Hyder Consulting PLC Annual Report 2012

Financial Review
The group’s geographic diversity has enabled us to report
another good set of financial results, in what have been
mixed market conditions. Our Australian business has
continued to perform well and benefited from the strength
of the Australian dollar. In the Middle East our results have
improved as new projects have been secured, following
our investments in Qatar and Saudi Arabia. The UK, and
particularly the highways sector has been challenging,
however our results have held up well and we are now well
positioned for the year ahead.
Cash balances have improved in spite of the current liquidity
pressures, and more onerous payment terms that exist
with public sector clients in the Middle East, where we
are growing. At the year end our net cash balances were
£15.6m, up from £13.1m the year before.
Revenue and profit
Revenue for the year was £277.3m (2011: £290.3m), 4.5%
lower. Net revenue, after deduction of sub-consultant
costs, was 3.8% lower at £241.8m (2011: £251.4m). On a
constant currency basis revenue and net revenue decreased
by 6.1% and 5.5% respectively. The reduction in revenue is
principally due to the challenging market conditions in the
UK, and particularly the highways market.
In presenting the group’s adjusted profit below,
amortisation of acquired assets, acquisition costs and
exceptional items have been excluded as the directors
believe that this assists with understanding the underlying
performance of the group:
2012
£’000
2011
£’000
Change
%
Operating profit 17,070 18,156 (6.0%)
Add back:
Amortisation on
acquired intangibles
and acquisition costs
2,462 2,147 14.7%
Exceptional items 1,499 - -
Adjusted operating
profit
21,031 20,303 3.6%
Net finance costs
Net pension interest
(353) (443) (20.3%)
income 929 466 99.4%
Adjusted profit before
taxation 21,607 20,326 6.3%
Adjusted operating profit increased 3.6% to £21.0m (2011:
£20.3m). The adjusted operating margin on net revenue
increased to 8.7% from 8.1%.
Redundancy costs of £1.5m (2011: £2.9m) have been
absorbed within adjusted operating profit following actions
to more closely align our resource levels with the mix of
projected workload. The redundancy costs were primarily
incurred in the UK (£0.6m), Australia (£0.5m), and the
Middle East (£0.3m). Foreign exchange gains of £0.9m have
been recognised within operating profit from translation of
overseas profits, largely in Australia.
Adjusted profit before taxation increased 6.3% to £21.6m
(2011: £20.3m).
Exceptional items
Exceptional items incurred in the current year relate to UK
vacant properties (£1.3m) and costs related to the closure
of the UK defined benefit pension scheme to future accrual
(£0.2m). The vacant property costs in the UK comprise
rental costs for the remaining life of the lease where due
to structural changes the offices are no longer required for
future use. The exceptional cost taken in the current year
will lead to overhead savings in future years. In order to
reduce the rate of growth of the UK defined benefit scheme’s
liabilities, and the volatility of the deficit, the scheme
was closed to future benefit accrual on 30 April 2011. This
resulted in closure costs of £0.2m being incurred. There
were no exceptional items in the prior year.
Taxation
The taxation charge for the year was £3.7m (2011: £3.3m),
equating to a tax rate of 21.1% (2011: 18.1%). The tax rate
on adjusted profit before tax was 20.5% (2011: 17.9%).
The increase in the tax rate is a result of a change in the
mix of the group’s profits, with more of the group’s profit
being earned in higher rate jurisdictions. The current rate
is lower than the UK rate of 26% reflecting research and
development tax credits in both Australia and the UK, and
lower tax rates in the Middle East.
Earnings per share
Basic earnings per share amounted to 36.48p (2011: 39.29p);
diluted earnings per share was 35.96p (2011: 38.63p). The
weighted average number of ordinary shares during the year
was 38.2m (2011: 37.9m), reflecting the shares issued to
satisfy options exercised during the year offset by shares
purchased by the company’s employee benefit trust. After
adjusting for the amortisation of acquired intangibles,
acquisition costs and exceptional items, fully diluted
earnings per share increased by 2.3% to 44.34p (2011:
43.34p).
Hyder Consulting PLC Annual Report 2012 25