ATA Group PLC 09 September 2005 ATA GROUP INTERIM STATEMENT 2005 CHAIRMAN'S STATEMENT I am pleased to present the interim report of the Company for the six months to 30 June 2005. Trading General Economic conditions remain stable, as does the trading environment in recruitment, although the Railway Industry is undergoing a process of fundamental change which creates significant uncertainty and challenging trading conditions much as expected. Although group turnover in the six months to 30 June 2005 increased 4.8% to £8.9m (2004 £8.5m), profit before tax fell to £48,000 (2004 £0.55m). Earnings per share fell to 0.41p (2004 4.60p). Recruitment Recruitment and labour supply turnover in the period was £5.9m (2004 £4.5m), a rise of 32%. Operating profit declined slightly to £0.15m (2004 £0.16m). The performance of ATA Selection improved during the period in permanent recruitment and further significant progress was made in contract recruitment. The additional direct costs associated with rapid expansion in contract personnel and subsequent turnover growth have served to restrain overall contract gross margin as new recruits develop their skills and gain experience. Ganymede Tracklayers, having secured its first contract with Network Rail to supply labour in the Thames Valley maintenance area in 2004 has built on this success and has important business flows in the London Underground system through an expanding relationship with Tube Lines. The business flows from National Rail Infrastructure Renewals Companies has, however, been disappointingly slow. The combined effect of these achievements has been to consolidate Ganymede on a wider client base and improve its contribution to Group. Gem Weld (UK) Limited, acquired in August 2004, has been fully integrated and, following a very difficult period to December 2004, has made significant and pleasing progress in generating good trading relationships with Renewals companies and has joined Ganymede in securing a valuable contract from Network Rail in the Thames Valley area. Revenue flows have consequently improved and the business has achieved profitability at the period end. Training Training turnover in the period has been seriously impacted by reduced demand for signal engineer and rail safety training following the transfer of all Infrastructure Maintenance to Network Rail in 2H04 and has fallen to £3.0m (2004 £4.02m) a fall of 25%. An operating loss of (£97,000) was incurred, mostly falling in the first quarter (2004 first half profit £0.425m). It is now clear that Network Rail have decided to abandon the facilities and expertise, sold at the time of privatisation, available from the private sector and, instead, establish competing facilities of their own. Whatever the business case for this policy we have to deal with the consequences and do not now expect to provide significant services in this area to Network Rail beyond March 2006. This is expected to reduce turnover in this segment of our training activities by a net £1.0m in 2005 and a further net £1.0m in 2006. Rail Training Audit Services continues to trade at budgeted levels and is tendering for renewal of the contract with Network Rail to commence at the beginning of 2006. Dividends Your Directors consider that significant market change has taken place in the first half of 2005 which has impacted severely on net pre-tax profits but that trading at more satisfactory levels may be expected in the second half. In view of this they have resolved to pay a reduced interim dividend of 1.0p (2004 2.5p). Outlook My previous statement predicted that 2005 would be a challenging year; so it is proving. The bulk of this year's re-positioning has taken place in the first half and the second should demonstrate a more stable picture. Further development of contract recruitment is anticipated enabling more intensive use to be made of our nationwide network of branches, where permanent recruitment is expected to gather pace too. This is expected to generate continuing increases in turnover and, through improvements in contract consultant maturity and skill, to generate improvements in profits from this section of our business. Ganymede Tracklayers is continuing steady development and expects to extend further its client base outside Network Rail. Having completed a short period of adjustment and integration, GemWeld will also build on the successes of the first half and extend its business and profitability in a similar manner. The second half is expected to produce a steadier performance from both Catalis and Rail Training Audit Services although further ahead continued adjustment to changes at Network Rail and the need to secure a renewal of their contract with Rail Training Audit Services will present further challenges. The re-positioning of Catalis Rail Training to take full advantage of a much altered Railway Industry will be substantially complete by April 2006. Although I am confident that the Group will continue to make solid progress in dealing with a fast changing trading environment, I expect the recovery from the first half trading setback to be slower than we would have wished. Consequently, profits for the year to 31 December 2005 are expected to be materially below expectations. W.J.C.Douie, Chairman. 9 September 2005. CONSOLIDATED PROFIT AND LOSS ACCOUNT 6 Months 6 Months 12 Months to to to 30 Jun 30 Jun 31 Dec 2005 2004 2004 (unaudited) (unaudited) As restated As restated Notes £'000 £'000 £'000 £'000 £'000 £'000 Turnover Continuing operations 8,930 8,519 17,054 Acquisitions - - 98 2 8,930 8,519 17,152 Operating Profit Continuing operations 54 586 1,558 Acquisitions - - (140) 2 54 586 1,418 Net interest payable (6) (35) (57) (6) (35) (57) Profit on ordinary activities before taxation 48 551 1,361 Tax on profit on ordinary activities 3 (14) (176) (436) Profit on ordinary activities after taxation 34 375 925 Dividends 4 (319) (318) (522) Retained profit / (loss) for the financial period (285) 57 403 Earnings per share (pence) 5 0.41 4.60 11.34 There were no recognised gains or losses other than those reported in the Profit and Loss Account. CONSOLIDATED BALANCE SHEET As at As at As at 30 Jun 30 Jun 31 Dec 2005 2004 2004 (unaudited) (unaudited) Notes As restated As restated £'000 £'000 £'000 FIXED ASSETS Intangible assets 1,118 1,083 1,154 Tangible assets 1,323 1,771 1,588 2,441 2,854 2,742 CURRENT ASSETS Stock 29 12 29 Debtors falling due after more than one year 802 817 809 Debtors falling due within one year 3,222 3,372 3,483 Cash at bank 803 1,314 715 4,856 5,515 5,036 CREDITORS: Due within one year (2,992) (3,998) (3,209) NET CURRENT ASSETS 1,864 1,517 1,827 TOTAL ASSETS LESS CURRENT LIABILITIES 4,305 4,371 4,569 CREDITORS: Due after more than one year (50) (161) (50) PROVISIONS FOR LIABILITIES AND CHARGES (101) (150) (101) NET ASSETS 4,154 4,060 4,418 CAPITAL AND RESERVES Called up share capital 82 82 82 Share premium account 1,817 1,784 1,796 Capital redemption reserve 50 50 50 Profit and loss account 8 2,205 2,144 2,490 7 SHAREHOLDERS' FUNDS 4,154 4,060 4,418 CONSOLIDATED CASH FLOW STATEMENT 6 Months 6 Months 12 Months to to to 30 Jun 30 Jun 31 Dec 2005 2004 2004 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 CASH INFLOW FROM 6 312 1,186 1,857 OPERATING ACTIVITIES Returns on investments and servicing of finance (6) (35) (57) Taxation (135) (326) (506) Payments to acquire tangible fixed assets (97) (190) (321) Receipts on disposal of tangible fixed assets 31 20 35 Purchase of subsidiary undertaking - - (15) Net Debt acquired with subsidiary (19) Equity dividends paid - - (522) Net cash inflow before use of liquid resources and financing 105 655 452 Issue of ordinary share capital 21 9 21 Decrease in medium term loans (8) (136) (500) Capital element of finance lease rental payments (30) (53) (97) (DECREASE)/INCREASE IN CASH BALANCES 88 475 (124) ATA GROUP PLC NOTES TO THE INTERIM STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2005 1. ACCOUNTING POLICIES The accounting policies used in the preparation of the interim accounts are consistent with those used in the preparation of the audited annual accounts for the year ended 31 December 2004 with the exception of the introduction of FRS 21 'Events after the balance sheet date', which requires dividends which are proposed after the balance sheet date to be disclosed and not recognised as a liability. Comparative data for the six months to 30 June 2004 and twelve months to 31 December 2004 has been restated in accordance with this standard. The interim accounts follow the provisions of SSAP 24 'Accounting for pension costs' which is consistent with the policy used in the preparation of the audited accounts for the year ended 31 December 2004. The company is required to adopt the provisions of FRS 17 'Retirement benefits' for the year ended 31 December 2005, however it has been impracticable to prepare these interim statements on this basis as it has not been possible to obtain appropriate valuations. The Group financial information consolidates the accounts of ATA Group Plc and all its material subsidiary undertakings using the acquisition method. The comparative figures for the year ended 31 December 2004 do not constitute statutory accounts within the meaning of S.240 of the Companies Act 1995, but they have been derived from the audited financial statements for that year, which have been filed with the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2. SEGMENTAL ANALYSIS 6 Months to 6 Months to 12 Months to 30 Jun 2005 30 Jun 2004 31 Dec 2004 (unaudited) (unaudited) (audited) £'000 £'000 £'000 TURNOVER Recruitment and labour supply 5,936 4,504 9,380 Training and consultancy 2,994 4,015 7,772 8,930 8,519 17,152 OPERATING PROFIT Recruitment and labour supply 151 161 270 Training and consultancy (97) 425 1,148 54 586 1,418 Operating profit is stated after amortisation of goodwill of £36,000 in the period (2004 £33,000). 3. TAX ON PROFIT ON ORDINARY ACTIVITIES The tax on profit on ordinary activities for the period to 30 June 2005 has been provided at the estimated rate applicable to the group for the period. 4. DIVIDENDS The Board has approved an interim dividend of 1p per ordinary share net to be paid on 12 December 2005 to shareholders on the register of members at 18 November 2005. 6 Months to 6 Months to 12 Months to 30 Jun 2005 30 Jun 2004 31 Dec 2004 (unaudited) (unaudited) As restated As restated £'000 £'000 £'000 Final dividend 2003, declared April 2004 - 318 318 Interim dividend 2004, declared September 2004 - - 204 Final dividend 2004, declared April 2005 319 - - 319 318 522 5. EARNINGS PER SHARE The earnings per share have been calculated on the profit on ordinary activities after taxation, both before and after exceptional items, and on the number of shares in issue (8,195,812) during the period. The fully diluted earnings per share is not materially different from the basic earnings per share and has not been disclosed. 6. CASH FLOW RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 2004 £'000 Operating profit 54 Amortisation 36 Depreciation 333 Profit on sale of fixed assets (2) Decrease in debtors 268 Decrease in creditors (377) ---------------- Net cash inflow from operating activities 312 ================ ANALYSIS OF CHANGES IN NET FUNDS At Cash Other At 30 1 Jan 2005 Flows Movements Jun 2005 £'000 £'000 £'000 £'000 Net Cash: Cash in hand and at bank 715 88 803 Debt: Debt due within 1 year (10) 8 (1) (3) Debt due after 1 year (1) - 1 0 HP and finance leases (107) 30 (77) Net Funds 597 126 0 723 7. MOVEMENT IN SHAREHOLDERS FUNDS STATEMENT OF MOVEMENT IN GROUP SHAREHOLDERS FUNDS As at As at As at 30 Jun 2005 30 Jun 2004 31 Dec 2004 £'000 £'000 £'000 Opening shareholders funds as previously stated 4,099 3,676 3,676 Prior period adjustment 319 318 318 Opening shareholders funds as restated 4,418 3,994 3,994 Profit / (loss) for the period (285) 57 403 Issue of shares 21 9 21 Closing shareholders funds 4,154 4,060 4,418 8. PRIOR PERIOD ADJUSTMENTS FRS 21 Events after the balance sheet date. Under the terms of FRS 21 dividends which have been declared after the balance sheet date are not recognised as a liability at that date. The effect of changes in accounting policy on comparative financial information of prior periods is as follows: Period ended Year ended 30 Jun 2004 31 Dec 2004 (unaudited) £'000 £'000 Dividends: 204 523 Dividend previously charged to profit and loss in the period Dividend charged to profit and loss under FRS 21 (318) (522) Net (reduction) / increase to retained profit in the period (114) 1 Profit / (loss) for year: As previously reported 171 402 FRS 21 (114) 1 As restated 57 403 Creditors: As previously reported (4,202) (3,528) FRS 21 204 319 As restated (3,998) (3,209) Reserves profit and loss account: As previously reported 1,940 2,171 FRS 21 204 319 As restated 2,144 2,490 ATA GROUP PLC Registered Office Kingston House, Oaklands Business Park, Armstrong Way, Yate, South Gloucestershire BS37 5NA Approved and authorised for release for and on behalf of ATA Group Plc This information is provided by RNS The company news service from the London Stock Exchange