Wayne Pearson, Chief Executive Officer Chris Kelly, Group Finance Director. Interim Results. for the six months ended 31 March 2018.

Transcription

1 Wayne Pearson, Chief Executive Officer Chris Kelly, Group Finance Director Interim Results for the six months ended 31 March 2018 June 2018

2 Agenda Highlights Strategic update Operational overview Financial review Outlook Questions 1

3 Highlights Financials Adjusted operating loss 1.9 million (H1 2017: profit of 0.2 million); 0.8 million before deduction of central costs of 1.1 million (H1 2017: profit of 0.2 million) Operating exceptional costs of 0.5 million closure and restructuring (H1 2017: nil) Group turnover 14.7 million (H1 2017: 19.0 million includes 3 months of Marine contract) Net debt of 4.5 million (30 Sept 2017: net cash 0.1 million) Opportunities Nuclear New build, Decommissioning & Defence Infrastructure High profile builds Oil & Gas Orderbook Order book 37 million (December 2017: 32 million) 18 million framework for Jordan Manufacturing announced in December Major contract awards for Hinkley Point C announced in March % Operations Business transformation strategy Developing value stream structure Lean journey started Significant improvement required 2

4 STRATEGIC UPDATE 3

5 Strategic Update Re-structuring Initial assessment 2017 Transformation Growth on A smaller business focused on manufacturing Fund raising & debt conversion Restructured balance sheet to create distributable profits Reduced pension deficit Weak operational performance Weak supply chain Sub-scale group High central costs Leadership gaps Drive operational Improvements Develop leadership teams Drive opportunity pipeline in strategic markets Strategic outsourcing Lean implementation New product & markets Increased security demand Increase fire regulations Operational leverage Acquisition in manufacturing space VAVE Exit RESL & Site Services Order taker culture Design for manufacture Advanced materials 4

6 Strategic Opportunities Nuclear & Defence 6 Nuclear New Build Power Stations 140 bn over 20 Years Nuclear Decommissioning - Sellafield, Dounreay, Magnox, Winfrith 161 bn over 100 yrs Defence Nuclear fleet, Atomic Weapons, Military Vehicles Infrastructure Domestic & International Underground and Overground Rail Systems Road System Tunnels Data Centres New regulations to drive higher margin opportunities High Profile Build Opera Houses, CERN Theatres, Architectural Exhibition Centres, Hospitals New regulations to drive higher margin opportunities Oil & Gas Recovery past $80 / barrel driving spend FPSO builds Repair & Maintenance 5

7 Strategic Update Nuclear Nuclear defence - AWE capital projects - Other opportunities Nuclear decommissioning - Sellafield/Magnox/DSRL - New facilities Nuclear new build - Hinkley Point C - Five possible future sites 6

8 Nuclear New Build Opportunities Planned UK New Builds 140 bn over next 20 Years Moorside NuGen 2,800 MW Sizewell C EDF Energy/CGN 3,200 MW Hinkley Point C Wylfa 275 million per station for 20 years for Redhall Group Wylfa Horizon Nuclear 2,700 MW Hinkley Point C EDF Energy/CGN 3,200 MW Bradwell B CGN/EDF Energy 1,150 MW Oldbury Horizon Nuclear 2,700 MW Product opportunities being progressed at Hinkley Point C: Sample glovebox Further marine works Core catcher fabrication Ductwork support Pipe supports Vessel fabrication Condensate polishing plant fabrication Shield, blast, fire & security doors 7

9 NDA Estate Opportunities Sellafield: Major Projects: BEP SRP - Major Frameworks - Spares framework - Additional Pond storage racks - Large volume 3m3 box fabrication Dounreay: ILW store Reactor Decommissioning Shafts & Silo Magnox Sites: - Support to retrieval operations across various sites - Manufacture of steelwork for 6m3 RCB (reinforced concrete boxes) 20 million per year for Redhall for next 10 years 161 bn over 100 years front end loaded 470 million for Redhall 8 Winfrith: Dragon Decommissioning SGHWR Decommissioning

10 Defence and Nuclear Research Defence: Support to Dreadnought (replacement for Royal Navy Trident Missile Vanguard submarine) including extensive modifications to nuclear facilities at Plymouth, Barrow, Faslane Submarine decommissioning programme at Rosyth including nuclear core interim storage at Capenhurst Support to SC Group Jackal military vehicle programme (manufacture of hampers ) High integrity doors for AWE Epure high integrity doors for MOD Nuclear Research: Manufacturing support to programmes at: ITER (first large scale fusion project) ESS (European Spallation Source, Sweden) ISIS CERN 9

11 OPERATIONAL REVIEW 10

12 Operational Review Continue to grow and deliver order book Order book progression growth coming from high integrity manufacturing 'm Total Manufacturing Dec Jun Dec Jun Dec Jun Orders on a like for like basis - excluding Marine Excludes 18 million Cavendish Nuclear framework 11

13 Operational Review Continued delivery of nuclear defence (UK and France), Crossrail and other infrastructure projects Invested in sales and marketing to develop the opportunity pipeline Focused on significant operational efficiency improvements both within engineering and manufacturing Lower profitability in H1 than anticipated due to ongoing contract delays and redesign 12

14 Photo credit: EDF Energy Operational Review Hinkley Point C contract commenced which was a major highlight of H1 Hinkley scope increased materially Significant opportunities for further contracts on Hinkley and long-term follow on nuclear new build sites Confirmed framework of 18 million with Cavendish Nuclear Substantial pipeline of quality tenders including high value framework bids in decommissioning The tendered pipeline subject to ongoing delays in awards Sales and marketing focus on runners and repeaters to support large projects 13

15 Operational Review Strong performance in H1 underpinned by strong long term relationships with major customers Business successfully delivered 4.7 million capital project for a major customer Major rubber micronisation plant project in installation phase Grimsby location closed and consolidated into Trafford Park, Manchester, making the operation more efficient and reducing overheads Visibility over client capital spend programmes for 2018 and into

16 Operational Review A strong first quarter Slowdown of work in the second quarter which has continued into the second half Medium term outlook for continued high volumes of new and upgrade works to cellular infrastructure Long-term outlook encouraging as operators install more technologies, split shared sites, upgrade and replace their existing sites 15

17 FINANCIAL REVIEW 16

18 Income Statement Income Statement H H Underlying revenue for H down 8% on a like for like basis due to later than expected Jordan Manufacturing contract awards Operating loss pre central costs driven by significantly lower than anticipated volumes, additional overhead investment Exceptional charge on continuing operations for closure of Grimsby site and minor restructuring Central costs include HR, Finance and IT Finance charge reduced following placing and debt conversion in July 2017 Revenue* 14,744 18,964 Adjusted operating (loss)/profit before central costs (806) 1,228 Central costs* (1,119) (1,045) Adjusted operating (loss) /profit* (1,925) 183 Net financial charge (209) (439) Adjusted loss before tax* (2,134) (256) Exceptional items (521) - Amortisation of intangible assets (135) (153) IFRS2 credit/(charge) 59 (210) Loss before tax (2,731) (619) Tax on loss on ordinary activities 294 (93) Loss for period continuing operations (2,437) (712) Profit/(loss) on discontinued activities 0 (72) Group loss (2,437) (784) * Before exceptional items, amortisation of intangible assets and IFRS2 charge. 17

19 Exceptional Items Exceptional items relate to: Closure of Jex Grimsby location and transfer of activity to Manchester ( 0.3m) Minor restructuring ( 0.2m) Continuing operations Restructuring and other costs

20 Tax and Pensions Tax Tax credit on loss for the period 294,000 Total deferred tax asset increased to 1.3 million (2017: 1.0 million) Pension Liability reduced to 0.4 million by deficit recovery payments Year end position will reflect CMI 2017 mortality update and change from RPI to CPI for future increases April 2018 triennial valuation ongoing with current deficit recovery payment of 305k per annum Scheme closed to future accrual 19

21 Cash Flow Statement Cash absorbed by operations in the period Continued investment in capital expenditure and product and process development Impacted by lower volumes, later contract starts and overhead investment Significant working capital in major construction contracts Improvement expected as work completed Cash generated (absorbed by)/from operations H H (3,846) 87 Interest paid (244) (379) Net cash from operating activities (4,090) (292) Net cash from investing activities (499) (310) Net cash from financing activities 2,219 (69) Net cash flow (2,370) (671) Opening net funds 2,370 1,021 Closing net funds Borrowings (4,165) (9,269) Net borrowings (4,165) (8,919) Finance leases (289) (355) Total borrowings (4,454) (9,274) 20

22 Thousands Debt Bridge 1, (521) (4,454) (1,925) (1,000) (2,000) 216 (740) (3,000) (625) (4,000) (251) (244) (499) (5,000) Sep-17 Exceptionals Operating loss Other items Debtors/other debtors WIP/Stocks Creditors Interest paid Net Capex Mar-18 21

23 Borrowings and Facilities Total bank facility at 31 March 2018 HSBC m Total Borrowings Current 000 >1 Year 000 Total Overdraft 2.0 RCF 3.5 Accordion LOIM term loan 1.7 Total facilities 9.7 Facilities secured until July 2021 Covenant amendments for FY2018 agreed with HSBC to reflect H1 losses As at 31/03/18: Cash/(Overdraft) (1,450) - (1,450) Loans - (2,715) (2,715) Finance leases (72) (217) (289) (1,522) (2,932) (4,454) As at 31/03/17: 258 (9,562) (9,304) Margins HSBC 3.5% and LOIM 4.25% above LIBOR 22

24 Balance Sheet Investment in working capital since year end expected to reverse in H2 Increase in borrowings to fund working capital and losses Deferred tax movement is due to expected future use of losses 31 st March st March Full Year Non-current assets 5,135 5,704 5,057 Goodwill 18,305 18,305 18,305 Non-cash current assets 15,600 12,953 14,404 Net assets held for sale Non-cash current liabilities (8,159) (9,979) (8,645) Deferred tax 1, ,021 Pension scheme (380) (1,815) (450) Borrowings net of cash balance (4,165) (8,919) 458 Finance leases (289) (355) (323) Net assets 27,503 16,501 29,968 23

25 OUTLOOK 24

26 Outlook H1 Performance constrained by operational issues and contract slippage Significant operational improvement required Group s performance remains sensitive to customer and project delays, much of which are outside our control The Board anticipates that the full year performance will be in line with expectations Strong trading expected in H2 and in particular Q4 Increased volumes and margins as we start to see some of the benefits of our operational excellence We are confident that the momentum in our order book and the improvements already underway within our business transformation strategy will deliver profitable growth in the Group and create long term value for shareholders 25

27 APPENDICES 26

28 Redhall Group Today A high integrity manufacturing and services business Businesses all serve complex and hazardous environments Operating in nuclear, oil & gas, telecoms and specialist infrastructure and food Wayne Pearson, CEO Strong blue-chip client base New CEO leading business transformation strategy and growth New FD, Simon Comer, joins in July 2018 Chris Kelly, Group FD 27

29 A Selection of Our Current Blue Chip Client Base 28

30 Redhall Group Businesses Strong brands with highly accredited products: Design, manufacture, project management and installation of: high integrity blast, fire, radiation shielding, acoustic and security doors fire and blast products including panels, decks and tunnels Manufacture of bespoke high integrity products including gloveboxes, nuclear civil and defence equipment Located in close proximity to Hinkley Point C 29

31 Redhall Group Businesses Provides cellular rigging installations to the mobile telecommunications market throughout England and Scotland Provides design, manufacture, installation and relocation of process equipment to the food and pharmaceutical markets 30

32 Major Shareholders Major shareholders Shareholders Shares 8 th June 2018 % 1. Lombard Odier Asset Management (LOIM) 92,587, Downing LLP 75,900, Ruffer LLP 43,550, Canaccord Genuity Group Inc , Others 93,363, Total 332,900, Note: Lombard Odier Asset Management have options over 18.5 million shares. They can exercise options to increase their holding to 29.9%. Options issued to directors and senior employees amount to million options. 31