RNS Number:3880Q
Malcolm Group PLC (The)
01 October 2003
1 October 2003
The Malcolm Group plc
Interim Results for the Half-year Ended 1 August 2003
The Malcolm Group (MAL), the UK Logistics and Construction Services group,
reports its interim results for the half-year ended 1 August 2003.
Key financials
* Group turnover up 17% to #60.8m (2002/03 #52.1m)
* Headline earnings per share up 6% to 3.7p (2002/03 3.5p)
* FRS14 earnings per share up 79% to 3.4p (2002/03 1.9p)
* Group operating profit of #4.3m after goodwill amortisation (2002/03
#4.3m) reflecting a resilient performance from two complementary divisions
* Group operating profit of #4.5m before goodwill amortisation (2002/03
#4.6m)
* Interim dividend maintained at 1.7p
* Contract wins in Logistics Services and very healthy order book in
Construction Services
David Mackay, Chairman, said:
"In this economic climate margin pressures are inevitable for almost all
businesses and we are no different. However, we are responding positively and I
believe the Group can look forward with confidence."
Enquiries:
The Malcolm Group plc Today: 020 7554 1400
Thereafter: 01505 324 321
David Mackay, Chairman
Andrew Malcolm, Chief Executive
Alan Palmer, Finance Director
Gavin Anderson & Company 020 7554 1400
Byron Ousey, Ken Cronin
www.malcolmgroup.co.uk
Chairman's Statement
Donald J Malcolm
In my first Chairman's statement, it is with deep regret that I have to record
the death of Donald J Malcolm on 3 May 2003. Donald was the founder of the main
trading subsidiary in the Group, W H Malcolm Ltd. The Group acquired W H Malcolm
Ltd in 1960, and through Donald's skill and expertise, the business grew from a
local transport company into a UK-wide business, with two complementary trading
divisions. His contribution was immense and he will be sadly missed.
Overview
During the first half of the year, market conditions remained challenging with
continuing economic uncertainty. Our Logistics Services Division benefited from
a combination of organic growth and maintenance of existing contracts on the
back of first class customer service levels within its UK-wide infrastructure.
Several new contract wins have also been secured, partly as a result of our new
state of the art warehouse management system, but also on the strength of our
ability to deliver practical solutions for customers' logistics requirements.
The benefits of these contract wins will not accrue until the second half of
this year.
Our Construction Services Division has achieved substantial growth in activity
levels in the first half, and has a much stronger order book than at this time
last year, leaving us well placed for the second half. The Division's
performance for the first six months is especially encouraging given the current
economic climate. The significant turnover growth is a clear reflection of the
success of our "one-stop-shop" philosophy within our chosen markets.
Group Results
Turnover for the first half increased by 17% to #60.8m from #52.1m in the same
period last year. In Logistics Services this was largely due to contract wins in
the second half of last year and in Construction Services due to the continuing
success of the "one-stop-shop" strategy.
Group operating profit of #4.5m, excluding goodwill amortisation, was comparable
with the prior half-year of #4.6m. Goodwill amortisation is marginally down on
the prior half-year, leaving group operating profit after goodwill amortisation
consistent with last half-year at #4.3m.
Divisional operating profits of #5.0m, before goodwill amortisation, are broadly
level with the same period last year. This represents a resilient performance
given the current challenging trading environment. Central costs also remained
in line with the prior half-year at #0.5m.
Logistics Services
(#m) Half-year to Half-year to
01/08/2003 02/08/2002 Change
Turnover 35.4 33.0 +2.4
Operating profit
(before goodwill amortisation) 3.9 4.1 -0.2
Operating margin (%) 11.0% 12.4% -1.4%
Logistics Services' turnover increased by 7% to #35.4m, a credible performance
in challenging market conditions, helped by a combination of contract wins in
the second quarter and further organic growth.
Operating profit fell by #0.2m to #3.9m as a result of the margin pressures
referred to in our trading statement at the Annual General Meeting. Insurance
premiums increased by approximately 40% against the comparative period last
year, and in addition high levels of agency labour in the East Midlands were
required to maintain customer service levels. National insurance contribution
increases and additional pension costs have also, as expected, impacted the
results for the first half.
The Group's rail freight operations continue to progress in line with our
expectations and strategy. Currently 6 trains per week run in both directions
between Grangemouth and Crick, with further increases planned in the medium
term. Future development is still inextricably linked to the Government's
investment strategy in terms of the overall UK rail network.
The customer base of Logistics Services is largely centred in defensive market
sectors, including food, soft and alcoholic drinks, glass and paper. This
strategy mitigates the Group's exposure to economic downturn and will provide a
sound platform for further development, as and when there is any sustained
economic recovery. Recent contract wins enable the division to view the second
half of the year with confidence.
Construction Services
(#m) Half-year to Half-year to
01/08/2003 02/08/2002 Change
Turnover 25.5 19.1 +6.4
Operating profit
(before goodwill amortisation) 1.1 1.0 -0.1
Operating margin (%) 4.3% 5.0% -0.7%
In spite of the difficult market conditions, turnover in Construction Services
increased 33% to #25.5m. In particular, groundworks contracting, tipper and
plant hire activities enjoyed substantially higher activity levels than the
equivalent period last year.
Operating profit, before goodwill amortisation, increased #0.1m to #1.1m. This
is a very good performance again given the competitive trading environment
prevailing within the construction sector.
Last year temporary delays to project commencement dates were the norm, and I am
pleased to report that this is no longer the case, and in fact our order book
and enquiry levels are well ahead of the same period last year. Due to the
continuing success of our "one-stop-shop" strategy, more and more of our
customers are choosing to adopt our complete range of services rather than
individual product offerings.
Service levels and reputation are as important to Construction Services as they
are to the Logistics Services Division. It is therefore very encouraging that a
large part of the growth in activity levels during the first half-year has been
repeat business with existing customers, alongside some important new contracts
gained through our reputation in the Scottish construction marketplace.
The continuing growth in our groundworks contracting operations maximises
utilisation levels of the Division's tipper/plant fleet, thereby further
reducing the Division's exposure to the extremely competitive spot hire market.
Interest
Interest expense of #0.9m, is up #0.2m against the previous period (excluding
exceptional interest). On 1 March 2002, #45.0m was returned to shareholders by
way of a share cancellation of which #41.5m was returned in cash and #3.5m by
way of Loan Notes. The Group therefore benefited in the comparative period by
approximately #0.2m, representing one month's interest on this amount. In
addition, due to the significant increase in turnover in the half-year to 1
August 2003, working capital has increased by approximately #4.3m further
impacting the Group's interest charge, but this is being aggressively managed.
Exceptional Items
I am pleased to report that the interim results for the six months to 1 August
2003 contain no exceptional items. The comparative period included an
exceptional item relating to the conclusion of a dispute with the Inland Revenue
relating to the disposal of Grampian Pharmaceuticals Limited in 1997.
Earnings per share
The directors consider it appropriate to provide detailed disclosure of FRS14,
UKSIP and Headline earnings per share, as these are all commonly used and
reported by both the investment community and other publicly quoted companies.
These calculations are set out in Note 10.
Headline earnings per share of 3.7p are up 0.2p against the previous half-year
(2002/03: 3.5p). FRS14 earnings per share of 3.4p are also up against the
comparative 1.9p.
Cash Flow
Operating cash flow of #4.7m in the half-year to 1 August 2003 was #0.9m lower
than the prior half-year reflecting in the main increased working capital of
#4.3m compared to an increase of #2.7m in the prior half-year. The increase in
working capital in both the current and prior half-years is attributable to the
growth in activity levels of 17% and 19% respectively.
Net capital expenditure of #5.1m is up #2.4m compared with the half-year to 2
August 2002 reflecting continued investment in the Group's operations following
recent contract wins.
Dividend
The Board proposes an interim dividend for 2003/04 of 1.7p per ordinary share
(2002/03: 1.7p). The interim dividend will be paid on 4 December 2003 to
shareholders on the register on 7 November 2003.
Responsibility for Interim Report
The directors approved the interim report for the half-year ended 1 August 2003
on 1 October 2003.
Board
Sir Donald MacKay retired as Chairman at the conclusion of the Annual General
Meeting on 20 June 2003. Sir Donald was appointed Chairman on 31 July 1998 and I
would like to pay tribute to his term of leadership. Under his stewardship the
Group was transformed from a conglomerate to a focused business. The Board is
grateful for the sound advice and strategic guidance he provided during this
difficult period of transition and wishes him well in his future ventures.
Management and employees
I am pleased to report a satisfactory set of interim results in a difficult
trading environment. The Group relies on the professionalism and dedication of
all its employees to deliver exceptional service levels and value to our
customers. I would record my appreciation to all concerned for the considerable
individual commitments made.
Outlook
The Group continues to face challenging but also potentially rewarding market
conditions.
Recent contract wins in Logistics Services mean that activity levels are
encouraging for the second half and a very healthy order book in Construction
Services should also deliver benefits in the remainder of the year.
In this economic climate margin pressures are inevitable for almost all
businesses and we are no different. However, we are responding positively and I
believe the Group can look forward with confidence.
David J Mackay
Chairman
1 October 2003
Group Profit & Loss Account
For the half year ended 1 August 2003
The results of the Group, following the review by the Auditors, are:
Unaudited Unaudited Audited
Half year to Half year to Year to
01/08/2003 02/08/2002 31/01/2003
Note (#000) (#000) (#000)
Group turnover 2 60,847 52,051 107,248
------- ------- -------
Net operating costs (56,525) (47,710) (98,881)
------- ------- -------
Group operating profit
Group operating profit excluding
goodwill amortisation 4,507 4,551 8,762
Goodwill amortisation (185) (210) (395)
Group operating profit 2 4,322 4,341 8,367
------- ------- -------
Interest
Interest excluding
exceptional interest (872) (706) (1,565)
Interest relating to tax
on exceptional items 3 - (200) (138)
------- ------- -------
Total net interest payable (872) (906) (1,703)
------- ------- -------
Profit on ordinary activities
before taxation 3,450 3,435 6,664
Taxation
Tax excluding tax
on exceptional items (1,272) (1,321) (2,486)
Tax on exceptional items 3 - (700) (700)
------- ------- -------
Total taxation 7 (1,272) (2,021) (3,186)
------- ------- -------
Profit attributable to shareholders 2,178 1,414 3,478
Dividends 8 (1,082) (1,081) (3,180)
------- ------- -------
Transferred to reserves 1,096 333 298
------- ------- -------
Earnings per ordinary share
Headline 10 3.7p 3.5p 6.9p
UKSIP 10 3.7p 3.5p 6.9p
FRS14 10 3.4p 1.9p 5.1p
FRS14 (diluted) 10 3.4p 1.9p 5.1p
Dividend per share 8 1.7p 1.7p 5.0p
Group Balance Sheet
As at 1 August 2003
Note Unaudited Unaudited Audited
1/08/2003 02/08/2002 31/01/2003
(#000) (#000) (#000)
Fixed assets
Intangible assets 925 1,295 1,110
Tangible assets
Land and buildings 62,635 61,036 61,926
Plant and machinery 3,845 4,467 4,270
Motor vehicles 22,151 22,231 22,415
Fixtures and fittings 1,854 1,329 1,668
------- ------- -------
90,485 89,063 90,279
------- ------- -------
91,410 90,358 91,389
------- ------- -------
Current assets
Stocks 580 736 601
Debtors 28,391 23,331 20,484
Cash at bank and in hand 1,696 2,098 2,279
------- ------- -------
30,667 26,165 23,364
------- ------- -------
Creditors: amounts falling due
within one year
Bank loans and overdrafts 4,061 - -
Other borrowings 5,924 8,377 6,460
Other creditors 23,350 20,570 20,831
------- ------- -------
33,335 28,947 27,291
------- ------- -------
Net current liabilities (2,668) (2,782) (3,927)
------- ------- -------
Total assets less current liabilities 88,742 87,576 87,462
Creditors: amounts falling due
after one year 25,443 25,639 25,451
Accruals and deferred income
Deferred government grants 747 644 590
Provisions for liabilities and charges 3,856 3,692 3,856
------- ------- -------
Net assets 58,696 57,601 57,565
------- ------- -------
Capital and reserves
Called up share capital 15,912 15,900 15,900
Share premium account 23 - -
Revaluation reserve 14,476 14,708 14,591
Profit and loss account 28,285 26,993 27,074
------- ------- -------
Shareholders' funds 4 58,696 57,601 57,565
------- ------- -------
Net assets per share 11 92.2p 90.6p 90.5p
Diluted net assets per share 11 91.9p 90.4p 90.5p
Group Cash Flow Statement
For the half year ended 1 August 2003
Note Unaudited Unaudited Audited
1/08/2003 02/08/2002 31/01/2003
(#000) (#000) (#000)
Cash inflow from operating activities 5 4,667 5,561 16,919
Returns on investments and
servicing of finance (878) (418) (1,454)
Taxation (794) (1,502) (3,153)
Capital expenditure and
financial investment (5,129) (2,726) (8,207)
Acquisitions and disposals 100 213 213
Equity dividends paid (2,099) (2,353) (3,434)
------- ------- -------
Cash (outflow) / inflow before use
of liquid resources and financing (4,133) (1,225) 884
Management of liquid resources
Increase in short term cash deposits (1,680) - -
Financing
Net issue / (cancellation) of shares 35 (41,458) (41,459)
(Decrease) / increase in debt
and lease financing (546) 24,944 23,017
------- ------- -------
Decrease in cash in the period (6,324) (17,739) (17,558)
------- ------- -------
Reconciliation of net cash flow to
movement in net debt
Decrease in cash in the period (6,324) (17,739) (17,558)
Increase in short term cash deposits 1,680 - -
Cash inflow from loans and overdrafts - (25,000) (25,000)
Cash outflow on repayment of loans 536 46 1,963
Repayment of capital on finance leases
and hire purchase contracts 10 10 20
------- ------- -------
Change in net debt resulting from cash flows (4,098) (42,683) (40,575)
Loan notes issued on share cancellation - (3,491) (3,491)
------- ------- -------
Decrease in net debt in the period (4,098) (46,174) (44,066)
Opening net (debt) / funds (29,219) 14,847 14,847
------- ------- -------
Closing net debt 6 (33,317) (31,327) (29,219)
------- ------- -------
Notes to the Interim Statement
For the half year ended 1 August 2003
1 Basis of preparation
a) The interim financial information contained in the Interim Report has been
prepared on the basis of the accounting policies set out in the Annual
Report and Accounts for the year ended 31 January 2003.
b) Those fixed assets carried at valuation were revalued as at 2 February 2001.
In accordance with FRS 15 an interim valuation of these assets will be
carried out at the year end.
c) The interim results cover the twenty six weeks to 1 August 2003. The
comparative interim results cover the twenty six weeks to 2 August 2002.
Comparative figures for the year ended 31 January 2003 are abridged from
unqualified accounts for the period which have been delivered to the
Registrar of Companies.
d) The financial information contained in this Interim Report does not
constitute statutory accounts as defined in Section 240 of the Companies
Act 1985.
2 Segmental analysis
Turnover Operating profit
Unaudited Unaudited Audited Unaudited Unaudited Audited
Half year Half year Year to Half year Half year Year to
to to to to
01/08/2003 02/08/2002 31/01/2003 01/08/2003 02/08/2002 31/01/2003
(#000) (#000) (#000) (#000) (#000) (#000)
By class of business
Malcolm Logistics Services 35,357 32,953 68,874 3,915 4,088 8,120
Malcolm Construction Services 25,490 19,098 38,374 1,110 964 1,584
------ ------ ------ ----- ----- -----
Logistics and Construction Services 60,847 52,051 107,248 5,025 5,052 9,704
Corporate and Central Services - - - (518) (501) (942)
------ ------ ------ ----- ----- -----
Group total before
goodwill amortisation 60,847 52,051 107,248 4,507 4,551 8,762
Goodwill amortisation - - - (185) (210) (395)
------ ------ ------ ----- ----- -----
Group total 60,847 52,051 107,248 4,322 4,341 8,367
------ ------ ------ ----- ----- -----
All turnover relates to continuing activities. All turnover by origin and
operating profit relates principally to operations in the United Kingdom. All
turnover by destination relates principally to the United Kingdom.
3 Exceptional items
Unaudited Unaudited Audited
Half year Half year Year to
to 01/08/2003 to 02/08/2002 31/01/2003
(#000) (#000) (#000)
Tax settlement relating to the disposal
of Grampian Pharmaceuticals - (900) (838)
------- ------- -------
Total exceptional items - (900) (838)
------- ------- -------
4 Reconciliation of movements in shareholders' funds
Unaudited Unaudited Audited
Half year Half year Year to
to 01/08/2003 to 02/08/2002 31/01/2003
(#000) (#000) (#000)
Profit attributable to shareholders 2,178 1,414 3,478
Dividends (1,082) (1,081) (3,180)
Other movements
Share cancellation - (44,949) (44,950)
New shares issued 35 - -
------- ------- -------
1,131 (44,616) (44,652)
Opening shareholders' funds 57,565 102,217 102,217
------- ------- -------
Closing shareholders' funds 58,696 57,601 57,565
------- ------- -------
5 Reconciliation of operating profit to net cash inflow from operating
activities
Unaudited Unaudited Audited
Half year Half year Year to
to 01/08/2003 to 02/08/2002 31/01/2003
(#000) (#000) (#000)
Operating profit 4,322 4,341 8,367
Amortisation of goodwill 185 210 395
Depreciation of fixed assets 5,152 4,732 9,604
Gain on disposal of tangible fixed assets (654) (546) (1,333)
Grants released (41) - (54)
Decrease / (increase) in stocks 21 (91) 44
Increase in debtors (8,007) (5,165) (3,227)
Increase in creditors 3,689 2,595 3,618
Decrease in provisions for liabilities and charges - - (15)
------- ------- -------
4,667 6,076 17,399
Net cash outflow in respect of exceptional costs - (515) (480)
------- ------- -------
Net cash inflow from operating activities 4,667 5,561 16,919
------- ------- -------
6 Analysis of net debt
Unaudited Unaudited Audited
Half year Half year Year to
to 01/08/2003 to 02/08/2002 31/01/2003
(#000) (#000) (#000)
Cash at bank and in hand 2,279 (2,263) 16
Overdraft - (4,061) (4,061)
------- ------- -------
2,279 (6,324) (4,045)
------- ------- -------
Short term cash deposits - 1,680 1,680
Debt due within one year (6,460) 536 (5,924)
Debt due after one year (25,000) - (25,000)
Finance leases and hire purchase contracts (38) 10 (28)
------- ------- -------
(31,498) 2,226 (29,272)
------- ------- -------
Net debt (29,219) (4,098) (33,317)
------- ------- -------
7 Taxation
The charge for taxation reflects the anticipated effective rate by division for
the year ending 30 January 2004 for the Group. The effective rate of tax differs
from the standard rate of 30% due to depreciation on assets which do not qualify
for capital allowances and other disallowable items.
8 Dividends
Unaudited Unaudited Audited
Half year Half year Year to
to 01/08/2003 to 02/08/2002 31/01/2003
(#000) (#000) (#000)
Equity-ordinary
Amount 1,082 1,081 3,180
------- ------- -------
Pence per share 1.7p 1.7p 5.0p
------- ------- -------
The interim ordinary dividend of 1.7 pence per share is payable on 4 December
2003 to shareholders on the register on 7 November 2003.
9 Number of shares
Unaudited Unaudited Audited
Half year Half year Year to
to 01/08/2003 to 02/08/2002 31/01/2003
(#000) (#000) (#000)
Basic weighted average number of ordinary
shares in issue during the period 63,615 72,609 68,106
Dilutive potential ordinary shares
- employee share options 6 159 56
------- ------- -------
Diluted weighted average number of ordinary
shares 63,621 72,768 68,162
------- ------- -------
Number of shares at period end 63,647 63,602 63,602
Dilutive potential ordinary shares
- employee share options 211 91 40
------- ------- -------
Diluted number of shares at period end 63,858 63,693 63,642
------- ------- -------
The number of fully paid shares in issue is calculated excluding those held by
employee share trusts. The diluted number of shares is calculated by adjusting
for all outstanding share options which are potentially dilutive ordinary
shares.
10 Earnings per share
The calculations of earnings per 25p ordinary share are based on the following:
Unaudited Unaudited Audited
Half year to Half year to Year to
01/08/2003 02/08/2002 31/01/2003
EPS EPS EPS
(p) (#000) (p) (#000) (p) (#000)
FRS14 earnings 3.4p 2,178 1.9p 1,414 5.1p 3,478
Goodwill amortisation 0.3p 185 0.3p 210 0.6p 395
Interest relating to tax on
exceptional items - - 0.3p 200 0.2p 138
Tax on exceptional items - - 1.0p 700 1.0p 700
---- ----- ---- ----- ---- -----
Headline earnings 3.7p 2,363 3.5p 2,524 6.9p 4,711
Exceptional items included in
UKSIP EPS
Operating exceptional items - - - - - -
---- ----- ---- ----- ---- -----
UKSIP earnings 3.7p 2,363 3.5p 2,524 6.9p 4,711
---- ----- ---- ----- ---- -----
Headline EPS 3.7p 3.5p 6.9p
UKSIP EPS 3.7p 3.5p 6.9p
FRS14 EPS 3.4p 1.9p 5.1p
Diluted FRS14 EPS 3.4p 1.9p 5.1p
Headline EPS has been presented as this performance measure is commonly used by
quoted companies. Headline earnings are defined as the profit on ordinary
activities before goodwill amortisation and exceptional items but after interest
and taxation.
UKSIP EPS has been presented as this figure is used by the investment community.
The UKSIP EPS calculation excludes goodwill amortisation, non-operating
exceptional items and impairment in the value of fixed assets, net of tax.
11 Net assets per share
Unaudited Unaudited Audited
Balance Balance Balance
sheet as at sheet as at heet as at
01/08/2003 02/08/2002 31/01/2003
(#000) (#000) (#000)
Net assets 58,696 57,601 57,565
Net assets per share 92.2p 90.6p 90.5p
Diluted net assets per share 91.9p 90.4p 90.5p
Net assets per share are defined as the Group's net assets at the balance sheet
date divided by the number of shares in issue at the balance sheet date.
Diluted net assets per share are defined as the Group's net assets at the
balance sheet date divided by the number of shares in issue together with
potentially dilutive shares at the balance sheet date.
12 Corporate
This report will be circulated shortly to all shareholders. Copies will be
available from the Company Secretary at Brookfield House, 2 Burnbrae Drive,
Linwood PA3 3BU. Telephone: 01505 324321. Fax: 01505 333215.
Independent Review Report To The Malcolm Group Plc
Introduction
We have been instructed by the company to review the financial information for
the half year ended 1 August 2003, which comprise the Group Profit and Loss
Account, Group Balance Sheet, Group Cash Flow Statement, and the related notes 1
to 11. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data, and based thereon, assessing whether the
accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the half year ended
1 August 2003.
Ernst & Young LLP
Glasgow
1 October 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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