Tolent PLC - Preliminary Results
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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