May Gurney Integrated Services plc

('May Gurney' or the 'Company')

 

Strong Performance for the first six months

 

May Gurney, the infrastructure support services company providing essential maintenance and enhancement services to clients in the public and regulated sectors, today reports results for the six months ended 30 September 2010.

 

Financial & Operational Highlights

 

Strong performance, with turnover and profit growth:

 

 

·     First half revenues up to £288.9 million (H1 2009: £239.1 million)

·     EBITA[1] up by 18% to £12.3 million (H1 2009: £10.4 million)

·     EBITDA[2] up by 17% to £16.3 million (H1 2009: £13.9 million)

·     Underlying profit before tax[3] up by 19% to £12.0 million (H1 2009: £10.1 million)

·     Profit before tax up by 31% to £11.1 million (H1 2009: £8.5 million)

·     Underlying earnings per share[4] up to 12.10 pence per share

(H1 2009: 10.39 pence)

·     Interim dividend up by 16% to 2.08 pence per share (H1 2009: 1.8 pence)

 

Strong fundamentals:

 

·     Robust balance sheet with gross cash of £50.7 million (2010: £43.4 million) and net cash of £33.2 million (2010: £29.2 million)

·     Excellent cash generation with in excess of 100% conversion of EBITA

 

Significant growth prospects:

·     Forward order book of £1.4 billion maintained (H1 2009: £1.4 billion) providing long-term earnings visibility

·     Potential contract extensions of a further £1.0 billion (H1 2009: £0.9 billion)

·     Strong prospect of adding to existing order book through an exciting pipeline of bidding opportunities worth in excess of £4 billion

 

Long-term contract wins and extensions during the first half and since 30 September 2010, totalling over £200 million:

 

·     Today, May Gurney has been named preferred bidder for 3 new long-term highways maintenance contracts for Surrey County Council with a combined value of up to

·     £93 million (6 years plus a possible 4 year extension)

·     New AMP5 contract for Essex & Suffolk Water (Northumbrian Water) worth up to

·     £30 million (33 months plus possible extensions of 2 and 5 years) and a design and build contract worth up to £8 million (4 years plus possible extensions of 4 and

·     2 years)

·     New AMP5 contract with Bristol Water worth up to £12 million (4+ years to March 2015)

·     A three-year extension to our long-term street lighting contract with the London Borough of Waltham Forest worth up to £3 million and a two-year extension to the street lighting contract with the London Borough of Bromley worth up to £3 million

·     New environmental services contract for West Oxfordshire District Council worth up to

       £36 million (7 years plus a possible 7 year extension)

·     Our Property Framework contract with Network Rail has been extended by two years, plus possible enhancement works

·     New three-year contract with Nexus for the refurbishment and upgrading of the Tyne & Wear metro

 

 

 

 

 

 

Commenting on the results, Philip Fellowes-Prynne, Chief Executive said:

 

"May Gurney delivers essential front-line services to more than 18.5 million people across the UK with 95% of our business represented by long-term contracts. Over the first half-year we have achieved another period of turnover and profit growth. We have further strengthened our cash position, maintained our forward order book at £1.4 billion and have a sales pipeline worth in excess of £4 billion, along with winning several significant new long-term contracts and extensions worth over £200 million.

 

Our strong H1 performance reflects excellent organic year-on-year growth and has been underpinned by a good performance in the local authority highways sector on the back of a severe winter and a dry summer, combined with an accelerated delivery of contracts in the rail sector, resulting in a change in our H1/H2 revenue profile compared to previous years.

 

In line with our performance we have adopted a more progressive dividend policy and increased the interim dividend to 2.08 pence per share, up 16% on the same period last year.

 

The Comprehensive Spending Review (CSR), that will lead to reduced budgets and the removal of ring-fencing, is driving our clients to pursue a variety of different approaches to deliver better outcomes from their front-line services, with an increasing propensity to outsource. Our ability to design and implement multi-service (or bundled) solutions and our wide service portfolio, along with our deep long-term relationships, leaves us well placed to support them.

.

The current market conditions have resulted in further opportunities for May Gurney. With our solid order book, excellent earnings visibility, focused acquisition strategy and continued strong cash generation we have confidence in the Group's future success."

 

A presentation will be given to analysts at 9.00am today, Wednesday 1 December 2010, at the offices of Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London EC2M 5SY.

 

For further information contact:

 

May Gurney Integrated Services plc Philip Fellowes-Prynne, Chief Executive Matt Stevens, Group Finance Director	020 7638 9571 (today)   020 7638 9571 (today) 01603 727272 (thereafter)
Citigate Dewe Rogerson Ginny Pulbrook	020 7282 2945
Altium Phil Adams/Paul Lines	0845 505 4343

 

 

 

 

Half-yearly Report 2010

 

 

Overview

 

May Gurney has achieved another period of sustained growth during the six months ended

30 September 2010 with record turnover and profits. Revenues have increased to £288.9 million

(H1 2009: £239.1 million), EBITA  is up 18% to £12.3 million (H1 2009: £10.4 million) and the EBITA margin has been maintained at 4.3% (H1 2009: 4.3%) after the high level of bidding and mobilisation costs incurred in the first half of the year, which are expensed as incurred. Cash generation remains strong, with gross cash of £50.7 million (2010: £43.4 million) and net cash of £33.2 million (2010:

£29.2 million).

 

The strong H1 performance, reflecting excellent organic year-on-year growth, has been underpinned by a good performance in the local authority highways sector on the back of a severe winter and a dry summer, combined with an accelerated delivery of contracts in the rail sector. This results in a change in our H1:H2 revenue profile compared to previous years.

 

We have secured new long-term contracts and extensions with a combined value of over £200 million in H1 and since the period end. In addition, we have mobilised 16 new contracts. Our forward order book (including frameworks, but excluding possible extensions) has been maintained at £1.4 billion

(H1 2009: £1.4 billion).

 

The majority of the services we deliver are 'essential' and safety related and therefore, offer resilience. To ensure that the effects of future reductions in public sector expenditure are minimised, we continue to manage our cost base and to develop deep and sustainable relationships with our long-term clients.

 

The first six months has been a period of intensive bidding activity as more long-term contracts come to market, and we expect this to continue. Our pipeline of future opportunities now stands at more than

 £4 billion. We see a shift in local authority tenders towards a requirement for 'bundled services', which May Gurney is well positioned to deliver.

 

In addition, we believe that the demand for spending cuts and 'added value' as a result of the CSR will increasingly drive local authorities to seek innovative solutions for their front-line services. Consequently, the propensity to outsource to trusted long-term partners, such as May Gurney, is increasing. Our proven ability to deliver greater value for clients by designing and implementing transformational front-line service solutions, means that we are ideally placed to support them through their budget challenges.

 

In order to mitigate the risk of any future declines in workload we have been working with our long-term clients to build alternative revenue streams - for example, by offering 'multi-service' or 'bundled' services, and increasing our penetration of the UK's environmental services market. As previously highlighted, we see a softening in future demand in the highways sector, although reductions in spend have generally been focused upon capital projects as opposed to maintenance activity.

 

Our recently mobilised bundled services contract with Torbay Council, where we are generating efficiency and cost savings by delivering a wide range of bundled services from highways maintenance to recycling collections and beach cleansing, and the increasing demand throughout the country for MaGOS™ (our unique environmental services kerbside sort solution), is a prime example of this trend. This shift towards the adoption of more efficient and innovative solutions represents a key opportunity for both May Gurney and its clients in the coming years.

 

In addition to delivering organic growth, we remain focused in selectively pursuing complementary, value-enhancing acquisitions. It remains imperative that any potential acquisitions are based upon long-term client contracts or where there are skills or services that will enhance our existing service offering. Our strong balance sheet allows us to pursue acquisition opportunities that are strategically aligned and add value to the Group.

 

 

Financial Results

 

The Group's focus on the delivery of essential services to our customers has continued to underpin a strong financial performance.  Group revenues have grown to £288.9 million (H1 2009: £239.1 million), whilst EBITA has increased to £12.3 million (H1 2009: £10.4 million). The business continues to be cash generative, with net cash increasing to £33.2 million (2010: £29.2 million).

 

Turnover

 

Revenues grew by 21% to £288.9 million (H1 2009: £239.1 million).  This performance was driven by strong organic growth in highways and environmental services, together with a greater proportion of work delivered in the first half of the year in the highways and rail sectors compared to previous periods. 

 

Margins

 

EBITA margin remains consistent at 4.3% (H1 2009: 4.3%), which is pleasing given the contract mobilisations and a higher than anticipated level of bidding activity in the period within the highways, environmental services and utilities sectors.

 

In line with our ongoing policy, all bid and mobilisation costs are written off as incurred.

 

The margin in our Public Sector services has reduced to 4.7% (H1 2009: 5.1%) as a result of bidding and mobilisation costs, whilst the Regulated Sector margin has increased to 3.4% (H1 2009: 3.1%).

 

Profit before Tax

 

Underlying profit before tax has increased by 19% to £12.0 million (H1 2009: £10.1 million). The Group continues to have a net interest charge at the half year of £0.3 million (H1 2009: £0.3 million), despite the significant positive net cash balance, due to the low interest rate level on cash balances versus the interest cost of assets under finance leases.

 

Profit before tax has increased by 31% to £11.1million (H1 2009: £8.5 million), helped by lower intangible asset amortisation.

 

Earnings per Share

 

Underlying earnings per share (EPS) has increased by 16% to 12.1 pence (H1 2009: 10.39 pence). Underlying EPS is calculated by adding back shares held by employee trusts to the weighted average number of shares excluding amortisation.

 

Cash

 

The business remains cash generative with cash generated from operations in the first half of

£14.7 million (H1 2009: £14.2 million), representing in excess of 100% conversion of EBITA.

 

Net cash was £33.2 million (2010: £29.2 million) being made up of cash and cash equivalents of

£50.7 million (2010: £43.4 million) less finance lease obligations of £17.5 million (2010: £14.2 million).

 

Balance Sheet

(Condensed Consolidated Statement of Financial Position)

 

The Group's balance sheet remains strong, and provides our clients with confidence that May Gurney will be a long-term partner in delivering their essential services.

 

Investment in fixed assets has grown in the year driven largely by environmental services business growth and the development of our Information Systems platform.  The investment in environmental services assets is backed by long-term contracts that give the Group confidence of high asset utilisation and therefore returns.

 

Whilst the Group has a significant net cash position and no debt except for our asset financing, we continue to maintain debt facilities should the Group require them to support acquisitions.

 

Dividends

 

Following continued strong financial performance and cash generation, the Group has adopted a more progressive dividend policy. An interim dividend of 2.08 pence per share (H1 2009: 1.8 pence per share) will be paid on 7 January 2011 to shareholders on the register at 10 December 2010.

 

 

Cost Management & business investment

 

Effective cost base management remains a priority for the Group.  Where we have had visibility that there is an imbalance between our long-term contract revenue flows and their associated cost bases the Group has acted decisively to reduce headcount and cost. We continue to actively review our non-core activities.

 

The Group continues to operate a shared services approach to our finance, procurement and plant and transport functions and we have been able to leverage these to support the Group's organic growth. We continue to invest in embedding Continuous Business Improvement principles to drive efficiency and productivity benefits both for its clients and May Gurney.

 

We are currently half way through a four-year programme to build and deploy our group-wide integrated technology platform, MGConnect™, which is proving to be an important market differentiator in our bidding activity. MGConnect™ is already delivering performance and efficiency savings including mobile solutions that eliminate 'paper' and reduce back office costs, and reporting tools that provide our clients and managers with real-time visibility of performance.

 

Accounting Policies

 

All of our policies are IFRS compliant and remain consistent with the previous year, unless otherwise stated.

 

 

Segmental Results

 

Public Sector Services

 

Our Public Sector services segment accounts for 67% of Group revenues and 74% of Group EBITA. Revenues generated for the first half of £194.0 million (H1 2009: £146.3 million) represent excellent organic growth. EBITA margins at 4.7% (H1 2009: 5.1%) reflected new contract mobilisations during the period. In addition, the first six months has seen an unprecedented level of bidding activity.

 

Highway Services

 

May Gurney is the market leader in highways maintenance services to local authorities, maintaining over 37,000 kilometres of roads and more than 500,000 street lights and illuminated signs across the country. We deliver highway services to eight councils and ten London boroughs, all under long-term contracts. Our core services include highways maintenance, street lighting and surface dressing.

 

There has been a strong operational performance across all services and contracts underpinned by essential maintenance-based income streams. The first half-year has seen a stronger performance than previous periods due to the impact of a severe winter and good early summer weather. Crucially, the services we deliver are often safety related - such as highways drainage or winter maintenance.

 

The new long-term bundled services contract with Torbay Council, valued at £130 million over an initial period of 10 years with possible extensions of a further 15 years, has mobilised well. This included the introduction of new waste and recycling services to Torbay's 60,000 households which aim to deliver cost savings of more than £14 million. Since the service introduction in September, there has been an uplift of 44% in recycling rates.

 

TOR2, the joint venture company we established with Torbay Council, is currently preparing to offer its services to other local authorities and private companies within the region. The delivery of bundled services in joint venture with a local authority is a truly innovative solution designed to drive service improvements and best value for residents - doing more with less.

 

Today (1 December, 2010) we were named as preferred bidder for three new long-term highways maintenance contracts with Surrey County Council with a combined value of £93 million. The core maintenance contract is for six years plus a possible extension of a further four years.

 

 

Environmental Services

 

May Gurney delivers environmental services for 21 local authorities, covering more than 2.2 million households across the UK. Our focus is on working with our clients to develop better ways of collection in order to extract the maximum value from recycled materials and reduce the amount of waste going to landfill. Our core services include kerbside recycling and refuse collections, street cleansing and the management of household waste recycling centres (HWRCs). Environmental Services operates in a resilient growth market with strong regulatory drivers and increasing cost implications for clients as landfill tax escalates.

 

During the period, in addition to Torbay, we have mobilised new long-term contracts with North Somerset Council and Bridgend County Borough Council. By deploying May Gurney's next generation kerbside sort solution, MaGOS™, we have achieved exceptional recycling rates, helping our clients to meet their ambitious carbon reduction and recycling targets.

 

We have also mobilised our new contract with North Yorkshire County Council for their 17 HWRCs, valued at up to £24 million over seven years (with a possible extension of a further three years). We now have almost a 10% share of the UK HWRC market.

 

 

Facility Services

 

May Gurney delivers facility services for local authorities, with a specific focus on the education sector and regional frameworks. Our core services include refurbishment, maintenance and new build. We have established partnerships for additional services such as design and information technology, enabling us to deliver complete end-to-end solutions for our clients.

 

After the period end, we were delighted to sign our five year £32 million Building Schools for the Future (BSF) contract with the London Borough of Lambeth following the Government's announcement on BSF in the summer. Work starts on Norwood and Dunraven secondary schools in February 2011. Working with our partners, we will deliver design, build and asset management services through the Local Education Partnership (LEP). As Lambeth's LEP partner, we also have the opportunity to bid for more work - for example, a new Academy is currently under review. In addition, our 10 year BSF programme with North Lincolnshire County Council is proceeding, with Melior Community College in Scunthorpe due to open in summer 2011.

 

These partnerships demonstrate May Gurney's expertise in bringing together the right organisations with the best skills to deliver complex bundled services for local authorities and the communities they serve.

 

Regulated Sector

 

Our Regulated Sector services segment accounts for 33% of Group revenues and 26% of Group EBITA. Revenues generated for the first half of £94.9 million (H1 2009: £92.8 million) were driven by a good performance across our services, with a 10% increase in EBITA. Margins have increased to 3.4% (H1 2009: 3.1%).

 

 

Utility Services

 

May Gurney delivers utility maintenance and enhancement services in water and telecommunications. Our core services include clean and waste water improvements, asset and infrastructure maintenance, mechanical and electrical design and maintenance, inspection and maintenance for bridges and masts, site investigation and design.

 

During the first half, we have seen a good performance from our core water network and M&E (Mechanical & Electrical) teams driven by the shift towards ongoing repair and maintenance activities.

 

As previously reported, the AMP5 bidding process is still ongoing and we have secured 11 contracts to date (November 2010). The AMP5 bidding process has been slower than expected as our water clients continue to assess the implications of Ofwat's Final Determinations regarding efficiency and customer service targets and how they are applied.

 

We have secured new contracts and extensions in H1 and since the period end, with a combined value of £50 million. These include two new contracts with Essex & Suffolk Water (Northumbrian Water) covering water mains (worth up to £30 million over 33 months plus possible extensions of two and five years) and design and build (worth up to £8 million over four years, plus possible extensions of four and two years) and a new contract with Bristol Water (worth up to £12 million over four years to March 2015).

 

May Gurney is well positioned to take advantage of the shift towards maintenance expenditure and the many other regulatory-driven spend opportunities in the market, including power and telecommunications.

 

 

Rail Services

 

May Gurney works in long-term partnership with its client, Network Rail, to deliver maintenance and refurbishment works on rail structures, rail property and in the signalling environment. We have a solid safety record and have won numerous awards for the quality of our delivery, including nine industry awards for our heritage maintenance works on the High Level Bridge in Newcastle upon Tyne.

 

Our long-term property and structures contracts with Network Rail have performed well during the first half. This has largely been the result of accelerated delivery of programmes due to the shift away from 'frameworks' towards a 'tendering' purchasing strategy which has allowed us to carry out works in a more timely and efficient fashion to take advantage of the summer weather.

 

The refurbishment and replacement of the roof at Victoria Station - London's busiest, with more than 385,000 customers each day - is due for completion during the summer of 2011.

 

We have also been awarded a three-year contract from a new rail client, Nexus, for the refurbishment and upgrading of the Tyne and Wear metro system.

 

As previously announced, our Property Framework contract with Network Rail has been extended by two years, plus possible enhancement works.

 

 

Waterways Services

 

May Gurney plays an essential role in the regeneration, maintenance and renaissance of the UK's waterways network. We deliver maintenance services, including mechanical, civil and electrical engineering for British Waterways across the national canal and river network infrastructure, and with the Environment Agency to protect communities from flooding. 

 

Our long-term framework contract with British Waterways for the maintenance and improvement of the national canal and river network continues to perform well and is fully in line with their strategic goal of achieving charitable status. Funding is supported by income generated from canal usage fees which continues to benefit from the increasing popularity of the network, alongside income from their property portfolio.

 

Several high profile maintenance programmes have been completed in the period including the upgrading and restoration of City Mill Lock at the Olympic Park in Stratford and the restoration of the sea gates at Sharpness North in Gloucestershire.

 

 

People

 

We are committed to ensuring that May Gurney is 'The Best' place to work. Our goal is to attract and retain the best talent by creating an environment where people can flourish and take great pride in doing the right thing for their colleagues and our long-term clients.

 

Our 4,600 people are at the front-line of essential service delivery for local communities across the UK - they keep the country running. We never forget that our clients trust us to engage with their customers - members of the public - on their behalf. This is why we continue to invest in development programmes to ensure that our people are safe, motivated and engaged with our vision to be the best infrastructure support services business in the UK.

 

The health and safety of our workforce, and the communities where we work, is our priority. For the sixth year in succession, we have received a RoSPA Gold Award for safety and we are currently rolling out the second phase of MAD, our award-winning behavioural safety programme.

 

In September, we won both the 'Best Training Partnership' and the 'Special Achievement' categories at the Training Journal Awards, in recognition of the customer care programmes developed for Norfolk County Council. The training programme delivered an impressive 68% reduction in complaints and resulted in a remarkable 800% increase in compliments.

 

In line with the Board's wish to see greater employee ownership, we have undertaken a Sharesave scheme for the fourth successive year.

 

The Board

 

As our business evolves, we continue to keep our Board skills under review to ensure that we have the very best talent, experience and vision to guide our success. In April 2010, we announced the appointment of Ishbel Macpherson as a non-executive director. Her extensive non-executive experience and corporate finance background makes her ideally placed to make a valuable contribution to the Board and to chair our Audit Committee.    

 

Corporate Sustainability

 

We deliver essential front-line services that make a real difference to the quality of life for our local communities. Therefore, we see it as our responsibility to deliver social and environmental sustainability in everything we do.

 

We are leading the way in inspiring our clients, our people and our supply chain partners in making a tangible difference. This pioneering role has been recognised with four Green Apple Awards in 2010 and we were highly commended at the Green Business Awards.

 

Our active involvement in local communities has been strengthened by the establishment of the May Gurney Foundation which specifically aims to help young people and the long-term unemployed get into work in the local communities where we operate - focusing on improving opportunities for people in terms of education, self help, health and wellbeing as well as supporting local environment issues.

 

 

 

Outlook

 

May Gurney delivers essential front line services to more than 18.5 million people across the UK with 95% of our business represented by long-term contracts. Over the first half-year we have achieved another period of turnover and profit growth. We have further strengthened our cash position, maintained our forward order book at £1.4 billion and have a sales pipeline worth in excess of £4 billion, along with winning several significant new long-term contracts and extensions worth over £200 million.

 

Our strong H1 performance, reflects excellent organic year-on-year growth, and has been underpinned by a good performance in the local authority highways sector on the back of a severe winter and a dry summer, combined with an accelerated delivery of contracts in the rail sector, resulting in a change in our H1/H2 revenue profile compared to previous years.

 

In line with our performance we have adopted a more progressive dividend policy and increased the interim dividend to 2.08 pence per share, up 16% on the same period last year.

 

The Comprehensive Spending Review (CSR), that will lead to reduced budgets and the removal of ring-fencing, is driving our clients to pursue a variety of different approaches to deliver better outcomes from their front-line services, with an increasing propensity to outsource. Our ability to design and implement multi-service (or bundled) solutions and our wide service portfolio, along with our deep long-term relationships, leaves us well placed to support them.

 

The current market conditions have resulted in further opportunities for May Gurney. With our solid order book, excellent earnings visibility, focused acquisition strategy and continued strong cash generation we have confidence in the Group's future success.

 

David Sterry OBE                             Philip Fellowes-Prynne

Chairman                                            Chief Executive

 

 

 

 

Condensed consolidated income statement
for the 6 months ended 30 September 2010	Note	6 months to 30 Sep 2010 £m	6 months to 30 Sep 2009 £m	12 months to 31 Mar 2010 £m
Group revenue	1	288.9	239.1	483.1
Cost of sales		(261.4)	(215.3)	(434.0)
Gross Profit		27.5	23.8	49.1
Administrative expenses		(15.2)	(13.4)	(27.0)
Group operating profit before amortisation		12.3	10.4	22.1
Other expenses
- Intangible assets amortisation		(0.9)	(1.6)	(3.2)
Operating profit		11.4	8.8	18.9
Finance income	2	0.3	0.2	0.4
Finance costs	2	(0.6)	(0.5)	(0.9)
Profit before taxation		11.1	8.5	18.4
Taxation	3	(3.2)	(2.4)	(5.3)
Profit for the period from continuing operations attributable to equity holders of the parent	1	7.9	6.1	13.1
Earnings per share (in pence)	4
Total and from continuing operations
Basic earnings per share		11.77p	9.11p	19.58p
Diluted earnings per share		11.55p	9.02p	19.25p

 

 

 

Condensed consolidated statement of comprehensive income
for the 6 months ended 30 September 2010		6 months to 30 Sep 2010 £m	6 months to 30 Sep 2009 £m	12 months to 31 Mar 2010 £m
Profit for the period		7.9	6.1	13.1
Actuarial losses on defined benefit pension schemes		-	-	(1.3)
Tax on actuarial losses on defined benefit pension schemes		-	-	0.4
Other comprehensive loss for the period		-	-	(0.9)
Total comprehensive income for the period attributable to equity holders of the parent		7.9	6.1	12.2

 

 

 

Condensed consolidated statement of changes in equity
for the period ended 30 September 2010	Share Capital £m	Share Premium Account £m	Merger Relief Reserve £m	Other Reserves £m	Retained Earnings £m	Total Equity £m
Balance at 31 March and 1 April 2009	3.5	13.2	1.9	1.4	43.5	63.5
Profit for the period	-	-	-	-	6.1	6.1
Other comprehensive income:
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-
Tax on actuarial losses on defined benefit pension schemes	-	-	-	-	-	-
Total comprehensive income for the period	-	-	-	-	6.1	6.1
Proceeds from disposal of own shares	-	-	-	0.1	-	0.1
Share based payments - income statement credit	-	-	-	-	1.1	1.1
Dividend paid	-	-	-	-	(2.3)	(2.3)
Balance at 30 September 2009	3.5	13.2	1.9	1.5	48.4	68.5
Profit for the period	-	-	-	-	7.0	7.0
Other comprehensive income:
Actuarial losses on defined benefit pension schemes	-	-	-	-	(1.3)	(1.3)
Tax on actuarial losses on defined benefit pension schemes	-	-	-	-	0.4	0.4
Total comprehensive income for the period	-	-	-	-	6.1	6.1
Proceeds from disposal of own shares	-	-	-	-	-	-
Taxation on share sales	-	-	-	(0.1)	-	(0.1)
Share based payments - income statement charge	-	-	-	-	(0.7)	(0.7)
Share based payments - deferred tax relief on future exercise	-	-	-	-	0.8	0.8
Dividend paid	-	-	-	-	(1.2)	(1.2)
Balance at 31 March and 1 April 2010	3.5	13.2	1.9	1.4	53.4	73.4
Profit for the period	-	-	-	-	7.9	7.9
Other comprehensive income:
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-
Tax on actuarial losses on defined benefit pension schemes	-	-	-	-	-	-
Total comprehensive income for the period	-	-	-	-	7.9	7.9
Share based payments - income statement charge	-	-	-	-	0.4	0.4
Share based payments - deferred tax relief on future exercise	-	-	-	-	(0.1)	(0.1)
Dividend paid	-	-	-	-	(2.5)	(2.5)
Balance at 30 September 2010	3.5	13.2	1.9	1.4	59.1	79.1

 

 

 

Condensed consolidated statement of financial position
at 30 September 2010	Note	30 Sep 2010 £m	30 Sep 2009 £m	31 Mar 2010 £m
Non current assets
Property, plant & equipment	6	27.2	21.1	25.7
Goodwill		35.2	35.2	35.2
Other intangible assets		5.4	7.2	5.6
Deferred tax asset		1.3	1.1	1.1
Retirement benefit surplus		-	0.1	-
		69.1	64.7	67.6
Current assets
Inventories		4.2	2.5	2.7
Trade and other receivables		90.1	81.5	81.4
Cash and cash equivalents		50.7	41.3	43.4
		145.0	125.3	127.5
Total assets		214.1	190.0	195.1
Current liabilities
Trade and other payables		(113.5)	(103.0)	(105.2)
Current tax liabilities		(2.9)	(1.9)	(1.1)
Obligations under finance leases		(6.3)	(5.8)	(5.6)
		(122.7)	(110.7)	(111.9)
Non-current liabilities
Retirement benefit obligations		(1.1)	-	(1.1)
Obligations under finance leases		(11.2)	(10.7)	(8.6)
Provisions		-	(0.1)	(0.1)
		(12.3)	(10.8)	(9.8)
Total Liabilities		(135.0)	(121.5)	(121.7)
Net Assets		79.1	68.5	73.4
Equity
Share capital		3.5	3.5	3.5
Share premium account		13.2	13.2	13.2
Merger relief reserve		1.9	1.9	1.9
Other reserves		1.4	1.5	1.4
Retained earnings		59.1	48.4	53.4
Total equity		79.1	68.5	73.4
These financial statements were approved by the board of directors on 30th November 2010.
Philip Fellowes-Prynne
Director

 

 

 

Condensed consolidated statement of cash flows
for the 6 months ended 30 September 2010		6 months to 30 Sep 2010 £m	6 months to 30 Sep 2009 £m	12 months to 31 Mar 2010 £m
Cash flows from operating activities
Group operating profit before amortisation		12.3	10.4	22.1
Non cash items		4.4	3.7	6.8
Working capital movement		(2.0)	0.1	1.8
Cash generated from operations		14.7	14.2	30.7
Corporation tax paid		(1.7)	(2.0)	(5.3)
Interest received		0.3	0.2	0.4
Interest paid		(0.6)	(0.5)	(0.9)
Net cash from operating activities		12.7	11.9	24.9
Cash flows from investing activities
Purchase of property, plant and equipment		(5.7)	(4.1)	(12.3)
Proceeds from sale of property, plant and equipment		0.2	1.2	2.0
Software development costs		(0.7)	-	-
Net cash used in investing activities		(6.2)	(2.9)	(10.3)
Cash flows from financing activities
Proceeds from sale of own shares by ESOT		-	0.1	0.1
Ordinary dividends paid		(2.5)	(2.3)	(3.5)
New finance leases		6.1	3.5	4.1
Payment of finance lease obligations		(2.8)	(2.6)	(5.5)
Redemption of loan notes		-	(0.6)	(0.6)
Net cash used in financing activities		0.8	(1.9)	(5.4)
Increase in cash and cash equivalents		7.3	7.1	9.2
Opening cash and cash equivalents		43.4	34.2	34.2
Closing cash and cash equivalents		50.7	41.3	43.4
Reconciliation of net cash flow to movement in net funds
Increase in cash and cash equivalents		7.3	7.1	9.2
(Increase)/decrease in finance leases		(3.3)	(0.9)	1.4
Increase in net funds in the period		4.0	6.2	10.6
Opening net funds		29.2	18.6	18.6
Closing net funds		33.2	24.8	29.2
Net funds represents cash and cash equivalents less obligations under finance leases.

 

 

 

 

Basis of preparation and accounting policies

 

 

 

 

The information for the year ended 31 March 2010 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statements under Section 498(2) or (3) of the Companies Act 2006.

 

The half-yearly financial statements are the unaudited, half-yearly, condensed consolidated financial statements. This half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'.

 

The directors have reviewed the current and projected position of the Group and have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half yearly condensed consolidated financial statements.

 

The financial statements have been prepared under the recognition and measurement principles of IFRS as adopted by the EU that are expected to be adopted and effective at 31 March 2011, using accounting policies and methods of computation, as set out in the 31 March 2010 May Gurney Integrated Services plc Annual Report and Accounts, except as set out below, and applied consistently.

 

Changes in accounting policy

 

IAS 27 'Consolidated and separate financial statements (revised 2008)' and IFRS 3 'Business combinations (revised 2008)' include revisions relating to the accounting for acquisitions. The principal change in accounting policy is that attributable transaction costs relating to business acquisitions which complete on or after 1 April 2010 are expensed in the income statement in the period incurred. Previously such costs would have been capitalised as part of goodwill relating to the acquisition. Any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of the acquisition are recognised in the income statement. In addition, the term 'non-controlling interest' has been introduced to replace the term 'minority interest'. The revisions to IAS 27 and IFRS 3 have had no impact on profit, earnings per share or net assets in the six months ended 30 September 2010.

 

IFRIC 15 'Agreements for the construction of real estate'; IFRIC 17 'Distributions of non-cash assets to owners'; IFRIC 18 'Transfers of assets from customers'; IAS 39 (amendment) 'Financial instruments: Recognition and measurement: Eligible hedged items'; Amendments to IFRS 2 'Group cash-settled share-based payment transactions'; IAS 28 'Investment in associates (revised 2008)'; and IAS 31 'Interests in joint ventures' also came into effect and were adopted in the current period but had no effect on the condensed consolidated financial statements.

 

At the date of authorisation of these interim financial statements the following standards and interpretations were in issue but not yet effective and therefore have not been applied in these interim financial statements:

IFRS 9 'Financial Instruments'; IAS 24 'Related party disclosures (revised 2009)'; IFRIC 19 'Extinguishing financial liabilities with equity instruments'; and IAS 32 (amendment) 'Financial instruments: Presentation'.

The directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group, with the exception of IFRS 9 which has not yet been finalised and so the directors have not been able to fully assess the potential impact yet.

 

 

 

 

 

Notes to the report and accounts

 

 

1. Segmental analysis
For management purposes, the Group is currently organised into three segments - Public Sector Services (Highways Services, Environmental Services and Facility Services), Regulated Sector Services (Utility Services, Rail Services and Waterways Services) and Property. The three segments noted are those that are regularly reviewed by the Group's Chief Operating Decision Maker (CODM). Revenue is mostly derived from contract work.
The identification of these reportable segments has come about due to the Group's aim of aligning services more closely with the needs of its long-term clients and the nature of the work the Group delivers for them, namely delivering essential front-line maintenance and enhancement services.
for the period ended 30 September 2010	Public Sector Services £m	Regulated Sector Services £m	Property £m	Group £m
Revenue
Total revenue	194.9	95.6	-	290.5
Less: between segments	(0.9)	(0.7)	-	(1.6)
External revenue	194.0	94.9	-	288.9
Sales between segments are charged at prevailing market prices.
Result per management information reviewed by the CODM
Group operating profit before amortisation	9.1	3.2	-	12.3
Intangible assets amortisation	(0.7)	(0.2)	-	(0.9)
Finance income				0.3
Finance costs				(0.6)
Profit before taxation				11.1
Taxation				(3.2)
Profit for the period per management information				7.9
Total assets
Segments	106.7	81.7	12.1	200.5
Not allocated to segments				13.6
				214.1
Total liabilities
Segments	(70.9)	(48.6)	(1.1)	(120.6)
Not allocated to segments				(14.4)
				(135.0)
Other Information
Capital expenditure	5.2	0.5	-	5.7
Depreciation	2.7	1.2	0.1	4.0
One customer in the Regulated Sector Services segment accounted for 15% of total revenue.
As the Group's activities are almost entirely domestic, no geographical segmental analysis is required.

 

 

1. Segmental analysis (continued)
for the period ended 30 September 2009	Public Sector Services £m	Regulated Sector Services £m	Property £m	Group £m
Revenue
Total revenue	146.8	93.8	-	240.6
Less: between segments	(0.5)	(1.0)	-	(1.5)
External revenue	146.3	92.8	-	239.1
Sales between segments are charged at prevailing market prices.
Result per management information reviewed by the CODM
Group operating profit before amortisation	7.5	2.9	-	10.4
Intangible assets amortisation	(0.8)	(0.8)	-	(1.6)
Finance income				0.2
Finance costs				(0.5)
Profit before taxation				8.5
Taxation				(2.4)
Profit for the period per management information				6.1
Total assets
Segments	95.1	79.8	11.6	186.5
Not allocated to segments				3.5
				190.0
Total liabilities
Segments	(61.8)	(43.4)	(0.9)	(106.1)
Not allocated to segments				(15.4)
				(121.5)
Other Information
Capital expenditure	3.5	0.6	-	4.1
Depreciation	2.0	1.4	0.1	3.5
One customer in the Regulated Sector Services segment accounted for 11% of total revenue.

 

 

1. Segmental analysis (continued)
for the year ended 31 March 2010	Public Sector Services £m	Regulated Sector Services £m	Property £m	Group £m
Revenue
Total revenue	285.3	200.8	-	486.1
Less: between segments	(1.6)	(1.4)	-	(3.0)
External revenue	283.7	199.4	-	483.1
Sales between segments are charged at prevailing market prices.
Result per management information reviewed by the CODM
Group operating profit before amortisation	14.7	7.4	-	22.1
Intangible assets amortisation	(1.7)	(1.5)	-	(3.2)
Finance income				0.4
Finance costs				(0.9)
Profit before taxation				18.4
Taxation				(5.7)
Profit for the year per management information				12.7
Taxation adjustment				0.4
Profit for the year per statutory accounts				13.1
Total assets
Segments	98.6	77.1	11.8	187.5
Not allocated to segments				7.6
				195.1
Total liabilities
Segments	(69.3)	(47.9)	(1.0)	(118.2)
Not allocated to segments				(3.5)
				(121.7)
Other Information
Capital expenditure	9.9	2.4	-	12.3
Depreciation	4.0	2.6	0.1	6.7
One customer in the Regulated Sector Services segment accounted for 13% of total revenue.

 

 

 

2. Finance income and costs
for the 6 months ended 30 September 2010	6 months to 30 Sep 2010 £m	6 months to 30 Sep 2009 £m	12 months to 31 Mar 2010 £m
Finance income
Interest receivable from short-term bank deposits	0.3	0.1	0.2
Other interest	-	0.1	0.2
	0.3	0.2	0.4
Finance costs
Finance charges payable under finance leases	(0.6)	(0.5)	(0.9)
	(0.6)	(0.5)	(0.9)

 

 

 

3. Taxation
for the 6 months ended 30 September 2010	6 months to 30 Sep 2010 £m	6 months to 30 Sep 2009 £m	12 months to 31 Mar 2010 £m
Current tax
Corporation tax on profits for the period	3.6	2.9	4.6
Over provision in respect of prior periods	-	-	0.9
Total current tax	3.6	2.9	5.5
Deferred tax
Origination and reversal of temporary differences	(0.1)	(0.1)	1.8
Tax effect of intangible assets amortisation	(0.3)	(0.4)	(0.9)
Retirement benefit obligation	-	-	-
Over provision in respect of prior years	-	-	(1.1)
Total deferred tax	(0.4)	(0.5)	(0.2)
Total tax charge for the period	3.2	2.4	5.3
The taxation charge for the six months ended 30 September 2010 has been calculated at 28.8% (2009: 28.5%) of profit before tax. This represents the estimated effective rate of tax for the half year period.

 

 

 

4. Earnings per share
for the 6 months ended 30 September 2010	6 months to 30 Sep 2010 £m	6 months to 30 Sep 2009 £m	12 months to 31 Mar 2010 £m
Profit for the period	7.9	6.1	13.1
Basic/Diluted earnings	7.9	6.1	13.1
Adjustments to basic earnings
Intangible assets amortisation	0.9	1.6	3.2
Tax on amortisation of intangible assets	(0.3)	(0.4)	(0.9)
Underlying earnings	8.5	7.3	15.4
Number of shares	Number	Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	67,104,803	66,933,314	66,993,564
Effect of dilutive potential ordinary shares	1,322,771	684,848	1,152,022
Weighted average number of ordinary shares for the purposes of diluted earnings per share	68,427,574	67,618,162	68,145,586
Weighted average number of ordinary shares for the purposes of underlying earnings per share	70,236,016	70,236,016	70,236,016
	pence	pence	pence
Underlying earnings per share	12.10	10.39	21.92
Basic earnings per share	11.77	9.11	19.58
Diluted earnings per share	11.55	9.02	19.25
Underlying earnings per share, before amortisation, has been disclosed to give a clearer understanding of the Group's underlying trading performance. It has been calculated using the underlying earnings figures above and the weighted average number of ordinary shares above which includes those shares held by the Group Employee Share Ownership Trust.
Diluted earnings per share is the basic earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the number of options outstanding during the year.

 

 

 

5. Dividends
for the 6 months ended 30 September 2010	6 months to 30 Sep 2010 £m	6 months to 30 Sep 2009 £m	12 months to 31 Mar 2010 £m
Amounts recognised as distributions to equity holders in the period:
Final dividend paid for the year ended 31 March 2010 of 3.7 pence per share (2009: 3.4 pence)	2.5	2.3	2.3
Interim dividend paid for the year ended 31 March 2010 of 1.8 pence per share	-	-	1.2
	2.5	2.3	3.5
An interim dividend of 2.08 pence per share has been declared since the balance sheet date and so has not been included as a liability in these financial statements. The dividend will be paid on 7 January 2011 to holders of ordinary shares on the register at the close of business on 10 December 2010.
The Trustees of the May Gurney Group Limited Employee Share Ownership Trust and the May Gurney Integrated Services plc Employee Benefit Trust have both waived their rights to receive any dividends in respect of shares held in the Trusts.

 

 

 

6. Property, plant and equipment
Property, plant and equipment of £5.7m were purchased in the period comprising plant and equipment. Disposals of £0.2m related to plant and equipment. The depreciation charge for the period of £4.0m was the only other significant movement on the book value of assets.
Future capital expenditure authorised by the directors but not provided for in these financial statements amounts to £4.1m (31 March 2010: £7.1m, 30 September 2009: £1.4m).

 

 

 

7. Employee benefits
The Group operates a defined benefit pension scheme (May Gurney Defined Benefit Pension Scheme) for some salaried employees and supervisory foremen. The assets of the scheme are held separately from those of the Group and are invested in managed funds. Full details of the defined benefit asset are disclosed in the Group's annual report and accounts.
The balance sheet position as presented at 31 March 2010 has not been remeasured at the interim reporting date as the level of actuarial gains and losses in the period is not considered to be material with the impact of lower bond yields offset by lower inflation rates and higher asset values.

 

 

 

 

Independent Review Report to May Gurney Integrated Services plc

 

Introduction

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of financial position, the condensed consolidated statement of cash flows and notes 1 to 7.  We have read the other information contained in the half yearly financial report, which comprises only the Highlights and the Half-yearly report 2010, and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. The other information comprises only the Highlights and the Half-yearly report 2010.

 

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity".  Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.

As disclosed in the basis of preparation, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the group a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with "International Standard on Review Engagements (UK and Ireland) 2410", Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.

 

 

 

 

 

 

 

 

GRANT THORNTON UK LLP
AUDITOR

LONDON

30^th November 2010

 

 

 

 

Corporate Directory

 

Company Registration Number	4321657
Directors	David Sterry OBE BSc (Hons) CEng MICE, FIHT (Non-executive Chairman) Philip Fellowes-Prynne BA (Hons) (Chief Executive) Matt Stevens BEng ACA (Group Finance Director) Tim Ross MA(Oxon) (Hons) FIQ (Senior Non-executive director) Ishbel Macpherson MA (Hons) (Non-executive director) Andrew Walker MA (Cantab) (Hons) F.IMechE (Non-executive director)
Secretary	Simon Howell BA (Hons) ACIS
Registered Office	Trowse Norwich Norfolk NR14 8SZ
Auditors	Grant Thornton UK LLP Registered Auditors Chartered Accountants Grant Thornton House Melton Street London NW1 2EP
Bankers	Bank of Scotland plc Ground Floor Black Horse House Castle Park Cambridge CB3 0AR
Legal Advisors to the Company	Eversheds LLP One Wood Street London EC2V 7WS
Nominated Advisor and Broker	Altium Capital Limited 30 St James's Square London SW1Y 4AL
Financial advisors	N M Rothschild & Sons Limited New Court St Swithin's lane London EC4P 4DU
Registrars	Capita Registrars Northern House Fenay Bridge Woodsome Park Huddersfield West Yorkshire HD8 0GA
Group Office	Trowse Norwich Norfolk NR14 8SZ Telephone 01603 727272 Fax No 01603 727400 www.maygurney.co.uk