RNS Number : 2461E
Forest Support Services PLC
25 September 2008
25 September 2008
Forest Support Services Plc ("the Group" or the "Company")
Preliminary results for the year ended 31 March 2008
The Group achieved a profit of �131,788 before goodwill charges and taxation on a turnover of �6,811,353.
The performance of individual businesses varied widely, continuing the trend seen at the interim stage.
At Bristol and Newport, the Forest Traffic Signals business has performed strongly. In these regions revenue has been firmly underpinned
by long term framework contracts, which have improved the quality of the earnings stream, giving better visibility and improving utilisation
of resources. Forest Access and Security has made a small positive contribution to the performance of the Newport depot.
The Forest Traffic Signals depot at Winchester has contributed to earnings for the first time, despite incurring start-up costs for the
new satellite depot on the Isle of Wight. The performance of the Winchester depot can be attributed to the broadened customer base and
improved tender success rate.
Forest Traffic Signals has significantly exceeded expectations in this period and continued the strong performance seen in the first
half. All depots recorded growth in revenue and earnings.
Forest Highways performed poorly throughout the period and incurred losses. Revenue fell compared to the previous year with workflow
also being erratic, exacerbating the problem of matching resources to demand. In March the decision was made to merge Forest Highways
business with Forest Traffic Signals. This has lead to cost savings and a redeployment of personnel and resources to meet the needs of the
growing Forest Traffic Signals business at Bristol. All costs of restructuring have been borne in the year being reported.
Following this restructuring, the Board decided to write off the investment held in Forest Highways Ltd of �584,722 and the associated
goodwill arising on consolidation of �497,492. This write off has been made following an impairment review made in accordance with
International Financial Reporting Standards under which these financial statements are prepared. The effect of the write off of the
investment has been to deplete the distributable reserves in Forest Support Services plc, the holding company. To supplement these reserves
and enable payment of the dividend proposed below, on 29 August 2008, a dividend of �500,000 was paid by Forest Traffic Signals Ltd to the
holding company.
Results
The Group has recorded a profit of �131,788 (2007: �279,581) for the period, before goodwill charges of �497,492 (2007: �nil) and
taxation. After goodwill charges the Group records a loss of �365,704 (2007: profit of �279,581. The loss, on the weighted average number
of shares in issue during the year, was (2.17p) per share.
Turnover for the period increased by 9% to �6,811,353 (2007: �6,233,853). The Group held cash at the period end of �546,037 (2007:
�319,230).
Dividend
On 29 August 2008, Forest Traffic Signals paid a dividend of �500,000 to Forest Support Services plc in order to provide sufficient
distributable reserves to enable the payment of the proposed dividend.
Your Board is recommending a cash dividend of 0.38p per share (2007: 0.36p). The dividend will be paid on 12 December 2008 to
shareholders on the register at close of business on 21 November 2008. The shares are expected to go ex dividend on 19 November 2008.
Current Trading and Future Prospects
Demand for the services provided by the Group, derives primarily from expenditure by Local and Central Government and Utility Companies
on maintenance of roads and utility services within roads. Traditionally, demand for these services is robust during all stages of the
business cycle. Historically about 2% of revenues arise from expenditure on road schemes associated with housing or retail developments.
This year will see the Group focus on developing its existing businesses, with a particular focus being the newly expanded depot at
Bristol. This strategy builds on regional strengths.
Overall trading during the initial period of the new financial year has been strong and ahead of expectations.
Conclusion
The Board continues to believe that organic growth is the best method of delivering shareholder value. Broadening the revenue increases
the resilience of the business, while taking best advantage of the Group's regional strengths.
I thank the Group's employees and my boardroom colleagues for their continued efforts and hard work.
C C Powell
Chairman
24 September 2008
Consolidated Income Statement
For the period ended 31 March 2008
Note 2008� 2007�
Revenue 6,811,353 6,233,853
Cost of sales (4,803,699) (4,273,078)
Gross profit 2,007,654 1,960,775
Administrative expenses (1,841,673) (1,671,259)
Goodwill impairment charge (497,492) -
Operating (loss)/profit (331,511) 289,516
Finance costs (48,894) (19,925)
Finance income 14,701 9,990
(Loss)/profit before taxation (365,704) 279,581
Taxation (39,792) 88,169
(Loss)/profit for the year attributable to (405,496) 367,750
equity holders of the parent
(Loss)/earnings per share: 4
Basic and diluted (2.17)p 1.97p
There are no gains or losses other than those shown in the income statement and therefore all recognised income and expense is included
therein.
All activities are classed as continuing.
Consolidated balance sheet
As at 31 March 2008
Note 2008� 2007�
Non-current assets Goodwill 544,291 1,041,783
Property, plant and equipment 1,168,663 1,027,842
Deferred tax asset 81,815 118,443
1,794,769 2,188,068
Current assets Trade and other receivables 1,695,165 1,758,668
Cash and cash equivalents 546,037 319,230
2,241,202 2,077,898
Total assets 4,035,971 4,265,966
Current liabilities
Trade and other payables
1,023,454 1,127,398
Current tax liabilities - 18,129
Bank loan 136,090 152,339
Obligations under finance leases 76,915 76,680
1,236,459 1,374,546
Non-current liabilities
Bank loan 295,228 66,658
Obligations under finance leases 266,370 121,992
561,598 188,650
Total liabilities 1,798,057 1,563,196
Net assets 2,237,914 2,702,770
Equity Share capital 935,350 935,350
Share Premium 1,513,530 1,513,530
Retained earnings (210,966) 253,890
Total Equity 2,237,914 2,702,770
Consolidated cash flow statement
For the period ended 31 March 2008
Note 2008 2007
� �
Net cash generated from operating activities 5 527,892 231,261
14,701 9,990
Investing activities
Interest received
Proceeds on disposal of property, plant and - 11,870
equipment
Purchase of property, plant and equipment (366,050) (406,957)
Net cash used in investing activities (351,349) (385,097)
(67,345) (50,509)
Financing activities
Dividends paid
Repayment of borrowings (137,680) (82,342)
New bank loans raised 350,000 150,000
Repayment of obligations under hire purchase (94,711) (55,794)
contracts
Net cash generated from/(used in) financing 50,264 (38,645)
activities
Net increase/(decrease) in cash and cash 226,807 (192,481)
equivalents
Cash and cash equivalents at beginning of year 319,230 511,711
Cash and cash equivalents at end of year 546,037 319,230
Notes
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 consolidated financial statements of the Group for the year ended 31 March
2008 comprise the Company and its subsidiaries (together referred to as the "Group").
The comparative information for the year ended 31 March 2007 has been extracted from the financial statements (which were prepared under
UK GAAP) for that period and adjusted, as shown in note 26 below, to restate in accordance with International Financial Reporting Standards
("IFRS"). This note includes reconciliations of equity and the profit for comparative periods reported under UK GAAP to those reported for
those periods under IFRS.
The Group's date of transition to IFRS was 1 April 2006 and these consolidated 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.
These consolidated financial statements are presented in pounds sterling because that is the currency of the primary economic
environment in which the Group operates.
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in
these financial statements were in issue but not yet effective.
Amendment to IFRS 2 "Share based payments"- vesting conditions and cancellations.
IFRS 3 and IAS 27 "Business Combinations" and "Consolidated and Separate Financial Statements"
- effective 1 July 2009
IFRS 8 "Operating Segments"-effective 1 January 2009
Amendment to IAS 1 "Presentation of financial statements"-effective 1 January 2009
IAS 23 "Borrowing Costs"-effective 1 January 2009
Amendment to IAS32 "Financial Instruments Presentation"-effective 1 January 2009
IFRIC 11 "Group and Treasury Share Transactions"-effective 1 January 2008
IFRIC12 "Service Concession Agreements"-effective 1 January 2008
IFRIC13 "Customer loyalty programmes"-effective 1 July 2008
IFRIC 14 & IAS 19 "The limit on a Defined Benefit Asset, Minimum Funding Requirements"
-effective 1 January 2008
IFRIC 15 "Arrangements for the construction of real estate" -effective 1 January 2009
IFRIC 16 "Hedges of a net investment in a foreign operation" -effective 1 October 2008
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material effect on the
financial statements of the Group. In each case the effective date refers to accounting periods commencing on or after that date.
2. Critical Accounting Judgements and Areas of Estimation Uncertainty
In applying the Company's accounting policies in note 3, management has made accounting judgements in the determination of the carrying
value of deferred tax assets, the impairment of goodwill and share-based payments. Due to inherent uncertainty involved in making
assumptions and estimates, actual outcomes will differ from those assumptions and estimates. An analysis of the key sources of estimation
uncertainty is provided below.
Deferred tax assets
The carrying value of certain deferred tax assets is dependent on sufficient taxable profits being generated in future periods.
Impairment of goodwill
The Group tests annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amount of the goodwill is determined from value in use calculations. The key assumptions and estimates for the value in
use calculations are those regarding the discount rates, growth rates and expected changes to sales during the period. Management estimates
discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the
cash-generating units. A post tax discount rate of 15% was assumed for the purpose of the calculation.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next year and
extrapolates cash flows to perpetuity assuming growth in both revenues and profits of 2.5% from that date. This rate does not exceed the
average long-term growth rate for the relevant market.
Share Based Payments
The Group has made awards of options on its un-issued share capital to certain directors and employees as part of their remuneration
package.
The valuation of these options involved making a number of critical estimates relating to price volatility, future dividend yields,
expected life of the options and interest rates. The assumptions have been described in more detail in note 18.
3. Significant Accounting Policies
Basis of accounting
The financial statements of Forest Support Services plc have been prepared for the first time in accordance with International Financial
Reporting Standards (IFRS) as adopted for use in the EU applied in accordance with the provisions of the Companies Act 1985. These
financial statements have been prepared on the historical cost basis. The principal accounting policies set out below have been consistently
applied to all periods presented.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of Forest Support Services plc ("the Company"), and all
entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and
operating policies of an invetee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
Revenue Recognition
Revenue represents the amounts, excluding VAT, receivable by the Company for goods and services supplied to outside customers in the
ordinary course of business. Revenue is recognised when persuasive evidence of an arrangement with a customer exists, products have been
delivered or services have been rendered and collectability is reasonably assured.
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 an impairment
at least annually. Any impairment is recognised immediately in the income statement.
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, 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 is stated at cost less accumulated depreciation. Depreciation is provided on all property, plant and
equipment at rates calculated to write off the cost of tangible fixed assets over their expected useful lives at the following rates:-
Property - Over the 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.
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged
against profits on a straight line basis over the period 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 cost. Appropriate allowances for estimated irrecoverable amounts are recognised
in the income statement 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.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial Instruments
Qualitative and quantitative information about exposure to risks arising from financial instruments are set out in the disclosure notes
in accordance with IFRS 7, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity
analysis to market risk.
Taxation
The tax expense represents the sum of tax currently payable and deferred tax. The tax currently payable is based on taxable profit for
the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current
tax is calculated using tax rates that have been enacted by the balance sheet date.
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 between the Group's taxable profits and its results as stated in the financial statements that
arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the
financial statements.
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.
A deferred tax asset is recognised where recovery is more likely than not.
4. Earnings per share
2008 2007
� �
Earnings (405,496) 367,750
Basic earnings per share is based on the profit 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 (2007: 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 current and prior
periods, there is no dilutive impact on earnings per share in either period. There are potentially 3,350,000 shares that could be issued
under the terms of options as described in note 18, which could potentially reduce future earnings per share if exercised.
5. Note to the cash flow statement
Cash generated from operations 2008 2007
� �
Operating (loss)/profit for the year (331,511) 289,516
Goodwill impairment charge 497,492 -
Share based payment expense 7,985 7,985
Depreciation on property, plant and equipment 458,227 449,899
Loss on sale of property, plant and equipment - 24,197
Operating cash flows before movements in working capital 632,193 771,597
Decrease/(increase) in receivables 63,501 (616,411)
(Decrease)/increase in payables (103,943) 96,000
Cash generated from operations 591,751 251,186
Interest paid (48,894) (19,925)
Tax paid (14,965) -
Net cash generated from operations 527,892 231,261
6. Other information
The financial information on the Group set out above is unaudited and does not constitute statutory accounts within the meaning of
Section 240 of the Companies Act 1985 but have been extracted therefrom.. Information relating to the year ended 31 March 2007 is derived
from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditors' report on those accounts
was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The auditors have reported their
opinion on the financial statements for the year ended 31 March 2008 today. The auditors gave an unqualified opinion, and contain no
statement under Sections 237(2) or (3) of the Act, the financial statements have not yet been filed with the Registrar of Companies.
The preliminary announcement was approved by the Board and authorised by them for issue on 24 September 2008.
Copies of the Report and Accounts will be posted to shareholders shortly. Copies will be available from the Company's website at
www.forestsupportservices.co.uk and registered office at Forest House, Broad Quay Road, Felnex Industrial Estate, Newport, Gwent, NP19 4PN.
The statutory accounts for the year ended 31 March 2008 will be delivered to the Registrar of Companies following the Company Annual
General Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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