RNS Number:1621K
Forest Support Services PLC
18 December 2007
Forest Support Services Plc
Chairman's Statement
The Group has recorded a loss of �63,036 before taxation. The overall trading
performance of the Group has been in line with expectations although the
performance of individual businesses has varied widely.
Forest Highways has suffered delays in the start-dates of secured workload,
particularly in Wales, and has traded at a level significantly below budget. The
extended lead-times required to secure major trunk-road projects have afforded
little opportunity for this subsidiary to re-direct capacity to cushion the
effects of the short term dip in workload.
Forest Traffic Signals has performed strongly in all regions. At the Winchester
depot, trading has been very strong. Workload and margin have been enhanced,
reflecting recent efforts to broaden the customer base and improve utilisation.
At the Newport and Bristol depots performance has been strong with earnings
being significantly ahead of expectations. Some initial weaknesses in Government
spending in Wales have been more than off-set by tender successes in other
regions and by stronger trading in the later months. Start-up costs relating to
the launch of Forest Access and Security have been incurred in the period, with
trading being in line with budget.
Results
The Group has recorded a loss of �63,036 for the period. This compares with a
loss of �3,885 for the equivalent period last year. The loss, on the weighted
average number of shares in issue during the year, was 0.34p per share.
Turnover for the period was �3,031,092 (equivalent period last year:
�2,941,859), an increase of 3%. The Group held cash at the period end of
�434,754 (equivalent period last year �233,715).
As in previous years, the Group will not pay an interim dividend but expects to
continue its progressive dividend policy.
Current Trading and Future Prospects
A large proportion of the demand for the Group's services originates from
spending by local and central Government on road maintenance. Due to the
inherent seasonality of the Government budgeting process, trading during the
second six months is traditionally stronger than the first.
Initial trading during the second half at Forest Highways has seen an
improvement in workload, with the first batch of delayed projects now underway.
Trading levels however remain lower than expected and this factor, coupled with
the weak start to the year, makes it unlikely that Forest Highways will achieve
budget for the full year and is unlikely to contribute to Group earnings this
year.
Forest Highways will shortly be relocated into new premises in Bristol that will
be shared with Forest Traffic Signals. Once the relocation has been completed
the range of traffic management services offered by Forest Highways will be
broadened to improve the resilience of the revenue stream.
Forest Traffic Signals continues to perform strongly in all regions. At
Winchester, workload continues to grow and the customer base has broadened. A
satellite depot was opened on the Isle of Wight during November to exploit
opportunities in that region. This depot will be administered from Winchester
and will initially offer a limited range of services.
Workload at Newport and Bristol continues to grow; further tender successes have
been achieved, including the winning of another Framework contract that will
underpin workload for the full year and throughout the next. Initial trading at
Forest Access and Security has been below budget although start-up losses
incurred in the first half are expected to be recovered during the second half.
Conclusion
As reported at the full year, the short term disruptions in Government
expenditure were anticipated and have not detracted from the Group's pursuit of
its longer term strategy. During the period investment has continued in the
development of the Group's service range and the expansion of regional coverage.
The Group continues to pursue a strategy of organic growth with a key focus
being to increase the scope of the business and develop future revenue streams.
Steps taken in past periods to broaden the business have yielded improvements in
the resilience of the Group's revenue stream and it is expected that the Group
will achieve a satisfactory conclusion to the full year.
Further Information:
Ross Williams, Managing Director Tel: 01633 284 700
Tim Cofman/Katy Birkin, W.H. Ireland Tel: 0121 265 6330
Forest Support Services plc
Consolidated Income Statement
for the six months ended 30 September 2007
Unaudited Unaudited Audited
Six months to Six months to Year to
30 September 30 September 31 March
2007 2006 2007
(restated)
� � �
REVENUE 3,031,092 2,941,859 6,233,853
Cost of sales (2,161,664) (2,114,642) (4,273,078)
GROSS PROFIT 869,428 827,217 1,960,775
Administrative expenses (923,721) (827,176) (1,671,259)
OPERATING (LOSS)/PROFIT (54,293) 41 289,516
Finance costs (16,500) (8,838) (19,925)
Finance income 7,757 4,912 9,990
(LOSS)/PROFIT BEFORE TAXATION (63,036) (3,885) 279,581
Taxation - (770) 88,169
(LOSS)/PROFIT FOR THE PERIOD (63,036) (4,655) 367,750
(LOSS)/EARNINGS PER SHARE
Basic (0.34p) (0.02p) 1.97p
Fully diluted n/a n/a n/a
Forest Support Services plc
Consolidated Balance Sheet
as at 30 September 2007
Unaudited Unaudited Audited
30 September 30 September 31 March
2007 2006 2007
(as restated)
� � �
NON-CURRENT ASSETS
Goodwill 1,041,783 1,041,783 1,041,783
Property, plant and equipment 1,215,131 924,985 1,027,842
2,256,914 1,966,768 2,069,625
CURRENT ASSETS
Trade and other receivables 1,637,161 1,372,831 1,758,668
Deferred tax asset 118,443 12,145 118,443
Cash and cash equivalents 434,754 233,715 319,230
2,190,358 1,618,691 2,196,341
CURRENT LIABILITIES
Trade and other payables 925,556 917,433 1,127,398
Current tax liabilities 18,129 - 18,129
Obligations under finance leases 109,450 54,883 76,680
Bank loan 170,545 57,104 152,339
1,223,680 1,029,420 1,374,546
NET CURRENT ASSETS 966,678 589,271 821,795
NON-CURRENT LIABILITIES
Bank loan 325,669 70,682 66,658
Obligations under finance leases 250,204 112,468 121,992
575,873 183,150 188,650
TOTAL LIABILITIES 1,799,553 1,212,570 1,563,196
NET ASSETS 2,647,719 2,372,889 2,702,770
EQUITY
Share capital 935,350 935,350 935,350
Share premium 1,513,530 1,513,530 1,513,530
Retained earnings 198,839 (75,991) 253,890
2,647,719 2,372,889 2,702,770
Forest Support Services plc
Consolidated Cash Flow Statement
for the six months ended 30 September 2007
Six months to Six months to Year to
30 September 30 September 31 March
2007 2006 2007
� � �
NET CASH FROM/(USED IN) OPERATING ACTIVITIES 79,282 (163,442) 231,261
INVESTING ACTIVITIES
Interest received 7,757 4,912 9,990
Proceeds on disposal of property, plant and equipment - 2,600 11,870
Purchases of property, plant and equipment (208,064) (57,541) (406,957)
(200,307) (50,029) (385,097)
FINANCING ACTIVITIES
Dividends paid - - (50,509)
Repayment of borrowings (72,783) (23,553) (82,342)
New bank loans raised 350,000 - 150,000
(40,668) (38,500) (55,794)
Repayment of obligations under finance leases 236,549 (62,053) (38,645)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 115,524 (275,524) (192,481)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 319,230 511,711 511,711
CASH AND CASH EQUIVALENTS AT END OF PERIOD 434,754 236,187 319,230
NET CASH FROM/(USED IN) OPERATING ACTIVITIES Six months to Six months to Year to
30 September 30 September 31 March
2007 2006 2007
� � �
Operating (loss)/profit (54,293) 41 289,516
Adjustments for:
Share based payment expenses 7,985 - 7,985
Depreciation on property, plant and equipment 222,425 190,792 449,899
(Profit)/loss on sale of property, plant and equipment - (163) 24,197
OPERATING CASHFLOWS BEFORE MOVEMENTS IN WORKING 176,117 190,670 771,597
CAPITAL
Decrease/(Increase) in debtors 121,507 (223,526) (616,411)
(Decrease)/Increase in creditors (201,842) (121,748) 96,000
CASH GENERATED FROM/(USED IN) OPERATIONS 95,782 (154,604) 251,186
Interest paid (16,500) (8,838) (19,925)
NET CASH GENERATED FROM/(USED IN) OPERATIONS 79,282 (163,442) 231,261
Forest Support Services plc
Consolidated Statement of Changes in Equity
for the six months ended 30 September 2007
Share Capital Share Premium Retained Earnings
� � �
Equity at 1 April 2006 935,350 1,513,530 (71,336)
Loss for the six months ended 30 September 2006 - - (4,655)
Equity at 30 September 2006 935,350 1,513,530 (75,991)
Profit for the six months ended 31 March 2007 - - 372,405
Cost of share based awards - - 7,985
Equity dividends paid - - (50,509)
Equity at 31 March 2007 935,350 1,513,530 253,890
Loss for the six months ended 30 September 2007 - - (63,036)
Cost of share based awards - - 7,985
Equity at 30 September 2007 935,350 1,513,530 198,839
Forest Support Services plc
Notes to the condensed interim financial statements
1. General Information
Forest Support Services Plc (the "Company") is a company domiciled in England
and Wales whose registered office address is Forest House, Broad Quay Road,
Felnex Industrial Estate, Newport NP19 4PN. The condensed consolidated interim
financial statements of the Company for the six months ended 30 September 2007
comprise the Company and its subsidiaries (together referred to as the "Group").
The condensed consolidated interim financial statements do not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985.
The financial information for the year ended 31 March 2007 has been extracted
from the statutory accounts (which were prepared under UK GAAP) for that period
and adjusted, as shown in note 5 below, to restate in accordance with
International Financial Reporting Standards ("IFRS"). This note includes
reconciliations of equity and the loss for comparative periods reported under UK
GAAP to those reported for those periods under IFRS. The auditors' report on
the statutory accounts was unqualified and did not contain a statement under
Section 237 of the Companies Act 1985. A copy of those financial statements has
been filed with the Registrar of Companies.
The Group's date of transition to IFRS was 1 April 2006 and condensed
consolidated interim financial statements have been prepared in accordance with
the first time adoption provisions set out in IFRS 1 First-time Adoption of
International Financial Reporting Standards. The condensed consolidated interim
financial statements do not include all of the information required for full
annual financial statements.
The condensed consolidated interim financial statements were authorised for
issue on 17th December 2007.
2. Significant Accounting Policies
Basis of accounting
The condensed consolidated financial statements are unaudited and have been
prepared in accordance with IFRS adopted by the EU.
The condensed consolidated financial statements have been prepared on the
historical cost basis. The principal accounting policies adopted are set out
below.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary, at the date of acquisition. Goodwill is
initially recognised as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill which is recognised as an
asset is reviewed for impairment at least annually. Any impairment is
recognised immediately in profit or loss.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash generating units expected to benefit from the synergies of the
combination. Cash generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
Goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the previous UK GAAP amounts subject to being tested for impairment
at that date.
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is provided on
all tangible fixed assets at rates calculated to write off the cost of tangible
fixed assets over their expected useful lives at the following rates:-
Property - over term of the lease
Plant and equipment - two to eight years
Share based payments
The Group issues equity-settled share based payments to certain employees.
Equity-settled share based payments are measured at fair value (excluding the
effect of non market-based vesting conditions) at the date of grant. The fair
value determined at the date of grant is expensed on a straight-line basis over
the vesting period, based on the Group's estimate of shares that will eventually
vest and adjusted for the effect of non market-based vesting conditions.
Fair value is measured by use of the binomial model. The expected life used in
the model has been adjusted, based on management's best estimate, for the
effects of non-transferability, exercise restrictions and behavioural
conditions.
Leases
Rentals payable under operating leases are charged against income on a straight
line basis over the term of the lease.
Retirement benefit costs
The Group operates a defined contribution scheme for the benefit of certain of
its employees. Contributions payable are charged as an expense as they fall
due.
Trade receivables
Trade receivables are measured at initial recognition at fair value.
Appropriate allowances for estimated irrecoverable amounts are recognised in
profit or loss when there is objective evidence that the asset is impaired. The
allowance recognised is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows discounted at the
effective interest rate computed at initial recognition.
Cash and Cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other
short-term, highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Trade payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the Group's taxable profits and its results
as stated in the accounts that arise from the inclusion of gains and losses in
tax assessments in periods different from those in which they are recognised in
the accounts.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which timing differences are expected to reverse, based on tax
rates and laws that have been enacted or substantially enacted by the balance
sheet date. Deferred tax is measured on a non-discounted basis.
Deferred tax is recognised where recovery is more likely than not.
3. Earnings per share
Basic earnings per share is based on the earnings for the year attributable to
shareholders and on the weighted average number of shares in issue during the
year. The number of shares used for calculating basic earnings per share was
18,706,961. As the exercise price of the share options granted by the company
exceeded the average market price of the shares during the year ended 31 March
2007, and given the losses reported for the two interim periods, there is no
dilutive impact on earnings per share in the period.
4. Restatement of results for the six months ended 30 September 2006
Following the completion of the interim statement for the six months ended 30
September 2006, the Directors reviewed the group's depreciation methods and the
allocation of items between fixed assets and stock. This review led to changes
that impacted on the results for the six months ended 30 September 2006, and
these have therefore been restated to provide comparable information. The
effects of the changes were as follows:
1) Amounts previously included in stock were re-designated as fixed assets as
the nature of these assets is that they have a useful economic life of more than
12 months. The stock has subsequently been depreciated in accordance with the
group's accounting policies, leading to an increase in depreciation of �93,734.
2) The Directors reviewed the useful economic life of certain items of plant and
machinery. Those that were previously depreciated over 2 years are now written
off over a period of 3 years which has led to a reduction in the depreciation
charge for the six months of �36,015. Those that were previously depreciated
over 6 years are now written off over a period of 8 years which has led to a
reduction in the depreciation charge for the year by �13,955.
5. Transition to IFRS
As stated in note 1, these are the Group's first condensed consolidated interim
financial statements for part of the period covered by the first annual
consolidated financial statements prepared in accordance with IFRS.
The accounting policies in note 2 have been applied in preparing the
consolidated condensed interim financial statements for the six months ended 30
September 2007, the financial information for the period ended 30 September 2006
and year ended 31 March 2007 and the preparation of an opening IFRS balance
sheet at 1 April 2006 (the Group's date of transition).
In preparing its opening IFRS balance sheet, comparative information for the six
months ended 30 September 2006 and for the year ended 31 March 2007, the Group
has adjusted amounts reported previously in financial statements prepared in
accordance with UK GAAP.
An explanation of how the transition from UK GAAP to IFRS has affected the
Group's financial position, financial performance and cash flows is set out in
the following tables and the notes that accompany the tables.
5. Transition to IFRS (continued)
Reconciliation of profit for the year ended 31 March 2007
IFRS 3
Goodwill Restated
UK GAAP (note a) under IFRS
� � �
Revenue 6,233,853 - 6,233,853
Cost of sales (4,273,078) - (4,273,078)
Gross profit 1,960,775 - 1,960,775
Administrative expenses (1,754,359) 83,100 (1,671,259)
Operating profit 206,416 83,100 289,516
Finance costs (19,925) - (19,925)
Finance income 9,990 - 9,990
Profit before taxation 196,481 83,100 279,581
Taxation 88,169 - 88,169
Profit for the period 284,650 83,100 367,750
Reconciliation of profit for the six months ended 30 September 2006
IFRS 3
Goodwill Restated
UK GAAP (note a) under IFRS
� � �
Revenue 2,941,859 - 2,941,859
Cost of sales (2,114,642) - (2,114,642)
Gross profit 827,217 - 827,217
Administrative expenses (868,726) 41,550 (827,176)
Operating loss (41,509) 41,550 41
Finance costs (8,838) - (8,838)
Finance income 4,912 - 4,912
Loss before taxation (45,435) 41,550 (3,885)
Taxation (770) - (770)
Loss for the period (46,205) 41,550 (4,655)
5. Transition to IFRS (continued)
Reconciliation of balance sheet as at 31 March 2007
IFRS 3
Goodwill Restated
UK GAAP (note a) under IFRS
� � �
Goodwill 958,683 83,100 1,041,783
Property, plant and equipment 1,027,842 - 1,027,842
1,986,525 83,100 2,069,625
Net current assets 821,795 - 821,795
Non-current liabilities (188,650) - (188,650)
Net assets 2,619,670 83,100 2,702,770
Share capital 935,350 - 935,350
Share premium 1,513,530 - 1,513,530
Retained earnings 170,790 83,100 253,890
Profit for the period 2,619,670 83,100 2,702,770
Reconciliation of balance sheet as at 30 September 2006
IFRS 3
Goodwill Restated
UK GAAP (note a) under IFRS
� � �
Goodwill 1,000,233 41,550 1,041,783
Property, plant and equipment 924,985 - 924,985
1,925,218 41,550 1,966,768
Net current assets 589,271 - 589,271
Non-current liabilities (183,150) - (183,150)
Net assets 2,331,339 41,550 2,372,889
Share capital 935,350 - 935,350
Share premium 1,513,530 - 1,513,530
Retained earnings (117,541) 41,550 (75,991)
Profit for the period 2,331,339 41,550 2,372,889
Explanations
(a) Goodwill
Under UK GAAP, capitalised goodwill was amortised over its useful economic life.
Under IFRS, this goodwill is no longer amortised but it is tested at least
annually for impairment. The impairment tests carried out by the Group have
identified no impairment loss and the amortisation provided under UK GAAP has
been reversed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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