TClarke plc Interim Results for the six months ended 30 June 2017

Transcription

1 TClarke plc Interim Results for the six months ended 30 June 2017 TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its interim results for the six months ended 30th June Business Highlights: 392 million forward order book (30th June 2016: 320m). 17% increase in revenues to million Year on year net cash improved from 1.3 million to 2.4 million. 20% increase in interim dividend to 0.6p per share (30th June 2016: 0.5p per share) New 26,000 Sq Ft prefabrication facility at Stansted, Essex now operational Acquisition of control systems specialist Eton Associates Limited Investing in our future workforce, 70 new apprentices begin training across the UK from September. Financial Highlights: Change Revenue from continuing operations +17% 142.8m 121.6m Operating profit - underlying 1,2 +6% 2.9m 2.7m Operating profit - reported +14% 2.4m 2.1m Operating margin - underlying 1,2-10% 2.0% 2.2% Profit before tax from continuing operations - underlying 1,2 +8% 2.5m 2.3m Profit before tax from continuing operations - reported +17% 2.0m 1.7m Net cash +94% 2.4m 1.3m Earnings per share - underlying 2,3 +7% 4.80p 4.49p Earnings per share - underlying (diluted) 2,3 +8% 4.71p 4.37p Earnings per share - basic +29% 3.89p 3.00p Earnings per share - diluted +30% 3.81p 2.92p Interim dividend per share +20% 0.60p 0.50p Forward order book +23% 392m 320m 1 Underlying profit is profit from continuing operations adjusted for amortisation of intangible assets and non-recurring costs. 2 Prior period re-presented to reclassify 0.4m cost of sales and 0.1m administrative expenses as non-recurring costs. 3 Underlying earnings is calculated by dividing underlying profit after tax by the weighted average number of shares in issue New contracts secured since our previous announcement include: John Lewis department store, Westfield London Refurbishment of 4M Building, Manchester Airport Aspire Army Basing Programme, Wiltshire Bargarran Primary School Edison Primary School, London Heart of Midlothian FC, New Main Strand at the Tynecastle Stadium, Edinburgh HMP Wymott & HMP Garth Heating Replacement New Covent Garden Market, Interim Distribution Unit Southbank Tower, London Underground Ticket Hall Date 8 th August ends-

2 For further information contact: TClarke plc Mark Lawrence Martin Walton David Lanchester Group Chief Executive Finance Director Company Secretary Tel: Tel: Tel: N+1 Singer (Financial Adviser and Broker) Sandy Fraser Rachel Newton Tel: RMS Partners Simon Courtenay Tel: Trading The Group s results are in line with the Board s expectations for the period. Underlying operating profit for the six months was 2.9 million (2016: 2.7 million), with revenues of million (2016: million). Underlying operating margins improved in three of our four regions, with London and South East delivering 4.4% margin (2016: 1.9%), North 3.8% (2016: 2.9%) and Scotland 3.9% (2016: 2.3%). However, the overall operating margin was impacted by workload and protracted final account settlement issues in the Central and South West region and were slightly lower at 2.0% (2016: 2.2%). The last year has seen the net cash position improve by 1.1 million to 2.4m (2016: 1.3m). In addition, the Group has access to 12m of unused banking facilities. The interim net cash position reflects the Group s typical working capital profile, with absorption of cash during the first half of the financial year. The Board proposes an increased interim dividend of 0.6p (2016: 0.5p). This will be paid on 6th October 2017 to shareholders on the register at 8th September Order Book Our forward order book, which reflects only contracts where we have a firm commitment to proceed, has grown during the period and stood at 392 million at 30th June 2017 ( 320 million 30th June 2016). Overall Group revenues for the year are expected to be in line with the Boards expectations for the year. Operational Review The Group is managed in four operational areas, London & South East, Central & South West, North and Scotland, providing nationwide coverage from 18 locations across the UK. We focus on repeat customers and framework contracts in the following key markets Design & Build Facilities Management Healthcare Intelligent Buildings M&E Contracting Mission Critical Residential & Hotels Prefabrication Transport

3 TClarke - London & South East () () Revenue Underlying operating profit Underlying operating profit margin 4.4% 1.9% Order book The London and South East division remains the largest of our four operating divisions and includes our combined M&E London business as well as Colchester, Sittingbourne and our prefabrication facility, which moved to an expanded purpose built facility at Stansted during the period. 98% of targeted revenues for 2017 and over 70% for 2018 for this region are now secured, and we are beginning to see the benefit of improving margins. Projects nearing completion include Bloomberg London, London Wall Place and Principal Place. We are now on site on a number of high profile London schemes including, 22 Bishopsgate, 100 Bishopsgate, Bank Underground Station, International Quarter London and South Bank Place, the majority of which are combined mechanical and electrical contracts. We had previously announced that we had secured the works associated with the 600 million extension of the retail mall, Westfield London at Shepherds Bush. We have also now secured the mechanical and electrical package for the 230,000 sq ft John Lewis department store which will anchor the development. TClarke - Central & South West () () Revenue Underlying operating profit (2.2) 0.4 Underlying operating (loss) / profit margin (9.3)% 1.3% Order book The Central and South West region has suffered from a number of delayed project starts and protracted final account settlements in the first half of the year which have impacted revenue and profit. We expect to see an increase in workload in the second half of the year which will recover some of the losses from the first half of the year. However, our team has resisted entering into contracts at unacceptable margins and as a result there is still some capacity in the region and we are seeking out further opportunities to contribute to the revenue and profit. The Central and South West region operates from our offices at Derby, Kimbolton, and Peterborough in the East, to Portishead, Plymouth and St Austell in the West, and is able to target a vast range of construction and facilities management opportunities across the region. We will shortly be opening our new premises in Birmingham to support and expand our existing client base in the city. Overall 80% of targeted revenues for 2017 and 50% of revenues for 2018 are secured. Current Schemes include: Aspire Army Basing Programme, Wiltshire Stanmore Hospital The Box, Plymouth, Formally Plymouth History Centre The Fitzroy, Retirement Home, Pegasus Life, Falmouth University of Exeter, Infrastructure Upgrade, Penryn University of Exeter, Renewable Energy Engineering Facility, Penryn Waitrose, various UK locations

4 TClarke North () () Revenue Underlying operating profit Underlying operating profit margin 3.8% 2.9% Order book The North division operates from three locations, Chorley, Leeds and Newcastle. 86% of targeted revenues for 2017 for the North are now secured. Targeting areas of the UK where we are underrepresented, in particular Manchester, Liverpool and Preston, we have recently strengthened our leadership in the North West and developed a team to focus solely on the M&E Contracting opportunities in the region. Our Leeds business has had an impressive performance which is set to be repeated in the second half, the office has built strong ongoing relationships with the likes of Bowmer & Kirkland, Clugston Construction and ISG. Newcastle is set to meet revenue target for this year despite a competitive local environment. Looking forward, we are preferred bidder on three schemes totalling 7 million which will be undertaken in Current Schemes include: City Tower, Manchester Daresbury Science Park, Chester Sunderland University, Nurse Teaching Facility George Mitchell Academy, Leyton Leeds Art Gallery. TClarke Scotland () () Revenue Underlying operating profit Underlying operating profit margin 3.9% 2.3% Order book In Scotland, we operate from our main office in Falkirk and a regional office in Aberdeen. 97% targeted revenues for 2017 are now secured and 60% for We have during the period opened a further regional office in Dumfries to support this expanding market. Our business in Scotland has successfully secured and will be delivering various projects within the M&E services market by the end of year. The first quarter of this year saw the successful delivery of Irvine Leisure Centre, Ayrshire. The final quarter of the year will see the delivery of Heart of Midlothian Football Club, New Main Stand and Royal Hospital for Sick Kids, Edinburgh. TClarke Scotland's strong Electrical and Plumbing experience and presence in the Residential market continues to grow positively year on year while adding new clients, with over 600 new homes delivered this year, and an expectation of over 1,300 by year end. Key residential projects include: Cala Homes, Kilmardinny, Bearsden, Glasgow Keepmoat, a new client for TClarke at Lyon s Gate Avant Homes, Greenhall Village, Blantyre Robertson Homes, Fair Acres, Dunbar. Other current projects include: Easter Bush Campus, at Heriot Watt University, Edinburgh Bargarran Primary School, Glasgow St Josephs College, Dumfries Mitsubishi Electric, Calorimeter test rooms, Livingston Arthurlie Family Community Centre, Paisley

5 Pensions Bond yields, which remain at historically low levels, and inflation expectations continue to adversely impact the pension scheme valuation. An actuarial loss of 1.1m, net of tax, has been recognized in reserves during the period, with the pension scheme deficit increasing to 22.3m (30th June 2016: 21.9m). Following completion of the triennial valuation as at 31 st December 2015, the Group has agreed a revised deficit reduction plan and schedule of contributions which will result in annual cash contributions increasing by approximately 0.5m. Acquisition We were pleased to announce on 7 th August 2017 the acquisition of Eton Associates Limited ( ETON ) a London based privately owned control systems specialist offering a variety of Building Management Systems. The acquisition of ETON is part of TClarke's stated strategy to grow and develop its range of services in the area of Intelligent Buildings providing our customers a comprehensive offering and supporting our core M&E contracting business. ETON employs around 80 people and is currently based in London Docklands with a manufacturing plant in Essex. The intention is to co-locate the operations of ETON at our London Head Office at Moorgate and at our recently opened purpose built prefabrication facility at Stansted. All of ETON s engineers are trained in Cylon, Honeywell, Trend & Tridium Building Control Systems which are the most utilised systems throughout the world, these engineers are supported by dedicated in House Software Design Engineers. Summary and Outlook It is pleasing to note that in spite of the uncertain economic and political climate, we have continued to grow our order book with good quality work and improving margins across most of our regions and a significant uplift in our core London and South East operations. Actions to address areas of the business with lower revenues than expected are in hand, coupled with targeted expansion in areas of the country where we are underrepresented. Our market reputation for operational excellence and successful delivery of the most complex assignments underpins our optimism for the future. In conclusion, The Board remains cautiously optimistic about the Group s future prospects and we look forward to updating shareholders on the progress that we make during the second half of the financial year.

6 Condensed consolidated income statement Audited 6 Months to 6 Months to 12 Months to * Revenue Cost of sales (126.6) (106.8) (246.2) Gross profit Other operating income Administrative expenses: Amortisation of intangible assets (0.1) (0.1) (0.2) Non-recurring expenses (0.4) (0.5) (2.3) Other administrative expenses (13.3) (12.1) (25.7) Total administrative expenses (13.8) (12.7) (28.2) Profit from operations Finance costs (0.4) (0.4) (0.7) Profit before taxation Taxation (0.4) (0.4) (0.8) Profit from continuing operations Loss from discontinued operations - (0.1) (0.5) Profit for the period Earnings per share from continuing operations: Attributable to owners of TClarke plc: Basic 3.89p 3.33p 6.74p Diluted 3.81p 3.24p 6.50p Earnings per share: Attributable to owners of TClarke plc: Basic 3.89p 3.00p 5.45p Diluted 3.81p 2.92p 5.25p * Represented to classify certain immaterial cost of sales and underlying administrative expenses totalling 0.5m as non-recurring administrative expenses. Further details are given in Note 3. Condensed consolidated statement of comprehensive income Audited 6 Months to 6 Months to 12 Months to Profit for the period Other comprehensive expense: Items that will not be reclassified to profit or loss Actuarial loss on defined benefit pension scheme (1.1) (6.8) (6.3) Other comprehensive expense for the period, net of tax (1.1) (6.8) (6.3) Total comprehensive income / (expense) for the period 0.5 (5.6) (3.9)

7 Condensed consolidated statement of financial position Non-current assets Audited Intangible assets Property, plant and equipment Deferred taxation Current assets Inventories Amounts due from customers under construction contracts Trade and other receivables Cash and cash equivalents Total assets Current liabilities Borrowings - (5.0) - Amounts due to customers under construction contracts (3.2) (4.2) (4.4) Trade and other payables (65.1) (60.4) (70.1) Current tax liabilities (0.5) (0.3) (0.2) Obligations under finance leases (0.1) (0.1) (0.1) (69.0) (70.0) (74.8) Net current assets Non-current liabilities Bank loans (3.0) - (3.0) Retirement benefit obligation (22.3) (21.9) (20.6) (25.3) (21.9) (23.6) Total liabilities (94.2) (91.9) (98.4) Net assets Equity attributable to owners of the parent Share capital Share premium ESOT share reserve (0.5) (0.5) (0.8) Revaluation reserve Retained earnings Total equity

8 Condensed consolidated statement of cash flows Audited 6 Months to 6 Months to 12 Months to Net cash (used in) / generated by operating activities (see note 8A) (4.8) (4.3) 4.0 Investing activities Interest received Purchase of property, plant and equipment (1.1) (0.1) (0.2) Receipts on disposal of property, plant and equipment Net cash generated (used in) / by investing activities (1.1) Financing activities Borrowings - - (2.0) Equity dividends paid (1.1) (1.1) (1.3) Acquisition of shares by ESOT (0.1) (0.6) (1.5) Disposal of shares by ESOT Net cash used in financing activities (1.0) (1.2) (3.7) Net (decrease) / increase in cash and cash equivalents (6.9) (5.4) 0.6 Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (see note 8) Condensed consolidated statement of changes in equity For the six months ended 30th June 2017 Share capital Share premium ESOT share reserve Revaluation reserve Retained earnings Total At 1st January (0.8) Comprehensive income Profit for the period Other comprehensive income: Actuarial loss on retirement benefit obligation (1.3) (1.3) Deferred income tax on actuarial gain on retirement benefit obligation Total other comprehensive expense (1.1) (1.1) Total comprehensive income Transactions with owners Dividends paid (1.1) (1.1) Shares based payment credit Shares acquired by ESOT - - (0.1) - - (0.1) Shares distributed by ESOT Total transactions with owners (1.0) (1.0) At 30th June (0.5)

9 Condensed consolidated statement of changes in equity For the six months ended 30th June 2016 ESOT share reserve Share Share Revaluation Retained capital premium reserve earnings Total At 1st January (0.4) Comprehensive income Profit for the period Other comprehensive income: Actuarial loss on retirement benefit obligation (8.4) (8.4) Deferred income tax on actuarial gain on retirement benefit obligation Total other comprehensive expense (6.8) (6.8) Total comprehensive expense (5.6) (5.6) Transactions with owners Shares based payment credit Shares acquired by ESOT - - (0.6) - - (0.6) Shares distributed by ESOT Dividends paid (1.1) (1.1) Total transactions with owners - - (0.1) - (1.0) (1.1) At 30th June (0.5) Condensed consolidated statement of changes in equity For the year ended 31st December 2016 ESOT share reserve Share capital Share premium Revaluation reserve Retained earnings Total At 1st January (0.4) Comprehensive income Profit for the year Other comprehensive income: Actuarial gain on retirement benefit - obligation (7.3) (7.3) Deferred income tax charge on actuarial profit on retirement benefit - - obligation Effect of change in rate of tax (0.4) (0.4) Total other comprehensive income (6.3) (6.3) Total comprehensive income (3.9) (3.9) Transactions with owners Share based payment credit Shares acquired by ESOT - - (0.9) - - (0.9) Shares distributed to ESOT Dividends paid (1.3) (1.3) Total transactions with owners - - (0.4) - (1.2) (1.6) Transfers (0.1) At 31st December (0.8)

10 Notes to the condensed consolidated financial statements for the six months to 30th June 2017 Note 1 Basis of preparation TClarke plc (the company ) is a company incorporated and domiciled in the United Kingdom. The nature of the Group s operations and its principal activities are set out in Note 2 below and in the interim management report. The consolidated interim financial statements comprise the condensed financial statements of the company and its subsidiaries (together the Group ). These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act The statutory accounts for the year ended 31st December 2016 were approved by the Board of Directors on 28 th March 2017, and have been delivered to the Registrar of Companies and a copy has been made available on the company s website at The auditors report on those accounts was unqualified and did not contain any statement under section 498 of the Companies Act These interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting ( IAS 34) as adopted by the European Union, and the Disclosure and Transparency Rules ( DTR ) of the Financial Conduct Authority. They do not include all the information required for the full annual financial statements, and should be read in conjunction with the financial statements of the Group as at and for the year ended 31st December The interim financial statements have not been audited or reviewed by the company s auditors. Accounting policies Except as described below, the financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31st December Taxes on income in the interim periods are accrued using the estimated effective tax rate that would be applicable to expected total annual earnings. Estimates and financial risk management The preparation of interim financial statements requires the Directors to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities at the reporting date and the amounts of revenue and expense incurred during the period that may not be readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. In preparing these interim financial statements, the significant judgements made by the Directors in applying the Group s accounting policies and the key sources of uncertainty together with the Group s financial risk management objectives and policies were the same as those that applied to the financial statements as at and for the year ended 31st December The principal risks and uncertainties continue to be those which are set out on pages of the Group s annual report and accounts for the year ended 31st December 2016, under the following headings: Political, economic and market conditions; Financial strength; Reputation; Winning new work; Contract delivery; People and skills; Health and safety; Supply chain; Pensions; and IT Systems. Going concern Our banking facilities comprised a 10 million revolving credit facility committed to 31st March 2020, of which 7m was undrawn at 30 June 2017, and a 5 million overdraft facility. The Group draws on the overdraft facility as and when needed to meet working capital requirements. As with all such facilities the overdraft is subject to annual review and is repayable on demand. The latest annual review was successfully completed in May To support the Group operations we also have available bonding facilities of 22.5 million, of which 10.5 million is currently unutilised. After making appropriate enquiries the Directors are satisfied that the Company and Group have adequate resources to continue their operations for the foreseeable future. Accordingly the Directors continue to adopt the going concern basis in preparing the financial statements.

11 Note 2 Segmental information The Group provides electrical and mechanical contracting and related services to the construction industry and end users. For management and internal reporting purposes the Group is organised geographically into four regional divisions; London and South East (which includes the Group s central operating costs), Central and South West, North, and Scotland, reporting to the Chief Executive, who is the chief operating decision maker. All assets and liabilities of the Group have been allocated to segments, apart from the retirement benefit obligation and tax assets and liabilities. 30th June 2017 London & South East Central & South West Unallocated & elimination North Scotland Total Total revenue Inter segment revenue - (0.2) (0.3) (2.2) - (2.7) Revenue from external operations Underlying profit from operations 3.5 (2.2) Non-recurring costs (0.4) (0.4) Amortisation of intangibles - - (0.1) - - (0.1) Profit from operations 3.1 (2.2) Finance costs (0.4) (0.4) Profit before tax 2.7 (2.2) Taxation expense (0.4) Profit for the period from continuing operations 1.6 Assets (13.5) Liabilities (45.6) (22.7) (15.1) (5.1) (5.7) (94.2) Net assets (19.2) 13.9

12 30th June 2016 London & South East* Central & South West Unallocated & elimination North Scotland Total* Total revenue Inter segment revenue - (0.2) (2.9) (0.6) - (3.7) Revenue from external operations Underlying profit from operations Non-recurring costs (0.5) (0.5) Amortisation of intangibles - - (0.1) - - (0.1) Profit from operations Finance costs (0.4) (0.4) Profit before tax Taxation expense (0.4) Profit for the period from continuing operations 1.3 Assets (14.9) Liabilities (50.1) (19.4) (12.7) (4.3) (5.4) (91.9) Net assets (20.3) 12.9 * Re-presented to classify certain immaterial cost of sales and underlying administrative expenses totalling 0.5m as non-recurring costs. Further details are given in Note 3 below. 31st December 2016 London & South East Central & South West Unallocated & elimination North Scotland Total Total revenue Inter segment revenue - (1.1) (3.4) (2.3) - (6.8) Revenue from external operations Underlying profit from operations Non-recurring costs (2.3) - (2.3) Amortisation of intangibles - - (0.2) - - (0.2) Profit from operations Finance income (0.1) - Finance costs (0.8) (0.7) Profit before tax Taxation expense (0.8) Profit for the period from continuing operations 2.9 Assets (21.7) Liabilities (53.4) (31.5) (13.1) (4.7) 4.3 (98.4) Net assets

13 Note 3 Non-recurring costs In the second half of the year ended 31st December 2016 the Group uncovered financial irregularities within the accounting function of a wholly owned subsidiary, DG Robson Mechanical Services Limited ( DGR ). 2.9m of cash was misappropriated over a number of years, of which 1.9m has been expensed in 2016 and 1.0m had been charged to the income statement in previous years within cost of sales and administrative expenses. The 2016 expense was separately disclosed as a non-recurring item in the financial statements for the year ended 31 December 2016, and the results for the six months ended 30th June 2016 have been re-presented to disclose separately the funds misappropriated in that period. Results prior to and including 2015 have not been restated as the impact cumulatively and in each year was not considered to be material. The Group engaged expert professional advisers to assist in the investigation and recovery of the stolen funds. The cost of the investigation have also been included disclosed as non-recurring costs. Note 4 Taxation expense The effective income tax rate applied for the period is 20.0% (30th June 2016: 20.0%). Note 5 Discontinued operations Audited Revenue Cost of sales - (2.5) (5.1) Gross loss - - (0.6) Administrative expenses - (0.1) - Loss before taxation - (0.1) (0.6) Taxation Loss for the financial period - (0.1) (0.5) The Group s activities in Bristol and Cardiff were discontinued in the year ended 31st December The Group incurred further losses in the year ended 31 December 2016 closing out its contractual commitments in respect of these offices. Note 6 Earnings per share A. Basic earnings per share The earnings per share represent the profit for the period divided by the weighted average number of ordinary shares in issue. Audited Earnings: Profit / (loss) attributable to owners of the Company Continuing operations Discontinued operations - (0.1) 0.5) Profit attributable to equity holders of the parent Weighted average number of ordinary shares (000s) 41,685 41,764 41,613

14 B. Diluted earnings per share Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has three categories of dilutive potential ordinary shares: share options granted under the Savings Related Share Option Scheme, and conditional share awards and options granted under the Equity Incentive Plan. Further details of these schemes are given in note 20 of the 2016 annual report and financial statements. Audited Earnings: Profit / (loss) attributable to owners of the Company Continuing operations Discontinued operations - (0.1) (0.5) Weighted average number of ordinary shares in issue (000s) 41,685 41,764 41,613 Adjustments Savings Related Share Options (000s) Equity Incentive Plan Conditional share awards (000s) Options (000s) Weighted average number of ordinary shares for diluted earnings per share (000s) 42,543 42,926 43,084 C. Underlying earnings per share Underlying earnings per share represents the profit for the period from continuing operations adjusted for amortisation of intangible assets and non-recurring costs and the tax effects of these items, divided by the weighted average number of ordinary shares in issue. Underlying earnings is the basis on which the performance of the operating divisions is measured. The underlying profit for the period is calculated as follows: Audited Profit from continuing operations attributable to owners of the company Adjustments: Amortisation of intangible assets Non-recurring costs Tax effect of adjustments (0.1) (0.1) (0.5) Underlying profit after tax from continuing operations Weighted average number of ordinary shares in issue (000s) 41,764 41,764 41,613 Adjustments Savings Related Share Options (000s) Equity Incentive Plan Conditional share awards (000s) Options (000s) Weighted average number of ordinary shares for diluted earnings per share (000s) 42,543 42,926 43,084 Underlying earnings per share 4.80p 4.73p 11.60p Diluted underlying earnings per share 4.71p 4.60p 11.20p

15 Note 7 Interim dividend An interim dividend of 0.6p per share (2016: 0.5p) was approved by the board on 7 th August 2017 and has not been included as a liability as at 30th June The shares will go ex-dividend on 7th September 2017 and the dividend will be paid on 6th October 2017 to shareholders on the register as at 8th September A dividend reinvestment plan is available for shareholders. Those shareholders who have not elected to participate in this plan, and who would like to participate with respect to the 2017 interim dividend, may do so by contacting Capita Registrars on The last day for election for the interim dividend reinvestment is 13th September 2017 and any requests should be made in good time ahead of that date. Audited Dividends paid in period Final dividends in respect of previous year Interim dividend in respect of the current year Dividends recognised in the period Note 8 Notes to the consolidated statement of cash flows Audited A. Reconciliation of operating profit to net cash from operating activities Profit from operations Continuing operations Discontinued operations - (0.1) (0.6) Depreciation charges Profit on sale of property, plant and equipment - (0.1) (0.1) Equity settled share based payment expense Amortisation of intangible assets Defined benefit pension scheme charge / (credit) 0.1 (0.2) (0.7) Operating cash flows before movements in working capital Decrease / (increase) in inventories - - (0.2) Decrease / (increase) in contract balances Decrease / (Increase) in trade and other receivables (2.9) (2.1) (5.5) (Decrease) / increase in trade and other payables (4.9) (6.4) 3.1 Cash (used in) / generated by operations (4.5) (4.2) 4.7 Corporation tax paid (0.2) - (0.5) Interest paid (0.1) (0.1) (0.2) Net cash (used in) / generated by operating activities (4.8) (4.3) 4.0 B. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that are readily convertible into cash, less bank overdrafts. C. Borrowings The Group had drawn down 3m of its 10m committed three year Revolving Credit Facility at 30 th June Note 9 Related party transactions Transactions between the company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Full disclosure of the Group s other related party transactions is given in Note 23 to the Group s financial statements for the year ended 31st December There have been no material changes in these relationships in the six months ended 30th June 2017 that have materially affected the financial position or performance of the Group during that period.

16 Note 10 Pension commitments The present value of the defined benefit retirement benefit scheme and the related past and current service costs were measured using the projected unit credit method. The amount included in the statement of financial position arising from the Group s obligations in respect of its defined benefit retirement benefit scheme is as follows: Audited Present value of defined benefit obligations Fair value of scheme assets (34.6) (30.5) (32.7) Deficit in scheme recognised in the statement of financial position Key assumptions used: Rate of increase in salaries 2.70% 2.20% 2.60% Rate of increase of pensions in payment 3.10% 2.70% 3.05% Discount rate 2.75% 3.20% 2.80% Inflation assumption 3.40% 2.90% 3.30% Audited Mortality assumptions (years): Life expectancy at age 65 for current pensioners: Men Women Life expectancy at age 65 for future pensioners (current age 45) Men Women Statement of Directors responsibilities The Directors confirm that the condensed interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR and DTR 4.2.8, namely: an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report. On behalf of the Board Iain McCusker - Chairman Mark Lawrence - Chief Executive Martin Walton - Finance Director 8 th August 2017