RNS Number:6570O
Northern Recruitment Group PLC
14 August 2003
14 August 2003
NORTHERN RECRUITMENT GROUP PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 JUNE 2003
"I am pleased to report a sustained improvement in the Group's performance
throughout the year, delivering substantial increases in our earnings and cash
balances."
* Profit before tax and joint venture impact #1.6m (2002: #1.1m)
* Pre- tax profit up 45% to #1.4m (2002: #0.97m)
* Diluted earnings per share up 46% to 5.1p (2002: 3.5p)
* Dividends per share raised 7% to 2.25p (2002: 2.1p)
* 5% share buyback during the year
* Balance sheet strengthened: net cash increased 41% to #3.8m (2002: #2.7m)
* Turnover up 7% to #20.7m (2002: #19.4m)
* Continued shift from temporary to permanent recruitment:
o Permanent turnover up 20%
o Temporary turnover up 4.5%
* Further expansion in public and not-for-profit sectors
* Good progress with national response handling unit
* Solid growth in executive selection
"The more progressive trends seen in the business in the second half have
continued in the current year to date. More importantly, the Group is very
soundly based with a good spread of clients across both the public and private
sectors, and strong, settled, professional teams in key target markets. We have
excellent facilities ... and an exceptionally strong balance sheet. I
therefore believe that we are well placed to achieve solid progress in the year
ahead."
Hamish Leslie Melville, Chairman
ENQUIRIES:
Northern Recruitment Group Hudson Sandler
Lorna Moran, Chief Executive Keith Hann / Lesley Allan
Telephone: 0191 260 4412 Telephone: 020 7796 4133
CHAIRMAN'S STATEMENT
I am pleased to report a sustained improvement in the Group's performance
throughout the year, delivering substantial increases in our earnings and cash
balances. This has been based primarily on our investment in new senior teams
to develop our capabilities in the public and not-for-profit, finance and
commercial sectors, and in the technology and people needed to undertake major
national response handling assignments.
Results
Turnover for the year increased by 7% to #20.705m (2002: #19.385m), maintaining
the growth rate we achieved in the first half. This was again driven by strong
progress in permanent recruitment, where our fee income grew by 20%. Income
from temporary placements also increased, by 4.5%, reflecting an improved
performance in the second half.
Gross profit rose by 10% to #6.728m (2002: #6.130m), and administrative expenses
were tightly controlled at #5.262m (2002: #5.063m), an increase of 4%. This
delivered a 37% uplift in operating profit, to #1.466m (2002: #1.067m).
After higher interest receivable of #113,000 (2002: #73,000), reflecting our
increased cash balances, profit before taxation and joint venture losses was
#1.579m (2002: #1.140m), an improvement of 39%. Our share of the losses of
Learning Dynamix was #52,000, compared with a total of #173,000 last year.
Pre-tax profit after joint venture losses, including loss on disposal, was up
45% at #1.399m (2002: #0.967m).
Diluted earnings per share increased by 46% to 5.1 pence (2002: 3.5 pence).
Joint Venture
Following its first half losses of #52,000, the Group reduced its ordinary
shareholding in Learning Dynamix Limited from 42 per cent to just below 20 per
cent. The loss arising on the disposal of our shareholding was #128,000. In
future we will account for Learning Dynamix as a trade investment rather than a
joint venture. Our decision to retain a strategic shareholding in this business
reflects our continued belief in the importance of training and development as
part of a total solutions approach to customer service in the recruitment
marketplace.
Finances
Cash flow remained strongly positive throughout the year, reflecting our
effective control culture together with the continued shift in the balance of
our business from temporary to permanent recruitment. During the year the Group
purchased for cancellation shares to the value of #0.4m. Net cash at the year
end totalled #3.8 million, compared with #2.7 million at the same point in 2002.
Dividend
In the light of our improved performance and strong financial and cash position,
the Board recommends a 9% increase in the final dividend to 1.5 pence per share
(2002: 1.38 pence). Together with the increased interim dividend of 0.75 pence
per share paid in May 2003, this makes a total for the year of 2.25 pence (2002:
2.10 pence), a rise of 7%.
Trading highlights
Despite economic uncertainty, our activity in key markets increased during the
second half of the year. Public sector work grew to account for more than 30
per cent of our revenues, with the successful handling of major national volume
projects providing us with a strong platform to seek further business gains.
NRG Connect, our response handling unit based in Newcastle upon Tyne, has played
a key role extending our capabilities nationwide. We have made good progress in
senior appointments where our specialist teams have grown this sector to close
to #1 million in fees, a rise of 50 per cent over the previous year. Recent
work has included executive selection for a government department where our
combination of public sector experience and value for money approach should
provide opportunity for further growth. NRG City, our business specialising in
professional support staff, has also done well, establishing a prominent high
street presence in key regional business centres and developing a strong
business in ad hoc placements as well as permanent recruitment. The Chief
Executive comments on our markets and individual business performances in more
detail in her Review.
Outlook
The more progressive trends seen in the business in the second half have
continued in the current year to date. More importantly, the Group is very
soundly based with a good spread of clients across both the public and private
sectors, and strong, settled, professional teams in all its key target markets.
We have excellent facilities, which will be further enhanced by the relocation
of our Glasgow office in the current half year, and an exceptionally strong
balance sheet. I therefore believe that we are well placed to achieve solid
progress in the year ahead.
Hamish Leslie Melville
Chairman
CHIEF EXECUTIVE'S REVIEW
We have evolved successfully from a regional recruitment specialist to a total
solutions Group that is capable of meeting the needs of the largest and most
demanding clients nationwide. Our improved financial performance is solidly
based on past investment in facilities and people, enabling us to deliver high
quality services across a growing range of sectors.
Group performance
As the Chairman has noted, the growth we achieved last year was broadly based
across the Group. Despite the market uncertainty expressed by many
commentators, we experienced an upturn in activity and demand. This was not
simply a function of our growing public sector expertise as we also saw good
growth in senior recruitment across the private sector, and in permanent
placements in traditional areas such as manufacturing and engineering. Revenues
from temporary recruitment were also more buoyant in the second half than the
first, reflecting increased demand for flexible resourcing from industry as well
as the success of our specialist operations, notably NRG City.
NRG Public Sector, specialising in recruitment for public and not-for-profit
clients, made excellent progress during the year. We undertook a series of
major projects involving the recruitment of 3,500 people in Scotland, the North
East of England, the Midlands, Wales and London. We also secured approved
supplier status with the major central procurement agency for the public sector
which will provide new opportunities in the coming year. Additionally we have
gained contracts with several Local Authorities. In the Higher Education
sector, we have continued to expand our client base with Universities and we are
also working for a growing range of arts and culture organisations including the
new Baltic Centre in Gateshead, the Royal Armouries in Leeds and the Royal
Botanical Gardens in Edinburgh.
Our approved supplier status for executive recruitment with the Cabinet Office
provided us with the opportunity to demonstrate our expertise in this field
including a recent assignment to recruit three chairmen for Regional Development
Agencies. Our success in this project makes us optimistic of securing further
work with this client in the future.
Our volume contract business in the private sector has also performed well,
meeting the flexible resourcing needs of a wide range of long-established
clients and also winning new business in the North East and Scotland. Since the
year end we have gained a new contract with a leading clearing bank, adding
significantly to our volume business portfolio.
NRG Connect, our national response handling unit, has played a key role in
enabling us to handle major assignments for both public and private sector
clients. Having our own contact centre provides us with a real competitive
advantage, with one of the largest response handling capabilities in UK
recruitment, fully equipped to handle enquiries from candidates and to conduct
initial telephone interviews. Recent business gains in this area include a
project for the Scottish Executive.
Senior executive selection has been a major area of growth for the Group across
all its markets, benefiting from our own appointments last year of new senior
consultants in Finance and the Public Sector. We believe that senior
recruitment offers further significant scope for growth, building on the strong
and stable teams we now have in place.
NRG City, specialising in the provision of high quality support staff on both a
permanent and temporary basis, has continued to grow and is expected to benefit
from the relocation of our Glasgow office to a more prominent site in the first
half of the current year.
We have strengthened our business in Scotland through senior appointments,
including the recruitment of Lynne Stockey as Director of Operations in December
2002, with a remit to develop a total solutions approach to the needs of our
clients north of the border. Our offices in our North East heartland have
continued to perform well, while our operations in Yorkshire have been reshaped
to enhance customer service and reduce costs. Our recent commitment to opening
a London base underlines our growing capability to service the needs of clients
throughout the UK.
Staff
It is impossible to exaggerate the importance of having strong and settled teams
in place throughout the business, and our results are a credit to their drive
and determination to succeed. I would like to thank all of our people for their
individual contributions to our progress this year. Morale has been heightened
by our business gains over the last year, and our improved financial
performance, and we enter the new year eager to demonstrate our ability to build
further on this success.
Prospects
Demand has remained healthy in the current year to date, and the visibility of
business in the near term is encouraging. As ever, we may be affected by
unforeseen developments in the national economy. Nevertheless, I am optimistic
about our ability to achieve further progress in the light not just of our
recent new business gains but also of our extremely solid fundamentals: the
balanced spread of our activities across the public and private sectors; our
ability to serve clients across a broader geographic area and with a growing
range of solutions; our strong financial position; and above all the quality and
commitment of our people.
Lorna Moran
Chief Executive
Consolidated Profit And Loss Account
For The Year Ended 30 June 2003
Note 2003 2002
12 months to 12 months to
30 June 30 June
Unaudited Audited
#'000 #'000
Turnover 20,705 19,385
(In addition, share of joint venture turnover
#139,000 and #129,000)
Cost of sales (13,977) (13,255)
Gross profit 6,728 6,130
Administrative expenses (5,262) (5,063)
Operating profit 1,466 1,067
Share of operating loss in:
- joint venture (52) (137)
- associate - (36)
Loss on disposal of investment in joint venture (128) -
Interest receivable and similar income 113 73
Profit on ordinary activities before taxation 1,399 967
Tax on profit on ordinary activities (494) (347)
Share of tax in joint venture - 18
Profit on ordinary activities after taxation 905 638
Equity dividends paid and proposed 4 (385) (377)
Retained profit for the financial year 520 261
Pence Pence
Earnings per ordinary share 3 5.1 3.5
Diluted earnings per ordinary share 3 5.1 3.5
Statement Of Total Recognised Gains And Losses
For The Year Ended 30 June 2003
2003 2002
12 months to 12 months to
30 June 30 June Audited
Unaudited
#'000 #'000
Profit on ordinary activities after taxation 905 638
Prior year adjustment - (27)
Total gains and losses recognised since last annual report and accounts 905 611
Consolidated Balance Sheet
At 30 June 2003
Note 2003 2003 2002 2002
Unaudited Audited
#'000 #'000 #'000 #'000
Fixed assets
Tangible assets 736 940
Investment in joint venture:
Share of gross assets - 396
Share of gross liabilities - (166)
- 230
Trade Investments 50 -
786 1,170
Current assets
Debtors 2,956 3,192
Cash at bank and in hand 3,799 2,691
6,755 5,883
Creditors
Amounts falling due within one year (3,083) (2,691)
Net current assets 3,672 3,192
Total assets less current liabilities 4,458 4,362
Provisions for liabilities and charges - (27)
Net assets 4,458 4,335
Capital and reserves
Called up share capital 855 898
Share premium account 529 529
Capital redemption reserve 43 -
Profit and loss account 3,031 2,908
Equity shareholder's funds 5 4,458 4,335
Consolidated Cash Flow Statement
For the Year Ended 30 June 2003
Note 2003 2003 2002 2002
Unaudited Audited
#'000 #'000 #'000 #'000
Net cash inflow from operating activities 6 2,278 1,329
Returns on investments and servicing of finance
Interest received 113 73
Net cash inflow from returns on investments and servicing of finance 113 73
Taxation paid (343) (255)
Capital expenditure and financial investments
Sale of tangible assets 9 49
Payments to acquire tangible fixed assets (177) (252)
Net cash outflow from capital expenditure and financial investments (168) (203)
Equity dividends paid (375) (370)
Net cash inflow before financing 1,505 574
Financing
Payments to acquire own shares (397) -
Net cash outflow from financing (397) -
Increase in cash 1,108 574
Net funds at start of year 2,691 2,117
Net funds at the end of year 3,799 2,691
NOTES
1. The financial information set out in the announcement does not constitute the company's statutory accounts for
the years ended 30 June 2003 or 2002. The financial information for the year ended 30 June 2002 is derived
from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The
auditors reported on those accounts; their report was unqualified and did not contain a statement under s237
(2) or (3) Companies Act 1985. The statutory accounts for the year ended 30 June 2003 will be finalised on the
basis of the financial information presented by the directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the company's annual general meeting.
2. The company has prepared these preliminary results on the basis of accounting policies consistent with those
in the full financial statements, which have yet to be published.
3. The calculation of earnings per ordinary share is based on the profit for the year of #905,000 (2002:
#638,000) and on 17,669,932 (2002: 17,952,370) ordinary shares, being the average number of shares in issue
during the year. The diluted earnings per ordinary share is based upon 17,699,848 (2002: 17,979,041) ordinary
shares. The company's average share price for the year was 41.43 pence (2002: 43.24 pence).
The diluted number of shares is calculated as follows:
2003 2002
Weighted average number of shares in issue 17,669,932 17,952,370
Exercise of share options 29,916 26,671
Diluted weighted average number of shares 17,699,848 17,979,041
4. The proposed final dividend of 1.5p net per Ordinary share will be paid on 31 October 2003 to shareholders on
the register at 3 October 2003, making a total for the year of 2.25p (2002: 2.10p). The ex-dividend date will
be 1 October 2003.
2003 2002
#'000 #'000
Dividends paid and proposed on equity shares
Interim dividend of 0.75p (2002: 0.72p) per Ordinary share 128 129
Final Dividend of 1.5p (2002: 1.38p) per Ordinary share 257 248
385 377
5. Reconciliation of movements in equity shareholders' funds.
2003 2002
#000 #000
Opening equity shareholders' funds 4,335 4,074
Own shares purchased (397) -
Profit for the year 905 638
Dividends (385) (377)
Net addition to equity shareholders' funds 123 261
Closing equity shareholders' funds 4,458 4,335
6. Reconciliation of operating profit to net cash inflow from operating activities.
2003 2002
#'000 #'000
Operating profit 1,466 1,067
Depreciation of tangible fixed assets 381 367
Profit on disposal of fixed assets (9) (28)
(Increase)/decrease in debtors 236 (19)
(Decrease)/increase in creditors 204 (58)
Net cash inflow from operating activities 2,278 1,329
As at 30 June 2003, the company held 19.9% (2002: 42%) of the issued ordinary share capital and 67% (2002:
67%) of the issued preference share capital of Learning Dynamix Limited. During the year the company disposed
7. of 50,910 ordinary shares for a consideration of 50,000 'B' preference shares in Learning Dynamix which the
directors estimate to have a value of #50,000. The Directors have estimated the remaining 44,579 ordinary
shares and 50,000 'A' preference shares at nil value. During the year the Group purchased services at a cost
of #12,000 (2002: #2,000) and made sales of #9,000 (2002: #19,000) in the ordinary course of business with
Learning Dynamix Limited and its subsidiary.
8. The annual report will be sent to shareholders in due course and will be available from the Company's
registered office at Vine House, Vine Lane, Newcastle upon Tyne NE1 7PU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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