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SUR Sureserve Group Plc

124.50
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Sureserve Group Plc LSE:SUR London Ordinary Share GB00BSKS1M86 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 124.50 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Sureserve Group PLC Interim Results for the six months ended 31 March (2598D)

25/06/2019 7:00am

UK Regulatory


Sureserve (LSE:SUR)
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TIDMSUR

RNS Number : 2598D

Sureserve Group PLC

25 June 2019

25 June 2019

Sureserve Group plc, the asset and support services group

Unaudited Interim Results for the six months ended 31 March 2019 (H1 FY19)

Transformed business positioned for growth

Bob Holt, Chairman of Sureserve Group commented:

"I am pleased to report an excellent set of results for the 6 months ended 31 March 2019, with the Group trading comfortably ahead of the previous year.

Both our Compliance and Energy business groups showed a significant improvement year on year. It should be remembered that the first half of our year takes into account the winter months where gas in particular incurs significantly higher costs than the summer months. It was pleasing to see our smart meter installation business achieve profitability and we look to the future with a positive view on that business.

The results demonstrate that we were well ahead of the comparable period last year and the Board look forward to achieving a successful outcome for the year to September.

It would be remiss of me to not highlight the commitment from Michael McMahon and the operational and support management teams. I commend my colleagues for their hard work and desire to drive the Group to market leading positions in the markets they serve. We operate across both the public and private sector markets which have seen difficult UK wide trading conditions, and our performance against this is a further demonstration of our ability to win new business on a profitable and cash generative basis.

I personally look forward to bringing you further good news in the future."

Financial highlights

Ø Revenue from continuing operations grew by 13% to GBP102.5m (H1 FY18: GBP91.1m)

Ø Underlying EBITA(1) from continuing operations grew by 17% to GBP3.1m (H1 FY18: GBP2.7m)

Ø Underlying EBITA(1) margins from continuing operations were 3.0% (H1 FY18: 2.9%)

Ø Underlying pre-tax profit(2) of GBP2.5m (H1 FY18: GBP1.9m)

Ø Group profit before tax from continuing operations of GBP1.1m (H1 FY18: Loss of GBP0.5m), after amortisation of acquisition intangibles of GBP1.4m (H1 FY18: GBP2.2m) and finance expenses of GBP0.6m (H1 FY18: GBP0.7m)

Ø Underlying cash conversion of 51% (H1 FY18: 25%)

Ø Losses from discontinued operations of GBPnil (FY18: losses of GBP11.8m resulting from the impairment exercise undertaken in the prior year as part of the preparation of these activities for sale). Earnings per share from continuing operations of 0.6p (H1 FY18: loss per share of 0.2p)

Ø Earnings per share from continuing operations and discontinued operations of 0.6p (H1 FY18: loss per share of 7.7p).

Ø Balance sheet remains robust, with net debt of GBP12.9m (31 March 2018: GBP14.2m) at the end of our peak seasonal working capital period

Operational highlights

Ø Repositioning of the Group to focus on Compliance and Energy Services and leveraging the strength of the Sureserve brand to capture new business is bearing fruit

Ø High bidding success rate led to contract wins in the period valued at GBP54.5m contributing to an order book of GBP350.5m, representing a 11% fall on the comparative period mainly due to the end of a number of long-term contracts (31 March 2018: GBP395.9m)

Ø Our number of frameworks stood at 291 (31 March 2018: 258), with a value of GBP1.2bn (31 March 2018: GBP1.1bn), representing a 9% rise on the comparative period

Ø Launched Sureserve Academy to provide skills training for employees and sourcing future workforce

Ø New appointment of Chief Financial Officer Peter Smith, formerly at MITIE

Outlook

Ø The de-risked and refocused Group is making excellent progress and the underlying performance of Compliance and Energy Services is strong

Ø Strong regulatory drivers continue to underpin demand demonstrated by our strong order book and visibility of future earnings

Ø The Group is trading comfortably ahead of the previous year and we are well positioned for further growth

Enquiries

Sureserve Group

Bob Holt, Chairman 07778 798 816

   Michael McMahon, Chief Operating Officer                                           07787 536 000 
   Shore Capital (Nominated Adviser and Broker)                                020 7408 4090 

Antonio Bossi / Andy Crossley

Camarco (Financial Public Relations)

Ginny Pulbrook 020 3757 4992

Tom Huddart

Ollie Head

Notes to editors

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

The Group was founded in 1988 and is headquartered in Basildon, Essex. It currently employs some 2,000 staff from 23 offices across the UK.

Definitions

1. EBITA is earnings before interest, tax and amortisation of acquisition intangibles. Underlying EBITA is defined as operating profit before deduction of exceptional and other items, as outlined in Note 3 and on the face of the Condensed Consolidated Statement of Comprehensive Income. Underlying EBITA is the same as "Operating profit before exceptional and other items" on the face of the Condensed Consolidated Statement of Comprehensive Income, but used as terminology in light of being a key performance measurement for management in the Group.

2. Underlying pre-tax profit is profit before tax from continuing operations before the deduction of exceptional and other items, as outlined in Note 3 and on the face of the Condensed Consolidated Statement of Comprehensive Income. As set out in the Condensed Consolidated Statement of Comprehensive Income, other underlying numbers are stated before exceptional and other items (discussed further in Note 3). Underlying profit after tax and underlying earnings per share are, where relevant, stated net of an imputed tax charge.

CHAIRMAN'S STATEMENT

I am pleased to report an excellent set of results for the 6 months ended 31 March 2019.

Both our Compliance and Energy Services business groups showed a significant improvement year on year. It should be remembered that the first half of our year takes into account the winter months where gas in particular incurs significantly higher costs than the summer months. It was pleasing to see our smart meter installation business achieve profitability and we look to the future with a positive view on that business.

The results demonstrate that we were well ahead of the comparable period last year and the Board looks forward to achieving a successful outcome for the year to September.

Revenues from continuing operations grew 13% to GBP102.5m (H1 FY18: GBP91.1m). Underlying EBITA grew by 17% to GBP3.1m (H1 FY18: GBP2.7m) and operating profits were GBP1.7m (H1 FY18: GBP0.2m). Net debt was GBP12.9m (31 March 2018: GBP14.2m) at the end of the period, where our cash conversion is seasonally low.

Although the Group's order book fell 11% to GBP350.5m against the comparative period, due mainly to a number of long-term contracts coming to an end within the period, we have also seen an encouraging 9% growth on the value of frameworks we are on, compared to the previous year.

These results demonstrate a turnaround in the Group's fortunes following a difficult period and the divestment of the construction and property services business groups. The Board believe that all legacy matters have now been provided for.

It would be remiss of me to not highlight the commitment from Michael McMahon, our Chief Operating Officer, and the operational and support management teams. I commend my colleagues for their hard work and desire to drive the Group to market leading positions in the markets they serve. We operate across both the public and private sector markets which have seen difficult UK wide trading conditions, and our performance against this is a further demonstration of our ability to win new business on a profitable and cash generative basis.

I am also pleased to announce that Peter Smith is joining the Group as Chief Financial Officer effective 29 July 2019 following an extensive search process. Peter has held senior finance roles at companies such as MITIE, OCS Group, Balfour Beatty and DHL over the past thirteen years and I look forward to working with him as we roll out our growth strategy over the years ahead.

I personally look forward to bringing you further good news in the future.

OPERATIONAL REVIEW

Compliance (63% of continuing Group revenue / H1 FY18: 61%)

 
 Compliance: six months ended         Unaudited   Unaudited     Change 
  31 March                          6 months to    6 months 
                                  31 March 2019       to 31 
                                                      March 
                                                       2018 
 Revenue (GBPm)                            65.7        56.1      17.2% 
                                ---------------  ----------  --------- 
 Underlying EBITA (GBPm)                    2.6         2.4      11.6% 
                                ---------------  ----------  --------- 
 Underlying EBITA margin                   4.0%        4.2%   (0.2pts) 
                                ---------------  ----------  --------- 
 

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

We are typically paid for service and repair work on a fixed price basis evenly through the year. The gas businesses (which as noted above make up the majority of the division's annual revenues) have more call-outs during colder months, resulting in higher labour and materials costs, meaning we are far more profitable and cash generative in the warmer months when call-out rates are lower and those same engineers can be deployed to jobs that yield further income. As a result, a significant proportion of the division's annual profit continues to arise during the second half of the financial year.

The division showed strong period-on-period revenue growth of 17.2% to GBP65.7m (H1 FY18: GBP56.1m), driven by further new contract wins and extensions in addition to increasing regulatory demands in the sector, which saw a focus by some clients on higher-than-expected installation works in the first half of the year. Underlying EBITA increased by 11.6% to GBP2.6m (H1 FY18: GBP2.4m). Ongoing operational improvements within the gas businesses have seen a small improvement in EBITA performance overall, however most of the additional profitability has been driven by the increased revenues in comparison to the same period last year.

The division continued its excellent track record on new wins during the period with particular success within our K&T business, including an GBP8.6m five year (possible extension to ten) gas service and repair contract with HARCA, an 18 month extension with L&Q worth GBP4.5m and further gas contracts with Hammersmith (GBP4m, one year), Optivo (GBP3m, 4 years), Red Kite (GBP2.7m, 3 years) and Moat HA (GBP2m, 2 years). Other significant wins in the division include GBP10m for Thurrock and GBP7.5m for Welwyn Hatfied for gas service and maintenance works.

The outlook for our Compliance businesses remains strong, underpinned by the continuing wins of long-term contracts and levels of frameworks to which the division has been appointed. With the trading environment pushing towards greater levels of regulation, there is a growing stimulus in demand for our compliance services expertise.

Energy Services (37% of continuing Group revenue / H1 FY18: 39%)

 
 Energy Services: six months       Unaudited      Unaudited   Change 
  ended 31 March                    6 months       6 months 
                                 to 31 March    to 31 March 
                                        2019           2018 
 Revenue (GBPm)                         38.0           36.6     3.9% 
                               -------------  -------------  ------- 
 Underlying EBITA (GBPm)                 1.9            1.6    18.6% 
                               -------------  -------------  ------- 
 Underlying EBITA margin                5.0%           4.4%   0.6pts 
                               -------------  -------------  ------- 
 

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

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

-- Providor is a leading national installer of smart meters (operating as a meter asset manager and meter operator), working for several "big six" and challenger utilities, who are required to install smart meters in every home in England, Wales and Scotland. There are more than 26 million homes for the energy suppliers to access, with the goal of every home being offered a smart meter by 2020. The national smart metering programme has been beset by delays, not least the advent of next generation SMETS 2 meters, for which the mandated implementation deadline has slipped a number of times.

The division showed period on period revenue growth of 3.9% to GBP38.0m (H1 FY18: GBP36.6m), reflecting increased activity within all departments of the Everwarm business with the exception of insulation, which has been impacted by ECO3 challenges, and further offset by a decrease in meter installation work due to the transitional period. EBITA improved 18.6% to GBP1.9m (H1 FY18: GBP1.6m), due to a move to a breakeven H1 trading position in our smart metering operations combined with an overall increase in profitability of the Everwarm business largely due to revenue increases.

As we have previously highlighted, there have been continued delays to the national smart meter roll-out and indeed, there are further derogations permitting the installation of older SMETS1 meters. This has adversely impacted anticipated installation volumes, compounding the challenges we outlined in previous annual reports and we are continuing to apply a range of approaches to navigate this challenging time. As such, we continue to manage our smart metering contracts responsibly and provide strong and secure employment for our engineers. With this level of uncertainty remaining in the smart metering market, costs are continuing to rise and we repeat our previous belief that it is imperative all stakeholders in the national smart meter roll out programme work together to agree an achievable timetable with consistent volumes, to avoid further cost increases.

Carbon prices remained largely stable during the period however volumes were impacted by the transition to "ECO3" which has proven challenging due to changes in measure types and qualifying property. We continue to work through this period and believe we are well-placed to deliver on behalf of our Utility partners despite the initial difficulties.

The Scottish Government's flagship Home Energy Efficiency Programme for Scotland ("HEEPS") continued to perform well in the first half, bringing a diversified installation portfolio, focusing on central heating, boiler improvements and other energy efficiency installation measures. Our Warmworks joint venture delivering the Warmer Homes Scotland initiative for the Scottish Government saw continued strong performance and we were delighted that in April our contract was extended to 2022.

We have now concluded the mobilisation of the Arbed 3 programme for the Welsh Government via our joint venture with the Energy Saving Trust, focused on improvements to households likely to be living in severe fuel poverty. The contract is now seeing consistent and growing monthly measure installation performance, which we expect to continue into the second half of the year as we focus on delivery.

Other notable successes further to the HEEPS extension above during the period include follow on work for Glasgow City via a GBP1.9m award for their 18/19 programme delivery and further EWI work for Fife in Kirkcaldy (GBP1.7m), in addition to a significant smart metering win with Octopus Energy for delivery of SMETS2 installations and asset management, estimated as worth up to GBP9.4m over an initial 18 month term.

New wins and order book

The Board is encouraged that high bidding success rates continue to be achieved by the Group. Contract wins in the period totaled GBP54.5m, contributing to a period-end order book of GBP350.5m. This represented a 11% decrease on the comparative period (31 March 2018: GBP395.9m). The order book remains strong across our continuing business lines as we continue to focus on securing contracts with long term visibility and robust value.

Our number of frameworks stood at 291 (31 March 2018: 258), with a value of GBP1.2bn (31 March 2018: GBP1.1bn), representing a 9% rise on the comparative period.

FINANCIAL REVIEW

The Operational Review provides a detailed overview of our trading performance during the period. This Financial Review therefore covers other aspects of the financial results, cash flows and financial position.

Trading overview

Revenues from continuing operations grew 13% to GBP102.5m (H1 FY18: GBP91.1m), driven by the impact of contracts secured and mobilised by Compliance in 2018, in addition to higher installation levels for clients and the stronger H1 revenue delivery within the Everwarm business. Underlying EBITA grew by 17% to GBP3.1m (H1 FY18: GBP2.7m) and the Group generated operating profits of GBP1.7m (H1 FY18: GBP0.2m), driven by performance improvements in the current period.

Central costs marginally increased to GBP1.4m (H1 FY18: GBP1.3m).

Underlying pre-tax profit was GBP2.5m (H1 FY18: GBP1.9m). Group profit before tax from continuing operations was GBP1.1m (H1 FY18: loss of GBP0.5m) and profits after tax from continuing operations were GBP0.9m (H1 FY18: losses of GBP0.3m), resulting in earnings per share from continuing operations of 0.6p (H1 FY18: loss per share of 0.2p).

Exceptional items

Net exceptional items in the period amounted to GBPnil (H1 FY18: costs of GBP0.2m). Further details are provided in note 3.

Amortisation of acquisition intangibles

When Sureserve Group acquires businesses, the estimated value of their intangible assets (such as customer contracts and non-compete undertakings from vendors) is recognised on the Group's Statement of Financial Position. These acquisition intangibles are then amortised over their expected useful lives, estimated at between four and six years. We exclude this amortisation charge from our calculation of adjusted EBITA as the Board believes the underlying operating performance of our business is better understood before such costs.

Amortisation of acquisition intangibles was GBP1.4m during the period (H1 FY18: GBP2.2m) with the decrease of GBP0.8m reflecting the fact that we have taken amortisation charges in prior periods, meaning we are amortising a reduced base of intangible assets.

Finance expense

Finance expense is the interest charged on our debt facilities and the unwinding of the discount applied to deferred consideration on acquisitions. The expense in the first half was GBP0.6m (H1 FY18: GBP0.7m).

Tax

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

Earnings per share

Profits from continuing operations for the period were GBP0.9m (H1 FY18: loss of GBP0.3m). Based on the weighted average number of shares in issue during the period of 157.5m, this resulted in basic earnings per share from continuing operations of 0.6p (H1 FY18: loss per share of 0.2p). Total earnings per share (including discontinued operations) were 0.6p (H1 FY18: losses per share of 7.7p).

Cash conversion

Underlying operating cash conversion represented an inflow of GBP1.6m (H1 FY18: GBP0.7m) as discussed in note 10 and reflected an operating cash conversion from continuing operations of 51% (H1 FY18: 25%). We calculate underlying operating cash conversion as cash generated from continuing operations excluding the cash impact of exceptional items and amortisation of acquisition intangibles, divided by underlying EBITA from continuing operations, to provide a consistent comparison of underlying cash generation. Operating cash outflow in the period was GBP1.8m (H1 FY17: GBP10.9m).

On a steady state basis, we expect to continue to target an average stabilised annual underlying operating cash conversion of 80% over the long term.

Net debt and banking facilities

At 31 March 2019, the Group had net debt of GBP12.9m (31 March 2018: GBP14.2m), comprising cash and other items of GBP1.3m (31 March 2018: GBP3.6m), together with a GBP14.2m drawing (31 March 2018: GBP17.8m) under our revolving credit facility, out of a total facility of GBP25m.

Statement of financial position

The principal items in our Balance Sheet are goodwill, intangible assets, debt and working capital.

The principal movement in net assets from 31 March 2018 to 31 March 2019 reflected the disposal of Lakehouse Contracts and Foster Property Maintenance, amortisation of acquisition intangibles, and movements in working capital.

The principal movements in working capital are notes below;

 
                         Unaudited    Unaudited         Audited 
                                31           31    30 September 
                             March        March            2018 
                              2019         2018 
                           GBP'000      GBP'000         GBP'000 
   Trade receivables          23.3         20.9            19.0 
   Accrued income             15.1         13.3            15.7 
   Trade payables           (23.7)       (23.5)          (24.6) 
   Accruals                  (7.8)        (8.9)           (7.9) 
                       ===========  ===========  ============== 
 

Net current assets excluding cash were GBP8.2m (31 March 2018: GBP3.7m).

As at 31 March 2019, we held provisions of GBP5.4m (31 March 2018: GBP2.3m; 30 September 2018: GBP7.7m). Some GBP2.3m was utilised in in the period in relation to resolving the ongoing matters to which the provisions pertain. We have reviewed the provision that was made at year end and the Board consider that all legacy matters have been provided for.

Risks

The Board considers strategic, financial and operational risks and identifies actions to mitigate those risks. Key risks and their mitigation were disclosed on pages 22 to 25 of the Annual Report for the year ended 30 September 2018.

We continue to manage a number of potential risks and uncertainties, including claims and disputes - many of which are common to other similar businesses - which could have a material impact on short and longer-term performance.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 March 2019

 
 
                                                        Unaudited      Unaudited          Audited 
                                                       six months     six months       year ended 
                                                            ended          ended     30 September 
                                                         31 March       31 March             2018 
                                                             2019           2018 
                                             Notes        GBP'000        GBP'000          GBP'000 
 
 
 Revenue                                       2          102,476         91,058          190,750 
 Cost of sales                                           (88,130)       (79,038)        (163,380) 
 
 Gross profit                                              14,346         12,020           27,370 
 
 Other operating expenses                                (11,622)        (9,152)         (19,558) 
 Share of results of joint venture                            371          (213)              226 
 
 Operating profit before exceptional 
  and other items                                           3,095          2,655            8,038 
 Exceptional costs                             3                -          (616)          (1,048) 
 Exceptional income                            3                -            373              757 
 Amortisation of acquisition intangibles       3          (1,367)        (2,186)          (4,325) 
                                                                                  --------------- 
 
 Operating profit                              2            1,728            226            3,422 
 
 Finance expense                                            (609)          (727)          (1,475) 
 
 Profit / (loss) before tax from 
  continuing operations                        2            1,119          (501)            1,947 
 
 Taxation                                      4            (218)            173            (782) 
 
 Profit / (loss) for the period 
  attributable to the equity holders 
  of the Group from continuing operations                     901          (328)            1,165 
                                                    -------------  -------------  --------------- 
 Discontinued operations 
 Loss for the period from discontinued 
  operations                                                    -       (11,826)         (11,520) 
                                                    -------------  -------------  --------------- 
 Profit / (loss) for the period 
  attributable to the equity holders 
  of the Group                                                901       (12,154)         (10,355) 
                                                    =============  =============  =============== 
 
 
 Earnings / (loss) per share from 
  continuing operations 
 Basic                               6   0.6p   (0.2)p   0.7p 
 Diluted                             6   0.6p   (0.2)p   0.7p 
                                        =====  =======  ===== 
 
 
 Earnings / (loss) per share from 
  continuing operations and discontinued 
  operations 
 Basic                                      6   0.6p   (7.7)p   (6.6)p 
 Diluted                                    6   0.6p   (7.7)p   (6.6)p 
                                               =====  =======  ======= 
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 March 2019

 
                                                                                 Audited 
                                                 Unaudited     Unaudited           As at 
                                                     As at         As at    30 September 
                                                        31            31            2018 
                                                     March         March 
                                                      2019          2018 
                                       Notes       GBP'000       GBP'000         GBP'000 
 
 Non-current assets 
 Goodwill                                           42,406        42,169          42,923 
 Other intangible assets                             3,701         7,093           4,927 
 Property, plant and equipment                       1,483         1,271           1,474 
 Interest in joint venture                             675           226             865 
 Deferred tax asset                                    195             -               - 
                                                    48,460        50,759          50,189 
                                              ------------  ------------  -------------- 
 Current assets 
 Inventories                                         3,034         4,296           4,222 
 Trade and other receivables                        45,846        41,471          42,618 
 Corporation tax receivable                              -             -             769 
 Assets held for sale                                    -        24,138               - 
 Cash and cash equivalents               8           1,407         3,730           1,705 
                                              ------------  ------------  -------------- 
                                                    50,287        73,635          49,314 
                                              ------------  ------------  -------------- 
 Total assets                                       98,747       124,394          99,503 
                                              ------------  ------------  -------------- 
 
 Current liabilities 
 Loans and borrowings                   7,8              -             -          12,926 
 Trade and other payables                           38,902        41,434          39,334 
 Finance lease obligations               8              53           131              83 
 Provisions                              9           1,549           218           5,102 
 Liabilities held for sale                               -        24,183               - 
 Income tax payable                                    192           256               - 
                                              ------------  ------------  -------------- 
                                                    40,696        66,222          57,445 
                                              ------------  ------------  -------------- 
 Net current assets / (liabilities)                  9,591         7,413         (8,131) 
                                              ------------  ------------  -------------- 
 
 Non-current liabilities 
 Trade and other payables                                -             -             269 
 Loans and borrowings                   7,8         14,199        17,750               - 
 Finance lease obligations               8              34            89              60 
 Deferred tax liability                                  -           172              37 
 Provisions                              9           3,813         2,073           2,593 
                                                    18,046        20,084           2,959 
                                              ------------  ------------  -------------- 
 Total liabilities                                  58,742        86,306          60,404 
                                              ------------  ------------  -------------- 
 Net assets                                         40,005        38,088          39,099 
                                              ============  ============  ============== 
 
 Equity 
 Called up share capital                            15,754        15,753          15,753 
 Share premium account                              25,318        25,314          25,314 
 Share-based payment reserve                           776           776             776 
 Own shares                                          (290)         (290)           (290) 
 Merger reserve                                     20,067        20,067          20,067 
 Retained earnings                                (21,620)      (23,532)        (22,521) 
 Equity attributable to equity 
  holders of the Company 
  Equity attributable to equity 
  holders of the Company                            40,005        38,088          39,099 
                                              ============  ============  ============== 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 March 2019

 
                                                  Share-based 
                                          Share       payment 
                              Share     premium       reserve     Own shares      Merger     Retained      Total 
                            capital     account                                  reserve     earnings     equity 
                            GBP'000     GBP'000       GBP'000        GBP'000     GBP'000      GBP'000    GBP'000 
 At 1 October 2017 
  (audited)                  15,753      25,314           776          (290)      20,067     (11,378)     50,242 
 
 Loss for the period              -           -             -              -           -     (12,154)   (12,154) 
 At 31 March 2018 
  (unaudited)                15,753      25,314           776          (290)      20,067     (23,532)     38,088 
 
 Profit for the period            -           -             -              -           -        1,799      1,799 
 Dividends paid (note 
  5)                              -           -             -              -           -        (788)      (788) 
 At 30 September 2018 
  (audited)                  15,753      25,314           776          (290)      20,067     (22,521)     39,099 
                         ==========  ==========  ============  =============  ==========  ===========  ========= 
 
 
 Issue of shares               1        4     -       -        -          -        5 
 Profit for the period         -        -     -       -        -        901      901 
 At 31 March 2019 
  (unaudited)             15,754   25,318   776   (290)   20,067   (21,620)   40,005 
                         =======  =======  ====  ======  =======  =========  ======= 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 31 March 2019

 
 
                                                      Unaudited      Unaudited          Audited 
                                                     six months     six months       year ended 
                                                          ended          ended     30 September 
                                                       31 March       31 March             2018 
                                                           2019           2018 
                                           Notes        GBP'000        GBP'000          GBP'000 
 
 Cash flows from operating activities 
 Cash used in operations                    10          (1,752)       (10,892)          (5,682) 
 Interest paid                                            (467)          (443)          (1,058) 
 Interest received                                            -              1                - 
 Taxation                                                   511            132            (152) 
 Net cash used in operating activities                  (1,708)       (11,202)          (6,892) 
                                                  -------------  -------------  --------------- 
 
 Cash flows from investing activities 
 Payment of deferred consideration 
  on prior year acquisitions                                  -        (1,245)          (1,245) 
 Receipt of deferred consideration                          916              -                - 
  on prior year disposals 
 Purchase of property, plant and 
  equipment                                               (334)          (236)            (430) 
 Purchase of intangible assets                            (300)          (150)            (449) 
 Sale of property, plant and equipment                       13             42               65 
 Net cash generated from / (used 
  in) investing activities                                  295        (1,589)          (2,059) 
                                                  -------------  -------------  --------------- 
 
 Cash flows from financing activities 
 Dividend paid to shareholders                                -              -            (788) 
 Proceeds from bank borrowings                            1,500              -                - 
 Repayment of bank borrowings                                 -        (9,500)         (14,500) 
 Repayments to finance lease creditors                     (57)          (106)            (183) 
 Finance issue costs                                      (328)            (2)              (2) 
 Net cash generated from / (used 
  in) financing activities                                1,115        (9,608)         (15,473) 
                                                  -------------  -------------  --------------- 
 
 Net decrease in cash and cash 
  equivalents                                             (298)       (22,399)         (24,424) 
 
 Cash and cash equivalents at beginning 
  of year                                                 1,705         26,129           26,129 
 
 Cash and cash equivalents at end 
  of year                                                 1,407          3,730            1,705 
                                                  =============  =============  =============== 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 31 March 2019

   1.   Basis of preparation 

The results presented in this report are unaudited and they have been prepared in accordance with the recognition and measurement of International Financial Reporting Standards (`IFRS') as adopted by the EU that are expected to be applicable to the financial statements for the year ending 30 September 2019 and on the basis of the accounting policies to be used in those financial statements. The figures for the year ended 30 September 2018 are extracted from the statutory accounts of the group for that period The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements, being the statutory financial statements for Sureserve Group plc, as at 30 September 2018, which have been prepared in accordance with IFRS as adopted by the European Union.

The condensed consolidated financial statements for the six months ended 31 March 2019 do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2018 have been approved by the Board of Directors and delivered to the Registrar of Companies. These accounts, which contained an unqualified audit report under Section 495, did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 30 September 2018, with the exception of those noted below;

IFRS 9

IFRS 9 Financial Instruments is effective for accounting periods beginning on or after 1 January 2018 and has been applied by the Group from 1 October 2018. The adoption of the standard has not had a material impact on the amounts reported.

IFRS 15

IFRS 15 sets out the principles to be applied in revenue recognition, replacing those in IAS 18 Revenue, IAS 11 Construction Contracts and their related guidance.

IFRS 15 is effective for accounting periods beginning on or after 1 January 2018 and has been applied by the Group from 1 October 2018. Upon transition to IFRS 15, the Group applied the 'Cumulative Catch-Up' method. Under this method, there was no adjustment to equity on 1 October 2018 and the comparative figures presented in the financial statements will not be restated.

IFRS 16

We will evaluate the potential impact of IFRS 16 on the FY19 accounts, which will form the comparative figure when the standard is adopted in FY20 and will provide guidance to the market accordingly.

Seasonality

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

   2.   Operating segments 

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

   --              Compliance 
   --              Energy Services 

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

The following is an analysis of the Group's revenue and Underlying EBITA by reportable segment:

 
 
                                   Unaudited      Unaudited          Audited 
                                  six months     six months       year ended 
                                       ended          ended     30 September 
                                    31 March       31 March             2018 
                                        2019           2018 
                                     GBP'000        GBP'000          GBP'000 
   Revenue 
   Compliance                         65,743         56,075          116,275 
   Energy Services                    38,002         36,571           77,734 
   Total segment revenue             103,745         92,646          194,009 
   Inter-segment elimination         (1,269)        (1,588)          (3,259) 
                               -------------  -------------  --------------- 
   Total underlying revenue          102,476         91,058          190,750 
                               -------------  -------------  --------------- 
 

Inter-segment trading comprises services provided between group companies charged at prevailing market prices.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2019

   2.   Operating segments (continued) 

Reconciliation of Underlying EBITA to loss before taxation

 
 
                                                 Unaudited      Unaudited          Audited 
                                                six months     six months       year ended 
                                                     ended          ended     30 September 
                                                  31 March       31 March             2018 
                                                      2019           2018 
                                                   GBP'000        GBP'000          GBP'000 
   Underlying EBITA by segment 
   Compliance                                        2,640          2,365            6,104 
   Energy Services                                   1,896          1,599            4,025 
   Central costs 1                                 (1,441)        (1,309)          (2,091) 
                                             -------------  -------------  --------------- 
   Total underlying EBITA                            3,095          2,655            8,038 
   Exceptional costs                                     -          (616)          (1,048) 
   Exceptional income                                    -            373              757 
   Amortisation of acquisition intangibles         (1,367)        (2,186)          (4,325) 
   Operating profit                                  1,728            226            3,422 
   Finance costs                                     (609)          (727)          (1,475) 
   Profit / (loss) before taxation                   1,119          (501)            1,947 
                                             =============  =============  =============== 
 

1 Central costs are those costs that are not allocated directly in support of a segment and comprise certain group service functions.

   3.   Exceptional and other items, including amortisation of acquisition intangibles 
 
 
                                                Unaudited      Unaudited          Audited 
                                               six months     six months       year ended 
                                                 ended 31       ended 31     30 September 
                                               March 2019     March 2018             2018 
                                                  GBP'000        GBP'000          GBP'000 
 
   Total exceptional costs                              -          (616)          (1,048) 
   Total exceptional income                             -            373              757 
   Amortisation of acquisition intangible 
    assets                                        (1,367)        (2,186)          (4,325) 
                                            =============  =============  =============== 
 

Exceptional costs and income

Exceptional costs related to restructuring costs during previous periods.

Exceptional income mainly related to the settlement of deferred consideration on previous acquisitions at sums lower than expectations.

Amortisation of acquisition intangibles

Amortisation of acquisition intangibles was GBP1.4m for the period (2018: GBP2.2m); with the GBP0.8m reduction reflecting the fact that we have taken amortisation charges in prior periods, meaning we are amortising a reduced base of intangible assets.

Accounting treatment

The costs discussed above are considered non-trading because they are not part of the underlying trading of the Group and (aside from amortisation of acquisition intangibles and unwinding discount of deferred consideration) are not expected to recur year to year.

   4.   Taxation 

The income tax charge for the six months ended 31 March 2019 is calculated based upon the effective tax rates expected to apply to the Group for the period of 19%.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2019

   5.   Dividends 

The proposed final dividend for the year ended 30 September 2018 of 0.25 pence per share amounting to GBP0.4m and representing a total dividend of 0.25 pence for the full year (2017: 0.5 pence per share), was paid on 6 April 2019 to the shareholders on the register at the close of business on 2 March 2019. The Directors do not propose an interim dividend at March 2019.

   6.   Earnings / (losses) per share 

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

 
 
                                                          Unaudited      Unaudited              Audited 
                                                         six months     six months           year ended 
                                                           ended 31          ended         30 September 
                                                         March 2019       31 March                 2018 
                                                                              2018 
                                                             Number         Number               Number 
   Weighted average number of ordinary 
    shares for the purposes of basic earnings 
    / (loss) per share                                  157,541,890    157,527,103          157,527,103 
 
   Diluted 
   Effect of dilutive potential ordinary 
    shares: 
   Share options                                            189,136      6,803,308            7,316,715 
                                                      -------------  -------------      --------------- 
   Weighted average number of ordinary 
    shares for the purposes of diluted loss 
    / earnings per share                                157,731,026    163,330,411          164,843,818 
                                                      =============  =============      =============== 
 
   Earnings / (loss) for the purpose of 
    basic and diluted earnings per share 
    from continuing operations being net 
    earnings / (loss) attributable to the 
    owners of the Company from continuing 
    operations (GBP'000)                                        901          (328)                1,165 
 
   Basic earnings / (loss) per share from 
    continuing operations                                      0.6p         (0.2)p                 0.7p 
   Diluted earnings / (loss) per share 
    from continuing operations                                 0.6p         (0.2)p                 0.7p 
 
   Earnings / (loss) for the purpose of 
    earnings per share being underlying 
    net profit attributable to the owners 
    of the Company from continuing and discontinued 
    operations (GBP'000)                                        901       (12,154)             (10,355) 
 
   Basic earnings / (loss) per share                           0.6p         (7.7)p               (6.6)p 
   Diluted earnings / (loss) per share                         0.6p         (7.7)p               (6.6)p 
                                                      =============  =============      =============== 
 
 

The number of shares in issue at 31 March 2019 was 157,543,621.

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

   7.   Loans and borrowings 
 
                                          Unaudited   Unaudited         Audited 
                                                 31          31    30 September 
                                              March       March            2018 
                                               2019        2018 
                                            GBP'000     GBP'000         GBP'000 
   Bank loans and credit facilities at 
    amortised cost: 
   Current                                        -           -          12,926 
   Non-current                               14,199      17,750               - 
                                         ----------  ----------  -------------- 
                                             14,199      17,750          12,926 
 
   Maturity analysis of bank loans and 
    credit facilities falling due: 
   In one year or less, or on demand              -           -          12,926 
   Between one and two years                      -      17,750               - 
   Between two and five years                14,199           -               - 
                                             14,199      17,750          12,926 
                                         ----------  ----------  -------------- 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2019

   8.   Net debt 
 
                                          Unaudited      Unaudited         Audited 
                                                 31             31    30 September 
                                              March          March            2018 
                                               2019           2018 
                                            GBP'000        GBP'000         GBP'000 
   Cash and cash equivalents                  1,407          3,730           1,705 
   Bank loans and credit facilities        (14,199)       (17,750)        (12,926) 
   Finance lease obligations                   (87)          (220)           (143) 
                                      -------------  -------------  -------------- 
                                           (12,879)       (14,240)        (11,364) 
                                      =============  =============  ============== 
 
   9.   Provisions 
 
                                                               Legal and 
                                                                   other 
                                                                 GBP'000 
    At 1 April 2018 (unaudited)                                    2,291 
    Identified on acquisition                                         27 
    Additional provision                                           5,490 
    Utilised in the period                                         (102) 
    Disposal of Lakehouse Contracts Limited and Foster 
     Property Maintenance Limited                                   (11) 
                                                               --------- 
    At 30 September 2018 (audited)                                 7,695 
    Utilised in the period                                       (2,333) 
                                                               --------- 
    At 31 March 2019 (unaudited)                                   5,362 
                                                               ========= 
 
    Current provisions                                             1,549 
                                                               ========= 
 
    Non-current provisions                                         3,813 
                                                               ========= 
 

Legal and other

Other costs relate to property dilapidation obligations, potential contract settlement costs and other potential legal settlement costs. These are expected to result in an outflow of economic benefit over the next one to three years. GBP2.4m of the provision has been settled in the period.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the six months ended 31 March 2019

10. Cash used in operations

 
                                                                                        Audited 
                                                       Unaudited      Unaudited      year ended 
                                                      six months     six months    30 September 
                                                           ended          ended            2018 
                                                        31 March       31 March 
                                                            2019           2018 
                                                         GBP'000        GBP'000         GBP'000 
   Operating profit                                        1,728            226           3,422 
   Adjustments for: 
   Depreciation                                              327            477             858 
   Amortisation of intangible assets                       1,524          2,369           4,668 
   Profit on disposal of property, plant 
    and equipment                                           (13)           (38)            (52) 
   Changes in working capital: 
   Inventories                                             1,188          (828)             305 
   Amounts owed by customers under construction 
    contracts                                                  -        (2,660)           6,269 
   Amounts owed to customers under construction 
    contracts                                                  -          (531)         (1,786) 
   Trade and other receivables                           (3,976)        (2,515)          18,010 
   Trade and other payables                                (197)        (5,911)        (29,185) 
   Provisions                                            (2,333)          (416)           3,638 
   Net change in working capital from 
    discontinued operations                                    -        (1,065)        (11,829) 
   Cash used by operations                               (1,752)       (10,892)         (5,682) 
                                                   -------------  -------------  -------------- 
 
   Underlying operating cash conversion 
    calculation 
   Cash used by operations                               (1,752)       (10,892)         (5,682) 
   Impact of exceptional and other costs 
    in the period                                          3,331          1,768           2,448 
   Cash impact of net change in working 
    capital from discontinued operations                       -          9,785           8,042 
   Underlying cash generated from operations               1,579            661           4,808 
 
   Operating profit before exceptional 
    items and amortisation of acquisition 
    intangibles                                            3,095          2,655           8,038 
 
   Underlying operating cash conversion 
    %                                                        51%            25%             60% 
                                                   -------------  -------------  -------------- 
 
 
   Impact of exceptional and other costs in the period relates to the 
    cash impact of Exceptional and other items as disclosed in Note 
    3. 
 

11. Related party transactions

There have been no material changes to the related party balances disclosed in the Group's Annual Report and Accounts 2018 and there have been no related party transactions that have materially affected the financial position or performance of the Group in the six months to 31 March 2019.

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

END

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