RNS Number:4456K
Conder Environmental PLC
21 December 2007
CONDER ENVIRONMENTAL PLC
INTERIM FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED
31 OCTOBER 2007
Company registration number 04102040
CONDER ENVIRONMENTAL PLC
Chairman's statement for the half year ended 31 October 2007
Conder Environmental plc announces interim results for the half year ended 31
October 2007. These unaudited interim financial statements have been prepared
in accordance with IFRS for the first time and are covered by IFRS1, First-time
Adoption of IFRS. The comparative figures previously reported under UK GAAP
have been restated for the transition to IFRS and the disclosures required under
IFRS1 are given in note 5.
Financial Overview
The Group achieved a small profit before tax in the first half of �4,000 (2006:
continuing operations loss of �643,000, total operations loss of �715,000) on
increased revenues of �6.8m (2006: continuing operations �6.2m, total operations
�11.7m).
The net cash outflow of the Group, pre financing was �202,000 (2006: �149,000)
which is primarily attributable to the higher levels of inventory required to
satisfy the increasing sales revenue.
Business Review
This financial year is a period of transition for the Group. In September I
reported that the Group had successfully completed its restructuring and that
the financial recovery was underway. Frustratingly, the recovery has not
realised our financial expectations due to the increase in oil prices. The
costs of resin and product distribution have seen double digit price increases
and glass costs have risen by similar levels. This has impacted margins from
the end of the first quarter onwards, however an over capacity of supply of GRP
product in the marketplace has limited our ability to pass on these cost
increases to customers. A review of production and distribution costs has been
undertaken and cost reduction initiatives are underway to mitigate the margin
deterioration.
The implementation of our strategy to subdivide Conder Environmental Solutions
Limited into four routes to market has enabled us to focus our efforts on
specific customer demands. This strategy is developing on plan and has assisted
in increasing first half revenues. These improvements should continue in the
second half-year and it is expected that the benefits will be realised more
fully in the following year.
Conder Products
It is pleasing to note that Conder Products has won another preferred supplier
agreement and can add the National Buying Group to its expanding merchant base.
Consequently, our sales of commodity products including separators and packaged
sewage treatment plants continue to grow. The policy of accessing the larger
merchant market has impacted margins through the requirement for merchant rebate
schemes but will benefit the company in the medium term through increased market
share.
Conder Technical Solutions
As part of the reorganisation, Conder Technical Solutions has brought a team of
wastewater treatment specialists in-house. This has enabled the redesign and
launch of the Techflo SAF products, our Technical Sewage Treatment plant range.
As market awareness of the improved products has grown it has been reflected in
the level of enquiries and sales, giving confidence that continuous expansion in
this sector will be achieved for the foreseeable future. Also, the plan to
expand into export sales has developed well with a number of successes already
secured this year. The level of enquiries for technical products as the Group
creates its route to market underpins our expectations in this arena.
Conder Pumping Solutions
To address the pumping market Conder has teamed with Grundfos, a world leading
pump manufacturer, to provide pumping solutions to the water and wastewater
treatment markets. The combination of Grundfos' pumping technology with
Conder's application know-how and route to market make this an exciting prospect
for the Group. The product range will be launched in the spring of 2008 and we
anticipate that it will rapidly establish a strong market position.
Hydroserve
Our service solutions provider continues to grow both through the servicing of
OEM sales and also through its repair and refurbishment arm. This business is
now focused on growth through a broader product offering to the larger
commercial market. It is able to provide a turnkey service either as a
preventative solution to a pollution risk or as a maintenance provider to
existing product installations. Hydroserve continues to grow and makes a
positive financial contribution to the Group.
Dividend
The Board is not recommending the payment of a dividend
Outlook
Conder Environmental plc has made significant improvements during this year of
transition. As we entered the financial year the market appeared strong and
with our reduced overhead cost base the first half turnaround was expected. As
we enter the second half there is evidence to show that certain of our markets
may be weakening and the external cost base increasing. This, combined with the
normal third quarter seasonal downturn, has reduced our full year expectations
and may result in a loss for the year as a whole.
Overall, the Group continues to pursue its strategy which it believes will
create long term shareholder value through sustainable profit generation.
Graham Setterfield
20 December 2007
For further information
Jon Varney/David Griffith Conder Environmental PLC 01420 470 811
Dru Danford Shore Capital & Corporate Ltd 0207 408 4090
CONDER ENVIRONMENTAL PLC
CONSOLIDATED INCOME STATEMENT
for the half year ended 31 October 2007
Note Half year Half year Year ended 30
ended 31 ended 31 April 2007
October 2007 October 2006
Continuing Operations
Revenue 2 6,804 6,194 11,790
Operating costs (6,728) (6,582) (12,304)
Operating profit/(loss) before exceptional 76 (388) (514)
items
Exceptional items: cost of restructuring - (146) (146)
Operating profit/(loss) 3 76 (534) (660)
Investment income 1 2 10
Finance costs (73) (111) (186)
Profit/(loss) before tax 4 (643) (836)
Income tax expense - - -
Profit/(loss) for the period from continuing 4 (643) (836)
operations
Discontinued operations - (63) 908
Profit/(loss) for the period 4 (706) 72
Attributable to:
Equity holders of the parent 4 (715) 63
Minority interest - 9 9
4 (706) 72
Earnings per share
From continuing operations
Basic 4 0.01p (1.14p) (1.48p)
Diluted 4 0.01p (1.10p) (1.43p)
From continuing and discontinued operations
Basic 4 0.01p (1.25p) 0.11p
Diluted 4 0.01p (1.21p) 0.11p
There are no other recognised gains or losses apart from those shown in the
income statement for the period. Consequently no statement of recognised income
and expense has been produced.
CONDER ENVIRONMENTAL PLC
CONSOLIDATED BALANCE SHEET
at 31 October 2007
Unaudited Unaudited Unaudited
As at 31 As at 31 As at 30 April
October 2007 October 2006 2007
Restated Restated
�'000 �'000 �'000
Assets
Non-current Assets
Property, Plant & Equipment 664 1,294 735
Goodwill 1,710 1,874 1,710
Other Intangible Assets 49 8 53
2,423 3,176 2,498
Current Assets
Inventories 1,334 1,817 1,000
Trade & other receivables 3,426 4,844 2,832
Cash and cash equivalents 244 - -
Total Current Assets 5,004 6,661 3,832
Total Assets 7,427 9,837 6,330
Current Liabilities
Trade and other payables (4,147) (7,220) (3,040)
Current tax payable - - -
(4,147) (7,220) (3,040)
Non-current liabilities - (135) (24)
Total Liabilities (4,147) (7,355) (3,064)
Net Assets 3,280 2,482 3,266
Equity
Called up share capital 5,725 5,725 5,725
Share premium account 3,902 3,902 3,902
Merger Reserve - (644) -
Retained earnings (6,347) (6,501) (6,361)
Equity shareholders funds 3,280 2,482 3,266
CONDER ENVIRONMENTAL PLC
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 31 October 2007
Unaudited Unaudited Unaudited
Half year Half year Year ended 30
ended 31 ended 31 April 2007
October 2007 October 2006
Restated Restated
�'000 �'000 �'000
Net cashflow from operating (313) (148) (570)
activities
Cashflows from investing activities
Interest received 1 4 12
Purchase of property, plant and equipment (62) (65) (79)
Purchase of intangible assets - - (72)
Acquisition of subsidiary, net of - - (40)
cash acquired
Proceeds from sale of subsidiaries, 172 60 1,754
net of cash disposed
Net cash from/(used in) investing 111 (1) 1,575
activities
Cashflows from financing activities
Repayment of borrowings (50) (586) (1,964)
New borrowings 330 315 2,000
Net cash from/(used in) financing activities 280 (271) 36
Net increase/(decrease) in cash and cash equivalents 78 (420) 1,041
Cash and cash equivalents at start of period (46) (1,087) (1,087)
Cash and cash equivalents at end of period 32 (1,507) (46)
The net increase of cash in the period from discontinued operations is �297,000
(�291,000 half year ended 31 October 2006, �383,000 year ended 30 April 2007)
CONDER ENVIRONMENTAL PLC
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the half year ended 31 October 2007
Unaudited Unaudited Unaudited
Half year ended Half year ended Year ended 30
31 October 2007 31 October 2006 April 2007
�'000 �'000 �'000
Increase/(decrease) in cash in the period 78 (420) 1,041
Repayment of loans 50 586 1,964
Loans acquired (330) (315) (2,000)
Change in net debt resulting from cash flows (202) (149) 1,005
Loans disposed of with subsidiary - - 40
Movement in net debt in the period (202) (149) 1,045
Net debt at the beginning of the period (632) (1,677) (1,677)
Net debt at the end of the period (834) (1,826) (632)
RECONCILIATION OF OPERATING PROFIT/(LOSS) TO OPERATING CASH FLOWS
for the half year ended 31 October 2007
Unaudited Unaudited Unaudited
Half year Half year Year ended 30
ended 31 ended 31 April 2007
October 2007 October 2006
Restated Restated
�'000 �'000 �'000
Operating profit/(loss) before exceptional items
Continuing business 76 (388) (514)
Discontinued business - 23 80
Share based payment expense 10 8 14
Depreciation and amortisation of research and development costs 137 179 438
(Increase)/decrease in inventories (334) 511 435
(Increase)/decrease in receivables (766) 1,909 170
Increase/(decrease) in payables 637 (1,975) (690)
Interest paid (73) (149) (237)
Net cash from operating activities before exceptional items (313) 118 (304)
Exceptional items - (266) (266)
Net cash from operating activities (313) (148) (570)
CONDER ENVIRONMENTAL PLC
ANALYSIS OF NET DEBT
for the half year ended 31 October 2007
Unaudited Cash Flow Other Unaudited
non-cash
At 30 April flows At 31 October
2007 2007
�'000 �'000 �'000 �'000
Cash at bank and in hand 323 (79) - 244
Overdrafts (369) 157 - (212)
(46) 78 - 32
Debt due within one year (562) (280) (24) (866)
Debt due after more than one year (24) - 24 -
Total (632) (202) (834)
Notes to the financial statements
for the half year ended 31 October 2007
1. Preparation of interim financial statements
Adoption of International Financial Reporting Standards (IFRS)
For all periods up to and including 30 April 2007, the Group prepared its
financial statements in accordance with UK Generally Accepted Accounting
Practice (UK GAAP). For the interim accounts to 31 October 2007 and for future
periods, the Group is required to prepare its consolidated financial statements
in accordance with International Financial Reporting Standards (IFRS) adopted
for use in the EU.
These interim financial statements have been prepared in accordance with IFRS
for the first time and are covered by IFRS1, First-time Adoption of IFRS. The
comparative figures previously reported under UK GAAP have been restated for the
transition to IFRS and the disclosures under IFRS1 are given in note 5.
The figures for the year ended 30 April 2007 have been extracted from the UK
GAAP financial statements for that year, which have been filed with the
Registrar of Companies, as adjusted for IFRS (see note 5). The auditors' report
on those financial statements was unqualified and did not contain any statement
under Section 237 (2) or (3) of the Companies Act 1985.
Outlined below is a summary of the Group's accounting policies under IFRS for
the year ended 30 April 2008.
Basis of consolidation
The Group consolidated financial statements incorporate the financial statements
of Conder Environmental plc and all of its subsidiary undertakings. All
intra-Group transactions, balances, income and expenses are eliminated on
consolidation.
Intangible assets
Business combinations are accounted for using the acquisition method of
accounting. The acquired identifiable tangible and intangible assets,
liabilities and contingent liabilities are measured at their fair value at the
date of acquisition. Any excess of the cost of acquisition over the net fair
value of the identifiable assets acquired is recognised as goodwill.
The Group has elected to use an exemption granted by IFRS1 not to restate
business combinations that took place prior to the transition date of 1 May
2006. In respect of acquisitions prior to 1 May 2006, goodwill is included at
transition date on the basis of its deemed cost, which is recognised as the
amount recorded under UK GAAP.
Property, plant and equipment
Property, plant and equipment are stated at their original cost less any
subsequent accumulated depreciation and subsequent accumulated impairment
losses. Depreciation is charged so as to write off the cost of the assets down
to their residual value, over their estimated useful lives on a straight line
basis on the following basis:
The carrying values of property, plant and equipment are reviewed for impairment
when events or changes in circumstance indicate the carrying value may not be
recoverable. Any impairment in the value is charged to income. The gain or
loss arising on the disposal of an asset is calculated as the difference between
sales proceeds and the carrying value of the asset and is recognised in income.
Research and development
Research and development expenditure is charged to the income statement as
incurred, except where a project is separately identifiable, where the outcome
can be assessed with reasonable certainty and where there is an expected
financial return in excess of the expenditure. Where there is a definable
future benefit, the related expenditure is capitalised and amortised over the
period expected to benefit from that expenditure.
Inventories
Inventories are valued at the lower of cost and net realisable value with due
allowance for any obsolete or slow moving items. In determining the cost of
raw materials, the first in first out method is used. For work in progress and
finished goods, cost is taken as production cost including an appropriate
proportion of attributable overheads that have been incurred to bring
inventories to their present location and condition. Net realisable value is
based on estimated selling price less any further costs expected to be incurred
to completion and disposal.
Taxation
The tax expense represents the sum of the tax currently payable and any deferred
tax. Current tax is provided at amounts expected to be paid (or recovered)
using the tax rates that have been enacted or substantively enacted by the
balance sheet date.
The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes. Deferred tax is provided in
full using the balance sheet liability method. Deferred tax is the future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities shown on the balance sheet. Deferred tax assets and
liabilities are not recognised if they arise in the following situations: the
initial recognition of goodwill; or the initial recognition of assets and
liabilities that affect neither accounting nor taxable profit. The amount of
deferred tax provided is based on the expected manner of recovery or
settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantially enacted at the balance sheet date.
The group does not recognise deferred tax liabilities, or deferred tax
assets, on temporary differences associated with investments in subsidiaries,
joint ventures and associates as it is not considered probable that the
temporary differences will reverse in the foreseeable future. It is the
group's policy to reinvest undistributed profits arising in group companies. A
deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. The carrying amount of the deferred tax assets are reviewed at each
balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the asset to
be recovered.
Share based payments
In accordance with the transitional provisions, the Group has applied the
requirements of IFRS2 Share based Payment to all grants of equity instruments
after 7 November 2002 that had not vested as of 1 May 2006. The fair value of
the options granted is measured using the Black Scholes option pricing model
taking into account the terms upon which the options were granted. The charge
made in respect of the share based payments is matched by an equal adjustment to
profit and loss reserves, thereby having no impact on the group's closing
reserves or on shareholders funds.
Revenue
Revenue represents amounts invoiced by the Group in respect of the goods sold
and services provided during the period excluding any applicable value added
tax.
Retirement benefit costs
Employees participate in a money purchase scheme; the assets of this scheme are
held separately from those of the Group in an independently administered fund.
The amount charged against profits represents contributions payable to the
scheme in respect of the accounting period.
2a.Revenue
Revenue represents the amounts (excluding value added tax) derived from the sale
of environmental products to third party customers.
All revenue arose in the United Kingdom except where shown below and is analysed
by destination as follows:
Unaudited Unaudited Unaudited
half year half year year ended
ended ended
31 October 2007 31 October 2006 30 April 2007
�'000 �'000 �'000
Arising in the United
Kingdom:
United Kingdom 6,048 6,642 11,718
Continental Europe 456 1,024 1,457
North America - 1 1
Middle East and North - 1,001 1,359
Africa
Former Soviet Union 2 1,167 1,187
South America - 51 267
Rest of World 298 1,502 3,080
6,804 11,388 19,069
Arising in Sweden:
Continental Europe - 305 533
6,804 11,693 19,602
2 b. Segmental analysis
The table below sets out information for each of the Group's industry segments,
including discontinued operations.
CES Continuing Discontinued Total
Half year Half year Year Half year Half year Yea Half year Half year Year
ended 31 ended 31 ended ended 31 ended 31 ended 30 ended 31 ended 31 ended 30
October October 30 April October October April October October April
2007 2006 2007 2007 2006 2007 2007 2006 2007
Revenue - External 6,804 6,194 11,790 - 5,499 7,812 6,804 11,693 19,602
Sales
Segmental
Profitability
Segment operating 242 37 (34) - (97) (40) 242 (60) (74)
profit/(loss)
Central Costs (166) (571) (626) - - - (166) (571) (626)
Operating profit/ 76 (534) (660) - (158) (40) 76 (631) (700)
(loss)
Profit on sale of - - - - 39 965 - 39 965
businesses
Investment income 1 2 10 - 1 2 1 3 12
Finance costs (73) (111) (186) - (6) (19) (73) (117) (205)
Group profit/(loss) 4 (643) (836) - (63) 908 4 (706) 72
before taxation
Net assets
Total assets 6,977 6,542 5,842 50 4,487 212 7,027 11,029 6,054
Total liabilities (3,947) (3,420) (3,213) - (2,035) (33) (3,947) (5,455) (3,246)
Net assets 3,030 3,122 2,629 50 2,452 179 3,080 5,574 2,808
Unallocated total 396 150 600
assets
Unallocated total liabilities (196) (3,242) (142)
Unallocated net 200 (3,092) 458
Total net assets 3,280 2,482 3,266
All turnover represents sales to third parties.
The assets and liabilities of segments exclude intercompany balances. All of
those assets and liabilities are in the United Kingdom.
Unallocated assets and liabilities include the holding company and dormant
subsidiaries.
Vikoma, Cerva and Hydroserve Limited are reported as discontinued businesses.
3. Profit/(loss) on ordinary activities before taxation
Profit/(loss) on ordinary activities before taxation is stated after charging:
Unaudited Unaudited Unaudited
Half year ended Half year ended Year ended
31 October 2007 31 October 2006 30 April 2007
�'000 �'000 �'000
Depreciation on property, plant and equipment 132 198 364
Amortisation of intangible assets 5 - 2
(Profit)/loss on disposal of fixed assets - - 7
Write-offs/(recoveries) resulting from the (45) (216) (49)
Administration of Hydroserve Ltd
4. (Loss)/earnings per ordinary share
The calculation of basic earnings per ordinary share is based upon the weighted
average number of shares in issue during the period.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume the conversion of all dilutive potential ordinary
shares. The Group has only one category of dilutive ordinary shares: share
options granted to employees where the exercise price is less than the average
market price of the Company's ordinary shares during the period.
31 October 2007 31 October 2006 30 April 2007
Weighted average number of ordinary shares 57,254,309 57,254,309 57,254,309
in issue
Dilutive potential ordinary shares: share 2,814,000 1,774,000 1,774,000
options
5. Transition from UK GAAP to IFRS
As required under IFRS 1, the equity and income statement reconciliations as at
1 May 2006 (the transition date for IFRS) and at 30 April 2007 (date of the last
UK GAAP financial statements) are set out below. For comparative purposes the
same reconciliations are provided as at 31 October 2006.
Summary of impact
The net effect of adopting IFRS is as follows:
Half year ended 31 October 2006 Year ended 30 April 2007
UK GAAP IFRS UK GAAP IFRS
Operating loss (687) (631) (819) (700)
Profit/(loss) after tax (771) (715) (52) 63
Non-current assets 3,120 3,176 2,383 2,498
Net Assets 2,426 2,482 3,151 3,266
The major area where IFRS has impacted on the results is the treatment of
goodwill. Under UK GAAP, goodwill was previously written off over its estimated
useful life. Under IFRS there is no systematic amortisation of goodwill, but it
is subject to an annual impairment review which is undertaken at the year end.
Cashflow
There are no significant changes between cash flows from operating activities,
investing activities and financing activities. No adjustments have been made to
cash and cash equivalents, and no other adjustments have been made to the cash
flow statement on conversion.
Reconciliation of UK GAAP Consolidated Profit and Loss Account to IFRS
Consolidated Income Statement
Unaudited Unaudited
Year ended 30 April 2007 Half year ended 31 October 2006
UK GAAP Goodwill IFRS UK GAAP Goodwill IFRS
amortisation amortisation
Revenue 19,602 - 19,602 11,693 - 11,693
Operating costs (20,155) 119 (20,036) (12,114) 56 (12,058)
Operating profit/ (553) 119 (434) (421) 56 (365)
(loss) before
exceptional items
Exceptional items: (266) - (266) (266) - (266)
cost of
restructuring
Operating profit/ (819) 119 (700) (687) 56 (631)
(loss)
Profit on sale of 969 (4) 965 39 - 39
subsidiary
businesses
Profit on ordinary 150 115 265 (648) 56 (592)
activities before
interest and
taxation
Interest receivable 12 - 12 3 - 3
Interest payable (205) - (205) (117) - (117)
Profit/(loss) on (43) 115 72 (762) 56 (706)
ordinary activities
before taxation
Tax on profit/(loss) - - - - - -
on ordinary
activities
Profit/(loss) on (43) 115 72 (762) 56 (706)
ordinary activities
after taxation
Minority interest - (9) - (9) (9) - (9)
equity
Profit/(loss) for (52) 115 63 (771) 56 (715)
the financial year
and retained loss
for the year
Reconciliation of UK GAAP Balance Sheets to IFRS Balance Sheets
Unaudited Unaudited Unaudited
As at 30 April 2007 As at 31 October 2006 As at 1 May 2006
UK GAAP Goodwill IFRS UK GAAP Goodwill IFRS UK GAAP Goodwill IFRS
amortisation amortisation amortisation
Assets
Non-current
Assets
Goodwill 1,595 115 1,710 1,818 56 1,874 1,853 - 1,853
Other intangible 53 - 53 8 - 8 10 - 10
assets
Property, plant 735 - 735 1,294 - 1,294 1,427 - 1,427
& equipment
2,383 115 2,498 3,120 56 3,176 3,290 - 3,290
Current Assets
Inventories 1,000 - 1,000 1,817 - 1,817 2,328 - 2,328
Trade & other 2,832 - 2,832 4,844 - 4,844 6,753 - 6,753
receivables
Cash and cash - - - - - - - - -
equivalents
3,832 - 3,832 6,661 - 6,661 9,081 - 9,081
Total Assets 6,215 115 6,330 9,781 56 9,837 12,371 - 12,371
Current
Liabilities
Trade and other (3,040) - (3,040) (7,220) - (7,220) (9,182) - (9,182)
payables
Non-current (24) - (24) (135) - (135) (32) - (32)
Liabilities
Total (3,064) - (3,064) (7,355) - (7,355) (9,214) - (9,214)
Liabilities
Net Assets 3,151 115 3,266 2,426 56 2,482 3,157 - 3,157
Equity
Called up share 5,725 - 5,725 5,725 - 5,725 5,725 - 5,725
capital
Share premium 3,902 - 3,902 3,902 - 3,902 3,902 - 3,902
account
Merger reserve - - - (644) - (644) (644) - (644)
Retained (6,476) 115 (6,361) (6,557) 56 (6,501) (5,794) - (5,794)
earnings
Equity 3,151 115 3,266 2,426 56 2,482 3,189 - 3,189
Shareholders
Funds
Minority - - - - - - (32) - (32)
interest
3,151 115 3,266 2,426 56 2,482 3,157 - 3,157
6. Copies of the interim financial statements
Copies of the interim financial statements will be sent to shareholders. Further
copies will be available from the Company's head office at Chandlers House,
Ganders Business Park, Kingsley, Bordon, Hampshire GU35 9LU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Conder Environmental (LSE:CDE)
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