6 SHARE CAPITAL AND SHARE PREMIUM
7 RETIREMENT BENEFIT LIABILITIES
11 CASH USED IN/FROM OPERATIONS
1 GENERAL INFORMATION
AEA is one of the world’s leading consultancies in Energy and Climate Change. The Group employs many of the world’s experts in air quality, energy policy, knowledge transfer and behaviour change. The Group’s mission is to help its customers make decisions based on good science and data, choose the optimum strategy or policy, be clear about the priorities and payback of programmes and investment and utilise technology to enable simpler, more effective, real-time networking and reporting.
The Company is a public limited company, incorporated and domiciled in the United Kingdom. The address of the registered office is 329 Harwell, Didcot, Oxfordshire, OX11 0QJ. The Company is listed on the London Stock Exchange.
These financial statements are presented in pounds sterling, the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies described in the annual financial statements for the year ended 31 March 2009.
On 18 November 2009 the consolidated Half-Year Financial Report was authorised for issue by the Board of Directors.
These half-year results do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2009 were approved by the Board of Directors on 10 June 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an ’Emphasis of matter’ paragraph and did not contain any statement under section 237 of the Companies Act 1985.
2 BASIS OF PREPARATION
The consolidated financial information for the half-year ended 30 September 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, ‘Interim financial reporting’ as adopted by the European Union. The Half-Year Financial Report should be read in conjunction with the annual financial statements for the year ended 31 March 2009, which were prepared in accordance with IFRSs as adopted by the European Union.
3 ACCOUNTING POLICIES
Except as described below the accounting policies are consistent with those of the annual financial statements for the year ended 31 March 2009, as described in pages 29 to 35 of those annual financial statements.
The following new standards, amendments to existing standards or interpretations are mandatory for the first time for the financial year ending 31 March 2010:
- IFRS 2 amendment, ‘Share based payment – vesting conditions and cancellations’, effective for periods beginning on or after 1 January 2009. The amendment addresses the definition of, and accounting for, non-vesting conditions. The amendment is fully retrospective and the impact on the Group has been that for the equity-settled share-based employee compensation plans in place, a review of the fair value of the awards has been made to take into account the effect of non-vesting conditions. The accounting policy for share-based payments has been revised so that if there is a failure to meet a non-vesting condition the IFRS 2 expense is recognised immediately rather than being spread over future periods.
The impact of this change on the half-year results was immaterial. The prior year impact of these changes was immaterial and therefore no prior period adjustment has been made.
- IFRS 8, ‘Operating Segments’, effective for annual periods beginning on or after 1 January 2009. This new standard requires a management approach to be taken to segmental reporting where information is presented on the same basis as that used for internal reporting purposes. This has had no effect on the segments previously reported under IAS 14, which were Europe and the US. This is consistent with the way in which information is reported internally to the chief operating decision maker. This has been identified as the body of Executive Directors who consider the allocation of resources between operating segments. The requirements of IFRS 8 have been applied retrospectively.
- IAS 1 (revised), ‘Presentation of financial statements: a revised presentation’, effective for annual periods beginning on or after 1 January 2009. The Half-Year Financial Report has been prepared under the revised disclosure requirements. AEA has elected to present two statements (the consolidated income statement and the consolidated statement of comprehensive income). The revised standard also requires that, in some situations, an additional statement of financial position is required as at the beginning of the earliest period presented. Such a situation would be the retrospective application of a new accounting policy, such as the amendment to IFRS 2 or IAS 1 (revised). This additional comparative information has not been included as it is considered immaterial and does not affect any statement of financial position.
The following new standards, amendments to existing standards or interpretations are mandatory for the first time for the financial year ending 31 March 2010, but are not currently relevant for the Group:
- IFRS 1 and IAS 27 amendment, ‘Cost of an investment in a subsidiary, jointly controlled entity or associate’, effective for periods beginning on or after 1 January 2009;
- IFRS 7 amendment, ‘Improving disclosures about financial instruments’, effective for periods beginning on or after 1 January 2009, subject to EU endorsement;
- IAS 23, ‘Borrowing costs’, effective for annual periods beginning on or after 1 January 2009;
- IAS 32 and IAS 1 amendment, ‘Puttable financial instruments and obligations arising on liquidation’, effective for annual periods beginning on or after 1 January 2009;
- IFRIC 9 and IAS 39, ‘Embedded derivatives’, effective for annual periods ending on or after 30 June 2009, subject to EU endorsement;
- IFRIC 13, ‘Customer loyalty programmes’, effective for annual periods beginning on or after 1 July 2008;
- IFRIC 15, ‘Agreements for the construction of real estate’, effective for annual periods beginning on or after 1 January 2009, and
- IFRIC 16, ‘Hedges of a net investment in a foreign operation’, effective for annual periods beginning on or after 1 October 2008.
- IAS 36 ‘Impairment of assets – allocating goodwill to cash-generating units’, effective for annual periods beginning on or after 1 January 2009;
The following new standards, amendments to existing standards or interpretations have been issued, but are not effective for the financial year ending 31 March 2010 and have not been adopted early:
- IFRS 2 amendment, ‘Share-based payment – Group cash-settled share-based payment transactions’, effective for annual periods beginning on or after 1 January 2010, subject to EU endorsement;
- IFRS 3 (revised), ‘Business combinations’ and related amendments to IAS 27 ‘Consolidated and separate financial statements’, effective for annual periods beginning on or after 1 July 2009;
- IAS 39 amendment, ‘Eligible hedged items’, effective for annual periods beginning on or after 1 July 2009;
- IFRIC 17, ‘Distribution of non-cash assets to owners’, effective for annual periods beginning on or after 1 July 2009, subject to EU endorsement, and
- IFRIC 18, ‘Transfers of assets from customers’, effective from 1 July 2009, subject to EU endorsement.
IFRS 3 (revised) may have an impact on the Group’s financial statements when implemented, depending upon future acquisition activity by the Group. It is not expected that the other statements will have a significant impact on the Group’s financial statements when they are adopted.
Alternative performance measures
AEA uses a number of alternative (non-Generally Accepted Accounting Practice (non-GAAP)) financial measures, which are not defined by IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and as such these measures are important and should be considered alongside the IFRS measures. The following non-GAAP measures are referred to in this Half-Year Financial Report:
a) |
Adjusted operating profit and adjusted profit before taxation |
b) |
Movement in net debt |
c) |
Adjusted earnings per share |
d) |
Cash used in/from business operations |
4 SEGMENTAL INFORMATION
The Group has only one product or service, being that of consultancy, policy support, programme management and data management. The measure of reported segment profit or loss used by the chief operating decision maker (see note 3, IFRS 8) to assess the performance of the segments is adjusted operating profit. This measurement excludes the effect of certain non-recurring expenditure and income, such as restructuring and integration costs and the amortisation of acquired intangibles.
The revenues and adjusted operating profit generated by each of the Group’s segments, together with the total assets measure for each segment, are summarised as follows:
| (Unaudited) Six months ended 30 September 2009 £m |
(Unaudited) Six months ended 30 September 2008 £m |
(Audited) Year ended 31 March 2009 £m |
|
| Europe | 33.4 | 32.0 | 70.6 |
| United States | 17.6 | 3.6 | 23.1 |
| Total revenue | 51.0 | 35.6 | 93.7 |
| Europe | 2.2 | 3.6 | 8.5 |
| United States | 2.0 | 0.3 | 3.5 |
| Total adjusted operating profit | 4.2 | 3.9 | 12.0 |
| Europe | 24.2 | 26.6 | 24.4 |
| United States | 51.6 | 48.5 | 60.4 |
| Total assets | 75.8 | 75.1 | 84.8 |
A reconciliation of adjusted operating profit to profit before taxation is provided as follows:
| (Unaudited) Six months ended 30 September 2009 £m |
(Unaudited) Six months ended 30 September 2008 £m |
(Audited) Year ended 31 March 2009 £m |
|
| Adjusted operating profit for reportable segments | 4.2 | 3.9 | 12.0 |
| Amortisation of acquired intangibles | (0.6) | (0.1) | (0.7) |
| Integration costs | (0.6) | - | (0.9) |
| Net pension credit from Scheme closure | 0.2 | - | - |
| One-off exchange gain | - | 0.4 | - |
| Operating profit | 3.2 | 4.2 | 10.4 |
| Finance income | 7.6 | 9.5 | 19.2 |
| Finance costs | (10.6) | (10.8) | (22.1) |
| Profit before taxation | 0.2 | 2.9 | 7.5 |
5 SEASONALITY
European revenues are subject to seasonal fluctuations, with the peak demand in the fourth quarter of the financial year. This reflects the pattern of purchasing/procurement by the UK Government, Europe’s most significant customer type. US revenues are not subject to seasonal fluctuations.
6 SHARE CAPITAL AND SHARE PREMIUM
| Number of ordinary shares (millions) |
Nominal value of ordinary shares £m |
Value of share premium £m |
Total share capital and premium £m |
|
| At 1 April 2008 | 124.1 | 15.2 | 40.4 | 55.6 |
| Rights issue | 99.3 | 12.1 | 24.1 | 36.2 |
| Consideration shares issued on acquisition of subsidiary | 5.3 | 0.6 | 1.9 | 2.5 |
| At 30 September 2008 | 228.7 | 27.9 | 66.4 | 94.3 |
| Adjustment to the value of consideration shares | - | - | 1.0 | 1.0 |
| At 30 September 2009 and 31 March 2009 | 228.7 | 27.9 | 67.4 | 95.3 |
The total authorised number of ordinary shares is 315,000,000 shares (March 2009 and September 2008: 315,000,000 shares) with a par value of 12.2 pence per share. All issued shares are fully paid.
Warrants
The Company has in issue 5,633,252 warrants (March 2009: 8,047,502 warrants,
September 2008: 4,366,799 warrants) giving the holders the right to subscribe in cash for shares in the Company.
Holders of these warrants may subscribe for one ordinary share in the Company at a price of 65.0 pence and these warrants may be exercised at any time prior to 8 July 2010. The fair value of these warrants as at 30 September 2009, calculated by reference to a closing market price of 28.0 pence per share, is £nil (31 March 2009: £nil, calculated by reference to a closing market price of 12.75 pence,
30 September 2008: £nil, calculated by reference to a closing market price of 38.5 pence).
7 RETIREMENT BENEFIT LIABILITIES
The amounts recognised in the Consolidated balance sheet are determined as follows:
| (Unaudited) At 30 September 2009 £m |
(Unaudited) At 30 September 2008 £m |
(Audited) At 31 March 2009 £m |
|
| Present value of funded obligations | 394.8 | 285.4 | 310.3 |
| Fair value of plan assets | (261.0) | (232.6) | (205.5) |
| 133.8 | 52.8 | 104.8 | |
| Present value of unfunded benefits | 3.8 | 3.2 | 3.4 |
| Net retirement benefit liability | 137.6 | 56.0 | 108.2 |
The net retirement benefit liability has increased to £137.6 million (March 2009: £108.2 million, September 2008: £56.0 million). This increase has occurred through changes to the financial assumptions used in calculating the present value of funded obligations partially offset by increases in the market value of plan assets.
As at 31 March 2009 a discount rate of 6.6% was used to discount the gross liabilities of the Scheme to a present value. Due to changes in market conditions this assumption, which is based on corporate bond yields at the Consolidated balance sheet date, has been updated to 5.6% as at 30 September 2009, with the resultant effect of significantly increasing the present value of the obligations. This has partially been offset by an increase in the value of plan assets. There have been no other significant changes to the assumptions used and disclosed in note 29 of the 2009 Annual Financial Report.
The defined benefit pension scheme (“the Scheme”) was closed to future accrual and no further benefits will be built up after 31 July 2009. From 1 August 2009 employees can build up benefits in relation to employment with AEA on a defined contribution basis.
The Scheme’s past service funding deficit is expected to be cleared over approximately 20 years under a schedule of contributions agreed by the Company and the Trustees in June 2009, which is subject to clearance by the Pension Regulator.
The amounts recognised in respect of pension benefits in the Consolidated income statement are as follows:
| (Unaudited) Six months ended 30 September 2009 £m |
(Unaudited) Six months ended 30 September 2008 £m |
(Audited) Year ended 31 March 2009 £m |
|
| Past service credit | (0.7) | - | - |
| Curtailment loss | 0.5 | - | - |
| Net credit due to Scheme closure | (0.2) | - | - |
| Current service cost | 0.4 | 0.6 | 1.2 |
| Accretion of discount on defined benefit scheme obligations | 10.0 | 10.1 | 20.5 |
| Expected return on defined benefit pension scheme assets | (7.5) | (9.3) | (19.0) |
| Total expense in the income statement | 2.7 | 1.4 | 2.7 |
The past service credit and curtailment loss arise from closing the funded defined benefit pension scheme to future accrual and amending the entitlements of certain members of the Scheme.
8 FINANCE INCOME
| (Unaudited) Six months ended 30 September 2009 £m |
(Unaudited) Six months ended 30 September 2008 £m |
(Audited) Year ended 31 March 2009 £m |
|
| Interest income | 0.1 | 0.1 | 0.1 |
| Fair value gains on financial instruments | - | 0.1 | 0.1 |
| Expected return on defined benefit pension scheme assets | 7.5 | 9.3 | 19.0 |
| Finance income | 7.6 | 9.5 | 19.2 |
9 FINANCE COSTS
| (Unaudited) Six months ended 30 September 2009 £m |
(Unaudited) Six months ended 30 September 2008 £m |
(Audited) Year ended 31 March 2009 £m |
|
| Interest on bank overdrafts and loans | 0.5 | 0.7 | 1.4 |
| Interest on finance leases | - | - | 0.1 |
| Fair value losses on financial instruments | 0.1 | - | 0.1 |
| Accretion of discount on defined benefit pension scheme obligations | 10.0 | 10.1 | 20.5 |
| Finance costs | 10.6 | 10.8 | 22.1 |
10 EARNINGS PER SHARE
Details of basic, diluted and adjusted earnings per share are set out below:
(a)
|
Basic |
| (Unaudited) Six months ended 30 September 2009 |
(Unaudited) Six months ended 30 September 2008 |
(Audited) Year ended 31 March 2009 |
|
| Profit attributable to equity holders of the Company (£ millions) | 0.1 | 2.9 | 7.0 |
| Weighted average number of ordinary shares in issue (millions) | 228.7 | 173.3 | 200.9 |
| Basic earnings per share (pence) | - | 1.7p | 3.5p |
(b)
|
Diluted |
| (Unaudited) Six months ended 30 September 2009 |
(Unaudited) Six months ended 30 September 2008 |
(Audited) Year ended 31 March 2009 |
|
| Profit attributable to equity holders of the Company (£ millions) | 0.1 | 2.9 | 7.0 |
| Weighted average number of ordinary shares in issue (millions) | 228.7 | 173.3 | 200.9 |
| Adjustment for share options and warrants (millions) | 2.7 | - | 0.6 |
| Weighted average number of ordinary shares for diluted earnings per share (millions) | 231.4 | 173.3 | 201.5 |
| Diluted earnings per share (pence) | - | 1.7p | 3.5p |
(c)
|
Adjusted earnings - alternative performance measures (note 3) |
| (Unaudited) Six months ended 30 September 2009 |
(Unaudited) Six months ended 30 September 2008 |
(Audited) Year ended 31 March 2009 |
|
| Profit attributable to equity holders of the Company (£ millions) | 0.1 | 2.9 | 7.0 |
| Amortisation of acquired intangibles (£ millions) | 0.6 | 0.1 | 0.7 |
| Integration costs (£ millions) | 0.6 | - | 0.9 |
| Net pension credit from Scheme closure (£ millions) | (0.2) | - | - |
| One-off exchange gain (£ millions) | - | (0.4) | - |
| Net pension finance cost (£ millions) | 2.5 | 0.8 | 1.5 |
| Adjusted earnings attributable to equity holders of the Company (£ millions) |
3.6 | 3.4 | 10.1 |
| Weighted average number of ordinary shares in issue (millions) | 228.7 | 173.3 | 200.9 |
| Adjusted earnings per share (pence) | 1.6p | 2.0p | 5.0p |
Back to top
11 CASH (USED IN)/FROM OPERATIONS
| (Unaudited) Six months ended 30 September 2009 £m |
(Unaudited) Six months ended 30 September 2008 £m |
(Audited) Year ended 31 March 2009 £m |
|
| Profit for the period | 0.1 | 2.9 | 7.0 |
| Adjustments for: | |||
| tax | 0.1 | - | 0.5 |
| depreciation and amortisation | 1.2 | 0.5 | 1.8 |
| share option charge | 0.1 | 0.1 | 0.1 |
| finance costs | 10.6 | 10.8 | 22.1 |
| finance income | (7.6) | (9.5) | (19.2) |
| other | 0.5 | (0.1) | - |
| Changes in working capital: | |||
| increase in work in progress | (0.1) | (0.2) | (0.1) |
| decrease in trade and other receivables | 2.3 | 0.7 | 1.5 |
| (decrease)/increase in trade and other payables | (7.5) | (3.9) | 2.0 |
| Changes in retirement benefit liabilities | (2.1) | (3.2) | (6.7) |
| Changes in provisions for liabilities and charges | (1.3) | (2.8) | (7.9) |
| Cash (used in)/from operations | (3.7) | (4.7) | 1.1 |
12 CONTINGENT LIABILITIES
The Group has contingent liabilities in respect of contracts entered into in the normal course of business and in respect of the disposal of businesses and subsidiaries. Other than those items provided for, it is not expected that these will have a material effect on the financial position of the Group.
13 POST BALANCE SHEET EVENTS
There were no post balance sheet events.