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RHL - Redhall News Story

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Sector
Industrials
Size
Micro Cap
Market Cap £n/a
Enterprise Value £n/a
Revenue £37.8m
Position in Universe th / 1826

Redhall Group PLC - Preliminary Results - Part 1

Wed 9th December, 2015 7:00am
RNS Number : 4353I
Redhall Group PLC
09 December 2015

For immediate release 9 December 2015

Redhall Group plc

("Redhall" or the "Group")

Preliminary Results for the year ended 30 September 2015

Redhall Group plc (AIM: RHL), the manufacturing and specialist services Group, announces its preliminary results for the year ended 30 September 2015.

Key points:

Group now refocussed on Manufacturing and Specialist Services following completion of first stage of strategic plan

Placing, open offer and debt conversion in September 2015 reduced debt by 8.0 million and provided 5.0million of funds (after expenses)

Revenue on continuing operations of 44.7 million (2014: 57.2 million), reflecting continuing delays in customer programmes and the downturn in the oil and gas sector

Operating loss on continuing operations before exceptional items 0.7 million (2014: profit of 1.6million), in line with management expectations

Loss on discontinued operations of 9.1 million including loss on sale of RESL of 5.1 million and costs of withdrawal from site based nuclear contracting

Refinancing agreed - facility expiring in December 2018 with facilities provided by HSBC Bank plc and funds managed by Henderson

Exceptional charges of 9.3 million (2014: 3.6 million) reflecting restructuring and other items of 4.2million (continuing 1.2 million and discontinued 3.0 million) and loss on sale of RESL of 5.1 million

Order book for continuing businesses of 21 million (2014: 21 million restated) with the quality of contracts improving

Martyn Everett, Chairman of Redhall commented: "Redhall has undergone dramatic change in the last financial year. The Group is now a Manufacturing and Specialist Services business with a clear strategy to leverage our relationships with customers in the nuclear and infrastructure sectors. The key to the next phase of the turnaround at Redhall is achieving an improved order flow in its core businesses. We firmly believe that the nuclear sector in particular represents a significant medium to long term opportunity for the Group."

Contact details:

Redhall Group plc

Tel: +44 (0) 1924 385 386

Martyn Everett, Chairman
Phil Brierley, Chief Executive
Chris Kelly, Finance Director




Buchanan

Tel: +44 (0) 20 7466 5000

Mark Court, Sophie Cowles, Jane Glover






Altium, NOMAD and Financial Advisors


Paul Lines, Simon Lord

Tel: +44 (0) 845 505 4343



WH Ireland, Broker


Adrian Hadden, Liam Gribben

Tel: +44 (0) 20 7220 1666



CHAIRMAN'S STATEMENT

Redhall has undergone dramatic change in the last financial year. The Group is now a Manufacturing and Specialist Services business with a clear strategy to leverage our relationships with customers inthe nuclear and infrastructure sectors. We have materially reduced borrowings. In September we successfully raised 5.0 million net of expenses by way of a placing and open offer andconverted 3.0 million of shareholder debt to equity resulting in year end net debt of 5.5 million (2014: 16.0 million).

Our focus this year has been the implementation of the strategic plan announced in December 2014 and this is dealt with in greater detail in the Chief Executive's Strategic Report. With a focus on the nuclear defence, decommissioning and infrastructure sectors our key manufacturing businesses, Booth Industries and Jordan Manufacturing, have the capability of generating high margins with anticipated improvements in volumes.

Our manufacturing businesses performed acceptably given clients' budgetary constraints and client driven design delays exacerbated by the downturn in the oil and gas market. Our Specialist Services businesses have performed satisfactorily generating profits during the year.

In May we sold Redhall Engineering Solutions ("RESL") to Cape plc and announced the closure of our site-based nuclear contracting businesses based at Sellafield and Aldermaston. Since then we have completed our withdrawal from site based work and are completing minor works and final accounts. Following these actions we have created a more stable platform for the business as well as reducing the Group's overall risk profile.

The Group now has a much simplified structure and cost base with no divisional management and our finance, HR and IT are all managed on a Group basis.

Trading results

This year's results reflect the transition that the Group has undergone. The revenue for the year from continuing operations was 44.7 million which compares with 57.2 million on a like for like basis. The adjusted operating loss before exceptional items amounted to 0.7 million compared with an operating profit of 1.6 million last year. Adjusted fully diluted loss per share for the continuing business was 3.34p (2014: 0.39p).

Exceptional items

Exceptional items amounted to 9.3 million (2014: 3.6 million). They can be classified in three categories: the loss on disposal of RESL of 5.1 million, the loss on disposal of surplus assets of 0.1 million and other exceptional items of 4.1 million, which were incurred in executing the strategy and reshaping the Group to achieve ongoing cost savings. In addition to the restructuring announced in May, the decline in the oil and gas market has had a significant effect upon our fabrication business in Newcastle. This has been down sized and the related reorganisation costs amounted to 0.3 million.

Financial position

The support of HSBC and of Henderson during this financial year has been fundamental in allowing the Group to implement the restructuring and begin the next stage of the turnaround. The HSBC facility has been reduced from 20.25 million to 6.0 million as a consequence of disposals, the fundraising and the purchase of debt by Henderson. Our total facilities at the year end were 12.2million and I am pleased that both HSBC and funds managed by Henderson have agreed to extend the facilities to December 2018.

Net debt at 30 September 2015 was 5.5 million (30 September 2014: 16.0 million).

Net assets at 30 September 2015 amounted to 18.6 million. The increase in net assets of 8.0m from the placing and open offer and debt conversion was offset by losses of 12.2 million and the movement on the pension deficit of 0.4 million.

An impairment review of the carrying value of goodwill and intangible assets has been carried out and based upon our projections there is no impairment of the amounts carried in the consolidated balance sheet.

Dividend

In the light of the performance in the year the Board does not recommend a dividend (2014: nil).

People

We have had a settled Board over the past year and the Board remains focussed upon the implementation of the strategic plan.

The Board would particularly like to thank the Group's loyal staff for their commitment and for their hard work to support the Group's turnaround.

Prospects

The key to the next phase of the turnaround in Redhall's fortunes is achieving an improved order flow in its core businesses. The order book now stands at 21.0 million. We are investing in sales resource to secure more work whilst taking full advantage of our strong brands and reputation. Whilst anticipated order flow from certain major customers is unpredictable, we firmly believe that the nuclear sector in particular represents a significant medium to long term opportunity for the Group. We are currently engaged in a number of major tenders for nuclear defence and decommissioning projects and infrastructure related work. The infrastructure opportunities are likely to result in work in FY16, and the nuclear opportunities are likely to lead to revenue in FY17 and beyond.

We are encouraged by agreements reached between the UK Government, EDF and China General Nuclear Power in recent months relating to the Hinkley Point C nuclear new build project. Further announcements by the parties will clarify the timing and extent of work that Redhall's manufacturing businesses will be able to bid for over the coming years.

The oil and gas sector remains subdued. We expect this to impact on volumes for a second year at both Booth Industries and R Blackett Charlton and we do not anticipate any significant improvement in this sector over the course of this financial year.

Our Specialist Services businesses in the telecommunications and food sectors are likely to have a strong year in 2015/16 whilst our Marine business will continue to work for its major customer on site instructions but with lower volumes due to process changes.

To enhance profitability we will also focus over the next year on operational improvements to drive margin growth. We plan to invest in essential capital equipment and are committed to enhancing our margins with supply chain, bidding and commercial management improvements.

After a difficult few years, the business is now right sized, leaner and well set to capitalise on future prospects in the infrastructure and nuclear sectors.

Martyn Everett

Chairman

9 December 2015



STRATEGIC REPORT

Strategic Update

The 2015 financial year has been one of considerable change for Redhall Group. In December 2014 we set out our Strategic Plan stating our intention to focus on our higher margin manufacturing and specialist services businesses, reduce contracting risk, reduce gearing and lower costs. The delivery of this plan was the Group's primary goal for the year.

We announced in June that Stage One of the Strategic Plan was largely complete. We have reduced the contracting risk through the disposal of RESL to Cape plc and the withdrawal from our site based nuclear contracting activities. Debt has been lowered as the sale of RESL for an enterprise value of 6.0 million injected 5.1 million of net cash into the Group and the sale of a non-core property generated net cash of 0.4 million. A further property sale raised net proceeds of 0.4 million after the year end. We have also lowered costs by removing the old divisional structure, centralising our service functions and exercising local cost reduction plans in some of our businesses.

We have now entered the second stage of the Strategic Plan, one of business improvement, investment and growth. To facilitate this we completed a fundraising in September consisting of a placing, open offer and debt conversion that improved the Group's balance sheet by 8.0 million and available cash by 5.0 million. We believe that this transaction will benefit the Group by:

improving client confidence

gaining better trading terms with our supply chain

allowing investment in equipment and technology to improve productivity and expand our business offering

allowing investment in pre-contract sales, marketing and tendering

providing working capital to fund growth

Furthermore, this transaction has introduced new institutions to our shareholder base to support the Group's future growth.

These actions delivered in the year have been significant steps in realising our strategic goals and redefining Redhall as an established high integrity manufacturing and specialist services business.

Overview

During this period of restructuring the Group has made an adjusted operating loss on continuing operations of 0.7 million on revenue of 44.7 million. This is lower than the 1.6 million of adjusted operating profit on revenues of 57.2 million for the year ended 30 September 2014, but is in line with expectations. The performance reflects the heavy restructuring that has been carried out during the financial year together with delays in some of our customers' capital projects and the substantial downturn in the oil and gas market. The ongoing activities have also taken the full burden of the Group costs in the year. These costs have progressively reduced as the restructuring has been delivered and will be lower in 2016. Pre Group costs the ongoing business made an adjusted operating profit of 1.2million.

Health and Safety

The health and safety of our employees and those who may be affected by our business remains our principal priority. All of our six subsidiaries, with the exception of Redhall Networks, now have management systems to control health and safety risks to OHSAS 18001 and environmental management systems certified to BS EN ISO 14001. We expect Redhall Networks will achieve accreditation to both standards by the end of 2015.

During the year our subsidiaries once again applied for health and safety awards from The Royal Society for the Prevention of Accidents (RoSPA), which recognises high or very high levels of performance. One of our businesses maintained performance to achieve the prestigious Order of Distinction for the fifth year in a row. This is awarded to organisations that have achieved 15 or more consecutive Gold Awards. Two businesses achieved Gold Awards whilst one achieved a Silver Award.

Manufacturing

Manufacturing operations encompass the design, manufacturing, installation and commissioning of high integrity products and equipment typically in nuclear, oil and gas, specialist infrastructure and high end architectural metalwork sectors. We have three businesses with very strong brands and heritage in their areas: Booth Industries, Jordan Manufacturing and R Blackett Charlton.

Through a period of significant restructuring, the turnover for Manufacturing reduced to 18.5 million from 29.4 million in 2014. Operating profits also fell to 0.3 million from 2.8 million last period. Although all three subsidiaries experienced revenue reductions in the year the most pronounced was RBC which experienced a reduction in sales of 53.0% bringing turnover down to 5.7 million. RBC's principal activity is the manufacture of large bore pipe for supply into the oil and gas market. This business had an excellent year in 2014 but, as a result of the dramatic fall in oil prices, the market for these products has been very depressed in recent months. We do not see this market improving in the foreseeable future and so have taken the decision to considerably reduce the size of the operation. The cost of this restructure is 0.3 million but will result in a business that will be modestly profitable.

Despite the difficulties encountered in 2015, we have experienced an increase in the order books of Booth Industries and Jordan Manufacturing during the year.

The manufacturing opportunities in nuclear decommissioning and nuclear new build are medium to long term in nature, although we have seen a significant increase in tenders for this work in the past three months. We are confident that, having strategically refocussed the business, we are now well positioned to take advantage of these opportunities in the coming years. In the shorter term, defence tenders have improved since the general election and we continue to expand our offering into other high integrity or high hazard environments. One notable success in the year has been the award to Booth Industries of five engineered doors contracts on the Crossrail major infrastructure project with a combined value in excess of 5 million.

Specialist Services

Specialist Services consists of our activities in installation and maintenance of the telecommunications network infrastructure, design manufacture and installation of process lines in food and pharmaceutical markets and specialist surface finishings to Astute class submarines. We deliver these services through Redhall Networks, Redhall Jex and Redhall Marine.

The turnover for this business segment for the year ended 30 September 2015 was 26.2 million, down from 27.7 million in 2014. The adjusted operating profit for the same period was 0.9 million which is consistent with the performance in 2014. Volumes and profits in Redhall Networks were strong as the networks infrastructure market remained buoyant throughout the year. Our clients in the food and pharmaceutical sectors have remained fairly consistent in the volume of prospects suited to Redhall Jex resulting in this business performing at similar levels to last year. Since our 2015 year end there has been a noticeable increase in food tenders which should allow the business to improve the order book and become more selective. Redhall Jex was part of our old engineering division and since the disposal of RESL it has been managed independently and it has become clear that there are opportunities to improve margin through driving efficiencies in both fixed costs and cost of sales. Redhall Marine continued to provide specialist surface finishings to Astute class submarines for BAe at Barrow.

Site Services

This reporting segment consists of the businesses held for strategic divestment or closure and is shown as discontinued operations. It encompasses the pre disposal activities of RESL and the site-based nuclear contracting activities of Redhall Nuclear Ltd.

The turnover from these businesses for year was 24.1 million and they contributed an adjusted operating loss of 1.0 million. These results are not directly comparable with 2014 as they do not relate to a full year of activity. Within this segment, the site-based nuclear contracting business also accounted for the majority of the Group's exceptional costs.

Exceptional Items

Exceptional costs in the period under review totalled 9.3 million We announced in our strategy update on 14 May 2015 that we expected total exceptional costs to be 8.8 million consisting of 3.6million resulting from redundancy costs, closure costs and asset write offs due to restructuring and 5.2 million resulting from the disposal of RESL. A large part of this 0.5million movement is as a result of the 0.3 million of redundancy costs at R Blackett Charlton to right size the business in the light of a significant drop in oil and gas contracts.

Outlook

We have now restructured Redhall into a clearly focussed Manufacturing and Specialist Services Group. Since the fundraising in September we have begun to invest in strengthening our business development capability, recruiting more depth into our management teams, training and developing our people and upgrading our equipment and technology. The improved balance sheet also gives us more credibility with customers and suppliers.

There is still more work to be done before the turnaround is complete and the Group can begin to achieve its potential. One of our main strategic priorities is to grow the order book whilst maintaining its quality. It is therefore encouraging that we have recently seen a significant increase in manufacturing tenders particularly for longer term nuclear opportunities where we will have submitted around 150 million of bids in the last quarter of the 2015 calendar year. These projects are primarily for manufacture from 2017 onwards with some extending for 10 years. There is considerable work to do before any of these schemes become contracts but we believe that the submission of these tenders not only demonstrates increased activity in the market but also the level of credibility and resource our businesses now have.

Also within Manufacturing we have secured multiple orders for the Crossrail project and continue to tender for a number of sizable engineered door projects on this infrastructure scheme. We are also benefiting from repeat work with many high quality clients such as Sellafield Ltd, Dounreay Site Restoration Ltd, Rolls Royce, AWE, and Renishaw.

Within Specialist Services we have submitted our proposal to renew the framework contract for blasting, painting and insulating the Astute class submarines. This contract is likely to be awarded during 2016. If successful, it will provide us with a further 2 years of work with BAe which may be extended to 5 years in annual increments. We continue to receive good levels of opportunities from Mondelez, Kellogg's and Nestle in our food and pharmaceutical business and have recently seen a substantial increase in tenders from Mars. The contracts in our networks infrastructure business are always short term but this market has been buoyant recently and with the continued roll out of 4G and the consolidation of network providers we expect that it will remain buoyant throughout 2016.

In summary we believe that we are experiencing a significant increase in opportunities due to both an uplift in our target markets and an improving business development capability within the Group. The implementation of Stage Two of the Strategic Plan will provide a good platform to benefit from these opportunities.

Phil Brierley

Chief Executive

9 December 2015



Consolidated Income Statement





Year to 30 September 2015

Year to 30 September 2014





Before

Exceptional


Before

Exceptional





Note

exceptional

items

Total

exceptional

items

Total



items

(Note 2)

items

(Note 2)





000

000

000

000

000

000









Restated

Restated

Restated



Revenue

1

44,704

-

44,704

57,164

-

57,164




Cost of sales


(34,518)

(252)

(34,770)

(44,616)

(459)

(45,075)




Gross profit


10,186

(252)

9,934

12,548

(459)

12,089




Administrative expenses


(11,178)

(988)

(12,166)

(11,278)

(651)

(11,929)




Operating (loss)/profit

1

(992)

(1,240)

(2,232)

1,270

(1,110)

160




Adjusted operating (loss)/profit*


(671)

(1,240)

(1,911)

1,591

(1,110)

481




Amortisation of acquired intangible assets


(321)

-

(321)

(321)

-

(321)




Operating (loss)/profit


(992)

(1,240)

(2,232)

1,270

(1,110)

160




Financial income

5

-

-

-

4

-

4




Financial expenses

5

(1,411)

-

(1,411)

(1,792)

-

(1,792)




Loss before tax from continuing operations


(2,403)

(1,240)

(3,643)

(518)

(1,110)

(1,628)




Tax credit

6

551

-

551

173

-

173




Loss on continuing operations


(1,852)

(1,240)

(3,092)

(345)

(1,110)

(1,455)




Loss on discontinued operations net of tax

3

(964)

(8,105)

(9,069)

(1,715)

(2,510)

(4,225)




Loss attributable to equity holders


(2,816)

(9,345)

(12,161)

(2,060)

(3,620)

(5,680)



of the Parent Company


Loss per share

8









Basic




(24.57)p



(14.29)p


Diluted




(24.57)p



(14.29)p













* Adjusted operating (loss)/profit is (loss)/profit before financial income, financial expenses, tax and amortisation of intangible assets acquired with business combinations. The comparative amounts have been restated as a result of discontinuance of site services operations (note 3).



Consolidated Statement of Comprehensive Income


Note

Year to


Year to



30 September 2015


30 September 2014




000


000






Restated


Loss for the year


(12,161)


(5,680)


Other comprehensive income:






Items that will not be reclassified to profit or loss:






Remeasurement of defined benefit liability

9

(509)


(594)


Tax on actuarial (loss)/gain

6

102


119


Tax on revaluation of property and amortisation of property,

6

-




revaluation transferred between reserves

2


Accelerated capital allowances

7

(1)


(4)


Other comprehensive income for the year net of tax


(408)


(477)


Total comprehensive income attributable to equity holders of the Parent Company

(12,569)


(6,157)



Consolidated Balance Sheet


Note

As at

As at



30 September 2015

30 September 2014


000

000


Assets





Non-current assets





Property, plant and equipment


2,501

4,733


Intangible assets


2,792

4,911


Purchased goodwill


18,305

23,785


Deferred tax asset


154

-




23,752

33,429


Current assets





Inventories


517

661


Trade and other receivables


14,968

27,030


Cash and cash equivalents


687

-


Assets held for sale


440

-




16,612

27,691


Liabilities





Current liabilities





Trade and other payables


(13,628)

(20,122)


Borrowings


-

(2,782)


Current tax payable


(19)

(19)




(13,647)

(22,923)


Non-current liabilities





Borrowings


(6,175)

(13,250)


Deferred tax liabilities

7

-

(68)


Retirement benefit obligations


(1,960)

(1,698)




(8,135)

(15,016)


Net assets


18,582

23,181


Shareholders' equity





Share capital


12,284

12,269


Share premium account


28,326

21,297


Merger reserve


12,679

12,679


Revaluation reserve


102

144


Other reserve


1,177

251


Retained earnings


(35,986)

(23,459)


Total equity


18,582

23,181








Consolidated Statement ofChanges in Equity


Share

Share

Merger

Revaluation

Other

Retained

Total



capital

premium

reserve

reserve

reserve

earnings


000

000

000

000

000

000

000


At 1 October 2013

7,462

19,127

12,679

147

265

(17,305)

22,375


Share capital issued during the year net of expenses

4,807

2,170

-

-

-

-

6,977


Employee share-based compensation

-

-

-

-

(14)

-

(14)


Tax in connection with employee share-based compensation

-

-

-

-

-

-

-


Transactions with owners

4,807

2,170

-

-

(14)

-

6,963











Loss for the year

-

-

-

-

-

(5,680)

(5,680)


Transfer between reserves in respect of depreciation

-

-

-

(3)

-

3

-


on property revaluations


Other comprehensive income for the year

-

-

-

-

-

(477)

(477)


Total comprehensive income for the year

-

-

-

(3)

-

(6,154)

(6,157)











At 30 September 2014

12,269

21,297

12,679

144

251

(23,459)

23,181











Share capital issued during the year net of expenses

15

7,029

-

-

927

-

7,971


Employee share-based compensation

-

-

-

-

(1)

-

(1)


Tax in connection with employee share-based compensation

-

-

-

-

-

-

-


Transactions with owners

12,284

28,326

12,679

144

1,177

(23,459)

31,151


Loss for the year

-

-

-

-

-

(12,161)

(12,161)


Transfer between reserves in respect of depreciation

-

-

-

(3)

-

3

-


on property revaluations


Transfer between reserves following disposal

-

-

-

(39)

-

39

-


Other comprehensive income for the year

-

-

-

-

-

(408)

(408)


Total comprehensive income for the year

-

-

-

(42)

-

(12,527)

(12,569)











At 30 September 2015

12,284

28,326

12,679

102

1,177

(35,986)

18,582


Other reserves comprise share based compensation 250,000 (2014: 251,000), equity reserve relating to the grant of options on conversion of debt during the year 925,000 and other reserves of 2,000.


Consolidated Cash Flow Statement



Note

Year to

Year to




30 September 2015

30 September 2014


000

000



Cash flows from operating activities






Loss after taxation


(12,161)

(5,680)



Adjustments for:






Depreciation


697

548



Amortisation of intangible assets


519

577



Difference between pension charge and cash contributions


(307)

(337)



Loss/(profit) on disposal of property, plant and equipment


102

48



Loss on sale of discontinued operations (net of tax)

4

5,147

203



Share-based payments credit


(1)

(14)



Financial income


-

(4)



Financial expenses


1,411

1,792



Tax credit recognised in the income statement


(576)

(85)



Decrease in trade and other receivables


5,809

5,686



Decrease/(increase) in inventories


144

(17)



Decrease in trade and other payables


(2,239)

(4,613)



Cash absorbed by operations


(1,455)

(1,896)



Interest paid


(1,361)

(1,651)



Net cash absorbed by operating activities


(2,816)

(3,547)



Cash flows from investing activities






Purchase of property, plant and equipment


(103)

(352)



Purchase of intangible assets


(17)

(134)



Proceeds from disposal of fixed assets


395

12



Net proceeds from sale of discontinued operations (net of cash disposed of)

4

5,114

94



Interest received


-

4



Net cash used in investing activities


5,389

(376)



Cash flows from financing activities






Proceeds from issue of share capital (net of costs incurred)


4,971

6,977



Proceeds from borrowings


-

3,000



Repayment of long-term borrowing


(5,075)

(4,750)


Net cash generated by financing activities


(104)

5,227


Net increase in cash and cash equivalents


2,469

1,304


Cash and cash equivalents at beginning of year


(1,782)

(3,086)


Cash and cash equivalents at end of year


687

(1,782)








See note 3 for cash flows relating to discontinued activities


Notes to the Consolidated Financial Statements

1. Segment analysis

IFRS8 "Operating Segments" requires an entity to report on those operating segments that engage in business activities from which it may earn revenues and incur expenses; whose operating results are regularly reviewed by the chief operating decision maker ("CODM"); and for which discrete financial information is available. The CODM has been identified ultimately as the Board of Directors.

The Board assess the performance of the operating segments based on a measure of operating profit or loss which excludes the effects of exceptional items. Central costs and unallocated items represent head office functions and items such as amortisation of acquired intangible assets arising on the acquisition of businesses.

The activities of each business segment are as follows:

Manufacturing

Manufacturing encompasses the design, manufacture and installation of bespoke specialist plant and equipment typically in the nuclear, defence, oil and gas, petrochemical, chemical, pharmaceutical and food sectors. The division has particular expertise in the design and manufacture of high integrity fire and blast resistant doors, window and wall systems.

Specialist Services

Specialist Services comprises our activities in installation and maintenance of the telecommunications network infrastructure, design, manufacture and installation of process lines in food and pharmaceutical markets and specialist surface finishings to Astute class submarines.

Site Services

During the period the activities of the Site Services segment were discontinued following the Group's decision to sell its Engineering business and to close its site-based Nuclear contracting businesses. The results of these businesses are disclosed in Note 3.

The Group has previously reported its activities in Manufacturing, Nuclear and Engineering segments. Following the strategic review by the Chief Executive businesses were reallocated to segments reflecting the Group's amended strategic direction.

Operating segments

Year to 30 September 2015





Group






Revenue

operating



profit


000

000


Manufacturing

18,461

321


Exceptional items

-

(867)


Total Manufacturing

18,461

(546)


Specialist Services

26,243

891


Exceptional items

-

(105)


Total Specialist Services

26,243

786


Central costs

-

(1,883)


Exceptional items

-

(268)


Total Central costs

-

(2,151)


Total operations before exceptional items*

44,704

(671)


Exceptional items

-

(1,240)


Total operations

44,704

(1,911)


Amortisation of acquired intangible assets


(321)






Operating loss


(2,232)


Financial income


-


Financial expenses

(1,411)






Group loss before tax


(3,643)


Tax


551


Group loss for the year

(3,092)


*Adjusted operating profit is stated before exceptional items and amortisation of intangible assets acquired with business combinations.

Year to 30 September 2014





Group






Revenue

operating



profit



000

000



Restated

Restated


Manufacturing

29,443

2,844


Exceptional items

-

(236)


Total Manufacturing

29,443

2,608


Specialist Services

27,721

865


Exceptional items

-

(298)


Total Specialist Services

27,721

567


Central costs

-

(2,118)


Exceptional items

-

(576)


Total Central costs

-

(2,694)


Total operations before exceptional items*

57,164

1,591


Exceptional items

-

(1,110)


Total operations

57,164

481


Amortisation of acquired intangible assets


(321)






Operating loss


160


Financial income


4


Financial expenses


(1,792)






Group loss before tax


(1,628)


Tax

173


Group loss for the year


(1,455)


* Adjusted operating profit is stated before exceptional items and amortisation of intangible assets acquired with business combinations.



1. Segment analysis (continued)



2015

2014

000

000


Operating segment assets




Manufacturing

8,881

13,260


Specialist Services

4,952

5,375


Site Services - discontinuing

3,785

12,961


Head office and Central

1,135

1,215


Unallocated:




- Cash and cash equivalents

687

-


- Acquired intangible assets

2,466

4,524


- Purchased goodwill

18,305

23,785

- Deferred tax

154

-

Total assets

40,365

61,120


Operating segment liabilities




Manufacturing

4,712

5,123


Specialist Services

4,664

4,113


Site Services - discontinuing

2,008

9,302


Head office and Central

2,245

1,584


Unallocated:




- Current borrowings

-

2,782


- Non-current borrowings

6,175

13,250


- Retirement benefit obligations

1,960

1,698


- Current tax

19

19


- Deferred tax

-

68

Total liabilities

21,783

37,939

Net assets

18,582

23,181


Capital expenditure




Manufacturing

20

233

Specialist Services

11

32

Site Services - discontinuing

25

135

Head office and Central

47

86

103

486

Depreciation



Manufacturing

182

168

Specialist Services

83

99

Site Services - discontinuing

385

256

Head office and Central

47

25

697

548

Amortisation of intangible assets



Manufacturing - development costs

78

76

Unallocated - acquired intangible assets

441

501



519

577



1. Segment analysis (continued)

Continuing operations

Geographical segments





2015

2014


000

000


Revenue by destination


Restated





United Kingdom

41,697

48,275


Other European Union countries

439

727


Other overseas locations

2,568

8,162



44,704

57,164


All of the Group's assets and capital expenditure originate in the United Kingdom.




Analysis of revenue by category





2015

2014


000

000




Restated


Sales of goods manufactured by the Group

17,732

29,681


Sales of services

26,972

27,483



44,704

57,164


Practically all of the Group's revenue is considered to be contract revenue as defined by IAS11.

Customers accounting for more than 10% of revenue

One customer accounted for more than 10% of revenue in the year, which is a customer of the Specialist Services segment and accounted for revenue of 9.6 million (2014: one customer accounting for 13.0 million of revenue in the Specialist Services segment).

2. Exceptional items

The Board has separately identified, by virtue of their size or incidence, certain credits and charges to the consolidated income statement that should be separately disclosed to enable users of the financial statements to better understand the underlying performance of the Group:

Continuing operations


2015

2014


Cost of sales

000

000





Redundancy and restructuring costs

252

-


Provisions against contracts

-

459







252

459


Administrative expenses




Redundancy and restructuring costs

883

651


Loss on disposal of properties

105

-







988

651


Exceptional items before tax

1,240

1,110


Tax credit

-

-






Exceptional items after tax

1,240

1,110


Redundancy and restructuring costs reflect the costs of resizing the businesses within the Manufacturing segment and Head Office. These are split between cost of sales and administrative expenses on the basis of the function of the personnel to which they relate.

Provisions against contracts in 2014 relate to charges in respect of legacy contracts which have suffered losses.

Discontinued operations



2015

2014


Cost of sales

000

000







Redundancy, restructuring costs and other costs

1,893

570



Provisions against contracts

-

1,614








1,893

2,184



Administrative expenses





Redundancy and restructuring costs

1,025

64



Loss on disposal of Chieftain Insulation (NI) Limited

40

203



Loss on disposal of Redhall Engineering Solutions Limited (note 25)

5,147

-



Other

-

209



Vivergo legal and professional fees

-

(150)









6,212

326



Exceptional items before tax

8,105

2,510



Tax credit

-

-







Exceptional items after tax

8,105

2,510


Redundancy and restructuring costs relate to the winding down and ultimate closure of those businesses which are discontinued, split between cost of sales and administrative expenses on the basis of the function of the personnel to which they relate.


3. Discontinued operations

Income and expenditure incurred on discontinued operations during the period comprises the Site Services business. RESL was sold on 13 May 2015 and on 14 May 2015 the Group announced the closure of its site based nuclear contracting businesses.

Site Services comprised certain engineering and nuclear related activities. These included engineering activities in industrial processes including oil and gas, petrochemical and chemical, and included design, project management and execution of on-site works through qualified and experienced engineers and trades personnel. Activities included mechanical design and construction, storage tank services, plant modifications and upgrades, repair and maintenance, shutdown services and offsite services.

The segment also included activities in both the civil and defence nuclear sectors and included design, project management and execution of on-site works through qualified and experienced engineers and trades personnel. Activities in the civil sector included decommissioning and waste management, support to operating nuclear power stations, and nuclear new build. Activities in the defence sector encompassed activities on behalf of the Ministry of Defence and included the design and manufacture of specialist equipment and mechanical and electrical engineering activities for the AWE establishment at Aldermaston.


2015

2014

000

000

Revenue

24,132

46,016

Cost of sales

(21,222)

(41,488)

Gross profit

2,910

4,528

Administrative expenses

(3,899)

(6,155)

Adjusted operating loss before exceptionals

(989)

(1,627)

Exceptional items

(2,958)

(2,307)




Operating loss before impairment and loss on disposal of operations

(3,947)

(3,934)

Impairment

-

-

Loss on disposal of operations

(5,147)

(203)

Operating loss and loss before taxation

(9,094)

(4,137)

Taxation credit/(charge)

25

(88)

Loss after taxation from discontinued operations

(9,069)

(4,225)

During the period, discontinued operations contributed a net outflow of 4.37m (2014: 0.63m outflow) to the Group's operating cash flows and a net inflow of 5.09m (2014: 0.03m outflow) to investing activities. There were no cash flows from financing activities.

The adjusted operating loss before exceptionals is stated after amortisation of acquired intangible assets of 120,000 (2014: 180,000).

Geographical segments




2015

2014




Revenue by destination

000

000





United Kingdom

23,302

44,574


Other European Union countries

-

-


Other overseas locations

830

1,442



24,132

46,016


All of the Group's assets and capital expenditure originate in the United Kingdom.




Analysis of revenue by category





2015

2014



000

000


Sales of goods manufactured by the Group

-

-


Sales of services

24,132

46,016







24,132

46,016






Practically all of the Group's revenue is considered to be contract revenue as defined by IAS11.

4. Disposal of subsidiary company

On 13 May 2015, the Group sold Redhall Engineering Solutions Limited to Cape plc for an enterprise value of 6.0m. The business is classified as a discontinued operation.

000

Property, plant and equipment

701

Amounts recoverable on contracts

3,096

Trade debtors

2,946

Prepayments and other debtors

211

Deferred tax asset

455

Trade creditors

(1,670)

Accruals and other creditors

(2,575)

Net assets sold

3,164

Goodwill and intangible assets at date of disposal

7,097

Loss on disposal

(5,147)

Proceeds, less costs of disposal

141



Debts assumed by purchaser

(5,255)


5. Financial income and expenses


2015

2014


Financial income

000

000





Interest income

-

4


Financial expenses




Interest on bank loans and overdrafts

(1,262)

(1,641)


Net finance expense on pension scheme*

(149)

(151)






(1,411)

(1,792)






* Includes 89,000 of pension administration expenses paid for by the Company (2014: 98,000).

6. Tax expense


2015

2014


(a) Recognised in the income statement

000

000





Current tax credit:




Current year

-

-


Recovery of tax that relates to prior year

-

-


Current tax credit

-

-






Deferred tax credit

(583)

(251)


Effect of change of tax rate

9

16


Prior years

(2)

150


Deferred tax credit

(576)

(85)


Tax credit in the income statement

(576)

(85)



2015

2014


(b) Reconciliation of the effective tax rate

000

000





Loss before tax - continuing operations

(3,643)

(1,628)


Loss before tax - discontinued operations

(9,094)

(4,137)


Loss before tax

(12,737)

(5,765)


Tax at standard rate of UK corporation tax of 20.5% (2014: 22.0%)

(2,611)

(1,268)


Expenses not deductible for tax purposes

131

21


Income not taxable for tax purposes

-

(8)


Tax losses not recognised

1,065

1,008


Adjustments in relation to prior periods

(2)

150


Change in tax rate

11

20


Non deductible loss on disposal of investment

830

45


Tax losses previously not recognised

-

(53)


Tax credit in the income statement

(576)

(85)






Tax credit in the income statement - continuing operations

551

173


Tax credit in the income statement - discontinued operations

25

(88)



2015

2014


000

000


(c) Deferred tax (credit)/charge recognised in other comprehensive income




Actuarial losses

(102)

(119)


Revaluation of property

-

(2)


Effect of tax rate change on revaluation of property

-

-


Accelerated capital allowances

1

4



(101)

(117)





(d) Deferred tax credit recognised directly in equity








Share options

-

-






7. Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

The net deferred tax liability at the year-end and movement during the year is analysed as follows:



Credit/(charge) to






Balance as at

Credit/(charge)

Disposal of

Balance as at



Consolidated



1 October 2014 Income Statement

directly to equity

investment

30 September 2015


000

000

000

000

000


Accelerated capital allowances

196

124

(1)

(149)

170


Short term timing differences

56

(20)

-

(6)

30


Losses

508

320

-

(300)

528


Buildings

(275)

115

-

-

(160)


Intangible assets

(892)

89

-

-

(803)


Retirement benefits

339

(52)

102

-

389



(68)

576

101

(455)

154



Balance as at

Credit/(charge) to

(Charge)/credit

Disposal of

Balance as at



Consolidated



Income Statement

directly to equity

investment

30 September 2014



000

000

000

000

000


Accelerated capital allowances

121

79

(4)

-

196


Short term timing differences

208

(152)

-

-

56


Losses

400

108

-

-

508


Buildings

(284)

7

2

-

(275)


Intangible assets

(992)

100

-

-

(892)


Retirement benefits

277

(57)

119

-

339



(270)

85

117

-

(68)


Unrecognised deferred tax assets

Deferred tax assets have not been recognised on tax losses of 16,300,000 (2014: 20,600,000) as their recovery is insufficiently certain in the longer term. 14,500,000 are related to the discontinued site services segment.

Effect of reduction in the main rate of Corporation tax

Reductions in the UK corporation tax rate from 23% to 21% (effective 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015. The deferred tax balances have been calculated based on the rate of 20% which was substantively enacted at the balance sheet date.

8. Loss per share

Basic and diluted loss per share

The calculation of the basic loss per share of 24.57p (30 September 2014: loss per share 14.29p) is based on 49,491,094 shares (30 September 2014: 39,751,863) being the weighted average number of shares in issue throughout the period and on a loss of 12,161,000 (30 September 2014: loss of 5,680,000).

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted loss per share for both the year ended 30 September 2015 and 30 September 2014 are identical to those used for the basic loss per share. This is because the exercise of share options would have the effect of reducing the loss per share and is, therefore, not a dilution under the terms of IAS33. The dilutive potential ordinary shares are therefore not included in the table below. At 30 September 2015 there were 250,000 outstanding options under relevant schemes and 18.5m shares under option to funds managed by Henderson. These may impact dilutive earnings per share in future.



Adjusted earnings per share

The Directors believe that helpful additional earnings per share calculations are earnings per share on adjusted bases (i.e. based on profit before exceptional items and amortisation of acquired intangible assets and on a fully taxed basis). The basic and adjusted weighted average numbers of shares and the adjusted earnings have been calculated as follows:

2015

2014


Number

Number


Basic weighted average number of shares

49,491,094

39,751,863


Dilutive potential ordinary shares arising from share options

-

-


Adjusted weighted average number of shares

49,491,094

39,751,863


Earnings:

000

000





Loss before tax

(12,737)

(5,765)


Exceptional items

9,345

3,620


Amortisation of acquired intangible assets

441

501


Adjusted loss before tax

(2,951)

(1,644)


Tax at 20.5% (2014: 22.0%)

605

362


Adjusted loss after tax

(2,346)

(1,282)


Adjusted, fully taxed basic loss per share

(4.74)p

(3.23)p


Adjusted, fully taxed diluted loss per share

(4.74)p

(3.23)p


Continuing operations




000

000




Loss before tax

(3,643)

(1,628)


Exceptional items

1,240

1,110


Amortisation of acquired intangible assets

321

321


Adjusted loss before tax

(2,082)

(197)


Tax at 20.5% (2014: 22.0%)

427

43


Adjusted loss after tax

(1,655)

(154)


Adjusted, fully taxed diluted loss per share

(3.34)p

(0.39)p


Discontinued operations




000

000




Loss before tax

(9,094)

(4,137)


Exceptional items

8,105

2,510


Amortisation of acquired intangible assets

120

180


Adjusted loss before tax

(869)

(1,447)


Tax at 20.5% (2014: 22.0%)

178

318


Adjusted loss after tax

(691)

(1,129)


Adjusted, fully taxed diluted loss per share

(1.40)p

(2.84)p


9. Retirement benefit obligation

The Group sponsors a defined benefit pension scheme in the United Kingdom, the Booth Industries Group PLC Staff Pension and Life Assurance Scheme ("the Booth Scheme") and operates a small number of defined contribution pension schemes and makes contributions to personal pension plans.

a) Defined benefit scheme

Pension benefits are linked to the members' final pensionable salaries and service at their retirement date (or date of leaving if earlier). The scheme is closed to new entrants. The scheme is governed by a Board of Trustees who meet on a quarterly basis. The Group has opted to recognise all actuarial gains and losses immediately through the Consolidated Statement of Comprehensive Income.



The most recent formal actuarial valuation, which was completed prior to 30 September 2014, was carried out as at 6 April 2012. The results of this valuation have been updated to 30 September 2015 by an independent qualified actuary. The assumptions used were as follows:

Assumptions




The following were the principle actuarial assumptions at the reporting date:




2015

2014




Discount rate

3.70%

3.90%


Retail Prices Index (RPI) inflation

2.90%

3.10%


Consumer Prices Index (CPI) inflation

1.90%

2.10%


Salary increases

1.90%

2.60%


Rate of increases to pensions in payment subject to inflationary increases:

2.80%



- RPI capped at 5% pa

3.00%


- RPI capped at 2.5% pa

2.20%

2.30%


- CPI capped at 3% pa

1.70%

1.90%


- CPI capped at 5% pa with minimum 3% pa

3.10%

3.10%


Rate of increase for deferred pensioners

1.90%

2.10%


Mortality basis:

S2 PA CMI 2014



Before retirement

S1 PA CMI 2013



(year of birth)

(year of birth)



+ 2 years

+ 2 years


After retirement

S2 PA CMI 2014

S1 PA CMI 2013



(year of birth)

(year of birth)


+ 2 years

+ 2 years






Asset class


2015


2014



Market value

% of total

Market value

% of total


scheme assets

scheme assets



000


000



Equities

9,657

48%

10,265

51%


Bonds

4,452

22%

4,406

22%


Gilts

3,747

19%

3,560

18%


Property

1,877

9%

1,672

8%


Cash

307

2%

253

1%


Total

20,040

100%

20,156

100%


The actual return on the scheme assets for the year ended 30 September 2015 was 431,000 (2014: 1,252,000).


9. Retirement benefit obligation (continued)

Pension expense

Amounts recognised within administrative expenses within the income statement are:







2015

2014

000

000

Charge for current service cost

(86)

(92)

Administration costs

(50)

(15)


(136)

(107)

Following the 6 April 2012 valuation the Company agreed to pay annual contributions of 13.4% to 5 July 2013 and thereafter at 17.6% of members' pensionable salaries each year plus deficit repair contributions of 334,184 pa increasing at 3% pa on 6 April 2013, 6 April 2014 and 6 April 2015 and then to increase at 5% pa from 6 April 2016 to 31 May 2026. Total employer contributions in 2015 were 443,000(2014: 444,000).

The amounts credited/(charged) to financial income and expense are:



2015

2014

000

000

Return on assets recorded as interest*

687

748

Interest on pension scheme liabilities

(836)

(899)

Net financial expense

(149)

(151)

* Includes 89,000 of pension administration expenses paid for by the Company (2014: 98,000).

Total actuarial gains and losses recognised in the consolidated statement of comprehensive income

The cumulative actuarial loss recognised in the consolidated statement of comprehensive income from 1 October 2006 (being the transition date to the adoption of International Financial Reporting Standards) is 2,780,000 (2014: loss 2,271,000).

Analysis of movement in retirement benefit obligation



2015

2014

000

000

Retirement benefit obligation at start of the year

21,854

20,921

Current service cost

86

92

Interest cost on retirement benefit obligation

836

899

Contributions by employees

28

31

Benefits paid and transfers out

(968)

(1,090)

Actuarial losses

164

1,001

Retirement benefit obligation at end of year

22,000

21,854

Change in fair value of scheme assets during the year

2015

2014

000

000

Fair value at start of the year

20,156

19,534

Interest income

776

846

Actual return on assets less interest

(345)

406

Employer contributions

443

444

Member contributions

28

31

Benefits paid

(968)

(1,090)

Administration costs

(50)

(15)

Fair value at end of the year

20,040

20,156



Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the percentage amounts shown below:



2015


2014



Change in

Change in

Change in

Change in


Assumption

defined benefit

defined benefit


assumption

obligation

assumption

obligation


Discount rate

+/- 0.5% pa

+/- 7%

+/- 0.5% pa

+/- 7%


RPI and CPI inflation

+/- 0.5% pa

+/- 3%

+/- 0.5% pa

+/- 3%


Future salary increases

+/- 0.5% pa

+/- 1%

+/- 0.5% pa

+/- 1%


Assumed life expectancy

+ 1 year

+ 3%

+ 1 year

+ 3%








b) Defined contribution schemes and personal pension plans

The Group operates a small number of defined contribution pension schemes and contributes to a number of personal pension plans. The total expense for these schemes during the year was 1,022,000 (2014: 897,000).

10. Basis of preparation

The financial information set out above for the years ended 30 September 2015 and 2014 ("the financial information"), has been prepared with consistent accounting policies and in accordance with the International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and are effective at 30 September 2015.

The financial information does not constitute the statutory financial statements (as defined by S434 of the Companies Act 2006) for those years. The 2015 financial statements, upon which the auditors issued an unqualified opinion and did not contain a statement either under sections 498(2) or 498(3) of the Companies Act 2006, have not yet been delivered to the Registrar.

The 2014 financial statements have been delivered to the Registrar and included the auditors' report which was unqualified and did not contain a statement either under sections 498(2) or 498(3) of the Companies Act 2006.

The annual report and accounts for the year ended 30 September 2015 will be posted to shareholders who have requested them. Copies will be available from the Company's registered office, 1 Red Hall Court, Wakefield WF1 2UN, and will be made available on the Company's website at www.redhallgroup.co.uk.


This information is provided by RNS
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