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28 August 2009

Parkwood Holdings plc

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009

Financial Summary - continuing operations

    

	Interim 2009	Restated Interim 2008
Revenue	£61.1m	£59.9m
Adjusted operating (loss)/profit	(£0.09m)	£1.96m
Operating (loss)/profit	(£0.79m)	£1.73m
(Loss)/profit before tax	(£1.14m)	£1.36m
Basic (loss)/earnings per share	(7.2p)	5.3p
Dividend proposed per share	nil	1.4p
Order book	£500m	£531m

            

The adjusted operating (loss)/profit is stated before amortisation and goodwill impairment.

The 2008 comparatives have been restated to exclude the results of discontinued operations.

Financial Calendar

Full Year Results Announced                        March 2010

Annual General Meeting                               May 2010

This statement is available from the Company's website at www.parkwood-holdings.co.uk. Shareholders will be notified in writing when the Interim Report is available unless shareholders have specifically elected to receive paper copies. Copies can be obtained from the registered office:

Parkwood House
Cuerden Park
Berkeley Drive
Bamber Bridge

Preston 

PR5 6BY

For further information, please contact:

Tony Hewitt - Executive Chairman                                                01772 627111

Mike Quayle - Group Finance Director

                                             
Neil Baldwin - Brewin Dolphin Investment Banking                       0845 213 4730

Chairman's Statement

Parkwood suffered its first loss in a number of years in the six months to 30 June 2009. This was the result of losses in some trading activities, the impairment of goodwill and adjustments for additional costs relating to prior periods. Poor management of certain customer relationships in Glendale during 2008 and early 2009 adversely affected Glendale Facilities Management at the Defence Animal Centre. Similarly, in February Glendale Recycling lost an important contract which secured gate fees for the processing of green waste. Although the majority of the Group's trading is underpinned by long-term contracts with the public sector, Parkwood is not immune to the current recession which has affected landscaping activity in Glendale Countryside and has impacted on discretionary spending patterns in golf, horticulture and catering.

Parkwood Leisure, however, increased its profits during the period to £1.75 million (2008: £1.25 million), but otherwise good news has been hard to find. Although the award of the first 'healthy living' contracts to provide health trainers for South East Essex PCT and West Berkshire PCT in July was welcome. The anticipated sale of the equity and subordinated debt in the leisure related PFI/PPP investments scheduled for June 2009 has been delayed into the third quarter of this year and is currently in the final stages of due diligence.

Group Results 

Revenues were slightly ahead at £61.1 million (2008: £59.9 million) but an operating loss of £0.8 million was incurred compared to a profit of £1.7 million for the same period in the previous year. The loss from continuing operations before tax amounted to £1.14 million, including £0.24 million of amortisation and £0.46 million of goodwill impairment. The Group's cash flow has been successfully managed during the period with net short-term borrowings kept to a minimum. The sale of the subordinated debt and equity in the PFI/PPP investments is expected to generate net proceeds of around £4.8 million which will be used to reduce the net debt of the recourse group. Dividends have been waived again as the Board has felt it prudent not to pay a dividend until this transaction completes.

The Group's forward order book at the period end was £500 million (2008: £531 million).

Board and Management

Both Terry Bowman, the Group Finance Director and Nick Temple-Heald, the Chief Executive of Glendale left the Company during the period. Mike Quayle was recruited as the Group Finance Director and joined Parkwood on 6 July 2009. Mike spent fourteen years working for KPMG before acting as Finance Director for the Greater Manchester Passenger Transport Executive and then Group Finance Director of European Colour plc. Parkwood's Board currently consists of three executive and two non-executive directors.

Leisure

Parkwood Leisure had a successful half year with revenues increasing to £29.8 million (2008: £26.1 million) and profit before tax increasing to £1.75 million (2008: £1.25 million).

April saw the start of a large new contract with Wycombe District Council with revenues in excess of £4 million per annum. Over 400 staff transferred to the company in three leisure centres at High Wycombe, Marlow and Princes Risborough. In May the refurbishment of the leisure centres in Kidlington and Bicester for Cherwell District Council were completed under a Design, Build, Operate and Maintain (DBOM) contract. In July the Mountbatten Leisure Centre was opened, this project involved a major refurbishment costing £17 million which was also invested under a DBOM arrangement.

Throughout the period Parkwood Leisure generated additional revenues by assisting clients to fulfil their obligations to facilitate the Government's initiate to provide free swimming sessions and lessons to those over 65 and young people under 16.

Health and fitness income under the Expression brand performed well throughout the period. Memberships totalled 48,700 at the period end (2008: 41,600) providing £1.4 million of direct debit net income per month with an average fee of £33. Food and beverage sales fell below budget as consumers reduced discretionary expenditure. Growth in revenue and profits is expected in the second half of the financial year.

Glendale

Glendale, comprising Glendale Grounds Management, Glendale Countryside, Glendale Golf, Glendale Horticulture, Glendale Recycling and Glendale Facilities Management operated under a new structure during the period with the objective of allowing each business to trade more autonomously. The restructuring process took too long and overhead costs have been high. Poor performance, disputes with certain clients and accounting adjustments were uncovered in the winter and early spring and the Chief Executive of the division resigned. The recession has affected sales in landscaping in Glendale Countryside, the sale of plants from Coblands, Glendale Horticulture's nursery in Kent, and Golf once again suffered from poor weather as well as a general decline in food and beverage sales.  

Disputes with the MOD over the kennelling of dogs at the Defence Animal Centre at Melton Mowbray, and with a major supplier of green waste in Devon have also impacted results. Only the core Grounds Management business of Glendale has performed well in the period.  Glendale Grounds Management commenced two ten year grounds management contracts, together with the retention of an existing contract with Birmingham City Council on 23 March 2009, with combined annual revenues of approximately £3.4 million.

Overall revenues for Glendale declined to £28.3 million in the period (2008: £30.6 million) and the operating loss for the period amounted to £1.5 million (2008: profit £0.5 million).

Healthcare

Parkwood Healthcare's revenue for the period was £2.4 million (2008: £2.3 million) and included the loss making patient transport contract in Staffordshire which came to an end on 30 July 2009. The loss for the period was £0.33 million (2008: loss £0.23 million) which includes the utilisation of a £0.19 million onerous contract provision. For the future the company will concentrate its business development on the 'healthy living' agenda where it has won its first two contracts to provide health trainers for South-East Essex PCT and West Berkshire PCT; these contracts commence in November 2009. Tenders are also being submitted for weight management and smoking cessation opportunities. 

Parkwood Consultancy Services 

The recent banking crisis has delayed the signing of the PFI project to build a £23 million leisure centre for Bristol City Council. In July the Council agreed to proceed to financial close on the project which is scheduled to complete in late autumn 2009. This delay has adversely affected the revenues of Parkwood Consultancy Services (PCS) which fell to £0.75 million (2008: £1.37 million), and resulted in a operating loss of £0.16 million for the period (2008: operating profit £0.31 million). Investment income from Special Purpose Companies (SPC's) was £0.25 million (2008: £0.28 million).

A number of projects were completed during the period including the construction of the leisure centres previously mentioned. In addition, a £2.6 million extension and refurbishment of a crematorium and office facilities for Rotherham Metropolitan District Council was successfully completed. The operation of cemeteries and crematoriums in Rotherham is now managed by Glendale.

An adjudication process relating to the condition of the kennels at the Defence Animal Centre, which is operated by Realm Services (DAC) Limited, found against the company. Consequently both Realm and Glendale Facilities Management, who act as a sub-contractor to Realm, have spent considerable time and money improving the facilities at the DAC. Nevertheless, after discussions with the senior lender to Realm it was decided to place Realm into Administration in August. This step invokes a 150 day suspension period to the contract to allow time to reach a resolution with the MoD. The outcome of this process cannot be predicted with certainty. At this stage no adjustment has been made to Realm's net carrying value in the Group's consolidated balance of £2.67 million before derivatives.

PCS has also throughout the period been heavily engaged in seeking a buyer for the subordinated debt and equity of six leisure SPC's. Jeremy Lightfoot, the Managing Director, is personally managing the process. A buyer has been found and the principal terms have been agreed. The sale is scheduled for completion in the early autumn.

Investment, Funding and Strategy

The Group has invested heavily in building its business in the last few years, investing in PFI/PPP projects, acquisitions, and the continued commitment to capital investment in new contracts and new business. The banking community is now more susceptible to corporate risk and Parkwood, like many other businesses, is currently finding credit harder to obtain, particularly given the downturn in profits. The Group therefore has revised its strategy to concentrate on cash management and the realisation of asset value. 

A W Hewitt 

Executive Chairman 

28 August 2009

Financial Review

Profitability has declined during the last six months with an adjusted operating loss from continuing operations before amortisation and goodwill impairment of £0.09 million (2008: profit £1.96 million). Finance costs from continuing operations for the period were lower at £0.5m (2008: £0.6 million) due to lower interest rates. Finance costs include £0.25 million related to interest paid on recourse borrowings. Investment income for the period was £0.25 million (2008: £0.23 million) and mainly relates to interest received on the subordinated debt due from the SPC investments held for sale and also interest earned on cash balances.

The charge for intangible amortisation of £0.24 million (2008: £0.22 million) is line with the prior period and relates to Realm's PFI contract with the MoD. The charge for goodwill impairment of £0.46 million relates to the carrying value of goodwill on EcoSci and Trees of Sedlescombe. The EcoSci business, which forms part of Glendale Recycling, lost a key contract during the period as referred to in the Chairman's Statement. 

Consistent with the treatment in the 2008 Financial Statements, the Leisure related PFI/PPP investments are separately reported as a discontinued operation within the income statement. The June 2008 interim results have also been similarly restated. There was a profit from discontinued operations of £0.5 million (2008: loss £0.1 million). The increase from the prior period mainly relates to the non-depreciation of the fixed assets which are held for resale.

The total loss for the period from continuing operations was £1.3 million (2008: profit £1 million). This loss was reduced to £0.8 million (2008: profit £0.9 million) after including the results of discontinued operations.

Trading Performance 

The following table summarises the performance of the Trading Group and the non-recourse SPC Group, excluding the assets held for sale which are reported within discontinued operations.  

	(unaudited) 6 months to June 2009		(unaudited) Restated 6 months to June 2008		(audited) Year ended 31 December  2008
	Revenue	Adjusted operating profit/(loss)	Revenue	Adjusted operating profit/(loss)	Revenue	Adjusted operating profit/(loss)
	£000	£000	£000	£000	£000	£000
Trading Group
Glendale	28,339	(1,318)	30,637	518	59,997	138
Leisure	29,756	1,803	26,117	1,311	53,530	3,533
Healthcare	2,444	(314)	2,287	(198)	4,763	(363)
PCS	751	(159)	1,365	309	2,108	83
Central costs not recharged	-	(295)	-	(435)	-	(1,261)
Total Trading Group	61,290	(283)	60,406	1,505	120,398	2,130
SPC group
Realm	1,805	198	1,858	452	3,714	894
DBOM contracts	1,145	-	622	-	1,858	-
Total SPC Group	2,950	198	2,480	452	5,572	894
Inter-segment elimination	(3,136)	-	(2,983)	-	(5,685)	-
Total Group	61,104	(85)	59,903	1,957	120,285	3,024

The adjusted operating profit/(loss) is stated before exceptional items, amortisation and goodwill impairment.

Whilst the revenue of the Trading Group increased by 2%, the adjusted operating profit decreased from £1.96 million to a loss of £0.09 million as a result of the underperformance of Glendale and the delay in the Bristol PFI contract adversely affecting PCS as referred to in the Chairman's Statement. Leisure continued to perform strongly with increased year on year revenue of 14% due to Wycombe and increased profits of 40%.

The joint venture losses of £0.1 million relate to Verdia Horticulture, the joint venture between Glendale Recycling and TEG Group plc. The plant is in the final stages of commissioning and accreditation by the regulatory authorities and future revenue streams are being sought.  

Within the SPC Group, Realm suffered a reduction in adjusted operating profit from £0.45 million to £0.2 million due to additional costs associated with the ongoing dispute with the MoD. The DBOM contracts, consisting of Broadwater Leisure Limited and Cherwell Leisure Limited, showed an increase in revenue mainly due to the Cherwell contract which was signed in April 2008. 

Summary Group Balance Sheet

The following table shows a summary of the Group's balance sheet analysed between recourse and non-recourse activities. The discontinued balance sheet relates to the SPC subsidiaries and joint ventures held for sale. The non-recourse balance sheet from continuing operations relates solely to the Group's investment in the Realm SPC.

	Continuing		Continuing		Discontinued			Restated
	Recourse		Non-recourse		Non-recourse		Total	Total
	30 Jun 09	31 Dec 08	30 Jun 09	31 Dec 08	30 Jun 09	31 Dec 08	30 Jun 09	31 Dec 08
	£000	£000	£000	£000	£000	£000	£000	£000
Non-current assets	15,847	16,997	11,730	12,198	21,758	21,699	49,335	50,894
Investment in sub debt of assets held for resale	3,867	3,875	-	-	(3,867)	(3,875)	-	-
Current assets	20,924	18,176	1,398	2,676	2,274	2,110	24,596	22,962
Net debt	(8,614)	(7,517)	(5,356)	(7,330)	(18,826)	(19,440)	(32,796)	(34,287)
Other liabilities	(26,854)	(25,494)	(5,098)	(4,494)	(4,587)	(4,163)	(36,539)	(34,151)
Net assets before derivatives	5,170	6,037	2,674	3,050	(3,248)	(3,669)	4,596	5,418
Derivatives (net of deferred tax)	(64)	(79)	(717)	(943)	(2,119)	(2,817)	(2,900)	(3,839)
Net assets	5,106	5,958	1,957	2,107	(5,367)	(6,486)	1,696	1,579

Net assets at 31 December 2008 have been restated to amend the values of certain derivative contracts within the non-recourse SPC's. The amendment was principally required due to an error in the valuation provided by the bank which issued the derivative. The net impact has been to reduce the net asset value at 31 December 2008 from £6.05 million to £1.58 million. This restatement has no affect on the profits in the current or prior period since the derivatives concerned are effective hedges and therefore changes in value are recognised directly in reserves. The restatement has no affect on the balance sheet of the recourse group which remains strong at £5.1 million. 

Once the disposal of the leisure related PFI/PPP investments has been completed the net liabilities of the discontinued group will be eliminated from the Group's balance sheet and the net assets of the continuing recourse group will be further enhanced by the profit generated on disposal.

Cash Flow

The net cash inflow from operating activities for the period was £2.3 million (2008: outflow £0.4 million) including £1.4 million inflow related to discontinued operations. Total capital expenditure for the period was £1.6 million of which £0.8 million was funded through HP contracts. Repayment of loans and HP obligations amounted to £1.7 million and net interest payments were £1.0 million. There was a net cash outflow for the period of £1.1 million (2008: outflow £6.5 million).

Principal Risks and Uncertainties 

The Group's Annual Report for the year ended 31 December 2008 set out the principal risks and uncertainties affecting the Group and its separate businesses. The Directors consider that these risks and uncertainties remained current throughout the six months to 30 June 2009 and will remain so for the second half of the year with the exception of energy costs within the Leisure Division. During the period, Leisure secured fixed priced contracts for gas for a three year period to 2012 and electricity for a two year period to 2011. The cost of the new contracts are 21% higher than in prior years, which is lower than the potential increase of 50% referred to in the 2008 Annual Report.  

The principal financial risk facing the Group is the availability of bank funding over the next twelve months. The Group is currently negotiating an extension to its current overdraft facility for an additional 12 months. In addition, following the restatement of the net assets as at 31 December 2008, a formal waiver of covenants is required on the non-recourse loans. The Group is holding discussions with its bankers about its future borrowing requirements in light of the anticipated proceeds from the sale of the subordinated debt and equity in the SPC's and has no reason to believe that the necessary facilities will not be provided.

Pensions

A formal triennial valuation of the Citrus (formerly LAWDC) defined benefit pension scheme took place on 31 March 2009. The provisional results of the valuation will be available before the end of the year and indications from the scheme actuaries are that there will be an increase in the deficit and an increase in employer contributions. No adjustments have been made at the half year due to the uncertainty in the market place of equities and bonds. The opening IAS 19 assumptions have been applied to the interim balance sheet. Any increase in the pension scheme deficit will be reflected in the year end 2009 balance sheet and increased employer contributions will be effective from April 2010.

Mike Quayle

Group Finance Director 

28 August 2009

Consolidated income statement

Six months ended 30 June 2009

			Six months ended 30 June Restated		Year ended 31 December  (audited) 2008 £000
Continuing operations	Note		(unaudited) 2009 £000	(unaudited) 2008 £000
Group revenue	3		61,104	59,903	120,285
Cost of sales			(42,246)	(44,072)	(88,932)
Gross profit			18,858	15,831	31,353
Administrative expenses			(19,647)	(14,098)	(29,371)
Operating (loss)/profit			(789)	1,733	1,982
EBITDA			2,449	4,050	7,381
Depreciation			(2,534)	(2,093)	(4,357)
Amortisation			(243)	(224)	(498)
Exceptional item			-	-	(360)
Impairment of goodwill			(461)	-	(184)
Operating (loss)/profit			(789)	1,733	1,982
Investment income			253	227	595
Finance costs	4		(506)	(596)	(1,299)
Share of joint venture loss (net of tax)			(96)	-	-
(Loss)/profit before tax from continuing operations			(1,138)	1,364	1,278
Taxation	5		(151)	(389)	(716)
(Loss)/profit for the period from continuing operations			(1,289)	975	562
Discontinued operations
Profit/(loss) for the period from discontinued operations			467	(110)	(193)
(Loss)/profit for the period attributable to equity shareholders			(822)	865	369
(Loss)/earnings per share			Pence per	Pence per	Pence per
			share	share	share
Basic (loss)/earnings per share From continued operations			(7.2p)	5.3p	3.1p
From discontinued operations			2.6p	(0.6p)	(1.1p)
	7		(4.6p)	4.7p	2.0p
Diluted (loss)/earnings per share From continued operations			(7.2p)	5.2p	3.1p
From discontinued operations			2.6p	(0.6p)	(1.0p)
	7		(4.6p)	4.6p	2.1p

Consolidated statement of comprehensive income

For the six months ended 30 June 2009

	Restated		Restated
	Six months ended		Year ended
	30 June 2009 (unaudited)	30 June 2008 (unaudited)	31 December 2008 (audited)
	£000	£000	£000
(Loss)/profit for the period	(822)	865	369
Other comprehensive income/(losses):
Net actuarial loss on defined benefit pension schemes	-	-	(66)
Change in derivative valuations - Cash flow hedges	334	344	(1,081)
Change in derivative valuations - Cash flow hedges held-for-sale	971	(373)	(1,409)
Income tax relating to components of other comprehensive income	(94)	(96)	303
Income tax relating to components of other comprehensive income
held-for-sale	(272)	104	395
Other comprehensive income/(losses) for the period, net of tax	939	(21)	(1,858)
Total comprehensive income/(loss) for the period	117	844	(1,489)

All recognised income and expense is attributable to the equity holders of the parent.

Consolidated statement of financial position As at 30 June 2009

                

				Restated		Restated
			30 June		30 June		31 December
	Note		2009 (unaudited)		2008 (unaudited)		2008 (audited)
			£000		£000		£000
Non-current assets
Goodwill			1,903		2,681		2,364
Intangible assets			4,509		4,716		4,752
Property, plant and equipment	9		21,043		43,471		21,940
Investments in joint ventures			-		5		-
Derivative financial instruments			-		844		-
Trade and other receivables			122		-		139
Deferred tax asset			-		320		-
Total non-current assets			27,577		52,037		29,195
Current assets
Inventories			3,847		3,537		3,750
Trade and other receivables			18,475		20,089		17,102
Cash			2,336		2,623		1,109
			24,658		26,249		21,961
Assets of disposal group classified as held-for-sale	8		25,654		-		25,068
Total current assets			50,312		26,249		47,029
Total assets			77,889		78,286		76,224
Current liabilities
Trade and other payables			25,739		21,996		25,399
Tax liabilities			2,519		500		2,657
Obligations under finance leases			1,249		1,601		1,540
Bank overdrafts			2,669		3,980		-
Bank loans			4,351		1,160		1,313
			36,527		29,237		30,909
Liabilities of disposal group classified as held-for-sale	8		27,156		-		27,679
Total current liabilities			63,683		29,237		58,588
Non-current liabilities
Bank loans			6,017		32,926		11,302
Retirement benefit obligations			621		788		621
Long-term provisions and deferred income			1,907		780		171
Obligations under finance leases			2,020		2,501		1,800
Derivative financial instruments			1,084		2,914		1,419
Interests in joint ventures			96		2,144		-
Deferred tax liability			765		1,954		744
Total non-current liabilities			12,510		44,007		16,057
Net assets			1,696		5,042		1,579
				Restated		Restated
			30 June	30 June		31 December
	Note		2009 (unaudited)	2008 (unaudited)		2008 (audited)
			£000	£000		£000
Equity
Share capital			187	189		189
Share premium account			2,227	2,227		2,227
Investment in own shares			(476)	(931)		(729)
Capital redemption reserve			410	408		408
Hedging reserve			(781)	(1,491)		(1022)
Revaluation reserve			783	857		819
Retained earnings			1,463	3,781		2,502
			3,813	5,040		4,394
Amounts recognised directly in equity relating to  8
assets classified as held-for-sale (hedging reserve)			(2,119)	-		(2,817)
Equity attributable to equity holders of the parent			1,694	5,040		1,577
Minority interest in equity			2	2		2
Total equity			1,696	5,042		1,579

Consolidated statement of changes in equity

As at 30 June 2009

 

	Share Capital	Share premium		Investment in own shares	Capital redemption reserve		Hedging reserve		Revaluation reserve		Retained earnings		Total
	£000	£000		£000	£000		£000		£000		£000		£000
Balance at 1 January 2009 as originally reported	189	2,227		(729)	408		443		819		2,688		6,045
Prior period adjustments (note 1)	-	-		-	-		(4,282)		-		(186)		(4,468)
Balance at 1 January 2009 as restated	189	2,227		(729)	408		(3,839)		819		2,502		1,577
Changes in equity for 2009
Loss for the period	-	-		-	-		-		-		(822)		(822)
Other comprehensive income:
Change in derivative valuations - Cash flow hedges	-	-		-	-		334		-		-		334
Change in derivative valuations - Cash flow hedges held-for-sale	-	-		-	-		971		-		-		971
Income tax relating to components of other comprehensive income	-	-		-	-		(94)		-		-		(94)
Income tax relating to components of other comprehensive income	-	-		-	-		(272)		-		-		(272)
held-for-sale
Total comprehensive income for the period	-	-		-	-		939		-		(822)		117
Cancellation of treasury shares	(2)	-		253	2		-		-		(253)		-
Transfer to retained earnings	-	-		-	-		-		(36)		36		-
Balance at 30 June 2009	187	2,227		(476)	410		(2,900)		783		1,463		1,694
Balance at 1 January 2008 as originally reported	193	2,227		(350)	404		(82)		896		3,420		6,708
Prior period adjustments (note 1)	-	-		-	-		(1,388)		-		(186)		(1,574)
Balance at 1 January 2008 as restated	193	2,227		(350)	404		(1,470)		896		3,234		5,130
Changes in equity for 2008
Loss for the period	-	-		-	-		-		-		865		865
Other comprehensive income:
Change in derivative valuations - Cash flow hedges	-	-		-	-		344		-		-		344
Change in derivative valuations - Cash flow hedges held-for-sale	-	-		-	-		(373)		-		-		(373)
Income tax relating to components of other comprehensive income	-	-		-	-		(96)		-		-		(96)
Income tax relating to components of other comprehensive income	-	-		-	-		104		-		-		104
held-for-sale
Total comprehensive income for the period	-	-		-	-		(21)		-		865		844
Cancellation of treasury shares	(4)	-		-	4		-		-		-		-
Purchase of treasury shares	-	-		(581)	-		-		-		-		(581)
Share based payments	-	-			-		-		-		76		76
Tax related to share based payments	-	-		-	-		-		-		(25)		(25)
Transfer to retained earnings	-	-		-	-		-		(39)		39		-
Dividends	-	-		-	-		-		-		(408)		(408)
Balance at 30 June 2008	189	2,227		(931)	408		(1,491)		857		3,781		5,040

Consolidated statement of cash flows

For the six months end 30 June 2009

    

		Six months ended 30 June		Year ended 31 December 2008 (audited) £000
	Note	09 (unaudited) £000	2008 (unaudited) £000
Net cash generated from /(used in) operating activities	10	2,332	(384)	10,036
Investing activities
Interest received		142	130	746
Proceeds on disposal of property, plant and equipment		26	7	25
Purchases of property, plant and equipment		(756)	(1,119)	(4,719)
Subordinated debt repaid by joint ventures		8	-	6
Subordinated debt invested in joint ventures		-	(204)	(208)
Sales of own shares by employee benefit trust		-	4	7
Acquisition of subsidiaries (net of cash acquired)		-	(475)	-
Net cash used in investing activities		(580)	(1,657)	(4,143)
Cash flows from financing activities
Interest paid		(1,123)	(949)	(3,043)
Acquisition of treasury shares		-	(589)	(828)
Acquisition of shares by employee benefit trust		-	-	(10)
Dividends paid		-	(408)	(678)
Repayments of obligations under finance leases		(835)	(853)	(1,595)
Repayment of recourse bank loans		(473)	(45)	(380)
Repayment of non-recourse bank loans		(400)	(1,572)	(2,091)
Net cash used in financing activities		(2,831)	(4,416)	(8,625)
Net decrease in cash and cash equivalents		(1,079)	(6,457)	(2,732)
Cash and cash equivalents at beginning of period		2,368	5,100	5,100
Cash and cash equivalents at end of period		1,289	(1,357)	2,368
Comprising:
Cash		3,958	2,623	2,368
Bank overdraft		(2,669)	(3,980)	-
		1,289	(1,357)	2,368

The consolidated cash flow statement includes the results of discontinued operations.  Notes to the interim financial report

Six months ended 30 June 2009

1.  General information

The financial information for the year ended 31 December 2008 set out in this interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The Group's statutory financial statements for the year ended 31 December 2008 have been filed with the Registrar of Companies.

The financial information in respect of the year ended 31 December 2008 has been produced using extracts from the statutory accounts prepared under IFRS for this period as amended by the restatements noted below. The statutory accounts for this period have been filed with the Registrar of Companies. The auditors' report on these accounts was unqualified and did not contain a statement under Sections 237 (2) or (3) of the Companies Act 1985 which deal respectively with the maintaining of proper accounting books and records and the availability of information to the auditors.

The balance sheet as at 31 December 2008 has been adjusted to correct an error arising on a third party valuation of a derivative contract and additional hedges within the non-recourse SPC Group. The impact of these changes, net of the associated change in deferred tax, is a reduction in net assets of £1.57 million at 31 December 2007, £2.15 million at 30 June 2008 and £4.47 million at 31 December 2008. The adjustments have no impact on the reported income statement for the year to 31 December 2008 since the derivatives met the effective hedge criteria of IAS 39 and therefore changes in value are taken directly to reserves.

 2.   Accounting policies and basis of preparation

    

The interim financial statements have been approved by the Board and have not been audited by the auditors.

This condensed consolidated interim financial information for the six months ended 30 June 2009 has been prepared in accordance with IAS 34, 'Interim financial reporting', the Listing Rules of the Financial Services Authority and with the principles of IFRS. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008, which have been prepared in accordance with IFRSs.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2008 except for the adoption of IAS 1 Presentation of Financial Statements (Revised 2007), IFRS 8 Operating Segments and IFRS 2 (amendment), 'Share based payments' on 'Vesting conditions and cancellations'.

The Group is currently negotiating an extension to its current overdraft facility for an additional 12 month period. In addition, following the restatement of the net assets as at 31 December 2008, a formal waiver of covenants is required on the non-recourse loans. The Group is holding discussions with its bankers about its future borrowing requirements in light of the anticipated proceeds from the sale of the subordinated debt and equity in the SPC's and has no reason to believe that the necessary facilities will not be provided. After making reasonable enquiries, the directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the interim financial statements.

The adoption of IAS 1 (Revised 2007) does not affect the financial position or profits of the Group, but gives rise to additional disclosures.  The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged, however, some items that were recognised directly in equity are now recognised in other comprehensive income.  IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a 'Statement of comprehensive income'.  In accordance with the new standard the entity does not present a 'Statement of recognised income and expenses (SORIE)', as was presented in the 2008 consolidated financial statements. Further, a 'Statement of changes in equity' is presented.

 

The adoption of IFRS 8 has not changed the segments that are disclosed in the interim financial statements.  In the previous annual and interim financial statements, segments were based on the internal management reporting information that is regularly reviewed by the chief operating decision maker which is in line with the new standard.

3.     Business segments

For management purposes, the Group is organised into four Trading divisions - Glendale, Parkwood Leisure, Parkwood Healthcare and Parkwood Consultancy (the Trading Group). These form the basis on which the Group reports its primary segment information for statutory and management purposes:

The principal activities, which the directors consider to be the segments of the business for the purpose of analysis are as follows:

Glendale    Provides amenity horticulture, grass cutting, arboriculture and care of sports pitches, parks and open spaces. The division also includes golf course management, waste recycling, environmental consultancy, tree moving and horticulture.  

Parkwood Leisure    Manages a diverse range of public and private leisure facilities, including swimming pools, sports halls, gyms, health suites and catering operations.

Parkwood Consultancy    Undertakes PFI, PPP and similar bids on behalf of joint ventures and the Group. Parkwood Consultancy is also responsible for project management of contracts and the management of other funds such as the lifecycle funds associated with the project agreements.  

Healthcare    Acts as an nursing agency, an ambulance and patient transport business, and a medical services business dealing both with the NHS and the private sector.

Non Recourse SPCs    Represents Realm Services (DAC) Limited a company created to carry out the function of concessionaire under a concession agreed with the Ministry of Defence.

Other    Represents Head office and Broadwater Leisure Limited and Cherwell Leisure Limited companies involved in the construction and management of new leisure facilities under DBOM contracts.

An analysis of the Group's revenue is as follows.

	6 months ended 30 June Restated		Year ended 31 December
Continuing operations	2009 £000	2008 £000	2008 £000
Provision of green services- Grounds management and parks	24,034	26,270	50,990
Horticultural revenue	1,749	2,113	3,781
Tree moving revenue	424	-	741
Golf Course management, including retail sales	2,132	2,254	4,485
Total Glendale	28,339	30,637	59,997
Provision of leisure management services to Local Authorities	28,561	25,008	51,386
Provision of private leisure facilities	1,195	1,109	2,144
Total Leisure	29,756	26,117	53,530
Provision of patient transport services	1,320	1,331	2,700
Nursing agency sales	909	912	1,851
LINk and Medical Services revenue	215	44	212
Total Healthcare	2,444	2,287	4,763
Bid, project and consultancy management fees	751	1,365	2,108
Service charges made by PFI companies	2,950	2,480	5,572
Other (including inter-segment revenue elimination)	(3,136)	(2,983)	(5,685)
Total revenue	61,104	59,903	120,285

	6 months ended 30 June Restated		Year ended 31 December
Discontinued operations	2009 £000	2008 £000	2008 £000
Service charges made by PFI/PPP companies	1,683	1,587	3,192
	1,683	1,587	3,192

A geographical segmental analysis of the results is not presented as the Group operates only in the UK. Inter-segment sales are charged at prevailing market prices.

Six months ended  30 June 2009	Glendale £000	Leisure £000	Healthcare £000	PCS £000	Non-recourse SPCs £000	Other* £000	Discontinued operations £000	Total 9 £000
External revenue	26,969	28,466	2,444	275	1,805	1,145	-	61,104
Inter-segment revenue	1,370	1,290	-	476	(1,338)	(1,492)	(306)	-
Revenue	28,339	29,756	2,444	751	467	(347)	(306)	61,104
Operating (loss)/profit before amortisation and goodwill impairment	(1,318)	1,803	(314)	(159)	198	(295)	-	(85)
Amortisation and goodwill impairment	(153)	-	-	-	(206)	(345)	-	(704)
Operating (loss)/profit	(1,471)	1,803	(314)	(159)	(8)	(640)	-	(789)
Investment income	-	4	-	247	1	1	-	253
Interest expense	(235)	(57)	(14)	(165)	(252)	217	-	(506)
Share of results of joint ventures (net of tax)	-	-	-	-	-	(96)	-	(96)
(Loss)/profit before tax	(1,706)	1,750	(328)	(77)	(259)	(518)	-	(1,138)
Restated Six months ended 30 June 2008	Glendale £000	Leisure £000	Healthcare £000	PCS £000	Non-recourse SPCs £000	Other* £000	Discontinued operations £000	Total 2008 £000
External revenue	29,410	25,347	2,287	379	1,858	622	-	59,903
Inter-segment revenue	1,227	770	-	986	(1,414)	(1,040)	(529)	-
Revenue	30,637	26,117	2,287	1,365	444	(418)	(529)	59,903
Operating profit/(loss) before exceptional items, amortisation and goodwill impairment	518	1,311	(198)	309	452	(435)	-	1,957
Amortisation and goodwill impairment	(18)	-	-	-	(206)	-	-	(224)
Operating profit/(loss)	500	1,311	(198)	309	246	(435)	-	1,733
Investment income	-	32	-	282	(28)	(59)	-	227
Interest expense	(335)	(92)	(34)	(262)	(478)	605	-	(596)
Profit/(loss) before tax	165	1,251	(232)	329	(260)	111	-	1,364

* Other segment represents DBOMs and Central Costs

4.    Finance costs

	Six months ended 30 June		Restated Six months ended 30 June	Restated Year ended 31 December
	2009 £000	2008 £000		2008 £000
Recourse loan interest	124	179		344
Non-recourse loan interest	853	880		529
Finance and HP lease interest	123	141		237
Other finance costs	7	11		1,447
	1,107	1,211		2,557
Attributable to:
Continuing operations	506	596		1,299
Discontinued operations	601	615		1,258
	1,107	1,211		2,557

5.    Tax

The expected tax benefit arising from the loss in the period has been offset by non-deductible expenses resulting in a £49,000 corporation tax credit for the interim period to 30 June 2009. The total charge for the period includes an adjustment of £200,000 in respect of prior periods. 

6.    Dividends

	Six months ended 30 June		Six months ended 30 June	Year ended 31 December
	2009 £000	2008 £000		2008 £000
Final 2007 paid May 2008 2.2p per share	-	408		408
Interim 2008 paid October 2008 1.4p per share	-	-		270
	-	408		678

7.    (Loss)/earnings per share

(Loss)/earnings per share relate to continuing operations and have been calculated on (losses)/earnings for the period divided by the weighted average number of ordinary shares in issue of 18.03 million (December 2008: 18.29 million; June 2008: 18.54 million). The shares options in issue as at 30 June 2009 are anti-dilutive in respect of the basic loss per share calculation and have therefore not been included.

 

8.   Assets of disposal group classified as held-for-sale and discontinued operations

On 4 December 2008, the board of directors agreed to seek a buyer for the Group's wholly owned SPCs Breckland Leisure Limited and Rivendell Leisure Limited, the 50% holdings in the SPC joint ventures Waterfront Leisure (Crosby) Limited, Boxwood Holdings Limited and Penzance Leisure Limited. The preferred bidder is currently undertaking due diligence and the sale is expected to complete in the autumn. 

Profit/(loss) for the period from discontinued operations		Six months ended 30 June		Restated Six months ended 30 June		Restated  Year ended 31 December
		2009 £000		2008 £000		2008 £000
Revenue		1,683		1,587		3,192
Expenses		(1,197)		(1,717)		(3,449)
Share of results of joint ventures (net of tax)		(19)		(23)		78
Profit/(loss) before tax		467		(153)		(179)
Taxation		-		43		(14)
Profit /(loss) for the period from discontinued operations		467		(110)		(193)

	Six months ended 30 June	Six months ended 30 June	Year ended 31 December
Cash flows from discontinued operations	2009 £000	2008 £000	2008 £000
Net cash flows from operating activities	1,438	957	1,796
Net cash flows from investing activities	(222)	(158)	(453)
Net cash flows from financing activities	(853)	(948)	(3,378)
Net cash flows	363	(149)	(2,035)

	Six months ended 30 June	Restated Six months ended 30 June	Restated Year ended 31 December
Assets of disposal group classified as held for sale	2009 £000	2008 £000	2008 £000
Property, plant & equipment	21,758	-	21,698
Interests in joint venture	-	-	1
Trade and other receivables	398	-	234
Corporation tax	1,876	-	1,876
Cash and cash equivalents	1,622	-	1,259
Total	25,654	-	25,068

  

	Six months ended 30 June	Restated Six months ended 30 June	Restated Year ended 31 December
Liabilities of disposal group classified as held for sale	2009 £000	2008 £000	2008 £000
Trade and other payables	814	-	465
Borrowings	20,448	-	20,699
Interest in joint ventures	2,064	-	2,038
Derivative financial liabilities	2,941	-	3,912
Deferred tax liabilities	889	-	565
Total	27,156	-	27,679

Cumulative income and expense recognised directly in equity relating to disposal group classified as held for sale

	Six months ended 30 June	Restated Six months ended 30 June	Restated Year ended 31 December
	2009 £000	2008 £000	2008 £000
Gains on cash flow hedges	(2,119)	-	(2,817)

9.    Property, plant and equipment

 

Six months ended 30 June 2008	Land and buildings £000	Assets under construction £000	Vehicles £000	Plant and equipment £000	Fixtures and fittings £000	Total £000
Opening net book amount at 1 January 2008	24,160	9,629	848	5,806	3,307	43,750
Additions	98	1,116	7	775	256	2,253
Transfers	8,503	(9,501)	-	-	998	-
Disposals	-	-	-	-	(5)	(5)
Depreciation	(619)	(24)	(162)	(1,206)	(515)	(2,526)
Closing net book amount at 30 June 2008	32,142	1,220	693	5,375	4,041	43,471
Six months ended 30 June 2009
Opening net book amount at 1 January 2009	13,546	597	719	4,758	2,320	21,940
Additions	12	57	-	1,205	370	1,644
Disposals	-	-	-	-	(7)	(7)
Depreciation	(246)	(56)	(172)	(1,262)	(798)	(2,534)
Closing net book amount at 30 June 2009	13,312	598	547	4,701	1,885	21,043

  

10.    Net cash from operating activities

	Six months ended  30 June	Six months ended  30 June	Year  ended 31 December
	2009 £000	2008 £000	2008 £000
Operating profit	212	2,328	3,276
Cost charged in respect of share remuneration	14	15	28
Share of results of joint ventures after taxation	115	23	(77)
Depreciation of property, plant and equipment	2,534	2,093	4,357
Depreciation of property, plant and equipment (held-for-sale)	-	433	851
(Gain)/loss on disposal of property, plant and equipment	(2)	-	359
Impairment of goodwill	461	-	184
Amortisation of intangible assets	243	224	498
Decrease in provisions	(63)	(148)	(1,069)
Operating cash flows before movements in working capital	3,514	4,968	8,407
Increase in inventories	(53)	(204)	(156)
(Increase)/decrease in receivables	(1,091)	(3,889)	(982)
Increase/(decrease) in payables	218	(1,552)	2,563
Cash generated/(used) by operations	2,588	(677)	9,832
Income taxes (paid)/refunded	(256)	293	204
Net cash generated from /(used in) operating activities	2,332	(384)	10,036

Operating profit includes amounts relating to discontinued operations of £1,249,000 (2008: £619,000). The closing cash and cash equivalents of £2,336,000 (31 December 2008: £1,109,000) and overdraft £2,669,000 (2008: £nil) excludes £1,622,000 (31 December 2008: £1,259,000) which is within the assets of disposal group held-for-sale (note 8).

11.   Investment in own shares

On 30 April 2009, the Company cancelled 200,000 ordinary shares held in treasury leaving 50,000 ordinary shares remaining in treasury.

12.    Related Parties 

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

There has been no change to the nature of related party transactions in the first six months of the financial year that has materially affected the financial position or performance of the Group.

13.      Post Balance Sheet Events

Realm Services (DAC) Limited ('Realm') was placed into Administration in August 2009. This decision followed discussions with Barclays Bank plc, the senior lender to Realm, and relates to an outstanding dispute with the Ministry of Defence on the Defence Animal Centre ('DAC') PFI contract. The dispute relates to the provision of kennelling for dogs trained at the DAC. The directors and Barclays believe that placing Realm into Administration is the best course of action since it invokes a 150 day suspension period to the contract which should allow time to reach a commercial resolution to the outstanding contractual issues. The net carrying value of Realm in the Group's consolidated balance sheet is £2.67 million before derivatives. Realm forms part of the Group's non-recourse activities.

Cautionary Statement 

This interim management report has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The interim management report should not be relied on by any other party or for any other purpose.

Responsibility Statement 

We confirm that to the best of our knowledge:

• The condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, give a true and fair view of assets, liabilities, financial position and the undertakings included in the consolidation as a whole; and

• The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and 

• The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By the order of the Board 

C Smith

Company Secretary

28 August 2009

ENDIR ZVLFLKVBFBBB