Chairman's Statement

 

In the six month period to 30 June 2010, Parkwood has returned to profitability after the losses of 2009.  Parkwood Leisure goes from strength to strength and the Group signed what will probably be its last leisure PFI contract with Bristol City Council in April. Effective cash management has allowed Parkwood to repay loans of £3.3 million and maintain a positive cash balance for most of the period.

 

The change of government in May and the announcement of significant cuts to the budgets of both central and local government provides both opportunity and risk to Parkwood.  The free swimming programme for those under 16 and over 60 has been cancelled, and Glendale is being asked to forego RPI inflation uplifts on its contracts.  However, some local authorities are considering outsourcing their services for the first time since the abolition of CCT (Compulsory Competitive Tendering) and others are seeking to consult with the private sector seeking innovative ideas to help reduce costs.

 

Group results

Revenues were maintained at £58.0 million (2009: £58.3 million restated), although this masked a further rebalancing of the Group with a 7% increase in revenues in Parkwood Leisure and a 5% reduction in Glendale's revenues.  Operating profits of £1.2 million were achieved (2009: operating loss restated of £0.7 million).  Average cash balances of £2.6 million have been maintained throughout the period despite the fact that asset finance has not been available and £0.8 million of capital expenditure has been cash funded.

 

The Group's forward order book at the period end was £518 million (2009: £500 million).

 

Dividend

A dividend of 1.2p per share was paid on 1 April 2010 and the Board is pleased to announce that a further dividend of 1.5p will be paid on 8 October 2010 to all shareholders on the register on 17 September 2010.

 

The Company purchased for cancellation, 52,500 shares in the period, under its share buyback authority.

 

Board and management

There have been no changes to the composition of the Board during the period.  Richard Tolkien became the senior independent non-executive director on 30 April 2010 and will serve as Chair of the Audit and Remuneration Committees.  An advertisement for a new non-executive director was placed in the Financial Times in May and interviews are currently being conducted.  The board will then consist of three executive and three non-executive directors.

 

Leisure

Parkwood Leisure's revenues in the first half increased to £32.1 million (2009: £29.9 million restated) with adjusted operating profits amounting to £2.4 million (2009: £2.1 million restated).  Health and Fitness memberships under the Expressions brand totalled 52,900 at the period end (2009: 48,700), providing £1.8 million of direct debit income per month at an average monthly subscription of £34.

 

The company is bidding for a number of large contracts and in June was successful in retaining the contract that it has held with Exeter City Council for the Riverside Centre, augmented by an additional six facilities. 

 

During May 2010, the Alemo Heron v Parkwood Leisure case was considered for appeal in the Supreme Court.  This important employment law case relates to the nature of the contractual right of an employee to a previously negotiated pay award at the point of transfer of their employment to a new employer.  The Court of Appeal has previously found in favour of Parkwood Leisure which could mean that local government national pay awards need not be recognised by the private sector.  The trade union, Unison brought the appeal to the Supreme Court.

 

Parkwood Leisure is now recognised as one of the top three companies in the local authority leisure market and is well positioned to win more new business in the second half of the year.

 

 

 

Glendale

Glendale's revenues for the period declined to £24.6 million (2009: £25.9 million restated) with the loss of a number of contracts as a result of fierce price competition.  Losses have continued with an adjusted operating loss in the period of £0.5 million compared to an adjusted operating loss of £0.9 million for the corresponding prior year period.

 

Glendale's core grounds maintenance and Countryside business is trading profitably, but losses have continued to be incurred by the horticultural nursery business known as Coblands, the recycling business in Devon, and Glendale Golf.  At Coblands, stock levels have been reduced to £0.9 million but some horticultural stock has been traded at a loss.  Overall plant sales in the spring and early summer months have also been disappointing.  A new general manager appointed in August 2010 is reviewing the company's cost base.  Glendale Recycling's in-vessel composting (IVC) plant at Exeter is now fully operational, but suffers from feedstock revenues lower than those in the original business model, and the Plymouth based green waste composting facility has had to close as a result of redevelopment.  The company has, however, re-won its contract with Plymouth City Council to process their green waste which is now being transported to Exeter.  Glendale Golf has not recovered its sales to previous levels as a result of both the recession and poor weather, and despite careful management continues to incur losses.  Glendale has reduced its overhead base and growth aspirations in order to meet the challenge of difficult times.  A return to overall profitability is the prime aim of Glendale's senior management.

 

Healthcare

Parkwood Healthcare's revenue for the period was reduced to £1.1 million (2009: £2.4 million) as a result of the company having virtually wound up its activity in its loss making patient transport business.  The 'healthy living agenda' forms a major part of Healthcare's new strategy and two existing health trainer contracts, which commenced at the end of 2009, have been added to with the award of a new health trainer contract for Leicester PCT which will commence in October.

 

The new Coalition Government's White Paper, Equity and Excellence; Liberating the NHS, suggests that the Local Involvement Networks (LINks) will become the local 'Health Watch', commissioned by local authorities to create a strong local infrastructure for patients.  'Health Watch England' will be established as the new independent consumer champion within the Care Quality Commission.  Parkwood Healthcare holds three LINk contracts in London and now expects to build on this service.

 

The nursing agency business has suffered a fall in revenues in the period as there has been less demand for agency work with people being more inclined to stay in post.  Overall adjusted operating losses in Parkwood Healthcare reduced to £0.04 million from £0.3 million in the same period last year.

 

Parkwood Consultancy Services

Parkwood Consultancy Services (PCS) finally signed what will be its last leisure PFI contract to build a £27 million leisure centre for Bristol City Council in April.  At the same time equity in the special purpose company (SPC), Bristol Active Limited, was sold to Equitix, a specialist fund which will also provide the subordinated debt for the project.  Kier Western are to construct the facility with PCS undertaking all project management.  Parkwood Leisure will operate the centre which is scheduled to open in January 2012.  The centre's facilities will include a 'healthy living' suite operated by Parkwood Healthcare.

 

Revenues for the period as a result of this and other transactions amounted to £1.0 million (2009: £0.8 million).  Augmented by the sale of equity in Bristol Active, adjusted operating profits of £0.9 million were recorded (2009: loss of £0.1 million).  Investment income was negligible with the sale at the end of 2009 of most leisure SPCs.  Realm Services (DAC) Limited was placed in administration following a contractual dispute with the Ministry of Defence in 2009 which finally resulted in the termination of the contract to run the Defence Animal Centre in February this year.

 

The company now manages some £22 million of lifecycle funds for various SPCs on which it takes the risk.  PCS is also still actively engaged in project management.  A cemeteries and crematorium project with North Somerset District Council which was scheduled for completion during the period is now expected to close in September.  Environmental consultancy services, in landscaping, arboriculture and environmental management continue with PCS providing the support for the Group's requirement to comply with the Carbon Reduction Commitment Scheme.

 

 

 

Investment funding and strategy

Ongoing investment in machinery and leisure centre facilities requires funding as usual and Parkwood intends to seek new asset finance in the autumn; lease finance for vehicles having already become more available.  The Group will seek to renew its £2.5 million overdraft facility in December 2010, but is expecting to be mainly cash positive for the year. 

 

The focus on cash management over the last eighteen months and the sale of the subordinated debt and equity in the leisure SPCs at the end of 2009 provides Parkwood with security and reduced risk.  Consolidation and stability are at the heart of the Group's strategy for the immediate future.

 

 

A W Hewitt

Executive Chairman

27 August 2010