Tolent PLC - Preliminary Results

Thu Mar 6, 2008 2:00am EST

* Reuters is not responsible for the content in this press release.

RNS Number:4597P
Tolent PLC
06 March 2008

                    TOLENT PLC ("TOLENT" OR "THE GROUP")

   PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2007

                           CHAIRMAN'S STATEMENT





Introduction


I am delighted to report yet another year of improved profits and ahead of
expectations. The profit before taxation increased by £320,000 to £5.5 million
in 2007 on turnover of £180m. As noted at the interim stage the contracts
which had been delayed in the first half of the year have now commenced and
contributed significantly to the level of activity in the second half of the
year.


Financial Summary


Total turnover increased by 7% from £168 million in 2006 to £180 million in
2007.

Total operating profits increased by 5.1% from £4.5 million in 2006 to £4.8
million in 2007. Operating margins have decreased marginally from 2.7% in 2006
to 2.6% in 2007.

Profit before tax increased by 6.2% from £5.2 million in 2006 to £5.5 million in
2007 with earnings per share increasing by 4% from 29.49 pence in 2006 to 30.67
pence in 2007.

The Group had net funds in hand at the end of 2007 of £20.2 million compared
with £18.6 million at the end of 2006. This figure fluctuates from year to year
depending upon the type and quantity of work in progress at a year-end.

Shareholders' funds increased during 2007 from £11.5 million at 31 December 2006
to £13.2 million at 31 December 2007.



Dividends

The Board proposes a final dividend of 10.5 pence per share (2006 - 11.7 pence)
payable on 7th July 2008 to shareholders of record on 6th June 2008.  This
brings the total dividend to 15.5 pence compared with 23.4 pence for 2006.  This
is in line with the revised dividend policy announced at the half year and means
the total dividend is approximately twice covered by profits which the Board
believes is more sustainable than the dividend covered just 1.2 times by profits
in 2006.



Operational Highlights

The Chief Executive's review sets out details of projects completed in 2007
illustrating the wide variety of construction projects in which Tolent is
engaged.  The results from the joint venture property development activities has
been disappointing and are impacted by market conditions, but new ventures
entered into during the year, which are at an early stage, provide interesting
opportunities of the future.

We went into 2008 with an order book of £128 million (2007 - £111 million).



Employees

On behalf of the board of directors I would like to thank the directors and all
of the Group's employees for their efforts in 2007.



Outlook for 2008

We anticipate that market conditions in 2008 will become more difficult as the
effects of the credit crunch on general and development funding are felt.  Our
substantial construction workload will protect us to some extent over the course
of 2008 but the market uncertainty may have a greater impact in 2009.

Property investment activities in 2008 should again be profitable on a virtually
fully let portfolio.


Mike Speakman
Chairman
5th March 2008



CHIEF EXECUTIVE'S REVIEW



Tolent Construction Limited


Tolent operates across the construction sector providing services in building,
civil engineering and property development. Our objective is to continue to
achieve our maximum potential in each of these activities by maintaining our
focus on quality, value for money and delivering a service in a non-adversarial
customer friendly manner.

Our success has been brought about by the quality of the people involved in our
business together with sub-contractors and suppliers who share our ethos of
providing a pro-active and responsive service that meets our customers' demands.
This policy has resulted in consistent repeat business on an ever expanding
customer base.

Our strategy is to continue to grow organically, but at the same time make
selective acquisitions should suitable opportunities arise.

Our belief that people are our most precious asset is supported by our
commitment to training and personal development. This will ensure that our
long-term objectives can be delivered to customers on a consistent basis.

2007 has seen a further increase in turnover maintaining the upward trend of
recent years.  The increased size and profile of Tolent has allowed the company
to negotiate and competitively tender larger projects as well as maintaining our
traditional core of activities.

We continue to operate from five regional offices on a national basis and we are
pleased to report an improving market in the Leeds and Manchester areas and a
favourable outlook for the North East region.

As in previous years we have successfully completed several major projects.  The
variety of work carried out can best be demonstrated by projects completed
during the year:

•    The new Collins Theatre and apartments at Islington Green for Friarbriar 
     £22m;

•    A new shopping complex in Gainsborough for Dransfield Properties £15m;

•    Distribution complexes at Lymedale, Stoke and Tinsley, Sheffield for 
     Helioslough (£16m and £23m);

•    A new health centre at Skelton North Yorkshire £2m; and

•    The award winning Echo 24 apartment building in Sunderland £24m.



Throughout the year the industry remained buoyant and we enter the year with a
healthy order book with a number of major schemes being negotiated.

Inflationary pressures have continued throughout the year across all categories
of costs fuelled by the demand from the Asian economies.  As noted last year an
element of this pressure is created by the shortage of skilled workers which is
likely to continue now that tendering and work on the construction for the
London Olympics has commenced.  This is being addressed by the recruitment of
trainees and the commitment to training and personal development noted above.

The "credit crunch" and the softening property outlook for the medium term has
resulted in developers now encountering difficulties in raising the finance for
future projects at affordable rates.  We do not anticipate this improving to any
great extent over the course of the coming year.

Our focus will be to continue as always to provide quality and value for money
to generate repeat business which has been the successful formula to date.



Health and Safety


A programme of continuous improvement in Health and Safety management and staff
training has resulted in an excellent safety record. This has been recognised by
annual Gold Awards and the prestigious President's Award from the Royal Society
for the Prevention of Accidents (RoSPA).  The accident frequency rate was 0.332
per 100,000 hours for 2007.  This rate compares favourably with the national
average for the construction industry according to the Health and Safety
Executive statistics of 2.5 per 100,000 hours. During 2006 we established an
accredited in house training centre at Gateshead which provides courses for our
employees, sub contractors and also provides training for third parties.  In
2007 over 8,500 (2006-4000) 'off job' hours of health and safety training has
been delivered with a total of 752 site visits and audits being completed.



Checkhire - Joint Venture


Checkhire is a 50/50 joint venture company owned by Tolent and Amco Property
Investments Plc. The company own 15.5 acres of land adjacent to Junction 46 on
the M1, known as Temple Point, and has planning permission to develop 166,000ft
(2) of office space.

The infrastructure and the first eight units (65,000 sq.ft) have now been
completed with six units being sold in 2006 following the sale of the first two
in 2005.

A further detailed planning application has been submitted with a view to
constructing further units in 2008 dependent on the progress of enquiries
received.



Echo Buildings - Joint Venture

Echo Buildings is a 50/50 joint venture company owned by Tolent and Glenrose
Developments (Hebburn) Limited.  The company has built 179 apartments over 10
storeys on land previously occupied by the Sunderland Echo newspaper.  On the
ground floor there is also 11,000sq. ft of commercial space.  Construction was
completed during 2007.  At December 2007 143 apartments have now been sold or
are in contract.

The overall success of the project is partly dependent on the confidence in the
housing market which has an impact on the final sales prices achieved on the
apartment sales. As has been well documented in the press, confidence is
relatively low at the moment due to the turmoil in the financial markets as
exemplified by the Northern Rock crisis which is North East based.

A further uncertainty is interest rate fluctuation that has a direct effect on
the profitability of the company in terms of the overall housing market and on
the funding package which was used to construct the development.  This funding
is being reduced on the completions of apartment sales and has reduced by £17.5m
from the peak borrowing.



42nd Street (Haymarket Hub) - Joint Venture


42nd Street Haymarket Hub is a joint venture company owned 50% Tolent, 33% 42nd
Street Reality Ltd, 17% Closegate.

Tolent Construction Limited has been appointed as Contractor to construct a
mixed-use development totalling 46,000ft(2) over the Haymarket Metro Station in
the centre of Newcastle.  In addition, to the new building Tolent Construction
Ltd is to carry out refurbishment of the existing station platforms and
concourse the total value of both contracts being £19.6m.

The scheme is set to become a new focal point in the city and given its
excellent location has already attracted high quality Tenants. H.B.O.S have
leased premises on the ground floor and legal agreements are currently being
completed to take the whole of the first floor as a restaurant.  We have other
interests for the remaining Grade A offices space with the scheme looking set to
be a great success.



Coolmore Estates

Coolmore Estates is a joint venture company owned 25% by Tolent Construction Ltd
the remainder by Philip Moross and Alistair Ross.

Philip Moross has strong connections with the Film Industry and property
development and has identified the need for a state of the art film studio with
facilities and a cost base that is lower than that which is currently available
in the UK.

A site of 200 acres has been identified immediately adjacent to the A19 in
Seaham NE England and options to purchase the land subject to planning
permission are in place.

A unique feature of the development is the strong link with education, and
Sunderland University, East Durham Community College in association with the
Learning Skills Council are keen to participate.  Students will be given the
opportunity to gain on the job experience in the film industry at various levels
from production through to NVQ training in the various trades associated with
set manufacture.

As a focal point the studios will attract local light industry that will be
required to support the film making together with a hotel and residential
accommodation for those involved in the various productions.

A planning application was lodged in December 2007 and we are currently awaiting
a decision, which is anticipated in May 2008.



Ravensworth Properties

Ravensworth operates in the office letting market where office space is
continually being improved in terms of refurbished offices and new offices in
both city centre locations and out of town office parks.  Ravensworth's
properties are all in purpose built office parks.  The company continually
reviews the standards being offered in the market place and makes improvements
where considered necessary to the property stock. The strategy is to secure
tenants with good covenant strength for lease periods in excess of three years.

As noted above interest rate fluctuations have an impact on the company in terms
of interest payments on the capital expenditure incurred and also on the market
place relating to lessee companies ability to move into new offices or to remain
in their existing space.

In November 2007 the company purchased an office at Christie Fields in
Manchester which is to occupied by the Manchester regional office of Tolent
Construction Limited.  The office will be fitted out and occupied in the first
quarter of 2008.

All premises are occupied with the exception of two units adjacent to Tolent
Construction's regional office at Teesside.  Agents have been appointed to
secure tenants for these units. The addition of Christie Fields increased the
space available to let to 75,300 sq. ft, an increase of 4,300 sq.ft on 2006.
The occupancy rate for 2007 was 87% compared with 82% in 2006.

The company does not intend to expand/dispose of the property base
significantly. However any opportunities to acquire or dispose of properties
will be considered in line with the company and Tolent plc's requirements.

The other companies within the Tolent plc group occupy a number of the
properties. The continued success of these companies has a direct bearing on the
results of Ravensworth Properties Limited. The changes to the empty property
relief for business rates will have a further impact if the properties remain
vacant.  It is envisaged it will be a difficult year in the 2008 property market
following the turmoil in the banking industry in 2007 and the subsequent
tightening of the lending restrictions against commercial properties. However,
as noted above with the exception of the two Thornaby offices all other premises
are 100% occupied which should result in another steady performance for
Ravensworth in 2008.


John G. Wood
Chief Executive
5th March 2008





FINANCIAL DIRECTOR'S REPORT



Results


Total turnover increased by 7.0% in 2007 from £168m in 2006 to £180m. This
represents yet another record turnover for the group and reflected the buoyant
construction market particularly in Central and Northern England in the first
nine months of the year.

Total operating profits in 2007 increased to £4.8m, an increase of 5.1% from
£4.5m in 2006.  This result is after making a £0.4m provision, against the
balance of amounts due under a contract for the construction of apartments in
Huddersfield following the development company being placed into administration.
Operating margins have continued to be tight marginally decreasing from 2.69% in
2006 to 2.64% in 2007.

Net interest received improved from £0.7m in 2006 to £0.8m in 2007.   The
improvement reflects a combination of the funds on deposit and the improved
interest rates that were available during the year.

The profit before tax increased by £0.3m in the year to £5.5m, an increase of
6.2% from the £5.2m profit in 2006.



Taxation and earnings per share



The tax charge in 2007 was £1.7m, which equates to 31.0% of pre-tax profits
compared to £1.5m (29.6%) in 2006. This is marginally higher than the standard
rate of corporation tax in the United Kingdom of 30% as a result of certain
expenditure not being deductible for tax purposes. Earnings per share increased
by 4.0% from 29.49p in 2006 to 30.67p in 2007.



Dividends


An interim dividend of 5p was paid during the year and a final dividend of 10.5p
is proposed. The total proposed dividend for 2007 of 15.5p is twice covered in
terms of earnings per share and compares with a total dividend of 23.4p paid in
respect of 2006.


Shareholders' funds during the year have increased from £11.5m to £13.2m.


Cashflow


Cash generated from operations has reduced from £12.1m to £6.4m mainly as a
result of cash due from the joint ventures increasing by £3.6m along with
increases in general trade debtors (£1.5m) and amounts recoverable on contracts
(£1m) following increased activity in the final quarter of 2007 compared to
2006. The Group had net funds at the end of 2007 of £20.2m, which is an overall
net inflow of funds of £1.6m from the net funds position of £18.6m at the end of
2006.  The year end cash position can be a misleading figure as it only
represents the cash balances on one day during the year.  However, the company
continues to make use of its strong cash position to participate through joint
ventures in development opportunities in situations where it has secured the
construction work.  As part of one such transaction an amount of £4.3m included
in the total cash funds at the year end has been placed on deposit in an escrow
account as part of the bonding for one such transaction.  The directors
anticipate that further opportunities to participate in such ventures will
become available over the coming months as the credit crunch starts to have an
impact on building projects.



Employee Share Ownership Plan


The Employee Share Ownership Plan owns 365,000 shares, bought at a cost of
£256,000, which had a market value at 31st December 2007 of £668,000.


International Financial Reporting Standards (IFRS)


These financial statements are the first the Group has produced in accordance
with IFRS.  The June 2007 interims were also produced under IFRS. Further
adjustments to the equity positions at 1st January 2006 and 31st December 2006
particularly in relation to deferred taxation have been made over those reported
in the June 2007 interims.  The impact of the transition to IFRS is set out in
detail in the Group's statutory financial statements.



Andy Clark
Financial Director
5th March 2008




         Consolidated Income Statement for the year ended 31st December 2007

PRIVATE                                                      2007                             2006
                                                      £000           £000              £000          £000
Group Revenue                                                     180,034                         168,265

Raw materials and consumables                        11,642                          10,394
Other external charges                              137,354                         130,040
                                                                  (148,996)                      (140,434)
                                                                   31,038                          27,831
Staff costs                                          22,563                          19,997
Depreciation                                            302                             296
Other operating charges                               3,578                           3,198
                                                                   (26,443)                       (23,491)
                                                                    4,595                           4,340
Result from investment property                                        367                              0
Share of post tax (loss)/profit in joint                             (204)                            185
ventures and associates
Operating profit                                                    4,758                           4,525

Finance income                                                         799                            735
Finance cost                                                           (14)                           (40)
Profit before taxation                                              5,543                           5,220

Taxation                                                            (1,719)                        (1,543)
Profit after taxation                                               3,824                           3,677

Basic and diluted earnings per share                                30.67p                          29.49p





          Consolidated balance sheet as at 31st December 2007
                                                                               2007             2006
                                                                               £000             £000
Assets

   Non-Current Assets

   Property, plant and equipment                                              4,356            3,537
   Investments properties                                                     6,755            6,388
   Investments in joint ventures and associates                                 877              440
   Investments - available for sale                                              10                0
   Trade and other receivables                                                1,159              150
                                                                             13,157           10,515
    Current assets
   Amounts recoverable on contracts                                          10,323            8,665
   Trade and other receivables                                               25,284           21,022
   Cash and cash equivalents                                                 20,188           18,635
                                                                             55,795           48,322
Total Assets                                                                 68,952           58,837

Liabilities
    Non-current liabilities
   Provisions                                                                   840              350
   Deferred tax liabilities                                                     822              897
                                                                              1,662            1,247
   Current liabilities

   Trade and other payables                                                  53,170           45,193
   Current tax payable                                                          889              908
                                                                             54,059           46,101
Total liabilities                                                            55,721           47,348

Net Assets                                                                   13,231           11,489
Equity
   Share capital                                                              1,283            1,283
   Other reserve                                                              (256)            (256)
   Profit and loss account                                                   12,204           10,462
                                                                             13,231           11,489




Consolidated cashflow statement for the year ended 31st December 2007
                                                                                  2007            2006
                                                                                  £000            £000
Cash flows from operating activities

   Profit after taxation                                                    3,824           3,677

   Depreciation on property, plant and equipment                              302             296
   Valuation increases in investments properties                            (367)               0
   Taxation expense recognised in income statement                          1,719           1,543
   Finance income and cost                                                  (785)           (695)
   (Increase)/decrease in trade and other receivables                     (5,271)             906
   Increase in amounts recoverable on contracts                           (1,658)           (627)
   Increase in trade and other payables                                     7,977           6,795
   Movement in provisions                                                     490             350
   Share of loss/(profit) after tax from joint ventures and                   204           (185)
   associates
   Cash (used in)/generated from operations                                 6,435          12,060

   Finance cost paid                                                         (14)            (40)
   Tax paid                                                               (1,813)         (1,396)
Net cash generated from operating activities                               4,608          10,624

Cash flows from investing activities

   Purchase of property, plant and equipment                              (1,121)         (1,149)
   Purchase of investments - available for sale                              (10)               0
   Increase in investment in joint ventures and associates                  (641)             (3)
   Finance income received                                                    799             735
Net cash used in investing activities                                       (973)           (417)

Cash flows from financing activities

   Dividends paid                                                         (2,082)         (2,238)
   Repayment of borrowings                                                      0         (1,340)
Net cash used in financing activities                                     (2,082)         (3,578)

Net increase in cash and cash equivalents                                  1,553           6,629
Cash and cash equivalents at beginning of period                          18,635          12,006
Cash and cash equivalents at end of period                                20,188          18,635




Consolidated statement of changes in equity for the year ended 31st December
2007
                                                  Share Capital   Other Reserve    Profit and      Total equity
                                                                                 loss account
                                                           £000            £000          £000              £000
At 1st January 2006                                       1,283           (256)         9,023            10,050
Profit after taxation for the year and total                  0               0         3,677             3,677
recognised gains and losses
Equity dividends paid                                         0               0       (2,238)           (2,238)
At 31st December 2006                                     1,283           (256)        10,462            11,489
At 1st January 2007                                       1,283           (256)        10,462            11,489
Profit after taxation for the year and total                  0               0         3,824             3,824
recognised gains and losses
Equity dividends paid                                         0               0       (2,082)           (2,082)
At 31st December 2007                                     1,283           (256)        12,204            13,231



Notes:



1.       Basis of preparation


The financial information in this preliminary announcement has been prepared in
accordance with the accounting policies set out in the financial statements of
Tolent Plc for the year ended 31st December 2007, which have remained unchanged
for the financial year ended 31st December 2007.



2.       Accounts


The summary accounts set out above do not constitute statutory accounts as
defined by Section 240 of the UK Companies Act 1985. The summarised balance
sheet at 31 December 2007, the summarised consolidated income statement, the
summarised consolidated cash flow statement and the summarised statement of
changes in equity for the year then ended have been extracted from the Group's
2007statutory financial statements upon which the auditors' opinion is
unqualified. The statutory financial statements for the year ended 31 December
2007 were approved by the directors on 5th March 2008, but have not yet been
delivered to the Registrar of Companies.



3.       Earnings per share


Earnings per ordinary share have been calculated on the basis of profit for the
period after tax, divided by the weighted average number of ordinary shares in
issue in the year of 12,467,626 (2006 - 12,467,626).



4.       Preliminary announcement


Copies of the preliminary announcement are available from the company's
registered office at Ravensworth House, 5th Avenue Business Park, Team Valley,
Gateshead, Tyne and Wear, NE11 0HF. The Annual Report and Accounts for the year
ended 31st December 2007 will be posted to shareholders on or about 2nd 
May 2008.



5.       Contacts:

Tolent plc                                                0191 487 0505                                   
Andy Clark, Finance Director

Brewin Dolphin Investment Banking                         0845 270 8610
Andrew Emmott


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

FR EAKDSEENPEFE