Interim Results, Sureserve Group PLC, 2020-05-27






RNS Number : 9872N
Sureserve Group PLC
27 May 2020
 

27 May 2020

Sureserve Group plc

 

(“Sureserve” or the “Group”)

 

Unaudited Interim Results for the six months ended 31 March 2020 (H1 FY20)

Building profitable market share

Sureserve, the compliance and energy services Group, is pleased to announce its interim results for the six month period ended 31 March 2020.

Chairman’s statement

Bob Holt, Chairman of Sureserve Group commented

“Despite the very difficult economic circumstances facing the United Kingdom, the six months ended 31st March 2020 showed continued growth and an impressive improvement in profits from our businesses.

The results include the latter part of March where the country and our Scottish, Welsh and Smart Metering businesses were in lockdown as a result of the Covid-19 crisis.

All of our gas, water and electrical service businesses, classified as “key worker” status, carrying out predominantly emergency testing services, continue to operate to agreed protocols with key clients.  We maintain open communications with our clients to ensure we are able to minimize the risks to our employees and position us to participate fully when we return to more normal work streams. 

Our Scottish and Welsh operations in Energy Services, where we manage the Emerging Fuel Poverty programme for both governments and smart metering installation working for Big 6 energy companies, saw an immediate shut down in March.

Like most other businesses, it was with deep regret that we furloughed those employees who were not required to provide front line services.  I would also like to thank those frontline employees for their commitment to deliver the emergency services in difficult conditions which our clients expect of us.  I believe the team effort from the most junior to senior members of staff will hold the Group in good stead as we emerge from lockdown.

The Board felt it right and proper that it reduce its compensation for the period during which we have been receiving government support for the business by 20%.

I would also like to thank Peter Smith, our new Chief Financial Officer, and his team for their excellent work managing our working capital and thereby reducing our debt from £12.9m at the end of March 2019 to £3.5m at March 2020.  Furthermore, at the time of writing, the Group is debt free with a modest net cash balance.

The Group has implemented a clear procedure for ensuring that all of our premises have undertaken a comprehensive risk assessment enabling all divisions of the group to recommence trading when the government determines it as safe to do so.

Our risk assessments have been created in consultation with our teams and clearly established control measures which we have put in place.  Due to the nature of our organization and its various geographical locations, each business has undertaken this risk assessment in the desired format and all assessments have been reviewed and approved by the senior management teams and our SHEQ managers.

Looking to the future

We are a business which is heavily dependent on government and local authority expenditure.  It is still too early to evaluate the long-term impact of the massive government deficits that are being incurred and what effect this will have on us over the medium term.

Our businesses are, however, market leaders providing critical services to the public sector offering, we believe, competitive pricing and meeting the high standards of performance expected by our clients.

We also take comfort that we have a strong order book of £323.7m. The Group’s financial position is now better than it has been for many years and we believe that, with a highly competitive cost basis, we can gain market share as we emerge out of what has been a most difficult time for the UK economy.

Traditionally the profitability of the Group is heavily weighted towards the second half of the trading year.  Sadly, our Welsh and Scottish operations remain closed and there is as yet no indication from the Scottish and Welsh governments when they will resume. 

England, on the other hand, is coming out of furlough so whilst our results will fall short of our original expectations for the year, we believe that the second half will show further progress.”

 

Financial overview

·      Revenue up 7% to £109.6m (H1 2019: £102.5m)

·      EBITA*1 up 27% to £3.9m (H1 2019: £3.1m)

·      Profit before tax up 129% to £2.6m (H1 2019: £1.1m)

·      Profit before tax before exceptional items and amortisation of acquisition intangibles up 35% to £3.4m (H1 2019: £2.5m)

·      Earnings per Share (EPS) from continuing operations up 117% to 1.3p (H1 2019: 0.6p)

·      EPS excluding amortisation of acquisition intangibles and share based payments up 29% to 1.8p (H1 2019: 1.4p)

·      Operating cash conversion*2 of 88% (H1 2019: 51%)

·      Net debt*3 reduced to £3.5m (31 March 2019: £12.9m)

·      Order book of £323.7m providing visibility of earnings with circa 90% covered in FY20

*1 EBITA is defined as operating profit before exceptional items and amortisation of acquisition intangibles.  EBITA excludes the profit from Discontinued Operations.

*2 Operating cash conversion is calculated before the effect of IFRS16

*3 Net debt is calculated before the effect of IFRS16

 

Operational overview 

  • Core divisions of Compliance and Energy Services both delivered strong performances, with demand for services remaining solid. Continued reputation for delivery of quality services and market-leading positions in the highly-regulated public sector gas testing and energy management sectors
  • Outstanding record of contract wins worth £124m during the period strengthening our position across the UK

 

Outlook

 

  • Well-placed to deliver a clear growth strategy in our market-leading gas services division
  •  90% of FY2020 forecast revenue covered by the order book worth £323.7m, providing good visibility of non-volatile revenue streams.  The nature of our work and clients is such that while we may see delays, we do not expect work to be cancelled
  • The Group is well-positioned for further organic growth in a fragmented and regional market
  •  Despite the challenges of Covid-19, we expect the continuation of strong trading in FY20 maintaining the Group’s momentum.  The work we do on behalf of our clients is such that this will continue well into the future
  •  Increased opportunities to look for further growth from the current crisis, both with existing and future clients.

Enquiries

Sureserve Group                                                                                                                 

Bob Holt OBE, Chairman                                                                                                                    07778 798 816

Peter Smith, Chief Financial Officer                                                                                                    07590 929 431

 

Shore Capital (Nominated Adviser and Broker)                                                                              020 7408 4050

Antonio Bossi

Mark Brown

Fiona Conroy

 

Camarco (Financial Public Relations)                                                                              

Ginny Pulbrook                                                                                                                                     020 3757 4992

Ollie Head

 

Notes to editors

Sureserve is a leading compliance and energy services group that performs critical functions in homes, public and commercial buildings, with a focus on clients in the UK public sector and regulated markets. Services are delivered through two divisions: Compliance and Energy Services.

 

The Group was founded in 1988 and is headquartered in Basildon and currently employs some 2,116 staff.

 

 

OPERATIONAL REVIEW

The unprecedented situation presented by the Covid-19 pandemic and associated Government response has resulted in challenges for the Sureserve group and our operations, as with many others. The safety of our employees and customers has and will always be our absolute priority. Our focus has been the implementation of numerous measures to ensure that we can serve our customers in a completely safe manner while protecting the wellbeing of colleagues and minimising virus spread risk.  Throughout this period we have witnessed many encouraging examples of voluntary support and assistance by our key workers to communities and the individuals within them.

Compliance (66% of Group revenue / H1 FY19: 63%)

Compliance: six months ended 31 March

Unaudited

6 months to 31 March 2020

Unaudited

6 months to 31 March 2019

Change

Revenue (£m) *1

73.4

65.7

11.6%

EBITA (£m) *2

3.7

2.6

40.2%

EBITA margin

5.0%

4.0%

1.0ppts

*1 Division revenue figures include revenue from intercompany trading which accounts for a total across both divisions of £1.1m in 2020 and £1.3m in 2019.

*2 EBITA is defined as operating profit before exceptional items and amortisation of acquisition intangibles.  EBITA excludes the profit from Discontinued Operations.

The Compliance division provides planned and responsive maintenance, installation and repair services predominantly to local authority and housing association clients, in the areas of domestic and commercial gas, fire and electrical, water and air hygiene, and lifts. These services cover clients’ social housing and public building assets, as well as industrial and commercial properties. Gas services comprise around three quarters of the division and we believe we remain the largest player in this fragmented and typically localised market.

We are predominantly paid for service and repair work on a fixed price basis evenly through the year. The gas businesses (which as noted above encompass the majority of the division’s revenues) have more call-outs during colder months, resulting in higher labour and materials costs, with this seasonality driving higher levels of profitability and cash generation in the warmer months when call-out rates are lower and a proportion of our engineers can be redeployed to jobs that yield further income. As a result, historically a significant proportion of the division’s annual profit arises during the second half of the financial year, making the strong results in this current period even more pleasing.  Revenue growth combined with a move to our targeted EBITA margin levels of 5% has seen a considerable step forward in our profits.

The division repeated previous strong period-on-period revenue growth of 11.6% to £73.4m (H1 FY19: £65.7m), driven by continued new contract wins and extensions in addition to ongoing regulatory pressures in the sector and growth within our fire protection business, demonstrating a continued improvement following work delivered by that team.  Installation works again exceeded expectations in the first half of the year, which by adding to our improved contractual client base further strengthened our position.  EBITA increased by 40.2% to £3.7m (H1 FY19: £2.6m).  The additional profitability has been driven by a combination of two factors; increased revenues in comparison to the same period last year, with both gas and non-gas businesses showing consistent growth in revenue, and further positive EBITA performance driven from margins which arises from work mix including more commercial works in addition to efficiencies gained by the experienced management teams as scale continues to increase.

The division continued its excellent track record on new wins during the period with particular success within our Aaron Services business, including £8.4m of work over three years for gas boiler upgrades and electrical testing with Hinckley and Bosworth council, a repair and testing contract with Stonewater worth £4.0m and in addition significant framework acceptances with Efficiency East Midlands (up to £4.2m) and Fusion 21 (up to £5.0m, with the other gas businesses also on the framework) for a range of gas and electrical works.  Other significant wins in the division include £4.9m for Southern Housing and £3.9m with Your Housing for gas service and testing works, along with numerous other wins across the full range of workstreams.

We believe the medium and long-term outlook for our Compliance businesses remains strong, underpinned by high levels of long-term contracts and frameworks for which the division has continued to see high appointment levels.  This is combined with an ongoing trend towards regulatory services and our client base largely of local authorities and housing associations provides us both continuity moving forward along with clients whom we regard as blue chip with minimal debtor risk.

In the short-term we, like many others, are experiencing uncertainty caused by the Covid-19 pandemic.  The nature of our Compliance businesses is of core services including vital emergency repair and testing cover to our local authority and housing association customers, to ensure compliance with gas, electricity and building testing regulations.  It is therefore crucial they continue to perform their essential services and this is why the Government has recognised many of our employees within their “key worker” classification. 

The division is experiencing some delays in accessing certain residential and communal properties to undertake work as a result of the Government measures and guidance given in response to the Covid-19 outbreak, including social distancing and travel restrictions.  Some local authority customers have, where work is considered of a lower priority or not essential, chosen to defer certain elements.  We believe that following the temporary uncertainty and disruption to the market our mix of customer and services remains strong and longer-term the demand for these works and underlying fundamentals will underpin our future prospects when conditions recover.  As a market leader in gas testing we believe the opportunities will be forthcoming as a result of other failing contractors.

 

Energy Services (34% of Group revenue / H1 FY19: 37%)

Energy Services: six months ended 31 March

Unaudited

6 months to 31 March 2020

Unaudited

6 months to 31 March 2019

Change

Revenue (£m) *1

37.3

38.0

(2.0%)

EBITA (£m) *2

1.9

1.9

1.6%

EBITA margin

5.2%

5.0%

0.2ppts

*1 Division revenue figures include revenue from intercompany trading which accounts for a total across both divisions of £1.1m in 2020 and £1.3m in 2019.

*2 EBITA is defined as operating profit before exceptional items and amortisation of acquisition intangibles.  EBITA excludes the profit from Discontinued Operations.

Energy Services undertakes a range of energy efficiency services for social housing and private homes through two businesses:

·      Everwarm delivering insulation and heating, energy efficient technologies including electrical vehicle charging points, battery storage and solar PV, including works within non-domestic properties.  Everwarm combines these services with providing carbon emissions savings for energy companies, enabling them to meet their legislative targets. The insulation operations are driven by seasonal influences, as we are unable to render or use fixing glue necessary for insulation at lower temperatures.  As a result, we typically experience a far larger number of productive working days in summer, compared to winter months, with the result that this business also sees higher revenues and margins in H2 each year. 

·      Providor, a leading national installer of smart meters (operating as a meter asset manager and meter operator), working for several “Big 6” and challenger utilities, who are required to install smart meters in every home in England, Wales and Scotland. The business is experienced in the ongoing UK-wide government roll-out, previously beset by delays and technology challenges around deployment of newer “SMETS2” meter assets.  As we have previously advised it was announced that the deadline for installation had been extended to 2024 to allow a more realistic timeframe for delivery.  While an expected impact is that overall roll-out costs for the industry may continue to rise, we believe a benefit from this revised timetable will be seen in more consistent volumes to allow more deliverable and sustainable installation levels in coming years.  Approximately one third of the 55m total meters within the roll-out have now been installed as smart, with a significant market opportunity remaining.

The division showed period-on-period revenue reduction of 2.0% to £37.3m (H1 FY19: £38.0m), reflecting some revenue reductions within the Everwarm business partly offset by an increase in smart meter installation work in Providor reflecting previous contract wins and consistency in delivery as mentioned in previous updates.  EBITA margin improved to 5.2% on the lower revenues (H1 FY19: 5.0%).  Results included operational improvements from the prior interim period with continued positive performance in smart metering, which had a profitable H1 trading position for the first time, in addition to a small profit within our Welsh Arbed joint venture (prior year had been a mobilisation phase as previously advised).  An overall decrease in profitability of the Everwarm business, due to a combination of the reduction in revenues, some impact from mix of works and a shortfall from the Covid-19 impact on March trading, offset those benefits.  We saw relative consistency in the Scottish Warmworks joint venture trading performance.

The largest win for the division has seen extension of our services to the central belt of Scotland (SPOW) region with Scottish Power, offering further smart metering installation services with estimated total contract value of up to £24m.  Further significant awards were within the Everwarm business and included £5.4m of air source heat pump installation works for E.ON, up to £10.7m with Argyll Community Housing Association for a mix of external wall insulation and air source heat pump installation in addition to a £1.9m award with Waverley Housing Association for a mix of improvement measures including insulation.  The Everwarm business was also placed on the Fusion 21 framework, which is believed to represent a significant opportunity for future energy efficiency works.

Providor remains focused on existing contract delivery; and following the clarity now provided on the Government smart meter roll-out extension, had signaled our intent to review new contract opportunities.  This represents an opportunity to strengthen further, particularly following commencement of SMETS2 meter technology installations, with consistency generally expected within volumes up to 2024.  Previously awarded agreements and an evaluation of existing contracts and potential extensions give us confidence over future delivery. We have been working well with Scottish Power as a key client in both the sector and across the division for a number of years and are delighted this strong relationship has resulted in extending our service offering to include their SPOW region.  This is also geographically attractive to the Sureserve Group given the pre-existing base in Bathgate within established Energy Services operations.  We consider this a key demonstration of our ongoing service delivery to extend reach with an existing customer.

Within Everwarm, carbon prices remained largely stable during the period however volumes remain impacted by the transition to “ECO3” which has proven challenging due to changes in measure types and qualifying property.  We continue to work through this period and believe we are well-placed to deliver on behalf of our Utility partners despite the ongoing challenges, particularly given the volumes are now becoming more consistent.

Our Warmworks joint venture delivering the Warmer Homes Scotland initiative for the Scottish Government saw ongoing operationally strong performance and client delivery.  The Scottish Government’s flagship Home Energy Efficiency Programme for Scotland (“HEEPS”) continued to perform well in the first half, bringing a diversified installation portfolio, focusing on central heating, boiler improvements and other energy efficiency installation measures. 

The Arbed 3 programme for the Welsh Government via our joint venture with the Energy Saving Trust, focused on improvements to households likely to be living in severe fuel poverty, is ongoing.  In the reporting period the contract moved to the delivery of more regular monthly installation performance, and while timings for specific schemes remain variable, contributed a positive six months of performance comparing favourably to the mobilisation period in the comparable results last year.

Whilst our Energy business remains strong with an extremely positive future outlook, as evidenced by both trading performance and recent wins, the short-term has seen impacts from Government action to address the impact of the Covid-19 outbreak.  The Energy division has not been afforded the same “key worker” status as seen in our Compliance businesses due to a combination of our services delivered and devolved government approaches around continuation of works, particularly in Scotland.  This has resulted in what we believe to be a short-term reduction in trade within both Energy businesses and joint ventures for which we are navigating through a range of measures.  These include the application for appropriate government support, customer and supplier negotiations and the implementation of any necessary cost control procedures to best mitigate the impact of the situation. 

New wins and order book 

The Board is encouraged that high bidding success rates continue to be achieved by the Group.  Contract wins in the period totalled £124m, contributing to a period-end order book of £323.7m.  This represented a 7.7% decrease on the comparative period (31 March 2019: £350.5m). The order book is consistent with our previously stated view around our targeted efforts on long term contracts that provide opportunities to deliver profitably in our core areas.  We believe our order book remains strong across the group and given the timing of award, the figures stated do not include Scottish Power smart metering win as mentioned above.  We continue to focus on securing contracts with long term visibility and robust value and this is an area we intend to invest in going forward.

 

FINANCIAL REVIEW

The Group had a strong half year posting an EBITA of £3.9m (H1 2019: £3.1m).

During the six months to 31 March 2020, the Group adopted IFRS16, using the modified retrospective approach which means that comparatives are not required to be restated.  The impact on the income statement are noted in the table below, with comparability to H1 2019.

Whilst Group revenue and cash are unaffected by the adoption of IFRS16, the following areas are impacted:

·      Operating profit before exceptional and other items has increased by £0.1m.  Lease payments are now reflected as a reduction in the lease liabilities. Conversely there is an increase in depreciation, and interest on finance lease obligations

·      Operating expenses (lease costs) have decreased by £2.3m

·      Depreciation charges increased by £2.2m

·      Finance costs increased by £0.15m such that the overall impact on profit before tax of adopting IFRS16 has been a decrease of £0.1m

·      The statement of financial position recognises £8.3m right of use assets and £8.3m lease liabilities on transition.

·      Total indebtedness therefore increases, although this does not have an impact on the Group’s covenants, which are measured on an historic GAAP basis

A reconciliation of EBITA and adjusted EBITA pre-IFRS16 to profit before tax for the period is provided below:

 

 

Unaudited six months ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

As reported

IFRS16 impact

Pre IFRS16

 

 

 

£’000

£’000

£’000

 

£’000

Operating profit before exceptional items and amortisation of acquisition intangibles

3,932

89

3,843

 

3,095

Amortisation of acquisition intangibles

(800)

  –

(800)

 

(1,367)

 

 

 

 

 

 

Operating profit

3,132

89

3,043

 

1,728

 

 

 

 

 

 

Finance expense

(614)

(148)

(466)

 

(609)

Investment income

39

  –

39

 

 

 

 

 

 

 

Profit before tax

 

 

2,557

  (59)

2,616

 

1,119

 

Group revenue increased by 6.9% to £109.6m (H1 2019: £102.5m), mainly reflecting an increase in revenues in the Compliance division, whose revenues increased by 11.6% to £73.4m (H1 2019: £65.7m). Revenues in Energy Services decreased by 2.0% to £37.3m (H1 2019: £38.0m). These divisional revenue figures include revenue from intercompany trading which accounts for a total of £1.1m (H1 2019: £1.3m).

Group EBITA increased by 27.0% to £3.9m (H1 2019: £3.1m), reflecting an increase in EBITA in the Compliance division of 40.2% to £3.7m (H1 2019: £2.6m) and an increase in EBITA in Energy Services of 1.6% to £1.9m (H1 2019: £1.9m). Central costs were £1.7m (H1 2019: £1.4m).

We reported an operating profit of £3.1m (H1 2019: £1.7m), after £0.8m of amortisation charges for acquisition intangibles (H1 2019: £1.4m). The reduction in amortisation reflected the fact that we have taken amortisation charges in prior periods, meaning we are amortising a reduced base of intangible assets.

Net interest expense was £0.6m (H1 2019: £0.6m), which represented the interest charged on our debt facilities (net of finance income), together with the amortisation of debt issue costs, which totaled £0.4m (H1 2019: £0.6m). The H1 2020 figures includes £0.15m interest in relation to the adoption of IFRS16 (H1 2019: £nil). 

 

 

Discontinued operations

Profits from discontinued operations amounted to £0.1m (H1 2019: £nil)

Discontinued activities represent the Group’s Construction and Property Services divisions which were sold on 17 August 2018 and Orchard (Holdings) UK Limited which was sold in September 2017. The profits for the six-month period to 31 March 2020 on disposal of discontinued operations comprise:

·      £0.1m profit on sale of Orchard (Holdings) UK Limited from reassessment of the fair value of consideration receivable

On 20 December 2019, Mapps Group Limited, the acquirer of Lakehouse Contracts Limited and Foster Property Maintenance Limited, went into liquidation.  We are in active dialogue with the liquidators and our advisors, in the hope of securing an early resolution.

Tax

The effective tax rate for the period was 19%, compared with a statutory rate of corporation tax of 19%.  We expect a full year effective tax rate of 19%.

Earnings per share

Basic earnings per share from continuing operations were 1.3 pence (H1 2019: 0.6 pence), based on profit after tax from continuing operations of £2.1m (H1 2019: £0.9m).

Adjusted earnings per share from continuing operations excluding amortisation of acquisition intangibles and share based payments were 1.8 pence (H1 2019: 1.4 pence), based on adjusted profit after tax from continuing operations excluding amortisation of acquisition intangibles and share based payments of £2.9m (H1 2019: £2.3m).

Our statutory profit for the period was £2.2m (H1 2019: £0.9m). Based on the weighted average number of shares in issue during the year of 158.9m, this resulted in basic earnings per share of 1.4 pence (H1 2019: 0.6 pence).

Cash flow performance

Our adjusted operating cash flow (see note 11), before the IFRS16 adjustment, for the period was an inflow of £3.4m (H1 2019: £1.6m), reflecting an operating cash conversion of 88% (H1 2019: 51%). We calculate operating cash conversion as cash generated from continuing operations, excluding the cash impact of exceptional items and amortisation of acquisition intangibles, divided by operating profit before exceptional items and amortisation of acquisition intangibles. We believe this measure provides a consistent basis for comparing cash generation consistently over time.

On a statutory basis, including the effect of IFRS16, we saw an operating cash inflow of £6.3m (H1 2019: outflow of £1.8m), representing a cash conversion of 160% inflow (H1 2019: outflow of 57%).

As we highlighted last year, the timing of revenues, method of contract delivery and customer contractual terms can all have an impact on working capital and, consequently, cash conversion.

The management of working capital is a continueddavid focus. This includes accrued income, debtors and creditors. We manage these balances within our banking facilities.  However, we recognise the importance of supporting our supply chain. We have ensured that we have paid our suppliers as normal.

 

Net debt

At 31 March 2020, the Group had net debt excluding the effect of IFRS16 of £3.5m (31 March 2019: £12.9m). However, this represents a snapshot in time and the weighted average revolving credit facility drawdown in the period was £9.7m (H1 2019: £15.3m).

The total net debt including the effect of IFRS16 is £9.9m, this is based upon a £6.4m adjustment for IFRS16.

Banking arrangements

We had drawn £10.0m at 31 March 2020 (31 March 2019: £14.5m) under our revolving credit facility (excluding borrowing costs). At the date of issuing this report we had drawn £6.5m (excluding borrowing costs), with a net cash, before finance lease liability of £4.3m; National Westminster Bank (‘NatWest’) continues to be an excellent and supportive partner.

In December 2018, the Group renewed its bank facilities to provide an overdraft facility of £5,000,000 together with a revolving credit facility of £25,000,000, which runs to 31 January 2022.

We are confident that our banking facilities provide sufficient support in managing our corporate affairs and provide sufficient capacity to plan for future growth, particularly in bidding with confidence on new contracts.

 

Statement of financial position

The principal items in our balance sheet are goodwill, borrowings and working capital.

There was a reduction of £0.8m in goodwill and other intangibles, mainly due to £0.8m amortisation charge of acquisition intangibles.

Net current assets (excluding cash, borrowings and lease liabilities) stood at £7.1m at 31 March 2020 (31 March 2019: £8.2m).  Net current assets stood at £10.1m at 31 March 2020 (31 March 2019: £9.6m). 

The principal movements in working capital are noted below;

Working capital

Unaudited

 31 March 2020

 

Unaudited

 31 March 2019

 

Audited

30 September 2019

 

£’000

 

 

£’000

 

£’000

Trade receivables

28.3

 

23.3

 

17.9

Accrued income

9.6

 

15.1

 

17.6

Trade payables

(23.6)

 

(23.7)

 

(21.1)

Accruals

(7.6)

 

(7.8)

 

(8.0)

Risks

The Board considers strategic, financial and operational risks and identifies actions to mitigate those risks. Key risks and their mitigation were disclosed on pages 29 to 31 of the Annual Report for the year ended 30 September 2019.

We continue to manage a number of potential risks and uncertainties, including claims and disputes which are common to other similar businesses which could have a material impact on short and longer term performance. The Board remains focused on the outcome of a number of contract settlements on which there is a range of outcomes for the Group in terms of both cash flow and impact on the consolidated statement of comprehensive income.

The Group have implemented a clear procedure for ensuring that all of our premises have undertaken a comprehensive Risk Assessment in line with returning to work.

By adhering to Government Guidance and the steps we, as a responsible collective Group have proactively taken, we advocate that all our colleagues stay alert by:-

·       Maintaining social distancing measures at all times – 2 metres apart where possible;

·       Ensuring they thoroughly wash/clean their hands regularly – adequate hand washing facilities and/or sanitising products are made available to all colleagues;

·       By agreement with Line Manager and HR Department, work from home where appropriate;

·       Limiting contact with other people, where at all possible;

·       Office rotas are in place to prevent too many people from being in small spaces;

·       Phased working time and/or hours;

·       One-way systems around our larger offices with different entry/exit points;

·       Wearing a face covering when they are in an enclosed space where it is difficult to socially distance e.g., on public transport

Our Risk Assessments have been created in consultation with our colleagues and clearly establish the control measures we have put in place. Due to the nature of our organisation and its various geographical locations, each Business has undertaken this Risk Assessment in the desired format – however all assessments have been reviewed and approved by the Senior Management Teams and our SHEQ Managers.

Going Concern statement

The Directors acknowledge the Financial Reporting Council’s ‘Guidance on the going concern basis of accounting and reporting on solvency and liquidity risks’ issued in April 2016. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review.

In assessing the Group and Company’s ability to continue as a going concern, the Board reviews and approves the annual budget, three-year plan and a rolling 12 month forecast, including forecasts of cash flows, borrowing requirements and covenant headroom. The Board reviews the Group’s sources of available funds and the level of headroom available against its committed borrowing facilities and associated covenants. The Group’s financial forecasts, taking into account possible sensitivities in trading performance including the potential impact of Covid-19, indicate that the Group will be able to operate within the level of its committed borrowing facilities and within the requirements of the associated covenants for the foreseeable future. NatWest remains supportive of the Group and in December 2018, the Group renewed its banking facilities to provide an overdraft facility of £5,000,000 together with a revolving credit facility of £25,000,000, which runs to 31 January 2022. The Directors have a reasonable expectation that the Group and Company have adequate resources to continue their operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the Interim report.

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 March 2020

 

 

 

 

 

 

Unaudited six months ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

Audited year ended 30 September 2019

 

Notes

 

£’000

£’000

£’000

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

2

 

109,551

102,476

212,066

Cost of sales

 

 

(92,029)

(88,130)

(179,188)

 

 

 

 

 

 

Gross profit

 

 

17,522

14,346

32,878

 

 

 

 

 

 

Other operating expenses

 

 

(13,736)

(11,622)

(23,953)

Share of results of joint venture

 

 

146

371

429

 

 

 

 

 

 

Operating profit before exceptional items and amortisation of acquisition intangibles

2

 

3,932

3,095

9,354

Exceptional costs

3

 

(225)

Amortisation of acquisition intangibles

 

 

(800)

(1,367)

(2,735)

 

 

 

 

 

 

Operating profit

 

 

3,132

1,728

6,394

 

 

 

 

 

 

Finance expense

 

 

(614)

(609)

(1,051)

Investment income

 

 

39

 

 

 

 

 

 

Profit before tax from continuing operations

 

2

 

 

2,557

1,119

5,343

 

 

 

 

 

 

Taxation

4

 

(498)

(218)

(1,154)

 

 

 

 

 

 

Profit for the period attributable to the equity holders of the Group from continuing operations

 

 

2,059

901

4,189

Discontinued operations

 

 

 

 

 

Profit for the period from discontinued operations

 

 

128

848

Profit for the period attributable to the equity holders of the Group

 

 

2,187

901

5,037

 

Earnings per share from continuing operations

 

 

 

 

 

Basic

6

 

1.3p

0.6p

2.7p

Diluted

6

 

1.3p

0.6p

2.6p

 

Earnings per share from continuing operations and discontinued operations

 

 

 

 

 

Basic

6

 

1.4p

0.6p

3.2p

Diluted

6

 

1.4p

0.6p

3.2p

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 March 2020

 

 

 

 

 

Unaudited

As at 31

March 2020

 

Unaudited

As at 31

March 2019

 

Audited

As at 30 September 2019

 

Notes

 

£’000

£’000

£’000

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

Goodwill

 

 

Other intangible assets

 

 

Property, plant and equipment

 

 

Right-of-use assets

7

 

Interest in joint venture

 

 

Deferred tax asset

 

 

 

 

 

52,588

48,460

47,071

Current assets

 

 

 

 

 

Inventories

 

 

Trade and other receivables

 

 

Cash and cash equivalents

9

 

6,273

1,407

2,452

 

 

 

54,564

50,287

47,579

Total assets

 

 

107,152

98,747

94,650

 

 

 

 

 

 

Current liabilities

 

 

Trade and other payables

 

 

Lease liabilities

9

 

Provisions

10

 

Income tax payable

 

 

634

192

242

 

 

 

44,423

40,696

37,409

Net current assets

 

 

10,141

9,591

10,170

 

 

 

 

 

 

Non-current liabilities

 

 

Loans and borrowings

8,9

 

Lease liabilities

9

 

Provisions

10

 

 

 

 

16,203

18,046

12,950

Total liabilities

 

 

60,626

58,742

50,359

Net assets

 

 

46,526

40,005

44,291

 

 

 

 

 

 

Equity

 

 

Called up share capital

 

 

Share premium account

 

 

Share-based payment reserve

 

 

Own shares

 

 

(290)

(290)

(290)

Merger reserve

 

 

Retained earnings

 

 

(15,050)

(21,620)

(17,237)

Equity attributable to equity holders of the Group

 

 

 

46,526

40,005

44,291

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 March 2020

 

 

            

 

 

Share

 capital

 

Share premium account

Share-based

payment

 reserve

 

 

Own shares

 

 

Merger reserve

 

 

Retained earnings

 

 

Total

equity

 

£’000

£’000

£’000

£’000

£’000

£’000

£’000

At 1 October 2017 (audited)

15,753

25,314

776

(290)

20,067

(11,378)

50,242

 

 

 

 

 

 

 

 

Loss for the period

(12,154)

(12,154)

At 31 March 2018 (unaudited)

15,753

25,314

776

(290)

20,067

(23,532)

38,088

 

 

 

 

 

 

 

 

Profit for the period

1,799

1,799

Dividends paid (note 5)

(788)

(788)

At 30 September 2018 (audited)

15,753

25,314

776

(290)

20,067

(22,521)

39,099

 

 

 

 

 

 

 

 

Issue of shares (exercise of options)

1

4

5

Profit for the period

901

901

At 31 March 2019 (unaudited)

15,754

25,318

776

(290)

20,067

(21,620)

40,005

 

 

 

 

 

 

 

 

Issue of shares (exercise of options)

141

(141)

Profit for the period

4,136

4,136

Dividends paid

(394)

(394)

Share based payments

544

544

Reserve transfer

(782)

782

At 30 September 2019 (audited)

15,895

25,318

538

(290)

20,067

(17,237)

44,291

 

Profit for the period

2,187

2,187

Share based payments

48

48

At 31 March 2020 (unaudited)

15,895

25,318

586

(290)

20,067

(15,050)

46,526

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 31 March 2020

 

 

 

 

 

Unaudited six months ended 31 March 2020

(post IFRS16 adjustment)

 

Unaudited six months ended 31 March 2019

 

Audited year ended 30 September 2019

 

Notes

 

£’000

£’000

£’000

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Cash generated from / (used in) operations

11

 

6,292

(1,752)

5,539

Interest paid

 

 

(540)

(467)

(914)

Interest received

 

 

39

Taxation

 

 

(242)

511

(34)

Net cash generated from / (used in) operating activities

 

 

5,549

(1,708)

4,591

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Receipt of deferred consideration on prior period disposals

 

 

930

916

910

Purchase of property, plant and equipment

 

 

(283)

(334)

(631)

Purchase of intangible assets

 

 

(232)

(300)

(403)

Sale of property, plant and equipment

 

 

3

13

86

Net cash generated from / (used in) investing activities

 

 

418

295

(38)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from Issue of Shares

 

 

5

Dividend paid to shareholders

 

 

(394)

Proceeds from bank borrowings

 

 

1,500

Repayment of bank borrowings

 

 

(3,000)

Lease payments

 

 

(2,146)

(57)

(89)

Finance issue costs

 

 

(328)

(328)

Net cash (used in) / generated from financing activities

 

 

(2,146)

1,115

(3,806)

 

 

 

 

 

 

Net increase / (decrease) in cash and cash equivalents

 

 

3,821

(298)

747

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

 

2,452

1,705

1,705

 

 

 

 

 

 

Cash and cash equivalents at end of year

 

 

6,273

1,407

2,452

 

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 31 March 2020

1.   Basis of preparation

 

The results presented in this report are unaudited and they have been prepared in accordance with the recognition and measurement of International Financial Reporting Standards (`IFRS’) as adopted by the EU that are expected to be applicable to the financial statements for the year ending 30 September 2020 and on the basis of the accounting policies to be used in those financial statements. The figures for the year ended 30 September 2019 are extracted from the statutory accounts of the group for that period  The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s annual financial statements, being the statutory financial statements for Sureserve Group plc, as at 30 September 2019, which have been prepared in accordance with IFRS as adopted by the European Union.

The condensed consolidated financial statements for the six months ended 31 March 2020 do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 30 September 2019 have been approved by the Board of Directors and delivered to the Registrar of Companies.  These accounts, which contained an unqualified audit report under Section 495, did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 30 September 2019, with the exception of those noted below;

IFRS 16

IFRS 16 ‘Leases’ was issued in January 2016 and is effective for accounting periods beginning on or after 1 January 2019. It has been applied by the Group from 1 October 2019 under the modified retrospective approach, applying the short term and low value lease exemption.

Under IFRS 16, leases have been recognised as a lease liability and a right of use asset. These lease liabilities were measured at the present value of the remaining lease payments based on a range of values approximating the Group’s incremental borrowing rate as at 1 October 2019 of 4.01%.  The range that is being used is between 3.01% and 4.51% depending on the type of asset. The associated right of use assets for all leases were measured at the amount equal to the lease liability. 

This has had a material impact on the Group’s consolidated statement of financial position, as can be seen from the extract below:

 

 

Unaudited six months ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

As reported

IFRS16 impact

Pre IFRS16

 

 

 

£’000

£’000

£’000

 

£’000

Right-of-use assets

6,296

6,296

 

 

 

 

 

 

 

Lease liabilities (current)

(3,279)

(3,249)

(30)

 

(53)

 

 

 

 

 

 

Lease liabilities (non-current)

(3,106)

(3,106)

 

(34)

 

 

 

 

 

 

Income tax payable

(634)

12

(646)

 

(192)

 

 

 

 

 

 

Net assets

46,526

(47)

46,573

 

40,005

 

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 31 March 2020

1.   Basis of preparation (continued)

 

The effect on operating profit before exceptional and other items has increased by £0.1m.  Lease payments are now reflected as a reduction in lease liabilities. Conversely there is an increase in depreciation and interest on lease obligations

A reconciliation of EBITA and adjusted EBITA pre-IFRS16 to profit before tax for the period is provided below:

 

 

Unaudited six months ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

As reported

IFRS16 impact

Pre IFRS16

 

 

 

£’000

£’000

£’000

 

£’000

Operating profit before exceptional items and amortisation of acquisition intangibles

3,932

89

3,843

 

3,095

Amortisation of acquisition intangibles

(800)

  –

(800)

 

(1,367)

 

 

 

 

 

 

Operating profit

3,132

89

3,043

 

1,728

 

 

 

 

 

 

Finance expense

(614)

(148)

(466)

 

(609)

Investment income

39

  –

39

 

 

 

 

 

 

 

Profit before tax

 

 

2,557

  (59)

2,616

 

1,119

Cash is unaffected by the adoption of IFRS16, but as noted on the extract of the Statement of Cash Flows below, cash generated from operating activities has increased being offset by a decrease in the cash used in financing activities:

 

 

Unaudited six months ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

 

As reported

IFRS16 impact

Pre IFRS16

 

 

 

£’000

£’000

£’000

 

£’000

Net cash generated from / (used in) operating activities

5,549

2,122

3,427

 

(1,708)

Net cash generated from investing activities

418

418

 

295

Net cash (used in) / generated from financing activities

(2,146)

(2,122)

(24)

 

1,115

Net increase / (decrease) in cash and cash equivalents

3,821

3,821

 

(298)

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

2,452

2,452

 

1,705

 

 

 

 

 

 

Cash and cash equivalents at end of year

6,273

6,273

 

1,407

The debt covenants on the Group’s borrowing facility will be unaffected by the application of IFRS16 as the covenant calculations are based on the accounting principles in place at the date the agreement was entered into.

Seasonality

The Group has seasonal influences in specific areas.  The Compliance division experiences higher activity levels in Gas and Lift services in colder weather, leading to higher working capital requirements and lower profitability in winter, and the opposite in the summer.  Within Energy Services it is not possible to render walls or use fixing glue at temperatures below three degrees centigrade, nor perform cladding work in high winds.  As such, weather has an influence on this business, meaning that the Group has to plan to increase capacity during warmer and more settled periods to compensate for time lost during colder ones.

 

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2020

2.   Operating segments

The Group’s chief operating decision maker is considered to be the Board of Directors (‘the Board’). The Group’s operating segments are determined with reference to the information provided to the Board in order for it to allocate the Group’s resources and to monitor the performance of the Group.

The Board has determined an operating management structure aligned around the two core activities of the Group, with the following operating segments applicable:

·      Compliance: focused on gas, fire, electrics, air, water and lifts where we contract predominantly under framework agreements.  Services comprise the following:

-      Installation, maintenance and repair-on-demand of gas appliances and central heating systems

-      Compliance services in the areas of fire protection and building electrics

-      Air and water hygiene solutions

-      Service, repair and installation of lifts

·      Energy Services: we offer a range of services in the energy efficiency sector, including external, internal and cavity wall insulation, loft insulation, gas central heating, boiler upgrades and other renewable technologies.  The services are offered under various energy saving initiatives including Energy Company Obligations (“ECO”), Green Deal and the Scottish Government’s HEEPs (“Home Energy Efficiency Programme”) Affordable Warmth programme. Clients include housing associations, social landlords, local authorities and private householders and we have trading relationships with all of the “big six” utility suppliers and many of the leading utility challengers.  We also provide metering services involving the installation, servicing and administration of devices and associated data.

The accounting policies of the reportable segments are the same as those described in the accounting policies section.

All revenue and profit are derived from operations in the United Kingdom only. 

The profit measure the Board used to evaluate performance is operating profit before exceptional items and other items, as outlined in Note 3 and on the face of the income statement. 

The Group accounts for inter-segment trading on an arm’s length basis.  All inter-segment trading is eliminated on consolidation.

The following is an analysis of the Group’s revenue and operating profit before exceptional items and amortisation of acquisition intangibles by reportable segment:

 

 

Unaudited six months ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

 

Audited year ended 30 September 2019

 

£’000

 

£’000

 

£’000

Revenue

 

 

 

 

 

Compliance

73,351

 

65,743

 

133,051

Energy Services

37,250

 

38,002

 

82,081

Total segment revenue

110,601

 

103,745

 

215,132

Inter-segment elimination

(1,050)

 

(1,269)

 

(3,066)

Total revenue

109,551

 

102,476

 

212,066

 

Reconciliation of operating profit before exceptional items and amortisation of acquisition intangibles to profit before taxation

 

 

Unaudited six months ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

 

Audited year ended 30 September 2019

 

£’000

 

£’000

 

£’000

Operating profit before exceptional items and amortisation of acquisition intangibles by segment

 

 

 

 

 

Compliance

3,701

 

2,640

 

8,470

Energy Services

1,926

 

1,896

 

4,341

Central

(1,695)

 

(1,441)

 

(3,457)

Total operating profit before exceptional items and amortisation of acquisition intangibles

3,932

 

3,095

 

9,354

Exceptional costs

 

 

(225)

Amortisation of acquisition intangibles

(800)

 

(1,367)

 

(2,735)

Finance costs

(614)

 

(609)

 

(1,051)

Investment income

39

 

 

Profit before taxation from continuing operations

2,557

 

1,119

 

5,343

Only the Group consolidated statement of financial position is regularly reviewed by the chief operating decision maker and consequently no segment assets or liabilities are disclosed here under IFRS 8.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2020

3.   Exceptional items

 

 

 

Unaudited six months

ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

 

Audited year ended 30 September 2019

 

£’000

 

£’000

 

£’000

 

 

 

 

 

 

Restructuring costs

 

 

225

Total exceptional costs

 

 

225

Exceptional items are considered non-trading because they are not part of the underlying trade of the Group.

4.   Taxation

 

The income tax charge for the six months ended 31 March 2020 is calculated based upon the effective tax rates expected to apply to the Group for the period of 19%.

5.   Dividends

 

The proposed final dividend for the year ended 30 September 2019 of 0.5 pence per share amounting to £0.8m and representing a total dividend of 0.5 pence for the full year (2018: 0.25 pence per share), was paid on 30 April 2020 to the shareholders on the register at the close of business on 31 January 2020. 

6.   Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

 

 

Unaudited six months ended 31 March 2020

 

 

Unaudited six months ended 31 March 2019

 

 

Audited year ended 30 September 2019

 

Number

 

Number

 

Number

Weighted average number of ordinary shares for the purposes of basic earnings per share

158,947,467

 

157,541,890

 

158,049,310

 

 

 

 

 

 

Diluted

 

 

 

 

 

Effect of dilutive potential ordinary shares:

 

 

 

 

 

Share options

1,840,747

 

189,136

 

595,869

Weighted average number of ordinary shares for the purposes of diluted earnings per share

160,788,214

 

157,731,026

 

158,645,179

 

 

 

 

 

 

Earnings for the purpose of basic and diluted earnings per share from continuing operations being net earnings attributable to the owners of the Company from continuing operations (£’000)

2,059

 

901

 

4,189

 

 

 

 

 

 

 

Basic earnings per share from continuing operations

1.3p

 

0.6p

 

2.7p

Diluted earnings per share from continuing operations

1.3p

 

0.6p

 

2.6p

 

 

 

 

 

 

Earnings for the purpose of basic and diluted earnings per share being net profit after tax attributable to the owners of the Company from continuing and discontinued operations (£’000’s)

2,187

 

901

 

5,037

 

 

 

 

 

 

Basic earnings per share

1.4p

 

0.6p

 

3.2p

Diluted earnings per share

1.4p

 

0.6p

 

3.2p

        

 

The number of shares in issue at 31 March 2020 was 158,947,467.

The weighted average number of Ordinary shares in issue during the year excludes those accounted for in the own shares reserve.

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2020

7.   Right-of-use assets

On 1 October 2019 following adoption of the leasing standard IFRS16, assets in relation to leases which had previously been classified as operating leases were recognised, along with the reclassification of finance-leased assets held within tangible assets to right-of-use assets – see note 1 for details.

 

Right-of-use property assets

 

Right-of-use motor vehicles

 

Total

 

£’000

 

£’000

 

£’000

Cost

 

 

 

 

 

At 30 September 2019

 

 

Change in accounting policy

3,159

 

5,171

 

8,330

At 1 October 2019

3,159

 

5,171

 

8,330

Additions

 

314

 

314

Disposals

 

(332)

 

At 31 March 2020

3,159

 

5,153

 

8,312

 

 

 

 

 

 

Depreciation

 

 

 

 

 

At 30 September 2019

 

 

Change in accounting policy

 

 

At 1 October 2019

 

 

Charge for the year

597

 

1,585

 

2,182

Disposals

 

(166)

 

At 31 March 2020

597

 

1,419

 

2,016

 

 

 

 

 

 

Net book value

 

 

 

 

 

At 31 March 2020

2,562

 

3,734

 

6,296

 

 

 

 

 

 

At 30 September 2019

 

 

8.   Loans and borrowings

 

 

Unaudited

31

March

2020

 

Unaudited

31

March

2019

 

Audited

 30 September

2019

 

£’000

 

£’000

 

£’000

Bank loans and credit facilities at amortised cost:

 

 

 

 

 

Current

 

 

Non-current

9,810

 

14,199

 

9,755

 

9,810

 

14,199

 

9,755

 

 

 

 

 

 

Maturity analysis of bank loans and credit facilities falling due:

 

 

 

 

 

In one year or less, or on demand

 

 

Between one and two years

9,810

 

 

Between two and five years

 

14,199

 

9,755

 

9,810

 

14,199

 

9,755

 

 

 

 

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2020

9.   Net debt

 

Unaudited

31

March

2020

 

Unaudited

31

March

2019

 

Audited

 30 September

2019

 

£’000

 

£’000

 

£’000

Cash and cash equivalents

6,273

 

1,407

 

2,452

Bank loans and credit facilities

(9,810)

 

(14,199)

 

(9,755)

Finance lease obligations

 

(87)

 

(54)

Pre IFRS16 net debt

(3,537)

 

(12,879)

 

(7,357)

Lease liabilities

(6,385)

 

 

Total net debt

(9,922)

 

(12,879)

 

(7,357)

10. Provisions

 

 

 

 

 

 

 

Legal and other

 

 

 

 

 

 

 

£’000

At 1 April 2019 (unaudited)

 

 

 

 

 

 

5,362

Additional provision

 

 

 

 

 

 

172

Utilised in the period

 

 

 

 

 

 

(1,924)

At 30 September 2019 (audited)

 

 

 

 

 

 

3,610

Additional provision

 

 

 

 

 

 

237

Utilised in the period

 

 

 

 

 

 

(95)

At 31 March 2020 (unaudited)

 

 

 

 

 

 

3,752

 

 

 

 

 

 

 

 

Current provisions

 

 

 

 

 

 

465

 

 

 

 

 

 

 

 

Non-current provisions

 

 

 

 

 

 

3,287

Legal and other

Other costs relate to property dilapidation obligations, potential contract settlement costs and other potential legal settlement costs.  These are expected to result in an outflow of economic benefit over the next one to three years.

 

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2020

11. Cash used in operations

 

 

Using consistent accounting policies

 

 

Unaudited six months ended 31 March 2020 (post IFRS16 adjustment)

 

Unaudited six months ended 31 March 2020 (pre IFRS16 adjustment)

 

Unaudited six months ended 31 March 2019

Audited year ended 30 September 2019

 

£’000

£’000

£’000

£’000

Operating profit

3,132

3,043

1,728

6,394

Adjustments for:

 

 

 

 

Depreciation

2,515

333

327

693

Amortisation of intangible assets

978

978

1,524

3,159

Share-based payments

48

48

544

Profit on disposal of property, plant and equipment

(3)

(3)

(13)

(40)

Changes in working capital:

 

 

 

 

Inventories

(240)

(240)

1,188

1,157

Trade and other receivables

(3,455)

(3,455)

(3,976)

199

Trade and other payables

3,175

3,176

(197)

(2,491)

Provisions

142

142

(2,333)

(4,076)

Cash generated from / (used in) operations

6,292

2

4,022

2

(1,752)

5,539

 

 

 

 

 

Adjusted operating cash conversion calculation
 

 

 

 

 

Cash generated from / (used in) operations

6,292

4,022

(1,752)

5,539 

Impact of exceptional and other costs in the period

(656)

(656)

3,331

4,364

Adjusted cash generated from operations

5,636

3,366

1,579

9,903

 

 

 

 

 

Operating profit before exceptional items and amortisation of acquisition intangibles

3,932

3,843

3,095

9,354

 

 

 

 

 

Operating cash conversion %

143%

88%

51%

106%

 

 

 

 

 

Statutory operating cash conversion calculation
 

 

 

 

 

Cash generated from / (used in) operations

6,292

4,022

(1,752)

5,539 

Operating profit before exceptional items and amortisation of acquisition intangibles

3,932

3,843

3,095

9,354

Statutory operating cash conversion %

160%

105%

(57%)

59%

 

 

 

 

 

12. Related party transactions

There have been no material changes to the related party balances disclosed in the Group’s Annual Report and Accounts 2019 and there have been no related party transactions that have materially affected the financial position or performance of the Group in the six months to 31 March 2020.

 

 

 

 

 

 

 

 

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 

END

 
 

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