NAK.L Regulatory News (NAK)

23 Jun 2005 07:01

Highams Systems Services Group PLC23 June 2005 Date: 23 June 2005 Contacts: Ted Andrews, Group Managing Director Highams System Services Group plc Tel: 01883 341 144 Tarquin Edwards / Chris Steele 07879 458 364 / 07979 604 687 Binns & Co PR Tel: 020 7786 9600 Highams Systems Services Group plc ("Highams" or "the Group") PRELIMINARY RESULTS 'A Year of Progress' Highams Systems Services Group plc, the AIM listed IT recruitment company, witha specialist focus on the provision of contractors into the banking, finance andinsurance sectors, is today pleased to announce preliminary results for the yearended 31st March 2005. HIGHLIGHTS • Turnover in the period has increased significantly by 58 per cent. following the acquisition in August 2004 of RWP Recruitment Services Limited ("RWP") • Revenues and gross margins from the placement of IT contractors in the second half year comfortably exceeding those reported for the first half • Acquisition of RWP successfully completed and now fully integrated into the Group • Appointment of Alan Howarth as Non-Executive Chairman • The Board anticipates that the effect of previously announced board and management changes will result in material net cost savings to the Group in 2005/6 • Current trading in line with expectations Ted Andrews, Group Managing Director of Highams Systems Services Group plc,commented: "The Group's major strategic event of the past year has been the acquisition ofRWP Recruitment Services Limited in August 2004, and its very successfulintegration with Highams Recruitment Limited." "We expect to see continuing growth opportunities for Highams in the ITrecruitment market in general and in the insurance and financial servicessectors in particular. Our performance and results in the coming year will see asignificant growth in our annual revenues and a considerable saving in ourannualised expenses resulting from the successful integration of RWP. Wecontinue to seek and explore strategic opportunities for the future growth anddevelopment of the Group." CHAIRMAN'S STATEMENT Introduction The Group's major strategic event of the past year has been the acquisition ofRWP Recruitment Services Limited ("RWP") in August 2004, and its very successfulintegration with Highams Recruitment Limited, enabling us to significantlyaccelerate the growth of the business, whilst gaining considerable cost savings. The rationale behind the acquisition was that in order to produce bottom lineprofits at Group level, we needed to grow not just organically but also byadding revenue to a fixed cost-base. We acquired RWP Recruitment ServicesLimited for an aggregate consideration of £2.1m plus expenses, consisting of£495,000 in new Highams ordinary shares and the balance in cash, raised partlythrough a placing of new Highams ordinary shares with institutional investorsand partly from our own resources. The impact of the greater critical mass has helped to improve the Group'soperational results in the second half of the year. The significant savingsresulting from the integration of the businesses will be demonstrated from April2005. Financial Results These results include a seven month contribution from RWP from 18 August 2004.Group turnover for the year amounted to £13.5m (2004: £8.6m). The operating lossexcluding goodwill amortisation and exceptionals was £207,000 (2004: loss of£419,000). The pre-tax loss was £523,000 (2004: loss of £293,000) after goodwillamortisation and exceptionals. The Group had Net Assets of £2.2m (2004: £1.8m) at the year-end. Reports on the year's trading by our subsidiaries are included in the GroupManaging Director's Report. Final Dividend The Directors are not recommending the payment of a final dividend for the yearto 31 March 2005 (2004: nil). Executives and Staff Highams has a very experienced and loyal team who have responded well to theopportunities and the challenges of the enlarged Group. I am very grateful tothe management and all our staff for their hard work and expertise. Outlook and Current Trading We expect to see continuing growth opportunities for Highams in the ITrecruitment market in general and in the insurance and financial servicessectors in particular. Our performance and results in the coming year will see asignificant growth in our annual revenues from our growing and impressive clientlist and a considerable saving in our annualised expenses resulting from thesuccessful integration of RWP. We continue to seek and explore strategicopportunities for the future growth and development of the Group. AM HowarthChairman23 June 2005 Group Managing Director's Report Overview The acquisition of RWP Recruitment Services in August 2004 has positioned us torealise the twin benefits of a significantly enhanced sales capability andconsiderable savings following the successful integration process. Whilst ourimproved operating results for the second half of the financial year showed theimmediate benefits, the substantial cost savings arising from the integrationwill be reflected in our results from April 2005. Trading Review Highams Recruitment Revenues and gross margins earned from the placement of IT contractors in thesecond half of the year exceeded those reported for the first half by more than18 per cent. Fees from the placement of permanent IT staff in the second half ofthe year were similar to those in the first half.For the year as a whole, turnover was £7.7m (2004: £7.7m) and pre-tax operatingprofit for the business (before Group overheads) amounted to £530,000 (2004:£529,000). RWP Recruitment Services Turnover in RWP since its acquisition (18 August 2004) was £5.8m with a pre-taxoperating profit of £316,000 (before Group overheads). Sales to RWP's clientswere impacted initially by the disruption of the acquisition and integration,including the transfer of RWP staff to Highams' Caterham office, but picked upagain from January 2005. With effect from 1 April 2005, Highams Recruitment and RWP merged fully and nowtrade only under the Highams Recruitment brand. Group Prospects The Market Last year saw growth in the IT market generally after the severe decline fromthe start of this decade. Independent forecasts indicate that there will becontinued steady growth in the IT market over the next two years, with insuranceand finance being two of the sectors in which growth is expected. Strategy The emphasis for the year ahead is the delivery of improved results throughorganic growth and a reduced cost-base. However, we will continue to seek toidentify suitable recruitment companies for acquisition. Our experience with RWPconfirms our previously stated belief that we can derive appropriate andworthwhile benefits of scale from carefully selected and integratedacquisitions. Financial Year 2005/2006 From the start of this year we will gain the financial benefits to be derivedfrom the restructuring of our Board and our senior management team that weannounced in January 2005 and from the termination of the lease of RWP'sTunbridge Wells premises. We have capacity within our current staff and systems to handle the improvedlevels of business that our niche markets are providing. Nigel Graham Maw The satisfaction that we felt from the important strategic achievements of thepast financial year has been tinged with considerable sadness at the news of thedeath of our Chairman, Nigel Graham Maw, in April 2005, shortly before he wasdue to retire. Nigel had been our charismatic Chairman since we floated inNovember 1996 and gave sterling service to the Group throughout his period inoffice. Appointment of Alan Howarth We were very pleased to announce the appointment of Alan Howarth asNon-Executive Chairman on 3 May 2005. He has over 30 years experience workingwith senior executives across a wide range of sectors and he enjoys substantialIT recruitment experience, having led the Search & Selection practice at Ernst &Young for a number of years. He has spent the last 20 years as a management consultant, firstly as a partnerwith Ernst & Young and more recently as Managing Director of Compass ManagementConsulting Limited. He is currently Non-Executive Chairman of full-listedGresham Computing plc and Non-Executive Director of AIM-listed MacLellan Groupplc. We are delighted that Alan has agreed to join the Board as Chairman and areconfident that his boardroom experience, knowledge of the IT recruitmentindustry and his wealth of contacts across the City and industry will be ofconsiderable value to Highams. Staff The integration of two businesses can be a fraught time, especially when one ofthe businesses is required to relocate. I'm delighted at the way our newlycombined staff and management teams have quickly come together as a unitedforce. I thank them for their commitment and hard work through this period ofdisruption and change. E I AndrewsGroup Managing Director23 June 2005 Consolidated Profit & Loss Accountfor the year ended 31 March 2005 Continuing Operations 2005 2004 Unaudited Audited Acquisition Total Restated Note £'000 £'000 £'000 £'000 Turnover 7,682 5,830 13,512 8,559Cost of sales (6,522) (5,277) (11,799) (6,932) Gross profit 1,160 553 1,713 1,627Administrative expenses- before exceptional items & goodwill amortisation (1,665) (255) (1,920) (2,046)- exceptional items 1 (170) (30) (200) (68)- goodwill amortisation 2 - (91) (91) - (1,835) (376) (2,211) (2,114) Operating (loss)/profit before exceptional items & goodwillamortisation (505) 298 (207) (419) Operating (loss)/profit (675) 177 (498) (487) Profit on sale of business - 174Interest receivable 15 20Interest payable (40) - Loss on ordinary activities before taxation (523) (293)Tax on loss on ordinary activities 9 - Loss for the financial year (514) (293)Dividends 3 - - Loss for the year (514) (293) Loss per share - basic and dilutedLoss for the financial year beforegoodwillamortisation and exceptional items 4 (0.83) p (2.05) pLoss for the financial year 4 (1.90) p (1.51) p Consolidated Statement of TotalRecognised Gains and Lossesfor the year ended 31 March 2005 2005 2004 Restated £'000 £'000 Loss for the financial year (514) (293)Profit on foreign currency translation 1 6Total recognised gains and losses (513) (287)relating to the yearPrior year adjustment 8 39Total gains and losses recognised (474)since the last annual report Consolidated Balance Sheet31 March 2005 2005 2004 Unaudited Audited Restated £'000 £'000Fixed assets Goodwill 1,394 -Tangible assets 46 99 1,440 99 Current assetsDebtors 2,909 1,638Cash at bank and in hand 247 740 3,156 2,378 Creditors: amounts falling due within one (2,409) (684)year Net current assets 747 1,694 Net assets 2,187 1,793 Capital and reservesCalled up share capital 1,594 979Share premium 679 684Merger reserve 297 -Employee share benefit trust reserve (59) (59)Profit and loss account (324) 189Equity shareholders' funds 2,187 1,793 Consolidated Cash Flow Statementfor the year ended 31 March 2005 2005 2004 Unaudited Audited Notes £'000 £'000 Net cash outflow from operating (38) (3)activities Returns on investments and servicing offinanceInterest received 15 20Interest paid (40) - (25) 20 TaxationUK corporation tax (64) - Capital expenditure and financialinvestmentPurchase of tangible fixed assets (8) (107)Sale of tangible fixed assets 25 - 17 (107) Acquisitions and disposalsPurchase of subsidiary undertaking 5 (1,771) -Net overdraft acquired with subsidiary 5 (102) -Deferred consideration received 300 -Sale of operations - 287Cash disposed of with operations - (329) (1,573) (42) Equity dividends paid - - Cash outflow before financing in the (1,683) (132)year FinancingNet proceeds from issue of shares 412 -Invoice discounting facility 778 - 1,190 - Decrease in cash in the year (493) (132) Notes to the financial information 1. Exceptional items The exceptional items comprise thefollowing: 2005 2004 £'000 £'000 Closure of Dutch office - (68)Post acquisition integration and (200) -restructuring costs Exceptional administrative (200) (68)expensesSale of Highams Business Solutions - 174Limited (200) 106 2. Goodwill £'000The carrying value of goodwill comprises:CostAt 1 April 2004 -Additions 1,485At 31 March 2005 1,485 AmortisationAt 1 April 2004 -Charge for the year 91At 31 March 2005 91 Carrying value at 31 March 2005 1,394 Goodwill arising on the acquisition of RWP Recruitment Services Limited is beingwritten off over 10 years. 3. It is not proposed to pay a final dividend (2004 : nil). 4. Loss per share Weighted Weighted Loss Average Loss Average per number of per Loss number of share Loss shares share 2004 shares 2004 2005 2005 2005 Restated 2004 Restated £'000 '000 p £'000 '000 p Loss for the financial yearbefore goodwill amortisation and exceptional items (223) 27,008 (0.83) (399) 19,425 (2.05)Goodwill amortisation (note 2) (91) - (0.33) - - -Exceptional items (note 1) (200) - (0.74) 106 - 0.54Loss for the financial year (514) 27,008 (1.90) (293) 19,425 (1.51) The average exercise price of share options is above market value and thereforethe options are not dilutive under the terms of FRS14. 5.Additions On 18 August 2004, the Group acquired the entire share capital of RWP RecruitmentServices Limited. The net assets acquired and their corresponding fair values were: Book value at 18 August Fair value to 2004 the Group £'000 £'000 Tangible fixed assets 13 13Current assetsDebtors 1,723 1,723 1,736 1,736Current liabilitiesBank overdraft (102) (102)Creditors (853) (853) (955) (955) Net assets 781 781 £'000Shares allotted at fair value 495Cash consideration (including expenses of 1,771£185,000) 2,266Net assets acquired (781) Goodwill arising on acquisition 1,485(note 2) During the year, RWP Recruitment Services Limited contributed £327,000 to theGroup's operating cashflows, paid interest of £4,000 and was responsible for taxcash outflows of £72,000. 6. Net cash flow from operating activities 2005 2004 £'000 £'000 Operating loss (498) (487)Depreciation of tangible fixed 49 72assetsGoodwill amortisation 91 -Decrease in debtors 152 651Increase/(decrease) in creditors 167 (245)Profit on disposal of fixed assets - -Exchange difference 1 6Net cash outflow from operating activities (38) (3) 7. Analysis and reconciliation of net fundsAnalysis of changes in net funds 1 Cash 31 March April 2004 flow 2005 £'000 £'000 £'000 Cash at bank and in hand 740 (493) 247Invoice discounting facility - (778) (778)Net funds 740 (1,271) (531) Reconciliation of net cash flow to movement in net funds 2005 2004 £'000 £'000 Cash outflow (493) (132)Increase in invoice discounting (778) -facility (1,271) (132)Net funds at 1 April 2004 740 872Net funds at 31 March 2005 (531) 740 8. Reconciliation of movements inshareholders' funds Employee Profit and Total Share Share Merger share loss 2005 capital premium reserve benefit reserve account £'000 £'000 £'000 £'000 £'000 £'000 1 April 2004 979 684 - - 150 1,813Prior year adjustment (note 9) - - - (59) 39 (20) 1 April 2004, as restated 979 684 - (59) 189 1,793Issue of new shares 615 83 297 - - 995Expenses on issue of shares - (88) - - - (88)Loss for the year - - - - (514) (514)Foreign currency translation differences - - - 1 1Closing shareholders' funds 1,594 679 297 (59) (324) 2,187 9. The accounting policies adopted in this preliminary announcement areconsistent with those in the most recent published set of annual financialstatements, except that previously, in accordance with UITF13 'Accounting forESOP trusts', the ordinary shares of the Company held by the Employee ShareBenefit Trust were shown as fixed asset investments, at cost less provisions forimpairment. In accordance with UITF38 'Accounting for ESOP trusts', issued on 15 December2003, this investment in own shares has been transferred to equity shareholders'funds and shown at cost. The comparative figures have been restated to reflectthis change. The effect on the Group and Company balance sheets at 31 March 2004is to decrease shareholders' funds by £20,000 and to increase the loss onordinary activities before taxation for the year ended 31 March 2004 by £11,000. The presentation of direct overheads has been amended to include these costswithin administrative expenses. Previously these costs have been included incost of sales. Comparative figures have been represented accordingly. Thedirectors consider that the revised presentation more fairly reflects theGroup's operations and is in line with sector norms. The effect on the profitand loss account for the year ended 31 March 2004 is to decrease costs of salesand increase administrative expenses by £428,000, with no net impact on the lossfor the year or net assets. 10. The financial information above does not constitute statutory accountswithin the meaning of section 240 Companies Act 1985 as amended (the "Act").Statutory accounts in respect of the year ended 31 March 2004, on which theauditors reported without qualification and which contained no statement undersection 237(2) or (3) of the Act, have been delivered to the Registrar ofCompanies. 11. The auditors have not reported on the accounts for the year ended 31 March2005, nor have any such accounts been delivered to the Registrar of Companies 12. Copies of the statutory accounts for the year ended 31 March 2005 will besent to all shareholders. Additional copies will be available from the CompanySecretary, Highams Systems Services Group plc, Quadrant House, 33/45 CroydonRoad, Caterham, Surrey CR3 6PB. This information is provided by RNS The company news service from the London Stock Exchange