-based payment expense 90 58 42
(Profit)/loss on disposal of
property, plant and equipment (8) (17) 31
-------------------------------------- ----------- ----------- ------------
Operating cash flows before movements
in working capital 4,860 5,340 10,117
(Increase) in receivables (10,506) (11,006) (4,930)
Increase in payables 11,982 11,273 2,187
Decrease/(increase) in inventories 136 (815) (1,830)
-------------------------------------- ----------- ----------- ------------
Cash generated by operations 6,472 4,792 5,544
Income taxes paid (713) (942) (1,901)
Interest paid (411) (682) (1,102)
-------------------------------------- ----------- ----------- ------------
Net cash generated from operating
activities 5,348 3,168 2,541
-------------------------------------- ----------- ----------- ------------
Independent review report to Morson Group PLC
We have been engaged by the company to review the condensed set
of financial statements in the half--yearly financial report for
the six months ended 30 June 2011, which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated cash flow statement, the condensed
consolidated statement of changes in equity and related notes 1 to
7. We have read the other information contained in the half--yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half--yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half--yearly financial report in accordance with
the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half--yearly financial report have been prepared in
accordance with the accounting policies the group intends to use in
preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half--yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half--yearly financial report for the six months ended 30
June 2011 is not prepared, in all material respects, in accordance
with the AIM Rules of the London Stock Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Manchester, United Kingdom 28 September 2011
This information is provided by RNS
The company news service from the London Stock Exchange
END
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