AGM and Interim Management Statement
Spice, the leading provider of Outsourced Utilities Support Services, today publishes its Interim Management Statement for the period from 1 May to 31 August 2010. This update is also being provided to shareholders attending the Group’s Annual General Meeting at 2pm today.
Current trading
During the period, trading for the continuing business has been, in aggregate, in line with the Board’s expectations as the Group has benefited from an increased focus on markets with strong underlying regulatory and environmental drivers.
Supply Division
The Energy business continues to perform well. The Carbon Reduction Commitment Energy Efficiency Scheme has generated a larger than expected demand for the Energy business’ services, and the pipeline remains strong. NIFES has been affected by an inconsistent order intake and workflow from its public sector client base which has impacted current performance.
Within Billing, we have made encouraging progress in entering the US market during this period and are in active discussions with a number of potential customers. This has been achieved at relatively modest cost, is ahead of schedule and is a significant development given the size of the deregulated USA energy market.
Distribution Division
In July 2010 we announced that Freedom, our Electricity business, had extended its contract with EDF Energy for major substation projects ‘workstream one’ and overhead line works ‘workstream five’. Spice has also recently been selected by CE Electric to undertake EHV major projects across its YEDL and NEDL footprint. This excellent news adds an additional level of certainty to future workflows. The benefit is expected to be seen into the 2011 calendar year and beyond rather than in the current financial half year which will inevitably witness lower workflows in synchronisation with the commencement of the new five year regulatory cycle from 1 April 2010. The Scottish Power overhead lines contract, extended in May 2010, has commenced but we incurred significant additional costs in the early stages, the impact of which will affect the first half results, following which benefits will start to flow.
The Water business has traded ahead of the Board’s expectations with strong activity levels in the period from major customers such as United Utilities and Yorkshire Water.
Central costs
Following disposal of the Telecoms and Gas businesses and actions taken by management, both head office costs and the Group’s net interest expense are declining and running at levels better than the Board’s original expectations.
Facilities business
The strategic review of the Facilities business is ongoing and an outcome is anticipated by the time of the announcement of the Group’s interim results in December 2010. The business is trading in line with the Board’s expectations.
Outlook
At this point in the regulatory cycle, the Board anticipates a stronger performance for the second half of the financial year than the first half through a combination of higher activity levels and the ongoing benefit of cost reduction measures.
The Group continues to build upon the significant progress made earlier in the year through greater focus and the disposal of non-core businesses. The Group’s targeting of markets where regulatory and environmental drivers prevail affords protection from the difficult economic environment affecting both private and public sectors. The Group’s exposure to the public sector is limited to around 2% of revenues.
Offer update
On 15 June 2010, the Board announced that it had received a conditional cash offer for the Group from Cinven. Since then, the Board has engaged in discussions with Cinven and has received a conditional proposal from another potential offeror. The Group confirms that confidential discussions are taking place which may or may not lead to a formal offer being made. There can be no certainty that any offer will be made, nor the terms on which any offer might be made. A further announcement will be made in due course.
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