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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Rok | LSE:ROK | London | Ordinary Share | GB00B1WL0527 | ORD 2P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 18.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMROK RNS Number : 2702I Rok PLC 09 March 2010 Press Release 09 March 2010 Rok plc Preliminary results for the year ended 31 December 2009 Rok plc announces its results for the year ended 31 December 2009. Financial summary +--------------------------+-----------+-------------+---------+ | Continuing operations | 2009 | 2008 | Change | +--------------------------+-----------+-------------+---------+ | · Revenue | GBP714.8m | GBP1,011.2m | (29)% | +--------------------------+-----------+-------------+---------+ | · Operating profit* | GBP22.6m | GBP21.5m | 5% | +--------------------------+-----------+-------------+---------+ | · Operating margin* | 3.2% | 2.1% | 52% | +--------------------------+-----------+-------------+---------+ | · Profit before tax* | GBP20.4m | GBP20.4m | 0% | +--------------------------+-----------+-------------+---------+ | · Profit before tax | GBP17.0m | GBP5.9m | 188% | +--------------------------+-----------+-------------+---------+ | · Earnings per share* | 8.3p | 8.1p | 2% | +--------------------------+-----------+-------------+---------+ | · Earnings per share | 7.4p | 2.1p | 252% | +--------------------------+-----------+-------------+---------+ | · Dividend per share | 2.4p | 2.4p | 0% | +--------------------------+-----------+-------------+---------+ * before intangible asset charges and exceptional items Operational summary +------------------------------------+----------+----------------------+------+-----+ | · Successful repositioning of business with increased focus on repairs | | | and maintenance | | | · Operating margins increased on reduced activity levels | | | · Secured market leading position in property insurance repairs | | | · Business restructured to enhance focus on our key services | | | · Continued success in securing new long term framework agreements | | | · High forward revenue visibility with framework agreements at GBP2.0bn | | | | | +-----------------------------------------------------------------------------+-----+ | | | | | +------------------------------------+----------+----------------------+------------+ | | | | | | +------------------------------------+----------+----------------------+------+-----+ Commenting on the results and outlook, Stephen Pettit, Chairman, said: "We have maintained our profit levels despite reducing our revenues. This reflects the impact of our cost reduction programme as we shift our emphasis to the repair, maintenance and improvement markets. "The Board continues to be cautious on the overall outlook for our sector. The changes we have made in repositioning our business I believe illustrate the strength and flexibility of our company which bodes well for the resumption of Rok's growth when the wider economy begins a sustainable recovery". Enquiries to: +--------------------------------------+----------------------------+ | Rok plc | www.rokgroup.com | +--------------------------------------+----------------------------+ | Garvis Snook, Group Chief Executive | Tel: 020 7977 | | | 7982 | | | garvis.snook@rokgroup.com | +--------------------------------------+----------------------------+ | Ashley Martin, Group Finance | Tel: 020 7977 | | Director | 7984 | | | ashley.martin@rokgroup.com | +--------------------------------------+----------------------------+ | Redleaf Communications Ltd | | | Emma Kane/ Kathryn Hurford/ Rebecca | Tel: 020 7566 | | Sanders-Hewett | 6700 | | | rok@redleafpr.com | | | | +--------------------------------------+----------------------------+ | | | Notes to Editors: | | | | | | ¡ Rok plc's shares are listed on the Official List of the | | London Stock Exchange under the symbol ROK. | | | | ¡ The Group specialises in low risk, relationship based | | provision of building services on a national basis and | | undertakes Maintenance and building improvements | | including plumbing, heating and electrical services; | | Social housing (new build and planned repairs); and | | Construction. The majority of these services are | | delivered directly using Rok's own trades people. | | | | ¡ Further information on the Group can be accessed at | | www.rokgroup.com | | | | | | | | | +-------------------------------------------------------------------+ | | | +--------------------------------------+----------------------------+ Financial Summary +------------------------------------+-----------+-------------+---------+ | | Year | Year | Change | | Continuing operations | ended 31 | ended | | | | December | 31 | | | | 2009 | December | | | | | 2008 | | | | | | | +------------------------------------+-----------+-------------+---------+ | Revenue | GBP714.8m | GBP1,011.2m | (29)% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Operating profit* | GBP22.6m | GBP21.5m | 5% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Operating margin - Response | 6.4% | 6.2% | 3% | | maintenance | | | | +------------------------------------+-----------+-------------+---------+ | - | 4.9% | 4.9% | 0% | | Planned repairs & refurbishment | | | | +------------------------------------+-----------+-------------+---------+ | - New | 1.5% | 0.4% | 275% | | build | | | | +------------------------------------+-----------+-------------+---------+ | Group operating margin | 3.2% | 2.1% | 52% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Profit before tax* | GBP20.4m | GBP20.4m | 0% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Exceptional items | GBP2.1m | GBP12.2m | (83)% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Profit before tax | GBP17.0m | GBP5.9m | 188% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Earnings per share* | 8.3p | 8.1p | 2% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Earnings per share | 7.4p | 2.1p | 252% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Dividend per share (p) | | | | +------------------------------------+-----------+-------------+---------+ | - Interim | 0.75p | 1.15p | | | - Final | 1.65p | 1.25p | | +------------------------------------+-----------+-------------+---------+ | | 2.40p | 2.40p | 0% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Operating cash flow** | GBP9.0m | GBP4.3m | 109% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Net assets | GBP105.7m | GBP105.0m | 1% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Net debt | GBP46.7m | GBP43.7m | 7% | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Discontinued operation | | | | +------------------------------------+-----------+-------------+---------+ | | | | | +------------------------------------+-----------+-------------+---------+ | Loss from Development operations | GBP4.6m | GBP18.6m | | | net of tax relief | | | | +------------------------------------+-----------+-------------+---------+ * before intangible asset charges and exceptional items ** before pension scheme contributions and exceptional items Statement by the Chief Executive, Garvis Snook It is my pleasure to report on Rok's progress towards its vision of being The Nation's Local Builder and on our performance in 2009. There is no doubt the poor economic climate of the last 18 months created some of the most challenging trading conditions any of us can remember, particularly for our industry. In the last year we have shifted the focus of the Group's operations on to the more profitable and more resilient repair, maintenance and improvement markets as we believe they provide attractive growth potential for Rok. As a result our maintenance and improvement businesses now account for some 58% of revenues and 83% of profits from our businesses. Conversely gross margins generally in the market for new build regional construction projects have declined markedly due to a 17% fall in demand from peak in the UK and the resultant increased competition. In sizing the construction business for this current economic environment we have scaled back our capacity by more than half and as a result have avoided the temptation to target these higher risk volumes at the expense of profitability. Maintaining margin discipline in this environment has therefore been a key priority. Rok will therefore remain focused for its growth for the foreseeable future on providing repair, maintenance and improvement services to its customers through its directly employed staff of more than 2,500 skilled trades people nationwide. These markets are not only more profitable but are also we believe more resilient in the current economic environment, positioning Rok, as they do, with increased exposure to non-discretionary spending markets. At the same time, we are investing more of our efforts in new build activities in the social and rented housing sectors as we expect demand to remain robust for the foreseeable future. Our capability for providing repair and maintenance services in social housing also increased and we are part way through expanding our plumbing, heating and electrical teams across the UK. This enables us to capitalise on the growing demand for integrated service provision since we can offer long term maintenance and improvement support to complement our new build services. Results In recognition of the downturn in the industry we reduced our capacity to undertake large volumes of general construction work. This was the main factor behind a 29% drop in revenues to GBP714.8m (2008: GBP1,011.2m). At the same time, we significantly reduced our cost base to align it with predictable future revenues and this, together with the change in business mix, has led to underlying operating margins increasing to 3.2% from 2.1% last year. These measures have enabled us to maintain pre tax profits (before intangible asset charges and one-off items) from continuing operations at GBP20.4m, the same level as last year. After amortisation of intangible assets and exceptional items, headline pre-tax profits increased to GBP17.0m from GBP5.9m in 2008. Earnings per share (before intangible asset charges and exceptional items) grew 2% to 8.3p (2008: 8.1p). Headline earnings per share from continuing operations increased to 7.4p (2008: 2.1p). The exceptional items include GBP5.1m incurred in restructuring costs to downsize our construction activities and reduce overhead which has resulted in savings of GBP18m per annum. Partly offsetting this is a one-off credit of GBP3.0m arising from the release of provisions made in respect of potential fines in connection with the Office of Fair Trading's (OFT) investigation into tendering in the industry. These provisions were made in respect of the tendering activities of certain subsidiaries prior to their acquisition by Rok. Rok Building Ltd was not involved in the investigation and tendering activities by those subsidiaries since their acquisition have been strictly in accordance with Rok's policies. The release arises from both the recovery of these fines from the vendors of the acquired businesses and the actual penalty being lower than the original estimate we made on acquisition. Losses in respect of the discontinued activity, commercial property development, were GBP4.6m net of tax relief (2008: GBP18.6m). This included a GBP4.0m write down of land assets, based on agent valuations, as a result of a continued weakening in the market for commercial land together with financing charges totalling GBP2.8m. The total finance charges on continuing operations of GBP2.2m (2008: GBP1.1m) comprise bank loan interest of GBP1.0m (2008: GBP0.9m) and net finance charges in respect of the deficit on the Group's pension schemes of GBP1.2m (2008: GBP0.2m). The pension scheme finance charges increased principally due to interest charges attaching to the larger pension scheme deficits. Total interest cover, including interest on discontinued operations, is 5.9 times. The tax charge on continuing operations of GBP4.0m represents an effective rate of 23.5%. This is lower than the standard rate mainly due to the non taxable OFT provision release. The effective rate in 2008 was 37% due to non tax deductible expenses and unrelieved tax losses. We were aware that scaling back our construction operations, which have a cash positive profile, would have an impact of some GBP25m on our working capital by reducing the amount of surplus cash available to the business. As a result cash absorbed by operations before tax amounted to GBP2.9m (2008: GBP5.2m). In 2009 we reduced net capital expenditure to GBP2.2m (2008: GBP5.0m), and curtailed acquisition activity and share purchases. Cash realised from the discontinued Development operations totalled GBP6.5m (2008: GBP2.2m) which helped to fund the increased working capital needs of the business. Net debt at the period end was GBP46.7m, up GBP3.0m on the previous year. Our year end net debt is not representative of our underlying net debt which averaged GBP69.6m (2008: GBP61.1m), the increase being due to the change in business mix, redundancy payments and the full year impact of 2008 acquisitions. Overall debt reduction remains a key focus for the Group. In March 2009 we successfully renegotiated and extended our banking facilities under a club arrangement with three major banks and entered into new long term facilities totalling GBP90m expiring in March 2012. These facilities reduce by the proceeds of any development asset sales and will amortise by a minimum of GBP16m over the three year period. All banking covenants were met during the year. Dividend The Board's dividend policy is to broadly mirror dividend growth with that of the growth in underlying earnings per share and to maintain dividend cover between three and three and a half times. In line with this policy we shall be recommending the payment of a final dividend of 1.65p making a total of 2.40p, the same as last year. The total dividend is 3.0 times covered by earnings from continuing operations. If approved by shareholders at the Annual General Meeting, the dividend will be paid on 14 May 2010 to shareholders on the register at 6 April 2010. Operations review Response maintenance This is a national service provided by a network of skilled locally based technicians who respond to calls from Rok customers when maintenance or repair work is needed within their properties or the properties of their customers. Revenues fell by 12% to GBP104.6m (2008: GBP119.0m) as a result of a reduction in insurance claims as a consequence of the milder weather. The decision by one of our insurance customers to use alternative networks for repairs rather than our integrated service also affected revenues. Operating profits for the year were 9% lower at GBP6.7m (2008: GBP7.4m) with operating margins rising to 6.4% from 6.2% reflecting improvements in technician productivity and lower levels of debt provisioning. Our ambition to provide the best insurance claims management and property repairs service in the industry (defined by cost effectiveness, efficiency and reliable high standards of customer service) was rewarded in the autumn when major insurer LV= appointed Rok. Opening a dedicated centre in Mansfield in late 2008 for co-ordinating these insurance services also helped improve our efficiency during 2009 and lift customer satisfaction scores to 98% from 89% a year ago. In May, the contact centre became operational around the clock every day of the year, and the response centre for all emergency calls to Rok. Calls are relayed to local teams of technicians and this 'one point of contact' for the whole of the country is proving attractive to a wide range of national organisations ranging from private landlords to car sales franchises. For example, during the year, we contracted with a wide range of new customers including the Wincanton Group, The Crown Prosecution Service and the National Ambulance Service for whom we provide maintenance cover for frontline stations and offices run by the UK's 11 ambulance trusts. Our ability to respond quickly to customers needs by sending locally based technicians who are competent and adept at working in occupied premises has helped us win new work from various housing associations and local authorities. Among those customers taken on during the year were, Bromsgrove District Council, Hampshire County Council, Home Group, North Wales Housing Association, St Albans City and District Council and Wellingborough Homes. The same multi-skilled technicians also deliver our property maintenance and improvement services which range from routine procedures such as cleaning gutters and drains to domestic improvement works such as installing new bathrooms or kitchens. This range of activities we undertake has increased as we work with major retailers and other direct-to-consumer sales organisations to provide their customers with a reliable, cost effective fitting service for the products they sell. Planned repairs and refurbishment Planned repairs and refurbishment work comprises contracts for housing associations and local authorities as well as general building improvements for public and private sector organisations. The work undertaken by our plumbing, heating and electrical teams (PHE) is also included here. Overall revenues for the year were 8% lower at GBP314.2m (2008: GBP341.3m) reflecting a slow first quarter when many housing association budgets were constrained in the wake of the banking crisis of the previous autumn. Since then we have seen a rise in activity levels as funding sources returned. Operating profits fell 8% to GBP15.5m (2008: GBP16.8m) as gross margins tightened on new projects and new frameworks were secured in a more competitive environment, offset by cost savings. Operating margins were level at 4.9% as a result. Whilst the tender market for planned social housing improvement work is more competitive, it is largely the major national organisations such as Rok, capable of being able to deliver an integrated service, that have been the main beneficiaries. We have delivered more of these services with our directly employed workforce and this is proving more efficient than sub-contracted labour which has helped to support margins. Social housing remains an attractive sector with constant demand for urgent and void repairs supplemented with longer term repair and improvement programmes funded from rental income replacing the government led Decent Homes programme in England. In Wales the programme has a number of years to run and is only just getting up to speed in Scotland. The market dipped to GBP7.9bn in 2009 and is forecast to steadily rise to GBP8.4bn in 2012. We have 60 framework agreements in place in this market giving forward visibility of future revenues. New long term agreements entered into by Rok in 2009 include those with Cardiff City Council, Newport City Homes, North East Procurement, One Vision Housing, Salford City West, Sanctuary Housing, Teign Housing, Wigan & Leigh Housing and Yorkshire Housing Group. In addition, the knowledge and experience we have developed in this area is allowing us to offer similar services to private landlords and residential care providers, both of which are growing markets. During 2009, we signed agreements with Paragon and Smartlandlord; Barchester Healthcare, Craegmoor Healthcare, Mimosa Healthcare and Prime Healthcare. During 2006 and 2007 we acquired a number of businesses which were involved in providing plumbing, heating and electrical (PHE) services. We have brought these companies together under one brand, Rok PHE, and continued rolling these services out across the UK as the year progressed. The purpose was to reduce further the amount of sub-contracting we do in these trades, thus improving customer service, retaining margin in-house and creating a pipeline of servicing and maintenance contracts. The intention ultimately is to match the geographic footprint of the Group's core building and maintenance services with our PHE activities. To date some 40% of the country is covered from the 16 branches offering these trades. We also provide planned repair and maintenance services to business premises where the needs of users of those premises during the work are of particular importance. One of our most vibrant markets, for example, is airports where many years of experience of working in these specialist and highly security conscious environments has led us to develop dedicated teams to work in six of the UK's leading airports including Heathrow and Gatwick. During 2009 GBP37m of revenues were generated from this sector. For many years, Rok's close ties with the communities in which we work have made us a natural choice for the education sector where we not only build but also refurbish and maintain universities and colleges as well as schools in both the private and public sectors. Many of the contracts to work in such establishments are now managed through large framework agreements and Rok is pleased to be included on a number of them. These frameworks typically extend over a pre-defined number of years with terms decided at the outset. In the autumn Rok was appointed by the Schools Advisory Service, which provides outsourcing services to schools and is endorsed by the National Association of Head Teachers, for a maintenance service to members. The service includes reactive and planned maintenance as well as compliance toolkits to help schools manage their property assets more effectively. New build Our new build activities in 2009 comprised regional construction for public and private sector organisations, as well as constructing new houses for social housing customers. New build revenues overall were down by 45% to GBP307.4m (2008: GBP563.6m) reflecting the scaling back of regional construction activities for reasons discussed earlier. Within this, new build social housing revenues of GBP122.3m were down 6% on the prior year. Operating profits increased from GBP2.2m to GBP4.6m and a more normalised margin of 1.5% (2008: 0.4%) was achieved as the cost base was re-aligned to revenues following the cut backs undertaken in the autumn of 2008. With regional construction capacity now around half the level it was in 2008, we have concentrated expertise in just six regional centres where previously there were twenty branches that provided these services. Trading conditions remained challenging throughout the year as tender margins came under increasing pressure reaching a low point in the final quarter with supply chain prices stabilising. We do not anticipate any change in trading conditions in the short term as early signs of recovery in the private sector are being overshadowed by anticipated cuts in public sector expenditure. Some of our previous regional construction capacity was diverted to increase our capacity in the new build social and rented housing sector, a market which we believe will continue to be supported by the main political parties in a climate of increasing need. Predictions made by the Local Government Association in 2008 appear to be correct when they suggested that waiting lists for social housing would rise 25% in two years. In January 2009 the demand had already risen 12.5% and is on course to reach two million households and affect five million people by the end of 2010. Even so the sector faltered in the early part of the year as Registered Social Landlords found that their traditional sources of funding were no longer available or were severely restricted. Projects were put on hold due to the uncertainty but as the year progressed the then newly established Homes and Communities Agency was instrumental in reviving many stalled schemes as funding constraints were relaxed. This resulted in a slow first quarter with revenues down 15% at the half way stage. Volumes gradually increased over the year and we completed 1,300 social housing units. In November we learned we had been successful, as part of the Inspiral consortium, in achieving preferred bidder status for the GBP130m Gateway to Oldham, Private Finance Initiative (PFI) housing and regeneration project. It is expected that work will commence in summer 2010 with Rok providing new build, planned repairs and ongoing maintenance for this scheme. The construction phase will last approximately four years and maintenance services will be provided for a further 21 years. At the end of the year, we had also reached the final stages of bidding for two other PFI funded housing projects in the north of England. Recognising that demand for social and rented housing is going to increase over the medium term but that funding will continue to come under pressure, we have been investing in new techniques that improve the efficiency of construction and reduce the cost whilst maintaining acceptable returns for the Group. As in planned and response maintenance, using direct employees is proving effective in helping us achieve this by reducing build periods through a combination of lean construction methods and avoiding the delays associated with an array of sub-contractors. Rok was awarded GBP350m (2008: GBP340m ) of new build housing framework contracts in 2009 bringing the total value of housing frameworks at the start of 2010 to GBP765m giving forward visibility of around 6,000 new housing units to be built by Rok. Recent appointments in this sector include those by Circle Anglia, City West Homes, Firebird JVC, Guinness Trust, Home Scotland, Midland Heart, Moat Housing and Your Homes Newcastle. Reshaping our business During 2009 we reduced costs in line with the decision to further constrain construction activities and organised the Group so as to achieve greater consistency and efficiency in our housing and maintenance services. The managing directors of the three new divisions through which we will manage the business going forward; Construction, Social Housing and Maintenance and improvements were appointed to the Group Executive team in October. This restructure, which has become effective from the beginning of 2010, has enabled us to remove GBP18m of run rate costs during the year at a cost of GBP5.1m mainly from construction and support activities. The new structure will be reflected in our segmental reporting for 2010. Discontinued Development activity We took the decision to close our commercial property development business in June 2008 and are seeking to sell the business as a going concern. In the meanwhile we have received offers on and sold individual sites in the absence to date of a buyer for the business as a whole. The market for these assets continued to weaken further during 2009 and lack of funding for developers and low tenant demand has meant that the realisation process has been slower than anticipated. We received a further GBP8.6m in net proceeds last year from the sale of individual sites and crystallised modest losses totalling GBP0.3m. We have also written down the remaining assets by a further GBP4.0m based on agents' indication of value in the current market as commercial land values have continued to fall. Together with interest funding costs of GBP2.8m the net loss after tax from discontinued operations was GBP4.6m (2008: GBP18.6m). The remaining assets, valued at GBP15.0m, consist of 12 development sites all with outline planning permission. Five of the sites have completed buildings on them, some of which are tenanted. People Rok's business model puts our people at the heart of everything we do. With so much of the Group's strategy reliant on the behaviour of our people, it is important that we select individuals who will thrive in a values based culture that promotes team work, self motivation and service. We rely on them and their skills to win and retain customers through providing exceptional levels of service. I would like to thank all employees for their commitment shown during the last year and for implementing the rapid changes we have made to reconfigure our business mix and align the cost base with a different demand profile. I am particularly proud of the success we have had in improving our health and safety performance and that this work has been recognised externally, with the Group attaining five star status in an audit by The British Safety Council. A determination to keep our people and the public safe while we work has brought considerable improvement in our record in the last few years. In 2009 we achieved a further reduction in our accident frequency rate (AFR) to 0.25. We are determined that Rok should be the safest place to work in the industry and this is an important step along the way. Performance and risk management The Board monitors performance at board meetings and through regular monthly management reports which include reviews of each area of the business against the current forecast together with reviews of key performance indicators. A more detailed review process is undertaken each quarter when the financial forecasts are updated for the following 15 months. Risk management is monitored by the Executive Team which reports on key risks to the Board on a quarterly basis or as required between times. This process covers both strategic and day to day operational risks. The Group's internal audit function, Rok Assurance, also reviews key risk areas as part of its annual plan as well as reviewing the effectiveness of internal controls. In view of the current economic backdrop the board has completed a comprehensive review of the Group's risk management processes and the internal controls in place. The Board considers that the key risks which may have a material impact on performance in 2010 are: · Economic risk - with a fragile economic backdrop we will need to continually monitor the impact of both public and private sector spend potential in each of our chosen markets. · Project risk - project selection and the need to continually monitor and manage progress, performance and customer satisfaction remain key risk areas for the business. · Revenue and profit forecasting - we operate a rolling forecast model which is reviewed by the Board every three months. Aligning our cost base and controlling discretionary spend to expected levels of revenue is key to the delivery of the Group's profit forecasts. · Cash and working capital management - This is a key focus area for the business having scaled back our higher risk but cash generative regional construction activities. Other risks that the Board manages include Health, Safety and Environment, Human Resources, Finance and counterparty risk, Regulatory and Reputational risk. Current trading and prospects We expect the market for regional construction to remain challenging in the UK for the next few years as the drive to reduce public sector debt intensifies, cancelling out the benefit from an improving private sector. Our focus during this period will remain on the repair, maintenance and improvement of property, particularly domestic property, where our directly employed technicians have consistently demonstrated that they provide customers and the Group with a differentiated level of service and profitability. History demonstrates that during periods of economic slowdown demand for these types of services grows ahead of work that is capital intensive but that it also demands ever higher levels of efficiency and cost effectiveness. We are confident this can be achieved following the investments we have made, and are making, in our national response centre and the latest communication technology for our technicians. Plumbing, heating and electrical systems all require regular maintenance and for many of our customers who own or manage multi occupancy or commercial property, this is a matter of compliance with statutory regulation. Most of this spend is of a non-discretionary nature and therefore unaffected by economic conditions. Having integrated all our teams responsible for such services under the banner of Rok PHE we intend to extend its footprint across the UK through our existing branch network, initially by capturing the work that we currently sub-contract. An area where we expect to do more of this type of work is social housing, a sector that is needing to find ways to improve its efficiency whilst meeting increasing legislative and tenant demands. We expect to see further consolidation of social landlords to gain economies of scale during the medium term as new build volume demands remain at similar levels to 2009 driven by increasing waiting lists. Grouping contracts for a range of improvements, repair and new build services with one integrated supplier is an effective way of addressing the problem of reduced budgets which tends to benefit larger organisations such as Rok. Expertise honed in the social housing arena has lent itself to similar markets where working around people in their own living space in a sensitive manner is a pre-requisite so we have seen the potential to make further inroads into the domestic, private rented and care sectors. In 2009 in total we worked in more than 100,000 homes. Spending so much of our time working in existing properties, we are also aware that many of them require considerable improvements in terms of insulation and energy efficiency to meet the country's energy consumption and carbon emissions targets. Indeed it is estimated that 70% of the domestic properties that will exist in 2050 are already built and will require extensive retro fitted improvements to meet these energy reduction targets. Rok is well placed to benefit from the increasing demand for such services. Having secured our position on further framework contracts during last year totalling GBP840m, our current forward revenue visibility under secured orders and framework agreements continues to be healthy at GBP2.0bn. In total some 85% of our 2010 forecast revenues are now either secured or probable. The secured order book currently stands at GBP330m. Overall, during 2009 and the latter part of 2008, we have reshaped and refocused our business while remaining true to our vision of being The Nation's Local Builder. Whilst we expect the economic backdrop to remain challenging during 2010, we now generate a large proportion of our revenues and profits from working in markets that are stable, are characterised by long term revenue visibility and have the potential to grow over the next few years. With the distinctive Rok approach to service and delivery, we believe we are well placed to ride out the current uncertainty and take advantage of opportunities that will inevitably arise in our chosen markets. Garvis Snook Chief Executive 09 March 2010 Consolidated income statement For the year ended 31 December 2009 +-----------------------------------------+-------+----------+----------+ | | | | | | |Notes | 2009 | 2008 | | | | GBPm | GBPm | | Continuing operations | | | | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Group revenue | 2 | 714.8 | 1,011.2 | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Gross profit | | 81.1 | 95.4 | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Administrative expenses | | (61.9) | (88.4) | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Profit from operations | | 19.2 | 7.0 | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Analysed as: | | | | +-----------------------------------------+-------+----------+----------+ | Adjusted operating profit | | 22.6 | 21.5 | +-----------------------------------------+-------+----------+----------+ | Intangible asset charges | | (1.3) | (2.3) | +-----------------------------------------+-------+----------+----------+ | Exceptional items | 3 | (2.1) | (12.2) | +-----------------------------------------+-------+----------+----------+ | Profit from operations | | 19.2 | 7.0 | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Finance costs | 4 | (2.2) | (1.1) | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Profit before tax | | 17.0 | 5.9 | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Income tax expense | 5 | (4.0) | (2.2) | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Profit for the year from continuing | | 13.0 | 3.7 | | operations | | | | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Discontinued operation | | | | +-----------------------------------------+-------+----------+----------+ | Loss for the year after tax from | 6 | (4.6) | (18.6) | | discontinued operations | | | | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Profit (loss) for the year | | 8.4 | (14.9) | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Earnings per share | | | | | Continuing operations | | | | +-----------------------------------------+-------+----------+----------+ | Basic earnings per share | 7 | 7.4p | 2.1p | +-----------------------------------------+-------+----------+----------+ | Diluted earnings per share | 7 | 7.3p | 2.1p | +-----------------------------------------+-------+----------+----------+ | | | | | +-----------------------------------------+-------+----------+----------+ | Continuing and discontinued operations | | | | +-----------------------------------------+-------+----------+----------+ | Basic earnings (loss) per share | 7 | 4.8p | (8.5p) | +-----------------------------------------+-------+----------+----------+ | Diluted earnings (loss) per share | 7 | 4.7p | (8.4p) | +-----------------------------------------+-------+----------+----------+ Consolidated statement of comprehensive income For the year ended 31 December 2009 +-----------------------------------------------+----------+-----------+ | | 2009 | 2008 | | | GBPm | GBPm | +-----------------------------------------------+----------+-----------+ | | | | +-----------------------------------------------+----------+-----------+ | Actuarial losses on defined benefit pension | (9.7) | (2.5) | | schemes | | | +-----------------------------------------------+----------+-----------+ | Additional defined benefit minimum funding | 2.8 | 1.1 | | requirement | | | +-----------------------------------------------+----------+-----------+ | Cash flow hedges | (0.2) | - | +-----------------------------------------------+----------+-----------+ | Deferred tax on pension schemes and cash flow | 2.0 | 0.3 | | hedges | | | +-----------------------------------------------+----------+-----------+ | | | | +-----------------------------------------------+----------+-----------+ | Net loss recognised directly in equity | (5.1) | (1.1) | +-----------------------------------------------+----------+-----------+ | Profit (loss) for the year | 8.4 | (14.9) | +-----------------------------------------------+----------+-----------+ | | | | +-----------------------------------------------+----------+-----------+ | Total comprehensive income | 3.3 | (16.0) | +-----------------------------------------------+----------+-----------+ Consolidated statement of financial position As at 31 December 2009 +--------------------------------+-------+---------+--------------+--------------+ | |Notes | 2009 | 2008 | 2007 | | | | GBPm | GBPm | GBPm | | | | | Represented* | Represented* | +--------------------------------+-------+---------+--------------+--------------+ | | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Assets | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Intangible assets | | 146.4 | 147.7 | 125.3 | +--------------------------------+-------+---------+--------------+--------------+ | Property, plant and equipment | | 17.1 | 19.6 | 21.3 | +--------------------------------+-------+---------+--------------+--------------+ | Investments | | 0.1 | 0.1 | 4.6 | +--------------------------------+-------+---------+--------------+--------------+ | Deferred tax assets | | 8.1 | 8.8 | 7.1 | +--------------------------------+-------+---------+--------------+--------------+ | Total non-current assets | | 171.7 | 176.2 | 158.3 | +--------------------------------+-------+---------+--------------+--------------+ | | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Inventories | | 8.2 | 13.4 | 42.1 | +--------------------------------+-------+---------+--------------+--------------+ | Trade and other receivables | | 182.9 | 201.1 | 224.4 | +--------------------------------+-------+---------+--------------+--------------+ | Cash and cash equivalents | | 5.5 | 39.1 | 43.0 | +--------------------------------+-------+---------+--------------+--------------+ | Assets classified as held for | 6 | 15.0 | 22.6 | - | | sale | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Total current assets | | 211.6 | 276.2 | 309.5 | +--------------------------------+-------+---------+--------------+--------------+ | | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Total assets | | 383.3 | 452.4 | 467.8 | +--------------------------------+-------+---------+--------------+--------------+ | | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Liabilities | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Interest-bearing loans and | | 51.3 | 75.0 | 45.7 | | borrowings | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Retirement benefit obligations | | 17.6 | 12.9 | 14.9 | +--------------------------------+-------+---------+--------------+--------------+ | Deferred tax liabilities | | 1.3 | 1.8 | 2.9 | +--------------------------------+-------+---------+--------------+--------------+ | Provisions | | 2.3 | 1.5 | - | +--------------------------------+-------+---------+--------------+--------------+ | Total non-current liabilities | | 72.5 | 91.2 | 63.5 | +--------------------------------+-------+---------+--------------+--------------+ | | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Interest-bearing loans and | | 0.9 | 7.8 | 2.6 | | borrowings | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Trade and other payables | | 201.6 | 244.7 | 270.9 | +--------------------------------+-------+---------+--------------+--------------+ | Income tax payable | | 0.8 | 1.8 | 6.2 | +--------------------------------+-------+---------+--------------+--------------+ | Provisions | | 1.8 | 1.4 | - | +--------------------------------+-------+---------+--------------+--------------+ | Liabilities associated with | 6 | - | 0.5 | - | | the assets held for sale | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Total current liabilities | | 205.1 | 256.2 | 279.7 | +--------------------------------+-------+---------+--------------+--------------+ | | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Total liabilities | | 277.6 | 347.4 | 343.2 | +--------------------------------+-------+---------+--------------+--------------+ | | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Net assets | | 105.7 | 105.0 | 124.6 | +--------------------------------+-------+---------+--------------+--------------+ | | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Equity | | | | | +--------------------------------+-------+---------+--------------+--------------+ | Issued share capital | | 3.6 | 3.6 | 3.5 | +--------------------------------+-------+---------+--------------+--------------+ | Share premium | | 18.2 | 18.2 | 18.2 | +--------------------------------+-------+---------+--------------+--------------+ | Other reserves | | 55.8 | 55.3 | 54.2 | +--------------------------------+-------+---------+--------------+--------------+ | Retained earnings | | 28.1 | 27.9 | 48.7 | +--------------------------------+-------+---------+--------------+--------------+ | Total equity | | 105.7 | 105.0 | 124.6 | +--------------------------------+-------+---------+--------------+--------------+ Consolidated statement of changes in equity +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | | Share | Share | Merger | Capital | Hedging | Own | Retained | Total | | | capital | premium | reserve | redemption | reserve | shares | earnings | equity | | | GBPm | GBPm | GBPm | reserve | GBPm | reserve | GBPm | GBPm | | | | | | GBPm | | GBPm | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | | 3.5 | 18.2 | 49.5 | 5.6 | | (0.9) | | 124.6 | | Balance at 31 | | | | | - | | 48.7 | | | December 2007 | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Loss for the | - | - | - | - | - | - | (14.9) | (14.9) | | year | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Actuarial loss | - | - | - | - | - | - | (2.5) | (2.5) | | on defined | | | | | | | | | | benefit | | | | | | | | | | pension | | | | | | | | | | schemes | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Gain on | - | - | - | - | - | - | 1.1 | 1.1 | | defined | | | | | | | | | | benefit | | | | | | | | | | minimum | | | | | | | | | | funding | | | | | | | | | | requirement | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Dividends | - | - | - | - | - | - | (6.3) | (6.3) | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Purchase of | - | - | - | - | - | (2.5) | - | (2.5) | | own shares | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Exercise of | - | - | - | - | - | 0.5 | (0.5) | - | | own shares | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Share based | - | - | - | - | - | - | 2.3 | 2.3 | | payments | | | | | | | | | | charge | | | | | | | | | | reversal | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Shares issued | 0.1 | - | 3.1 | - | - | - | - | 3.2 | | for | | | | | | | | | | acquisitions | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | | 3.6 | 18.2 | 52.6 | 5.6 | | (2.9) | | 105.0 | | Balance at 31 | | | | | - | | 27.9 | | | December 2008 | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Profit for the | - | - | - | - | - | - | 8.4 | 8.4 | | year | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Actuarial loss | - | - | - | - | - | - | (9.7) | (9.7) | | on defined | | | | | | | | | | benefit | | | | | | | | | | pension | | | | | | | | | | schemes | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Gain on | - | - | - | - | - | - | 2.8 | 2.8 | | defined | | | | | | | | | | benefit | | | | | | | | | | minimum | | | | | | | | | | funding | | | | | | | | | | requirement | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Dividends | - | - | - | - | - | - | (3.5) | (3.5) | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Exercise of | - | - | - | - | - | 0.7 | (0.7) | - | | own shares | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Share based | - | - | - | - | - | - | 0.9 | 0.9 | | payments | | | | | | | | | | charge | | | | | | | | | | reversal | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Fair value | - | - | - | - | (0.2) | - | - | (0.2) | | movement on | | | | | | | | | | cash flow | | | | | | | | | | hedges | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Deferred tax | - | - | - | - | - | - | 2.0 | 2.0 | | on items | | | | | | | | | | recognised | | | | | | | | | | directly in | | | | | | | | | | equity | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ | Balance at 31 | 3.6 | 18.2 | 52.6 | 5.6 | (0.2) | (2.2) | 28.1 | 105.7 | | December 2009 | | | | | | | | | +----------------+---------+---------+---------+------------+---------+---------+----------+--------+ Consolidated statement of cash flows For the year ended 31 December 2009 +----------------------------------------+-------+----------+---------+ | | Notes | 2009 | 2008 | | | | GBPm | GBPm | | Continuing operations | | | | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Profit before tax | | 17.0 | 5.9 | +----------------------------------------+-------+----------+---------+ | Adjustments for: | | | | +----------------------------------------+-------+----------+---------+ | Depreciation | | 5.5 | 6.7 | +----------------------------------------+-------+----------+---------+ | Intangible asset charges | | 1.3 | 2.3 | +----------------------------------------+-------+----------+---------+ | Gain on disposal of plant and | | (0.1) | (0.2) | | equipment | | | | +----------------------------------------+-------+----------+---------+ | Expense in respect of share options | | 0.9 | 2.3 | +----------------------------------------+-------+----------+---------+ | Finance cost | | 2.2 | 1.1 | +----------------------------------------+-------+----------+---------+ | Restructuring costs | | 2.1 | 12.2 | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Cash generated from operations before | | | | | changes in working capital | | 28.9 | 30.3 | +----------------------------------------+-------+----------+---------+ | Decrease in trade and other | | 7.8 | 9.0 | | receivables | | | | +----------------------------------------+-------+----------+---------+ | Decrease (increase) in other work in | | 5.2 | (3.8) | | progress | | | | +----------------------------------------+-------+----------+---------+ | Decrease in trade and other payables | | (32.9) | (31.2) | +----------------------------------------+-------+----------+---------+ | Cash generated from operations before | | 9.0 | 4.3 | | defined benefit pension scheme | | | | | contributions and exceptional costs | | | | +----------------------------------------+-------+----------+---------+ | Defined benefit pension scheme | | (3.4) | (3.6) | | contributions | | | | +----------------------------------------+-------+----------+---------+ | Restructuring costs paid | | (8.5) | (5.9) | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Cash flows from operations | | (2.9) | (5.2) | +----------------------------------------+-------+----------+---------+ | Income tax paid | | (0.3) | (3.4) | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Cash flows from operating activities | | (3.2) | (8.6) | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Investing activities | | | | +----------------------------------------+-------+----------+---------+ | Acquisition of subsidiaries, net of | | - | (17.3) | | cash acquired | | | | +----------------------------------------+-------+----------+---------+ | Acquisition of property, plant and | | (2.8) | (7.3) | | equipment | | | | +----------------------------------------+-------+----------+---------+ | Proceeds from disposal of plant and | | 0.6 | 2.3 | | equipment | | | | +----------------------------------------+-------+----------+---------+ | Interest paid | | (0.6) | (0.9) | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Cash flows from investing activities | | (2.8) | (23.2) | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Financing activities | | | | +----------------------------------------+-------+----------+---------+ | Purchases of own shares | | - | (2.5) | +----------------------------------------+-------+----------+---------+ | (Repayment) proceeds from borrowings | | (23.4) | 36.0 | +----------------------------------------+-------+----------+---------+ | Repayment of obligations under finance | | (0.7) | (1.5) | | leases | | | | +----------------------------------------+-------+----------+---------+ | Dividends paid | | (3.5) | (6.3) | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Cash flows from financing activities | | (27.6) | 25.7 | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Net decrease in cash and cash | | | | | equivalents from continuing operations | | (33.6) | (6.1) | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Discontinued operation | | | | +----------------------------------------+-------+----------+---------+ | Cash flows from (used in) discontinued | | | | | operation | | | | +----------------------------------------+-------+----------+---------+ | Cash flows from operating activities | | 8.6 | 6.2 | | (discontinued operation) | | | | +----------------------------------------+-------+----------+---------+ | Cash flows from investing activities | | (2.1) | (4.0) | | (discontinued operation) | | | | +----------------------------------------+-------+----------+---------+ | Cash flows from financing activities | | (6.5) | - | | (discontinued operation) | | | | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Net increase in cash and cash | | | | | equivalents from discontinued | | - | 2.2 | | operations | | | | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Net decrease in cash and cash | | (33.6) | (3.9) | | equivalents | | | | +----------------------------------------+-------+----------+---------+ | Net cash and cash equivalents at | | 39.1 | 43.0 | | beginning of year | | | | +----------------------------------------+-------+----------+---------+ | | | | | +----------------------------------------+-------+----------+---------+ | Net cash and cash equivalents at end | | 5.5 | 39.1 | | of year | | | | +----------------------------------------+-------+----------+---------+ Notes to the preliminary announcement 1. Basis of accounting and accounting policies The financial information set out in this preliminary announcement does not constitute statutory financial statements for the years ended 31 December 2009 or 2008, for the purpose of the Companies Act 2006, but is derived from those financial statements. Statutory financial statements for 2008 have been filed with the Registrar of Companies and those for 2009 will be filed following the Annual General Meeting. The Group's auditors have reported on those accounts; their reports were unqualified and did not contain statements under s. 498(2) or (3) Companies Act 2006. Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union ("IFRS"), this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended 31 December 2008 updated as noted below. The key risks affecting the Group are set out in the preliminary statement and in the Company's Annual Report for the year ended 31 December 2009. Having reviewed the current and projected financial position of the Group the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the annual financial statements. During the year ended 31 December 2009, the Company adopted IFRIC 14 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. This interpretation sets out how a minimum funding requirement might give rise to a liability. The Group has adopted IFRIC 14 with effect from 1 January 2009 and comparative information for 2008 has been represented accordingly. This has resulted in the recognition of an additional liability in 2008 for the amount of the present value of the minimum funding requirements in excess of the existing defined benefit deficit. The movement in the liability between periods has been recognised in the statement of comprehensive income. The Group's retained earning of GBP51.4 million at 1 January 2008 has been restated by an increase in the pension liability of GBP2.7 million, net of tax to GBP48.7 million. The Group pension liability of GBP10.1 million at 31 December 2008 has been restated by an increase in the liability of GBP2.8 million to GBP12.9 million. The Group deferred tax asset of GBP8.0 million at 31 December 2008 has been restated by an increase in the asset of GBP0.8 million to GBP8.8 million. The Group movement in the liability between 1 January 2008 and 31 December 2008 has been recognised as income of GBP0.7 million net of tax in the statement of comprehensive income. GBP2.9 million previously disclosed in accruals and deferred income has been re-presented in provisions in respect of the financial position as at 31 December 2008. 2. Segment reporting The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. In the current and prior years the segment disclosure and information reported to the Group's chief operating decision maker for the purposes of assessment of segment performance is focused on the service each division provides to its customers. Accordingly following the adoption of IFRS 8 the identification of the Group's reportable segments has not changed. In the opinion of the directors, the Group's core activities comprise of three material segments being: response maintenance; planned repairs and refurbishment and new build. The Group was also previously involved in Property Development which has been reported as a discontinued operation in the current and prior period financial statements (see note 7). All activities were conducted within the United Kingdom. In 2009, we took a decision to restructure the Group into three new operating divisions from the 1 January 2010. The new divisions are Maintenance and improvements, Social housing and Construction. Our maintenance and improvements activity which previously reported as a separate response maintenance business and as part of our planned repairs and refurbishment business has been identified as a separate segment. Our social housing activity previously reported as part of our new build and planned repairs and refurbishment business and has been identified as a separate segment. Our construction activity previously reported as part of our new build business and has been identified as a separate segment. The financial data below reflects the performance of our three divisions in the organisational structures that applied during the period to 31 December 2009. A pro-forma analysis of the financial results of the new segments for the year ended 31 December 2009 is also set out below. 2. Segment reporting (continued) The following table provides details of revenue and profit by segment: +----------------------------------------------+----------+----------+ | Revenue | 2009 | 2008 | | | GBPm | GBPm | +----------------------------------------------+----------+----------+ | Response maintenance | 104.6 | 119.0 | +----------------------------------------------+----------+----------+ | Planned repairs and refurbishment | 314.2 | 341.3 | +----------------------------------------------+----------+----------+ | New build | 307.4 | 563.6 | +----------------------------------------------+----------+----------+ | | | | +----------------------------------------------+----------+----------+ | | 726.2 | 1023.9 | +----------------------------------------------+----------+----------+ | Less: inter segment revenue | (11.4) | (12.7) | +----------------------------------------------+----------+----------+ | | | | +----------------------------------------------+----------+----------+ | | 714.8 | 1011.2 | +----------------------------------------------+----------+----------+ | | | | +----------------------------------------------+----------+----------+ | Operating profit | | | +----------------------------------------------+----------+----------+ | Response maintenance | 6.7 | 7.4 | +----------------------------------------------+----------+----------+ | Planned repairs and refurbishment | 15.5 | 16.8 | +----------------------------------------------+----------+----------+ | New build | 4.6 | 2.2 | +----------------------------------------------+----------+----------+ | Group activities | (4.2) | (4.9) | +----------------------------------------------+----------+----------+ | | | | +----------------------------------------------+----------+----------+ | Segment adjusted operating profit | 22.6 | 21.5 | +----------------------------------------------+----------+----------+ | Exceptional items | (2.1) | (12.2) | +----------------------------------------------+----------+----------+ | Intangible asset charges | (1.3) | (2.3) | +----------------------------------------------+----------+----------+ | | | | +----------------------------------------------+----------+----------+ | Profit from operations | 19.2 | 7.0 | +----------------------------------------------+----------+----------+ | Finance cost | (2.2) | (1.1) | +----------------------------------------------+----------+----------+ | Income tax expense | (4.0) | (2.2) | +----------------------------------------------+----------+----------+ | | | | +----------------------------------------------+----------+----------+ | Profit for the year from continuing | 13.0 | 3.7 | | operations | | | +----------------------------------------------+----------+----------+ | Loss for the year from discontinued | (4.6) | (18.6) | | operations | | | +----------------------------------------------+----------+----------+ | | | | +----------------------------------------------+----------+----------+ | Profit / (loss) for the year from continuing | 8.4 | (14.9) | | and discontinued operations | | | +----------------------------------------------+----------+----------+ Proforma segmental analysis - structure from 1 January 2010 - unaudited +----------------------------------------------------------+----------+ | Revenue | 2009 | | | GBPm | +----------------------------------------------------------+----------+ | Maintenance and improvements | 283.5 | +----------------------------------------------------------+----------+ | Social housing | 204.3 | +----------------------------------------------------------+----------+ | Construction | 246.8 | +----------------------------------------------------------+----------+ | | | +----------------------------------------------------------+----------+ | | 734.6 | +----------------------------------------------------------+----------+ | Less: inter segment revenue | (19.8) | +----------------------------------------------------------+----------+ | | | +----------------------------------------------------------+----------+ | | 714.8 | +----------------------------------------------------------+----------+ | | | +----------------------------------------------------------+----------+ | Operating profit | | +----------------------------------------------------------+----------+ | Maintenance and improvements | 14.2 | +----------------------------------------------------------+----------+ | Social housing | 9.1 | +----------------------------------------------------------+----------+ | Construction | 3.5 | +----------------------------------------------------------+----------+ | Group activities | (4.2) | +----------------------------------------------------------+----------+ | | | +----------------------------------------------------------+----------+ | Segment adjusted operating profit | 22.6 | +----------------------------------------------------------+----------+ | Exceptional items | (2.1) | +----------------------------------------------------------+----------+ | Intangible asset charges | (1.3) | +----------------------------------------------------------+----------+ | | | +----------------------------------------------------------+----------+ | Profit from operations | 19.2 | +----------------------------------------------------------+----------+ | Finance cost | (2.2) | +----------------------------------------------------------+----------+ | Income tax expense | (4.0) | +----------------------------------------------------------+----------+ | | | +----------------------------------------------------------+----------+ | Profit for the year from continuing operations | 13.0 | +----------------------------------------------------------+----------+ | Loss for the year from discontinued operations | (4.6) | +----------------------------------------------------------+----------+ | | | +----------------------------------------------------------+----------+ | Profit for the year from continuing and discontinued | 8.4 | | operations | | +----------------------------------------------------------+----------+ 3. Exceptional items During the year the Group's continuing operations incurred exceptional charges and income as follows: +-----------------------------------------------+----------+----------+ | | 2009 | 2008 | +-----------------------------------------------+----------+----------+ | | GBPm | GBPm | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Redundancy and restructuring costs | 4.0 | 8.3 | +-----------------------------------------------+----------+----------+ | Property and integration costs | 1.1 | 3.9 | +-----------------------------------------------+----------+----------+ | Release of unutilised provision held in | (3.0) | - | | relation to potential OFT fine* | | | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | | 2.1 | 12.2 | +-----------------------------------------------+----------+----------+ *As part of the Office of Fair Trading's (OFT) review on tender activity in the construction sector three subsidiaries within the Group, Sol Construction Limited, Lemmeleg Limited and Richardson Projects Limited were fined a total of GBP2.4m on 22 September 2009. The fines relate to a small number of tenders performed in periods prior to their acquisition by the Group. The credit relates to the recovery of a contingent asset for reimbursement of such fines which was not previously anticipated as recoverable, and the release of the remaining provision. The provisions reflected the calculation methodology published by the OFT. In levying the eventual penalty, the OFT used its discretion to reduce the amount and hence a credit arose. 4. Finance costs and income +-----------------------------------------------+----------+----------+ | | 2009 | 2008 | +-----------------------------------------------+----------+----------+ | | GBPm | GBPm | +-----------------------------------------------+----------+----------+ | Interest: | | | +-----------------------------------------------+----------+----------+ | Interest payable on bank loans and overdrafts | (1.0) | (0.9) | +-----------------------------------------------+----------+----------+ | Other finance income: | | | +-----------------------------------------------+----------+----------+ | Expected return on pension scheme assets | 3.5 | 4.5 | +-----------------------------------------------+----------+----------+ | Other finance charges: | | | +-----------------------------------------------+----------+----------+ | Interest on pension scheme liabilities | (4.7) | (4.7) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Total finance cost | (2.2) | (1.1) | +-----------------------------------------------+----------+----------+ All finance income and charges relate to continuing operations 5. Income tax expense +-----------------------------------------------+----------+----------+ | | 2009 | 2008 | +-----------------------------------------------+----------+----------+ | | GBPm | GBPm | +-----------------------------------------------+----------+----------+ | Current tax expense: | | | +-----------------------------------------------+----------+----------+ | Current year | - | (1.0) | +-----------------------------------------------+----------+----------+ | Over provided in prior years | (0.7) | (0.4) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | | (0.7) | (1.4) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Deferred tax expense: | | | +-----------------------------------------------+----------+----------+ | Origination and reversal of temporary | 2.6 | 1.1 | | differences | | | +-----------------------------------------------+----------+----------+ | Over provided in prior years | (0.4) | (0.4) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | | 2.2 | 0.7 | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Total income tax (credit) expense | 1.5 | (0.7) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Analysed as: | | | +-----------------------------------------------+----------+----------+ | Continuing operations | 4.0 | 2.2 | +-----------------------------------------------+----------+----------+ | Discontinued operations | (2.5) | (2.9) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | | 1.5 | (0.7) | +-----------------------------------------------+----------+----------+ 5. Income tax expense (continued) +-----------------------------------------------+----------+----------+ | | 2009 | 2008 | +-----------------------------------------------+----------+----------+ | Reconciliation of effective tax rate | GBPm | GBPm | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Profit before tax on continuing operations | 17.0 | 5.9 | +-----------------------------------------------+----------+----------+ | Loss before tax on discontinued operation | (7.1) | (21.5) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Profit (loss) before tax | 9.9 | (15.6) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Income tax at the UK corporation tax rate of | 2.8 | (4.4) | | 28% (2008: 28%) | | | +-----------------------------------------------+----------+----------+ | Share of results of joint ventures | - | 0.3 | +-----------------------------------------------+----------+----------+ | Unrecognised tax losses | - | 1.9 | +-----------------------------------------------+----------+----------+ | Non taxable income | (0.8) | - | +-----------------------------------------------+----------+----------+ | Non-deductible expenses | 0.4 | 2.3 | +-----------------------------------------------+----------+----------+ | Over provided in prior years | (0.9) | (0.8) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | | 1.5 | (0.7) | +-----------------------------------------------+----------+----------+ 6. Discontinued operation The Group's Development operation was discontinued on 4 June 2008 and it has been classified separately in the current and prior year income statements and the statements of financial position and cash flows. +-----------------------------------------------+----------+----------+ | | 2009 | 2008 | | Results of discontinued operation | GBPm | GBPm | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Revenue (including share of joint ventures) | 7.9 | 31.6 | +-----------------------------------------------+----------+----------+ | Less: share of joint ventures' revenue | - | (0.2) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Revenue | 7.9 | 31.4 | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Gross loss | (0.3) | (0.2) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Administrative expenses | - | (2.1) | +-----------------------------------------------+----------+----------+ | Work in progress impairment and closure costs | (4.0) | (16.0) | +-----------------------------------------------+----------+----------+ | Share of post tax losses from joint ventures | - | (0.4) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Loss from discontinued operation | (4.3) | (18.7) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Analysed as: | | | +-----------------------------------------------+----------+----------+ | Underlying operating loss | (0.3) | (2.7) | +-----------------------------------------------+----------+----------+ | Work in progress impairment | (4.0) | (8.6) | +-----------------------------------------------+----------+----------+ | Other closure costs | - | (3.6) | +-----------------------------------------------+----------+----------+ | Intangible asset charges | - | (3.8) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Finance costs | (2.8) | (2.8) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Loss before tax | (7.1) | (21.5) | +-----------------------------------------------+----------+----------+ | Income tax credit | 2.5 | 2.9 | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Loss for the year from discontinued operation | (4.6) | (18.6) | +-----------------------------------------------+----------+----------+ +-----------------------------------------------+----------+----------+ | Assets and associated liabilities held for | 2009 | 2008 | | sale | GBPm | GBPm | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | The assets and liabilities classified as held for sale are: | +---------------------------------------------------------------------+ | Investments in joint ventures | 1.8 | 3.6 | +-----------------------------------------------+----------+----------+ | Inventories | 13.2 | 19.0 | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | | 15.0 | 22.6 | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Trade and other payables | - | 0.5 | +-----------------------------------------------+----------+----------+ 7. Discontinued operation (continued) Earnings per share - discontinued operation +----------------------------------------+----------+---------+---------+--------+---------+ | The calculation of earnings per share, together | | | | with the adjusted earnings per share is based on | 2009 | 2008 | | the following: | | | +---------------------------------------------------+-------------------+------------------+ | | | Diluted | Basic | Diluted | | | Basic | | | | +---------------------------------------------------+---------+---------+--------+---------+ | | GBPm | GBPm | GBPm | GBPm | +---------------------------------------------------+---------+---------+--------+---------+ | | | | +-------------------------------------------------------------+---------+------------------+ | Loss attributable to ordinary shareholders | (4.6) | (4.6) | (18.6) | (18.6) | +---------------------------------------------------+---------+---------+--------+---------+ | Add Goodwill write off, not taxable | - | - | 3.8 | 3.8 | +---------------------------------------------------+---------+---------+--------+---------+ | | | | +----------------------------------------+------------------------------+------------------+ | Adjusted loss | (4.6) | (4.6) | (14.8) | (14.8) | +---------------------------------------------------+---------+---------+--------+---------+ | | | | | | +---------------------------------------------------+---------+---------+--------+---------+ | | pence | pence | pence | Pence | +---------------------------------------------------+---------+---------+--------+---------+ | Loss per share | (2.6) | (2.6) | (10.6) | (10.5) | +---------------------------------------------------+---------+---------+--------+---------+ | Adjusted loss per share | (2.6) | (2.6) | (8.5) | (8.4) | +---------------------------------------------------+---------+---------+--------+---------+ | | | | | | | +----------------------------------------+----------+---------+---------+--------+---------+ 8. Earnings per share The calculation of basic and diluted earnings per share, together with the adjusted earnings per share for each is based on the following: +-------------------------------------+-------+---------+-------+---------+ | | | | | From continuing operations | 2009 | 2008 | +-------------------------------------+-----------------+-----------------+ | | Basic | Diluted | Basic | Diluted | +-------------------------------------+-------+---------+-------+---------+ | | GBPm | GBPm | GBPm | GBPm | +-------------------------------------+-------+---------+-------+---------+ | | | | +---------------------------------------------+---------+-----------------+ | Earnings, being profit attributable | 13.0 | 13.0 | 3.7 | 3.7 | | to ordinary shareholders | | | | | +-------------------------------------+-------+---------+-------+---------+ | Less: OFT provision release, not | (3.0) | (3.0) | - | - | | taxable | | | | | +-------------------------------------+-------+---------+-------+---------+ | Add: intangible and exceptional | 4.6 | 4.6 | 10.4 | 10.4 | | charges, net of tax | | | | | +-------------------------------------+-------+---------+-------+---------+ | | | | +---------------------------------------------+---------+-----------------+ | Adjusted earnings | 14.6 | 14.6 | 14.1 | 14.1 | +-------------------------------------+-------+---------+-------+---------+ +-------------------------------------+-------+---------+--------+---------+ | | | | | From continuing and discontinued | 2009 | 2008 | | operations | | | +-------------------------------------+-----------------+------------------+ | | Basic | Diluted | Basic | Diluted | +-------------------------------------+-------+---------+--------+---------+ | | GBPm | GBPm | GBPm | GBPm | +-------------------------------------+-------+---------+--------+---------+ | | | | +---------------------------------------------+---------+------------------+ | Earnings, being profit (loss) | 8.4 | 8.4 | (14.9) | (14.9) | | attributable to ordinary | | | | | | shareholders | | | | | +-------------------------------------+-------+---------+--------+---------+ | Add: Goodwill write off, not | - | - | 3.8 | 3.8 | | taxable | | | | | +-------------------------------------+-------+---------+--------+---------+ | Less: OFT provision release, not | (3.0) | (3.0) | - | - | | taxable | | | | | +-------------------------------------+-------+---------+--------+---------+ | Add: Intangible and exceptional | 4.6 | 4.6 | 10.4 | 10.4 | | charges, net of tax | | | | | +-------------------------------------+-------+---------+--------+---------+ | | | | +---------------------------------------------+---------+------------------+ | Adjusted earnings (loss) | 10.0 | 10.0 | (0.7) | (0.7) | +-------------------------------------+-------+---------+--------+---------+ +-------------------------------------+-------+-------+-------+-------+ | | m | m | m | m | +-------------------------------------+-------+-------+-------+-------+ | | | | +---------------------------------------------+-------+---------------+ | Issued ordinary shares at 1 January | 179.3 | 179.3 | 176.6 | 176.6 | +-------------------------------------+-------+-------+-------+-------+ | Effect of shares issued in the year | - | - | 2.1 | 2.1 | +-------------------------------------+-------+-------+-------+-------+ | Effect of own shares held | (3.4) | (3.4) | (3.3) | (3.3) | +-------------------------------------+-------+-------+-------+-------+ | Weighted average number of shares | 175.9 | 175.9 | 175.4 | 175.4 | +-------------------------------------+-------+-------+-------+-------+ | Effect of share options | - | 2.0 | - | 1.7 | +-------------------------------------+-------+-------+-------+-------+ | Weighted average number of shares | 175.9 | 177.9 | 175.4 | 177.1 | | used | | | | | +-------------------------------------+-------+-------+-------+-------+ | | | | | | +-------------------------------------+-------+-------+-------+-------+ | From continuing operations | pence | pence | pence | pence | +-------------------------------------+-------+-------+-------+-------+ | | | | +---------------------------------------------+-------+---------------+ | Earnings per share | 7.4 | 7.3 | 2.1 | 2.1 | +-------------------------------------+-------+-------+-------+-------+ | Adjusted earnings per share | 8.3 | 8.2 | 8.1 | 8.0 | +-------------------------------------+-------+-------+-------+-------+ | | | | | | +-------------------------------------+-------+-------+-------+-------+ | From continuing and discontinued | pence | pence | pence | pence | | operations | | | | | +-------------------------------------+-------+-------+-------+-------+ | | | | +---------------------------------------------+-------+---------------+ | Earnings (loss) per share | 4.8 | 4.7 | (8.5) | (8.4) | +-------------------------------------+-------+-------+-------+-------+ | Adjusted earnings (loss) per share | 5.7 | 5.6 | (0.4) | (0.4) | +-------------------------------------+-------+-------+-------+-------+ 9. Dividends +-----------------------------------------------+----------+----------+ | | 2009 | 2008 | | | GBPm | GBPm | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Final paid 2008: 1.25p (2007: 2.35p) per 2p | 2.2 | 4.2 | | ordinary share | | | +-----------------------------------------------+----------+----------+ | Interim paid 2009: 0.75p (2008: 1.15p) per 2p | 1.3 | 2.1 | | ordinary share | | | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | | 3.5 | 6.3 | +-----------------------------------------------+----------+----------+ Subject to approval by shareholders, a final dividend of per share 1.65p (2008: 1.25p) will be paid on 14 May 2010 to members on the register at 6 April 2010. A dividend reinvestment plan ('the Plan') is available which enables shareholders to reinvest their cash dividend in Rok plc ordinary shares. Details of the Plan are contained in a leaflet which can be found on the Company's website - www.rokgroup.com - under Investor Relations/Accounts & Circulars/Other Circulars/Dividend Reinvestment Plan or which may be obtained from the Registrars. Shareholders who have already lodged a mandate and who wish to remain in the Plan need take no action, whereas those who wish to cancel an existing mandate and receive a cash dividend should advise the Registrars in writing of this by 22 April 2010. Shareholders who have not yet completed a mandate but who wish to reinvest the dividend will need to complete a mandate and return this to the Registrars to arrive by 22 April 2010. The Registrars, Computershare Investor Services PLC, can be contacted at The Pavilions, Bridgwater Road, Bristol BS99 6ZZ or on 0870 707 1274. 10. Share capital The number of shares in issue at 31 December 2009 was 179,310,087 (2008: 179,303,672). 11. Reconciliation of net cash flow to movement in net debt +-----------------------------------------------+----------+----------+ | | 2009 | 2008 | | | GBPm | GBPm | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Decrease in cash and cash equivalents in the | (33.6) | (3.9) | | year | | | +-----------------------------------------------+----------+----------+ | Cash outflow (inflow) from change in debt | 30.6 | (34.5) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Change in net debt resulting from cash flows | (3.0) | (38.4) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Movement in net debt | (3.0) | (38.4) | +-----------------------------------------------+----------+----------+ | Net debt at 1 January | (43.7) | (5.3) | +-----------------------------------------------+----------+----------+ | | | | +-----------------------------------------------+----------+----------+ | Net debt at 31 December | (46.7) | (43.7) | +-----------------------------------------------+----------+----------+ Cautionary statement This Preliminary Report has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The Preliminary Report should not be relied on by any other party or for any other purpose. The Preliminary Report contains certain forward looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information. This information is provided by RNS The company news service from the London Stock Exchange END FR DBGDXSBGBGGI
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